Comment Sought on Competitive Bidding Procedures for Broadcast Incentive Auction 1000, Including 1001 and 1002, 4816-4846 [2015-01607]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 80, Number 19 (Thursday, January 29, 2015)]
[Proposed Rules]
[Pages 4816-4846]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-01607]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 1, 27 and 73

[AU Docket No. 14-252; GN Docket No. 12-268; FCC 14-191; DA 15-24; DA 
15-60]


Comment Sought on Competitive Bidding Procedures for Broadcast 
Incentive Auction 1000, Including 1001 and 1002

AGENCY: Federal Communications Commission.

ACTION: Proposed rule; proposed auction procedures.

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SUMMARY: The Auction 1000 Request for Comment initiates the pre-auction 
process by which the Federal Communications Commission will develop 
detailed procedures for the broadcast television spectrum incentive 
auction, taking into account public comment received in response to its 
proposals. The Auction 1000 Request for Comment includes specific 
proposals, including on determination of the initial broadcast 
television spectrum clearing target, opening bid prices, benchmarks for 
the final stage rule, and the final television channel assignment 
process, and seeks comment on those proposed procedures.

DATES: Comments are due on or before February 13, 2015, and reply 
comments are due on or before March 13, 2015. Written comments on the 
Paperwork Reduction Act proposed information collection requirements 
must be submitted by the public, Office of Management and Budget (OMB), 
and other interested parties on or before March 30, 2015.

ADDRESSES: All filings in response to this notice must refer to AU 
Docket No. 14-252 and GN Docket No. 12-268. The Federal Communications 
Commission strongly encourages interested parties to file comments 
electronically, and requests that an additional copy of all comments 
and reply comments be submitted electronically to the following 
address: auction1000@fcc.gov. Comments may be submitted by any of the 
following methods:
    [ssquf] Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
    [ssquf] Federal Communications Commission's Web site: https://fjallfoss.fcc.gov/ecfs2/. Follow the instructions for submitting 
comments.
    [ssquf] Paper Filers: Parties who choose to file by paper must file 
an original and one copy of each filing. Filings can be sent by hand or 
messenger delivery, by commercial overnight courier, or by first-class 
or overnight U.S. Postal Service mail. All filings must be addressed to 
the Commission's Secretary, Attn: WTB/ASAD, Office of the Secretary, 
Federal Communications Commission. All hand-delivered or messenger-
delivered paper filings for the Commission's Secretary must be 
delivered to FCC Headquarters at 445 12th Street SW., Room TW-A325, 
Washington, DC 20554. All hand deliveries must be held together with 
rubber bands or fasteners. Any envelopes must be disposed of before 
entering the building. Commercial overnight mail (other than U.S. 
Postal Service Express Mail and Priority Mail) must be sent to 9300 
East Hampton Drive, Capitol Heights, MD 20743. U.S. Postal Service 
first-class, Express, and Priority mail must be addressed to 445 12th 
Street SW., Washington, DC 20554.

    People with Disabilities: Contact the FCC to request reasonable

[[Page 4817]]

accommodations (accessible format documents, sign language 
interpreters, CART, etc.) by email: FCC504@fcc.gov or phone: 202-418-
0530 or TTY: 202-418-0432.
    PRA Comments: In addition to filing comments with the Secretary, a 
copy of any comments on the Paperwork Reduction Act information 
collection requirements contained herein should be submitted to the 
Federal Communications Commission via email to PRA@fcc.gov and to 
Nicholas A. Fraser, Office of Management and Budget, via email to 
Nicholas_A._Fraser@omb.eop.gov or via fax at 202-395-5167.

FOR FURTHER INFORMATION CONTACT: Wireless Telecommunications Bureau, 
Auctions and Spectrum Access Division: For auction legal questions: 
Erin Griffith at (202) 418-0660 and for general auction questions: 
Linda Sanderson at (717) 338-2868; Spectrum and Competition Policy 
Division: For mobile spectrum holding questions: Amy Brett at (202) 
418-1310; and Broadband Division: For 600 MHz Band service rule 
questions: Madelaine Maior at (202) 418-1466. Media Bureau, Video 
Division: For broadcast questions: Dorann Bunkin at (202) 418-1636. 
Office of Engineering and Technology: For repacking and inter-service 
interference questions: Aspasia Paroutsas (legal) at (202) 418-7285 or 
Martin Doczkat (technical) (202) 418-2435. For additional information 
concerning the Paperwork Reduction Act information collection 
requirements contained in this document, send an email to PRA@fcc.gov 
or contact Cathy Williams on (202) 418-2918.

SUPPLEMENTARY INFORMATION: This is a summary of the Auction 1000 
Request for Comment adopted on December 11, 2014 and released on 
December 17, 2014, as well as the Order adopted and released on January 
7, 2015, extending the dates for responding to the Auction 1000 Request 
for Comment and the Supplemental Auction 1000 Request for Comment 
adopted and released on January 15, 2015. The Auction 1000 Request for 
Comment includes as attachments the following appendices: Appendix A, 
Incentive Auction General Flow; Appendix B, ISIX Constraints; Appendix 
C, Clearing Target Optimization; Appendix D, Reverse Auction Pricing 
and Bid Processing Algorithm; Appendix E, Final Channel Assignment 
Optimization; Appendix F, Bidding Units, Upfront Payments, and Minimum 
Opening Bids; Appendix G, Forward Auction Clock Phase; and Appendix H, 
Forward Auction Assignment Phase. The complete text of the Auction 1000 
Request for Comment, 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 1000 Request for Comment 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, 
FCC 14-191. The Auction 1000 Request for Comment and its attachments, 
as well as related documents, also are available on the Internet at the 
Commission's Web site: https://wireless.fcc.gov/auctions/1000/, or by 
using the search function for AU Docket No. 14-252, GN Docket 12-268 on 
the Commission's Electronic Comment Filing System (ECFS) Web page at 
https://www.fcc.gov/cgb/ecfs/.
    This document contains proposed information collection 
requirements. The Commission, as part of its continuing effort to 
reduce paperwork burdens, invites the general public and the Office of 
Management and Budget (OMB) to comment on the information collection 
requirements contained in this document, as required by the Paperwork 
Reduction Act of 1995, Public Law 104-13.
    Comments should address: (a) Whether the proposed collection of 
information is necessary for the proper performance of the functions of 
the Commission, including whether the information shall have practical 
utility; (b) the accuracy of the Commission's burden estimates; (c) 
ways to enhance the quality, utility, and clarity of the information 
collected; (d) ways to minimize the burden of the collection of 
information on the respondents, including the use of automated 
collection techniques or other forms of information technology; and (e) 
way to further reduce the information collection burden on small 
business concerns with fewer than 25 employees. In addition, pursuant 
to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, 
see 44 U.S.C. 3506(c)(4), we seek specific comment on how we might 
further reduce the information collection burden for small business 
concerns with fewer than 25 employees.
    OMB Control Number: None.
    Title: Application by a Broadcast Licensee to Participate in a 
Broadcast Spectrum Incentive Auction (BSIA), FCC Form 177; and 47 CFR 
1.22002.
    Form No.: FCC Form 177.
    Type of Review: New collection.
    Respondents: Business or other for profit entities; not-for-profit 
institutions; State, local or Tribal government.
    Number of Respondents and Responses: 2,254 respondents; 2,254 
responses.
    Estimated Time per Response: 3 hours.
    Frequency of Response: One time reporting requirement.
    Obligation to Respond: Required to obtain benefits. The statutory 
authority for this information collection is contained in sections 
154(i) and 309 of the Communications Act of 1934, as amended.
    Total Annual Burden: 6,762 hours.
    Total Annual Costs: N/A.
    Privacy Act Impact Assessment: N/A.
    Nature and Extent of Confidentiality: Pursuant to statute, pending 
the effective date of related license reassignments and spectrum 
reallocations, the Commission will take all reasonable steps necessary 
to protect the confidentiality of Commission-held data of a broadcast 
licensee participating in the broadcast spectrum incentive auction, 
pursuant to 47 CFR 1.22006.
    Needs and Uses: Any broadcast licensee choosing to participate in 
the broadcast spectrum incentive auction must provide information to 
demonstrate that it is legally, technically, and financially qualified 
to participate, pursuant to 47 CFR 1.22000 and 1.22004. Information 
collection on the form will include information regarding the relevant 
broadcast license, information regarding parties with an ownership 
interest in the license, and if applicable, information regarding any 
agreement that the applicant may have to share a broadcast channel in 
the event that it relinquishes some of its spectrum usage rights 
through the auction.
    Statutory Authority: The statutory authority for this information 
collection is contained in sections 154(i) and 309 of the 
Communications Act of 1934, as amended.
    OMB Control Number: 3060-0600.
    Title: Application to Participate in a FCC Auction; FCC Form 175; 
47 CFR 1.2105, 1.2110 and 1.2112.
    Form No.: FCC Form 175.
    Type of Review: Revision of currently approved collection.

[[Page 4818]]

    Respondents: Business or other for-profit; Not-for-profit 
institutions; State, local or Tribal governments.
    Number of Respondents and Responses: 500 respondents; 500 
responses.
    Estimated Time per Response: 90 minutes.
    Frequency of Response: On occasion reporting requirement.
    Obligation to Respond: Required to obtain or retain benefits.
    Total Annual Burden: 750 hours.
    Total Annual Costs: N/A.
    Privacy Act Impact Assessment: N/A.
    Nature and Extent of Confidentiality: There is no need for 
confidentiality with this collection of information. Applicants may 
request confidential treatment of information collected in FCC Form 175 
pursuant to 47 CFR 0.459.
    Needs and Uses: The Commission will revise the FCC Form 175 to 
require a party to certify compliance with requirements applicable to 
the incentive auction prior to submitting the Form.
    Statutory Authority: The statutory authority for this information 
collection is contained in sections 154(i) and 309 of the 
Communications Act of 1934, as amended.

I. Introduction

    1. With the Auction 1000 Request for Comment, the Commission takes 
another important step toward conducting the broadcast television 
spectrum incentive auction, a new tool to help meet the Nation's 
accelerating spectrum needs. The Commission established the rules and 
policies for the incentive auction in the Report and Order, ``Expanding 
the Economic and Innovation Opportunities of Spectrum Through Incentive 
Auction,'' 79 FR 48441, August 15, 2014 (Incentive Auction R&O). The 
Auction 1000 Request for Comment initiates the pre-auction process by 
which the Commission will develop, based on additional public input, 
the detailed procedures necessary to carry out the auction. It includes 
specific proposals on crucial auction design issues such as 
determination of the initial broadcast television spectrum clearing 
target, opening bid prices, benchmarks for the final stage rule, and 
the final television channel assignment process. The legal authority 
for the Commission's proposals is set forth in the rules the Commission 
adopted in the Incentive Auction R&O.
    2. The incentive auction will include a ``reverse auction'' in 
which broadcasters will offer to voluntarily relinquish some or all of 
their spectrum usage rights, and a ``forward auction'' of new, 
flexible-use licenses suitable for providing mobile broadband services. 
Forward auction proceeds will be used to pay broadcasters that 
relinquish rights in the reverse auction. As part of the reverse 
auction, the Commission will reorganize or ``repack'' the broadcast TV 
spectrum so that the television stations that remain on the air after 
the incentive auction occupy a smaller portion of the UHF band. For the 
incentive auction to succeed, the reverse and forward auctions and the 
repacking process must work seamlessly.
    3. To encourage voluntary broadcaster participation, the Commission 
is striving to make the reverse auction design simple and transparent 
from the perspective of the broadcaster bidder. Broadcasters will be 
able to participate online through an easy-to-use computer interface 
and will be able to react to prices provided by the auction system 
rather than having to formulate their own bids. They will have multiple 
options to relinquish their spectrum usage rights in exchange for a 
share of auction proceeds--including to cease broadcasting, to continue 
broadcasting in a different band, or to share a channel with another 
station. Broadcasters can decide whether to participate after opening 
prices are announced, and may drop out of the bidding in any subsequent 
round if they decide the prices are too low. Stations will be treated 
the same in the repacking process whether or not they participate in 
the reverse auction. Except for broadcasters that receive auction 
proceeds in exchange for relinquishing spectrum usage rights, the 
identities of broadcasters that participate in the auction will remain 
confidential for a period of two years after the incentive auction.
    4. Because the reverse auction and the repacking process are 
interdependent, the Auction 1000 Request for Comment includes proposals 
that may affect broadcasters that do not choose to participate in the 
reverse auction, such as objectives for optimizing final channel 
assignments in the remaining television bands. In making such 
proposals, the Commission is mindful of Congress's directive to make 
all reasonable efforts to preserve the coverage area and population 
served of eligible broadcasters that remain on the air following the 
auction, and the Commission seeks to avoid unnecessary disruption to 
free, over-the-air television service.
    5. The proposals in the Auction 1000 Request for Comment are 
organized into three major sections. First, the integration section 
addresses how the reverse and forward auctions will be integrated. 
Among other things, the integration section addresses the determination 
of an initial spectrum clearing target, how much market variation to 
accommodate, and the process of moving to subsequent stages of the 
auction if necessary. The issues and proposals discussed in the 
integration section may be of interest to potential participants in 
both the reverse and the forward auctions, as well as to broadcasters 
that do not choose to participate in the reverse auction. The second 
and third sections of the Auction 1000 Request for Comment focus on the 
reverse and forward auctions, respectively. They address opening 
prices, details of the application process, and bidding procedures for 
each auction, as well as issues unique to each auction, such as how the 
repacking process will work in the context of the reverse auction and 
the final frequency assignment process for licenses won in the forward 
auction.
    6. The Auction 1000 Request for Comment also includes a number of 
technical appendices, which detail the mechanics of the proposed 
auction design, such as use of data from the inter-service interference 
(ISIX) methodology in order to identify potential ``impairments'' to 
600 MHz Band spectrum blocks, optimization procedures for determining 
the spectrum clearing target and final TV channel assignments, and 
algorithms for the reverse and forward auctions. The information in the 
appendices supplements the description of these elements in the Auction 
1000 Request for Comment, but the Auction 1000 Request for Comment 
contains the information necessary for an interested party to evaluate 
participation in the reverse or forward auction.
    7. The major steps of the incentive auction process, based on the 
proposals in the Auction 1000 Request for Comment, together with the 
decisions in the Incentive Auction R&O, are illustrated in Appendix A 
of the Auction 1000 Request for Comment. From the perspective of 
potential bidders, the major steps will be as follows. (1) Procedures 
PN: After considering the record produced in response to the Auction 
1000 Request for Comment, the Commission will adopt final auction 
procedures and provide detailed explanations and instructions for 
potential auction participants in a future public notice (Procedures 
PN). (2) Auction application: Any party wishing to participate in the 
bidding in either the reverse auction or the forward auction must 
submit an auction application by

[[Page 4819]]

a date to be specified in the Procedures PN. Opening prices in the 
auction will be made available at least 60 days in advance of the 
deadline for applications to participate in either the reverse or the 
forward auction. An auction applicant must disclose to the Commission 
on the application, among other things, specified information about the 
applicant's identity, certifications, and, for reverse and forward 
auction applications, respectively, selections regarding bid options or 
licenses it may wish to bid on. Each applicant will be informed whether 
its application is complete or deficient in particular respects after 
Commission staff reviews it for completeness and consistency with the 
relevant auction rules. Any applicant whose application is incomplete 
will have a specified period of time within which to resubmit its 
application to correct deficiencies. (3) Reverse auction initial bid 
commitment: In order to qualify to bid in the reverse auction, each 
reverse auction applicant that successfully completes an application 
must identify one of the bid options it selected on its application as 
its preferred option, thereby indicating its commitment to relinquish 
the spectrum usage rights associated with that option at the opening 
price for that option. (4) Clearing target determination: Based on the 
commitments of broadcasters in response to the opening prices, the 
auction system will determine the broadcast TV spectrum clearing target 
for the initial stage of the auction, which will have an associated 600 
MHz Band plan. (5) Forward auction upfront payment: After the clearing 
target along with the associated band plan is determined, forward 
auction bidders must submit upfront payments to qualify to bid. Each 
applicant's upfront payment will establish its bidding eligibility in 
terms of bidding units. (6) Reverse auction bidding clock phase: 
Reverse auction bidding will begin. Each qualified bidder will have an 
opportunity to bid by responding in successive clock bidding rounds to 
price offers, which may be reduced as bidding progresses. If at any 
time the price offered is lower than a bidder wants to accept, the 
bidder can drop out of the bidding. (7) Forward auction bidding clock 
phase: Forward auction bidding will begin on two different categories 
of licenses. The license categories will reflect the extent of 
potential impairments from television stations to a given license. Each 
qualified bidder will have an opportunity to bid by indicating in 
successive clock bidding rounds its demands for categories of generic 
license blocks in specific geographic areas. The auction system will 
check after each round of clock bidding to determine whether the final 
stage rule has been satisfied. If bidding stops in ``high-demand'' 
markets before the final stage rule is satisfied, the auction system 
will initiate an extended round of bidding for licenses in those 
markets aimed at satisfying the final stage rule. If the final stage 
rule is met after any forward auction round (clock or extended), the 
auction system will implement the market-based spectrum reserve. 
Bidding rounds will continue in all markets after the final stage rule 
is met, ending when demand does not exceed supply. (8) Subsequent 
auction stage if necessary: If the final stage rule is not satisfied in 
the forward auction portion of the initial stage, the auction system 
will move to the next stage of the auction. (9) Final TV channel 
assignment optimization: After the final stage rule is satisfied, the 
auction system will determine final television channel assignments for 
all television stations that will remain on the air following the 
incentive auction. (10) Forward auction assignment phase: After bidding 
stops in the clock phase of the forward auction, the forward auction 
assignment rounds will be conducted to assign frequency-specific 600 
MHz Band licenses consistent with the demands of specific bidders in 
specific geographic areas.
    8. The Commission intends to begin accepting applications to 
participate in the broadcast television spectrum incentive auction in 
the fall of 2015, and to start the bidding process in early 2016. The 
Commission will finalize specific deadlines in the Procedures PN, but 
recognizes the need to give parties adequate notice prior to the 
application filing date. The Commission will endeavor to give several 
months' notice prior to the application filing deadline. Parties who 
may be interested in participating in the reverse or forward auction 
should regularly monitor the LEARN Web site. The broadcast spectrum 
incentive auction, which is designated as Auction 1000, will begin with 
bidding in the reverse auction, designated as Auction 1001, followed by 
bidding in the forward auction, designated as Auction 1002. Since 
adopting the Incentive Auction R&O in May, the Commission has made 
progress on a number of auction-related issues, including how to 
predict potential inter-service interference in certain areas and the 
auction's potential impact on low-power television stations, wireless 
microphones, and unlicensed white space devices. The staff also has 
released additional information regarding the reverse auction and the 
repacking process. Well in advance of the auction, the Procedures PN 
will establish final auction procedures and provide detailed 
explanations and instructions for potential auction participants. The 
Commission will resolve outstanding issues outside the scope of the 
pre-auction process in advance of the Procedures PN.

II. Background

A. Incentive Auction Order

i. 600 MHz Band Plan
    9. Pursuant to the Incentive Auction R&O, in the forward auction 
the Commission will offer licenses for the UHF band spectrum that is 
repurposed through the incentive auction on a geographic area basis. 
The service areas for these licenses will be Partial Economic Areas 
(PEAs). The 600 MHz Band will be licensed in 5+5 megahertz paired 
uplink and downlink blocks, which will be authorized for fixed and 
mobile Frequency Division Duplex (FDD) operations.
    10. The 600 MHz Band Plan the Commission adopted in the Incentive 
Auction R&O consists of an uplink band that will begin at channel 51 
(698 MHz), followed by a duplex gap, and then a downlink band. Because 
the incentive auction may be conducted in several stages, each for a 
different ``spectrum clearing target,'' the Commission adopted a set of 
band plan scenarios based on the number of television channels cleared.
    11. The first stage of the forward auction will offer licenses 
corresponding to one of these band plan scenarios, and subsequent 
stages, if necessary, will offer licenses for scenarios corresponding 
to lower clearing targets. The 600 MHz Band Plan can accommodate 
variation in the amount of spectrum recovered in different geographic 
areas in order to prevent the most restricted market from limiting the 
quantity of spectrum the Commission can offer generally across the 
nation. If not all PEAs can be cleared, the 600 MHz Band Plan will 
accommodate market variation either by including some spectrum blocks 
subject to inter-service interference, or alternatively, fewer spectrum 
blocks than in most PEAs across the country.
ii. Repacking Process
    12. Repacking involves reorganizing television stations in the 
broadcast television bands so that the stations that remain on the air 
after the incentive auction will occupy a smaller portion of

[[Page 4820]]

the UHF band, thereby freeing up a portion of that band for new 
wireless uses. Prior to the commencement of the reverse auction, the 
staff will determine the coverage area and population served of every 
television station whose coverage area and population served the 
Commission will make ``all reasonable efforts'' to preserve in the 
repacking process, using the methodology described in the Office of 
Engineering and Technology Bulletin No. 69. Based on this data, the 
staff will develop ``constraint files'' for each station that will be 
used to check the feasibility of assigning permissible channels to 
stations that will remain on the air.
    13. Before bidding in the reverse auction begins, the initial 
``clearing target'' for how much broadcast TV spectrum will be 
repurposed through the reverse auction and the repacking process will 
be determined based on broadcasters' collective willingness to 
relinquish spectrum usage rights at the opening prices announced by the 
Commission. The clearing target will dictate the total number of 
remaining television channels available for the repacking process.
    14. At the start of the reverse auction bidding process, television 
stations will fall into two general categories: Non-participating 
stations that will remain on the air after the incentive auction, and 
participating stations that may or may not remain on the air, depending 
on the reverse auction outcome. The auction system will use a 
``repacking feasibility checker'' to ensure that every non-
participating station is assigned a television channel in its pre-
auction band consistent with the Commission's statutory obligation to 
make reasonable efforts to preserve its population and coverage area. 
Each time a participating station drops out of the auction, it will be 
assigned a channel in its pre-auction band consistent with this 
obligation, and the repacking feasibility checker will determine 
whether a channel that meets these requirements is available for each 
individual station that continues to participate in the bidding.
    15. Television station channel assignments in the remaining 
television bands will be provisional throughout the bidding stages of 
the auction. Final channel assignments will be made after the final 
stage rule is satisfied and bidding ends in the reverse and forward 
auctions. At that point, the assignments for each television station 
that will be assigned a channel in the remaining TV bands will be 
optimized to ensure efficient final channel assignments that preserve 
the coverage area and population served of each station and account for 
the additional goals that the Commission has adopted or will adopt in 
this pre-auction process.
iii. Auction Process
    16. The incentive auction will consist of reverse and forward 
auctions. The reverse auction will collect information about the prices 
at which broadcast television licensees would be willing to voluntarily 
relinquish some or all of their spectrum usage rights. The forward 
auction will consist of a clock phase and an assignment phase. The 
clock phase will identify the prices that potential users of repurposed 
broadcast television spectrum will pay for generic spectrum blocks. In 
the assignment phase, winners of blocks in the clock phase will bid for 
specific licenses to use the spectrum. The results of both auctions 
will be used to determine whether the overall reserve price, or final 
stage rule, has been satisfied. Once the reserve price requirements of 
the final stage rule are met and bidding meets the conditions of a 
stopping rule, the overall results of the bidding in both auctions will 
determine those broadcasters selected to relinquish spectrum usage 
rights and the amounts of their incentive payments from the reverse 
auction, as well as the winning bidders for flexible-use 600 MHz Band 
licenses and the prices they will pay for those licenses from the 
forward auction. After the final stage rule is satisfied and there is 
no excess demand for licenses, broadcasters that will remain on the air 
will receive final channel assignments and winners of generic licenses 
will have the opportunity to bid for specific frequencies. Then the 
incentive auction will close.
    17. The reverse and forward auctions will be integrated in one or 
more stages. Each stage will consist of a reverse auction and a forward 
auction bidding process; multiple stages will be run only if necessary. 
The forward auction bidding process will follow the reverse auction 
bidding process. If bidding in the forward auction does not satisfy the 
final stage rule, additional stages will be run with progressively 
lower spectrum clearing targets in the reverse auction and fewer 
licenses available in the forward auction, until the final stage rule 
is satisfied.
    18. In the Incentive Auction R&O, the Commission adopted a 
descending clock format for the reverse auction in which, in each 
bidding round, stations will be offered prices for one or more bid 
options and indicate their choices at those prices. The prices offered 
to each station for options will be adjusted downward as the rounds 
progress in a way that accounts for the availability of television 
channels in different bands in the repacking process. A station will 
continue to be offered prices for bid options until its voluntary 
relinquishment of rights becomes needed to meet the current spectrum 
clearing target. When all remaining bidders' relinquishments are needed 
in this way, the reverse auction for the stage will end. If the final 
stage rule is satisfied in that stage, then those bidders will be 
winning bidders, and the price paid to each will be at least as high as 
the last price it agreed to accept.
    19. For the clock phase of the forward auction, the Commission 
adopted an ascending clock auction format in which bidders will be able 
to bid for generic spectrum blocks in one or more license categories, 
to be followed by an assignment mechanism for frequency-specific 
licenses. Consistent with the Mobile Spectrum Holdings R&O, 79 FR 
39977, July 11, 2014, the forward auction will incorporate a market-
based spectrum reserve of blocks for certain eligible bidders. There 
will be a separate clock price for each license category in each PEA, 
and bidders will indicate the number of blocks that they demand at the 
current prices. The prices generally will rise from round to round, as 
long as the demand for blocks exceeds availability. Bidders still 
demanding blocks when the clock prices stop rising in every license 
category in every PEA will become winners provided the final stage rule 
is satisfied. If the rule is not satisfied, bidders will have an 
opportunity to make additional bids to meet the rule in an extended 
bidding round. Once the final stage rule is satisfied, winners may 
indicate their preferences for frequency-specific licenses in the 
assignment phase of the forward auction. Final license prices will 
reflect the winning bid amounts from the clock bidding rounds as well 
as any adjustments from the extended bidding and assignment rounds.

B. Inter-Service Interference (ISIX) Order and Further Notice

    20. The Commission recently issued an order establishing a 
methodology for use during the incentive auction to predict inter-
service interference in areas where broadcast and wireless services 
operate on the same or adjacent channels as a result of market 
variation. In such areas, television channels may not be available in 
the remaining television bands for all of the stations that will remain 
on the air, and one or more stations may have to be assigned channels 
in the 600 MHz Band, that is, in the portion of the UHF spectrum that 
generally will be repurposed. Assigning channels to television stations 
in the 600 MHz Band creates a potential for

[[Page 4821]]

harmful interference to both broadcast and wireless operations. In 
addition, some areas may be subject to inter-service interference 
resulting from existing television stations along the borders in Canada 
and Mexico. The ISIX Order established a methodology (the ISIX 
methodology) for predicting such interference.
    21. The ISIX methodology varies depending on the applicable 
interference scenario or case. Cases 1 and 2 relate to interference 
from television to wireless operations (base stations and user 
equipment, respectively). Cases 3 and 4 relate to interference from 
wireless operations (base stations and user equipment, respectively) to 
digital TV receivers. The applicable interference case depends on where 
television stations are placed in the 600 MHz Band.
    22. In the Incentive Auction R&O, the Commission defined an 
``impaired'' PEA as one in which a 600 MHz Band licensee is restricted 
to some extent from operating within the geographic boundary of the PEA 
in order prevent harmful interference to television operations in the 
600 MHz Band; and conversely, one in which a 600 MHz Band licensee may 
receive harmful interference from television operations in the 600 MHz 
Band. In the ISIX Order, the Commission further clarified that 
impairments may result in ``restricted'' and ``infringed'' areas within 
a 600 MHz Band service area. A ``restricted'' area is one in which the 
wireless operator could cause harmful interference to a television 
station. An ``infringed'' area is one in which the wireless operator 
may receive harmful interference from a television station. The 
Commission proposed in the ISIX Further Notice, 79 FR 76282, December 
22, 2014, to allow wireless carriers to operate in areas where they may 
receive interference from TV stations, but not in areas where they may 
cause any harmful interference to television operations in the 600 MHz 
Band. The Commission further proposed that a 600 MHz Band licensee with 
an ``impaired'' license would hold the license for the entire PEA but 
would be limited to operations within the boundaries permitted under 
the inter-service interference rules. The ISIX Further Notice also 
proposed a methodology for use after the auction to prevent inter-
service interference based on actual deployment of wireless networks, 
including a zero-percent threshold for interference to TV stations from 
wireless services.

C. Mobile Spectrum Holdings Order

    23. The Commission established the maximum amount of licensed 
spectrum that will be reserved in each PEA for eligible entities 
(reserve-eligible entities) in the forward auction for different 
initial stage spectrum clearing targets. A spectrum clearing target 
will include licensed spectrum and guard bands; however only licensed 
spectrum is relevant to determination of the reserve. If the auction 
does not close in the initial stage, the maximum amount of reserved 
licensed spectrum in each PEA in subsequent stages will be the smaller 
of (1) the maximum amount in the previous stage, or (2) the amount that 
the reserve-eligible bidders demanded at the end of the previous stage. 
The maximum amount of reserved spectrum is 30 megahertz for initial 
clearing targets with more than 100 megahertz of licensed spectrum. The 
Mobile Spectrum Holdings R&O inadvertently omitted the 80 megahertz 
clearing scenario established by the Commission (as set forth in the 
technical appendix to the Incentive Auction R&O) from an accompanying 
chart. Consistent with the Commission's finding that a maximum spectrum 
reserve of 30 megahertz is appropriate for most levels of total 
available spectrum licenses except for levels less than 70 megahertz, 
the maximum amount of reserved spectrum for an 80 megahertz clearing 
scenario is 30 megahertz. The actual amount of reserved spectrum will 
depend on the demand by reserve-eligible bidders when the auction 
reaches a ``spectrum reserve trigger.'' The auction system will set the 
spectrum reserve trigger at the point when the final stage rule is 
satisfied.

III. Proposed Procedures for Overall Incentive Auction Structure, 
Including Integration of Reverse and Forward Auctions

    24. The Commission seeks comment on integrating the reverse and 
forward auction bidding processes consistent with the staged structure 
it established in the Incentive Auction R&O. In particular, the 
Commission seeks comment on procedures for setting the broadcast 
television spectrum clearing target and for determining whether the 
final stage rule is satisfied, as well as on the steps triggered by the 
determination that the final stage rule is satisfied.

A. Setting an Initial Spectrum Clearing Target and Determining 
Impairments

    25. The Commission proposes procedures for setting the initial 
clearing target for the auction. The approach the Commission proposes 
will establish the highest clearing target possible from among the 
available options given broadcaster participation in the reverse 
auction. Alternatively, the Commission seeks comment on whether it 
should omit any initial clearing targets, such as the 108 MHz clearing 
target. The auction system will use mathematical optimization 
techniques to identify provisional TV channel assignments that protect 
the coverage area and population served of non-participating television 
stations as required by the Spectrum Act. Where necessary, non-
participating stations will be assigned to channels in the 600 MHz 
Band. Any stations assigned to channels in the 600 MHz Band will be 
entitled to the same protection in the repacking process as other TV 
stations, and will be protected from inter-service interference under 
the standards the Commission adopted in the ISIX proceeding, in which 
it has proposed strict standards to protect TV stations from such 
interference. In making such assignments, the Commission proposes that 
the auction system will minimize potential inter-service interference 
to 600 MHz Band licenses. To limit the extent of market variation in 
the provisional TV channel assignment plan, the Commission proposes to 
limit impairments on a nationwide aggregated basis to less than 20 
percent of the total U.S. population (measured on a weighted basis). If 
a provisional channel plan does not exceed this limit, the auction 
system may apply any secondary objectives for TV channel assignments 
that the Commission establishes. If a provisional channel plan exceeds 
the less than 20 percent limit, however, the process will start again 
with the next lower clearing target.
    26. The Commission first addresses its proposed approach to 
measuring the extent of potential inter-service interference to 600 MHz 
Band PEAs in order to set the clearing target. Second, the Commission 
addresses objectives for determining the location of any TV stations 
that must be assigned to the 600 MHz Band to accommodate market 
variation. Third, the Commission explains its proposal to use 
``weighted-pops'' to calculate the market variation associated with a 
clearing target and propose a standard for limiting market variation. 
Fourth, the Commission addresses the use of optimization techniques 
under its proposed approach to setting a clearing target.
i. Measuring the Extent of Potential Impairments
    27. In order to determine a clearing target, the auction system 
must be able to evaluate the extent of any potential impairments to 
licenses in the 600 MHz Band as a result of market variation. In the 
ISIX R&O, the Commission adopted

[[Page 4822]]

the ISIX methodology to predict potential inter-service interference 
between TV and wireless services. Appendix B of the Auction 1000 
Request for Comment details how the Commission proposes to use the data 
produced using this methodology to generate mathematical constraints 
that enable the auction system to measure the extent of potential 
impairments to 600 MHz Band licenses in order to set a clearing target. 
Under the proposed procedure, the raw data the ISIX methodology 
produced at the two-by-two kilometer cell level would be aggregated 
into uplink and downlink, county-level data sets (a table cross-
referencing counties to PEAs is available on the Commission's Web site 
at https://transition.fcc.gov/oet/info/maps/areas/) and mapped to 
specific 600 MHz Band licenses in advance of the incentive auction. The 
percentage of the population of each county subject to inter-service 
interference then would be calculated for every TV station eligible for 
protection in the repacking process on every possible channel in the 
600 MHz Band. Consistent with the ISIX methodology, which defines each 
cell as ``impaired'' or ``unimpaired'' depending on whether it is 
subject to any inter-service interference, the procedure would apply a 
threshold to determine whether a county is ``impaired'' for each 
possible TV station and channel combination.
    28. The Commission invites comment on a threshold for determining 
whether a county is ``impaired'' for purposes of determining 
impairments for a given clearing target. In particular, the Commission 
invites comment on setting a threshold within the range of 10-to-20 
percent. Under the Commission's proposed methodology, a county with 
predicted impairment above the threshold for a specific station-channel 
assignment would be considered wholly impaired, i.e., 100 percent of 
the county population, for purposes of measuring the extent of 
impairment in the PEA when setting the clearing target. In considering 
the impaired population to which the Commission will apply the 
threshold, it also proposes to distinguish between uplink and downlink 
impairments. In this regard, a TV station in the uplink portion of the 
600 MHz Band might allow unimpaired use of the downlink portion of a 
paired 5+5 megahertz license. Accordingly, the Commission proposes that 
rather than consider uplink impairments above the threshold to be 
wholly impaired as it does with downlink impairments, it consider a 
county with uplink impairments above the threshold to be 50 percent 
impaired. Commenters that advocate a different threshold or approach 
should explain why they believe their approach would better inform the 
setting of a clearing target.
    29. The Commission proposes to aggregate the data in order to 
reduce the volume of data inputs to a quantity that reasonably can be 
utilized in setting a clearing target. The data would be aggregated to 
this level only for use in the optimization procedure to set a clearing 
target; the Commission proposes that the auction system would provide 
more detailed data on the location and extent of impairment to 600 MHz 
Band licenses during the forward auction.
    30. Under the Commission's proposed procedure for setting an 
initial clearing target, the mathematical constraints for measuring 
impairments that are the inputs to the optimization procedure would be 
generated before the auction, so that during the auction the 
optimization can dynamically calculate the percentage of impaired 
population within each license for any possible combination of TV 
stations and channel assignments in the 600 MHz Band by adding the 
total population of the ``impaired'' counties within the PEA and 
dividing that sum by the total population of all of the counties within 
the PEA. The Commission proposes that if a 600 MHz Band license is more 
than 50 percent impaired by the assignment, the optimization procedure 
will consider all of the associated weighted-pops to be impaired, 
consistent with its proposal not to offer such licenses in the forward 
auction.
ii. Assigning TV Stations to the 600 MHz Band as Necessary To 
Accommodate Market Variation
    31. The Commission seeks comment on certain details for assigning 
television stations to the 600 MHz Band as necessary to accommodate 
market variation. Under the Commission's proposed approach, the auction 
system will use mathematical optimization techniques to identify a 
provisional TV channel assignment plan for stations that elect not to 
participate in the auction that best meets certain primary objectives. 
While these techniques will identify channels in the remaining TV bands 
for as many of these stations as possible, the auction system may not 
be able to assign channels in the remaining bands to all of the 
stations that must be assigned channels in areas that are constrained 
due to factors such as lack of broadcaster participation in the reverse 
auction or international border-related issues. Under such 
circumstances, the auction system will assign television stations to 
channels in the 600 MHz Band. Any television stations assigned to 
channels in the 600 MHz Band will be entitled to the same protection in 
the repacking process as other TV stations, and will be protected from 
inter-service interference under the standards the Commission adopts in 
the ISIX proceeding, in which it has proposed not to allow any harmful 
interference to TV stations from wireless services.
    32. Importantly, although TV channel assignments in the 
broadcasting portion of the band will be provisional until the final 
channel assignment process, which occurs after bidding ends in the 
final stage of the auction, under the Commission's proposed approach 
any assignments of television stations to channels in the 600 MHz Band 
will be fixed prior to the start of the forward auction for that stage, 
and those assignments will be final if no subsequent stages of the 
auction are necessary. Thus, a television station's assignment to a 
channel in the 600 MHz Band for purposes of setting a clearing target 
may determine both its post-auction channel assignment and the specific 
impairments to 600 MHz Band blocks that will be offered in the forward 
auction, depending on whether the final stage rule is satisfied in that 
stage. If subsequent stages are necessary, the auction system will 
generate a new band plan that may involve different provisional TV 
station and channel assignments in the 600 MHz Band. In contrast to any 
TV channel assignments in the 600 MHz Band, the vast majority of 
assignments to channels in the remaining television bands will change 
constantly during the repacking process.
    33. Because of differences in wireless uplink and downlink 
transmission technologies, location of a television station in the 
downlink or uplink portion of the 600 MHz Band is likely to affect the 
extent of impairments to affected PEAs and, therefore, 600 MHz Band 
license prices. In particular, uplink impairments are likely to affect 
larger geographic areas than downlink impairments, although whether 
that interference to a larger area translates into a significantly 
larger impact on value to the forward auction licenses depends on the 
population density within a PEA. Uplink impairments also may affect 
fewer spectrum blocks than downlink impairments, however, because they 
would allow for unimpaired use of the downlink portion of a 600 MHz 
Band license by carriers with below-1 GHz uplink spectrum. On the other 
hand, assigning stations to the downlink band would limit the 
geographic reach of impairments and

[[Page 4823]]

promote greater contiguity with television stations in the remaining TV 
bands. Assigning stations to the downlink band, and/or only to the 
licensed portion of the uplink band, would also result in more 
consistently usable nationwide spectrum for wireless microphones and 
unlicensed devices that will operate in the duplex gap, i.e., the guard 
band between 600 MHz Band uplink and downlink services. In cases where 
a television station must be assigned to a channel in the 600 MHz Band 
in order to meet a given clearing target, the Commission proposes to 
assign these stations based on its goal of minimizing the loss of value 
due to impairments, i.e., minimizing the total impaired weighted-pops 
nationwide. Under this proposal, the optimization procedure could 
assign TV stations to any frequency in the 600 MHz Band. This could 
lead to assignments in the uplink portion of the 600 MHz Band in some 
markets, and in the downlink portion in others. The Commission proposes 
to include this objective in the optimization procedure consistent with 
its goals of limiting the potential for inter-service interference and 
maintaining a generally consistent band plan. In addition, the proposed 
objective will increase the likelihood of meeting the incentive auction 
reserve price conditions at the initial clearing target. On the other 
hand, the Commission recognizes that this approach may result in 
assigning television stations to the duplex gap or other guard bands in 
some markets, and limit the contiguity of TV stations if they are not 
assigned to the downlink portion of the 600 MHz Band.
    34. Alternatively, the Commission seeks comment on whether it 
should assign stations to the downlink portion of the 600 MHz Band 
whenever feasible to do so, in the interest of greater contiguity and 
ensuring more consistently usable nationwide unlicensed spectrum. The 
Commission notes that by limiting the choice of assignments, a 
downlink-only approach may make it more difficult to identify an 
assignment of TV stations that meets the less than 20 percent standard 
than would its more flexible proposed approach and, therefore, could 
result in setting a lower clearing target. The Commission invites 
commenters to address the costs and benefits of its proposal and the 
alternative, including the potential impact on broadcast and wireless 
licensees, as well as on wireless microphones and unlicensed devices, 
and to discuss how the Commission should prioritize objectives where 
multiple outcomes are possible. In the Part 15 NPRM, 79 FR 69709, 
November 21, 2014, the Commission proposed technical criteria for 
wireless microphones and unlicensed devices for each possible guard 
band size (7, 9, or 11 megahertz).
iii. Standard for Limiting Market Variation
    35. In the Incentive Auction R&O, the Commission established that 
the 600 MHz Band Plan will allow for market variation, while 
recognizing that it is important to limit the potential for inter-
service interference and maintain a generally consistent band plan 
nationwide by applying a ``near-nationwide'' standard. The Commission 
therefore proposes to limit the amount of market variation associated 
with the initial spectrum clearing target by limiting impairments on a 
nationwide aggregated basis to less than 20 percent of ``weighted-
pops.'' The Commission believes that its proposed approach will promote 
the central goal of a successful auction that allows market forces to 
determine the highest and best use of spectrum. By accommodating market 
variation, it will ensure that broadcasters have the opportunity to 
participate in the reverse auction in markets where interest is high, 
and avoid the need to restrict the licenses offered in the forward 
auction to the number available in the most constrained market. At the 
same time, by strictly limiting the total amount of market variation 
associated with a clearing target, it will limit the potential for 
inter-service interference and help 600 MHz Band licensees achieve 
economies of scale when deploying their new networks. The Commission's 
proposed approach also takes into account the relative costs and 
benefits of impairing licenses in different PEAs.
    36. For purposes of applying the near-nationwide standard, the 
Commission proposes to measure the impact of potential impairments in 
terms of ``weighted-pops,'' weighting the affected population in a 
license area by an index of area-specific prices from prior auctions. 
The same weighted-pops amount will be applied for each spectrum block 
in a PEA. This index is the same index used for calculating bidding 
units before applying the proposed decile approach. Both indices are 
provided in Appendix F of the Auction 1000 Request for Comment. The 
Commission proposes to incorporate the final results of the auction of 
AWS-3 licenses (Auction 97) when calculating the indices. The 
Commission seeks comment on whether it should group the index by 
deciles for purposes of applying the near-nationwide standard as it 
proposes for calculating bidding units. Under this approach, for a 
given clearing target and assignment of TV stations to channels, the 
Commission calculates the percentage of the population impaired in 
every PEA for each license using the county level data generated using 
the measurement approach. The Commission multiplies that percentage by 
the weighted-pops associated with the PEA to determine the ``impaired 
weighted-pops'' for the license. To calculate a nationwide total of 
impaired weighted-pops, the impaired weighted-pops for all licenses 
associated with a clearing target will be added together. This total 
will then be divided by the nationwide total number of weighted-pops 
for all licenses associated with that clearing target to determine 
whether the maximum aggregate nationwide impairment standard or 
threshold is satisfied. The Commission believes that its proposed 
approach to applying a threshold provides for flexibility in balancing 
the population that will be affected by potential inter-service 
interference with the number of markets that will be affected, and 
accounts for the relative value of the market to wireless providers 
based on past auction prices. Alternatively, the Commission seeks 
comment on whether it should use a metric that does not weight 
population by the amount of bandwidth and/or by a price index. For 
example, an alternative metric could require that 80 percent of the 
U.S. population (or price-weighted population) must be in areas not 
considered impaired, regardless of the quantity of impaired spectrum in 
any one area.
    37. The Commission proposes to set the near-nationwide standard at 
less than 20 percent. Under this standard, a clearing target could be 
chosen only if 80 percent or more of the weighted-pops in the targeted 
amount of spectrum nationwide is considered unimpaired according to its 
methodology. If the provisional TV channel assignment plan associated 
with a clearing target results in potential impairments to 20 percent 
or more of the total number of weighted-pops nationwide, the auction 
system would consider a lower clearing target. The Commission believes 
that a less than 20 percent limit is appropriate to avoid reducing the 
amount of spectrum that will be available in most areas nationwide 
while ensuring that, for any given clearing target, 600 MHz Band Plan 
licenses generally will not be affected by inter-service interference. 
The Commission's proposal to use weighted-pops also will help to ensure 
that most of the spectrum in the most

[[Page 4824]]

heavily-weighted PEAs remains unimpaired.
    38. The Commission seeks comment on these proposals. The Commission 
also invites comment on alternatives to its proposed near-nationwide 
standard. For example, should the Commission set a lower standard? 
Should the Commission require that certain PEAs, or a specific number 
of PEAs (e.g., 40 of the top 50 PEAs as measured by total population), 
not have any Category 2 licenses in order to choose a clearing target? 
The Commission encourages commenters to address the trade-offs involved 
in any alternative approach that they advocate.
iv. Clearing Target Optimization Procedure
    39. Consistent with the Incentive Auction R&O, the process the 
Commission will use to set the initial clearing target will incorporate 
mathematical optimization techniques. The proposed optimization 
procedure is set forth in detail in Appendix C of the Auction 1000 
Request for Comment. This process will also provisionally assign 
television stations to channels under an assignment plan that best 
meets the rules and objectives the Commission proposes. Once a clearing 
target is set, the resulting provisional assignment plan of television 
stations to channels in the television bands will be used by the 
reverse auction system as the initial tentative assignment, and 
information about license impairments due to stations assigned in the 
600 MHz Band will be used in the forward auction portion of the stage.
    40. The proposed procedure will apply a number of rules or 
constraints that any provisional assignment plan must satisfy. It will 
ensure that any assignment plan includes a permissible channel in its 
pre-auction band for every television station that is not participating 
in the reverse auction. The procedure will apply the technical 
repacking constraints established in the Incentive Auction R&O, taking 
into account any fixed constraints specific to an area or a channel 
that would prevent an assignment of a station to a channel, as well as 
all other stations that cannot be located on a co- or adjacent channel. 
The procedure also will determine an initial assignment of 
participating stations to relinquishment options consistent with the 
station's initial commitments made during the application process and 
will attempt to assign as many stations as possible to their preferred 
option.
    41. The Commission proposes that the primary objective of the 
proposed clearing target optimization procedure will be to minimize the 
total impaired weighted-pops nationwide. The optimization procedure 
will measure the percentage of population impaired in a PEA for a given 
television station and channel assignment using the measurement 
approach and described in more detail in Appendix C of the Auction 1000 
Request for Comment. Thus, the optimization procedure will determine a 
feasible assignment of television stations to channels in the remaining 
TV bands where possible and, as necessary, assign stations to channels 
in the 600 MHz Band so as to minimize potential impairments to 600 MHz 
Band licenses.
    42. In addition to these primary rules and objectives, the 
procedure could consider additional criteria in setting a clearing 
target. For example, should the procedure apply criteria to account for 
operation of the proposed dynamic reserve price process? Should it 
apply criteria to increase the likelihood of satisfying the final stage 
rule? The Commission seeks comment on whether to apply additional 
criteria in setting a clearing target. The Commission asks commenters 
to keep in mind that the tradeoff from stricter requirements may be to 
move to a lower clearing target, where fewer licenses will be available 
and fewer stations will be needed to relinquish spectrum usage rights.
    43. Any channel assignment plan that satisfies the primary rules 
and objectives also may be modified for secondary objectives, provided 
that it does not violate the Commission's less than 20 percent standard 
for impairments. Should the Commission incorporate a secondary 
objective that would favor an initial channel assignment with at least 
a minimum level of vacancy in the broadcasting portion of the band, so 
as to give the auction system more flexibility to find feasible 
assignments during the bidding rounds, potentially avoiding the need to 
move to a lower clearing target because it failed to meet the final 
stage rule? In this context, should the Commission consider requiring 
that the 20 percent nationwide standard include sufficient vacancy to 
accommodate additional impairments created during any reverse auction 
dynamic reserve pricing procedures? The Commission seeks comment on 
possible secondary objectives to be applied in the optimization 
procedure. Because the optimization procedure may identify more than 
one possible assignment plan that satisfies the primary rules and 
objectives, the Commission particularly seeks comment on how the 
procedure should choose between plans to best meet the goals of the 
incentive auction. For example, the Commission asks commenters to 
consider whether the procedure should favor an assignment in which the 
number of 600 MHz Band blocks, or the number of Category 1 blocks (a 
Category 1 license is any license with potential impairments that do 
not exceed 15 percent of the population) is most nearly the same in the 
largest number of PEAs, in order to promote the geographic contiguity 
of the band plan. Alternatively, the Commission invites comment on 
whether the optimization procedure should try to minimize the number of 
PEAs--or the number of particular PEAs--in which Category 2 blocks 
outnumber Category 1 blocks, to avoid having PEAs with significantly 
fewer Category 1 blocks than are available in most areas nationwide.

B. Final Stage Rule

    44. The final stage rule the Commission adopted in the Incentive 
Auction R&O incorporates an aggregate reserve price based on the bids 
in the forward auction. Satisfaction of the rule conditions will cause 
the current stage to become the final stage for the auction's clock 
bidding rounds. The rule has two components, both of which must be 
satisfied. The first and second components are complementary and not 
cumulative. The auction must satisfy both components, but it need not 
raise sufficient proceeds to satisfy the first in addition to the 
second. Rather, the same bids and proceeds can be considered when 
satisfying each component. The Commission seeks comment on determining 
the price and spectrum clearing benchmarks for the first component of 
the rule, as well as on other rule implementation issues.
i. First Component: Average/Aggregate Prices in Forward Auction
    45. The Commission proposes an average price per MHz-pop (the term 
MHz-pop is defined as the product derived from multiplying the number 
of megahertz associated with a license by the population of the 
license's service area, i.e., PEA, for the 600 MHz band, specifically) 
benchmark of $1.25 for spectrum offered in the largest 40 PEAs by 
population in the forward auction and a forward auction spectrum 
benchmark of 70 megahertz, corresponding to a broadcast spectrum 
clearing target of 84 megahertz. The Commission also seeks comment on 
its proposal to consider a subset of those licenses in applying the 
first component of the final stage rule.
    46. The first component ensures that winning bids for the licenses 
in the forward auction reflect competitive

[[Page 4825]]

prices. The Commission explained in the Incentive Auction R&O that the 
first component of the reserve price will be satisfied if, for a given 
stage of the auction: (1) The average price per MHz-pop for licenses in 
the forward auction meets a price benchmark that will be set by the 
Commission in the pre-auction process; or (2) the total proceeds 
associated with licenses in the forward auction exceed the product of 
the price benchmark, the forward auction spectrum benchmark, and the 
total number of pops for those licenses. The determination of the 
average price and spectrum clearing benchmarks is therefore essential 
to the implementation of the first component of the final stage rule.
    47. Setting an average unit price benchmark of $1.25 per MHz-pop in 
the largest 40 PEAs by population will accomplish the Commission's goal 
of ``assuring that prices for licenses in the forward auction reflect 
competitive values without reducing the amount of spectrum repurposed 
for new, flexible-use licenses.'' The closest comparable spectrum 
auction--Auction 73--generated an auction-wide average price per MHz-
pop of $1.28 and an average price among paired spectrum blocks of 
$1.36. Since that auction closed in early 2008, spectrum prices 
generally appear to have increased, although the growth rate cannot be 
validated based on comparable data due to the absence of final results 
for a large-scale auction in that period. Moreover, because the prices 
of 600 MHz Band licenses will be determined by the forward auction 
bidding, the Commission believes that any aggregate reserve price it 
sets should reflect a ``floor'' and not a ``ceiling'' of the 
``competitive values'' of these licenses, in order to provide 
sufficient margin to account for the inherent price uncertainty present 
in any auction.
    48. The Commission proposes to set the forward auction spectrum 
benchmark to correspond with the spectrum recovery scenario in which 
the Commission clears 84 megahertz of broadcast TV spectrum and offer 
licenses for 70 megahertz of spectrum in the forward auction. The 
spectrum benchmark will be used as part of the alternative formulation 
of the final stage rule's first component, which ``recognizes that if 
the incentive auction repurposes a relatively large amount of spectrum 
for flexible uses, per-unit market prices may be expected to decline 
consistent with the increase in available supply.'' An 84 megahertz 
broadcast TV spectrum clearing target, which would repurpose all of the 
spectrum between TV channel 37 and the 700 MHz Band and provide 70 
megahertz of spectrum in the forward auction, would promote the 
Commission's competitive goals by enabling multiple bidders to obtain 
low-band spectrum. Therefore, the Commission believes that this 
threshold is appropriate for the forward auction spectrum benchmark.
    49. The Commission proposes to determine whether the first 
component of the final stage rule is satisfied based on the average 
prices for a subset of PEAs likely to be subject to the greatest level 
of demand. The Commission proposes to include in the subset the 40 
largest PEAs by population because they cover geographic areas that 
have usually generated the highest average prices per MHz-pop in prior 
spectrum license auctions. In previous auctions, prices for licenses in 
these ``high-demand'' areas have accounted for a substantial fraction 
of total auction revenues, and further, licenses in ``high-demand'' 
areas tend to reach their final prices well before bidding stops on all 
licenses, making these markets a good leading indicator of final 
auction revenues. Further, using this subset of PEAs will promote a 
speedy auction by enabling the auction system to determine quickly when 
the final stage rule will not be met necessitating a new stage with a 
lower clearing target. The Commission seeks comment on this use of 
``high-demand'' PEAs and the proposed definition of this ``high-
demand'' subset.
    50. The Commission further proposes, in considering whether average 
prices meet the benchmark, to consider only bids for spectrum blocks in 
Category 1. The Commission proposes to offer spectrum blocks in two 
categories of generic licenses for bidding in the forward auction. 
Specifically, the Commission defines a Category 1 license as any 
license with potential impairments that affect zero to 15 percent of 
the population of a specific PEA, and as Category 2, any license with 
potential impairments that affect greater than 15 percent but less than 
or equal to 50 percent of the population. Limiting the Commission's 
consideration of blocks in this manner is consistent with its proposed 
use of data from other auctions in determining the relevant average 
price, as the licenses in those prior auctions were not impaired in a 
manner comparable to the proposed licenses in Category 2.
    51. Applying the Commission's proposals to the first component of 
the final stage rule, as explained in more detail in Appendix G of the 
Auction 1000 Request for Comment, the first component will be satisfied 
if the average price per MHz-pop for Category 1 licenses in ``high-
demand'' PEAs in the forward auction equals or exceeds $1.25 per MHz-
pop at clearing targets at or below the benchmark clearing target. For 
clearing targets above the benchmark clearing target, the Commission 
proposes to consider current auction proceeds for all licenses when 
comparing to the proceeds that would be generated by the benchmark 
price for ``high demand'' PEAs and the benchmark clearing target. This 
simplifies the evaluation of the formulation since the Commission will 
compare a number publicly announced at the end of every round (the 
total forward auction proceeds) to a fixed number known in advance (the 
product of the price and spectrum benchmarks that it adopts, and the 
total number of pops covered by licenses in ``high-demand'' PEAs). 
Under this formula, the first component of the final stage rule may be 
satisfied even if the overall average price per MHz-pop in the ``high-
demand'' PEAs fails to meet the proposed $1.25 price benchmark.
    52. In evaluating whether the first component of the final stage 
rule is satisfied, the Commission also proposes not to take into 
account any adjustments to final clock prices. Thus, the Commission 
proposes to rely on gross bids, rather than bids net of individual 
bidders' bidding credits or any adjustments for impairments. The first 
component is intended to assess whether the bids reflect competitive 
prices for the licenses. The Commission tentatively concludes that the 
clock prices will adequately measure competitive prices for the 
licenses in the proposed Category 1, even though the full amount of the 
clock price may not be collected from every winning bidder. Moreover, 
since winning bidders will not yet be determined at the time the final 
stage rule is met, it will not be clear which licenses will be subject 
to bidding credits. The clock price reflects a common metric for 
pricing the licenses and is appropriate to use in assessing whether the 
first component of the final stage rule has been satisfied.
ii. Second Component: Covering Costs
    53. The second component of the final stage rule requires that the 
proceeds of the forward auction be sufficient to meet mandatory costs 
and expenses set forth in the Spectrum Act and any Public Safety Trust 
Fund amounts needed in connection with FirstNet. Given the purpose of 
assuring sufficient proceeds for specified purposes, the Commission 
proposes a conservative approach to estimating the proceeds resulting 
from

[[Page 4826]]

forward auction bids for evaluating whether the second component is 
met.
    54. The Spectrum Act requires that the forward auction generate 
proceeds sufficient to pay three types of expenses: payments to winning 
bidders in the reverse auction; the Commission's relevant 
administrative costs of the auction; and an estimate of broadcaster 
relocation costs eligible for reimbursement. In addition, the 
Commission concluded that the forward auction proceeds also must cover 
a fourth expense: any Public Safety Trust Fund amounts still needed to 
provide funding for FirstNet as contemplated in the Spectrum Act.
    55. The reverse auction itself will determine the amount of the 
first expense. With regard to the second expense, the Commission cannot 
yet provide a reliable estimate of the amount of its expenses in 
conducting the incentive auction because there is still much work to do 
before it can conduct the auction. The Commission therefore proposes 
here to provide an estimate in the Procedures PN and a maximum 
percentage by which the final amount might vary from that estimate. The 
final amount for purposes of the final stage rule would be provided no 
later than the commencement of bidding. The flexibility in this 
approach will enable the Commission to discharge its statutory 
obligation to recover the relevant expenses from auction proceeds while 
providing adequate information to potential and actual auction 
participants to make informed decisions about participating and 
bidding.
    56. With regard to the third expense that must be covered, the 
actual amount that will be needed to reimburse broadcasters from the TV 
Broadcaster Relocation Fund (Reimbursement Fund) will not be known 
until sometime after the auction. In any event, the Spectrum Act 
provides that the forward auction must generate proceeds sufficient to 
meet the Commission's estimate of the total expenses, as opposed to the 
actual amount. The Commission proposes to estimate this amount at $1.75 
billion, the maximum amount that the Spectrum Act permits it to deposit 
in the Reimbursement Fund. The Commission considers setting this 
expense at the maximum amount to be prudent in light of the difficulty 
of estimating the amount in advance and the substantially conflicting 
range of estimates suggested in the record to date.
    57. With regard to the fourth expense, the Commission proposes to 
announce in the Procedures PN any amount needed in the Public Safety 
Trust Fund to provide funding for FirstNet. The maximum amount of the 
Public Safety Trust Fund deposits to be made available to FirstNet for 
build out under the Spectrum Act is $7 billion. The amount that the 
incentive auction must provide will depend on the proceeds generated 
for FirstNet by the auction of AWS-3 licenses (Auction 97) and whether, 
once Auction 97 has been concluded, there are any Public Safety Trust 
Fund amounts still needed to provide funding for FirstNet as 
contemplated in the Spectrum Act. The Commission is optimistic that 
upon the conclusion of Auction 97, it will be clear that deposits to 
the Public Safety Trust Fund will be sufficient to fully fund requisite 
amounts for FirstNet.
    58. The Commission proposes to take into account discounts that may 
affect actual amounts paid by winning bidders when evaluating whether 
the second component of the final stage rule is satisfied. Given the 
second component's purpose of assuring sufficient proceeds for 
specified purposes, the Commission believes a more conservative 
approach to estimating the ultimate proceeds resulting from forward 
auction bids is appropriate than for the first component of the final 
stage rule. Accordingly, in determining whether the second component 
has been satisfied, the Commission proposes to take into account any 
discounts based on impairments, as well as discounts based on small 
business bidding credits applicable to particular bidders.
    59. A final license price may be adjusted to take into account the 
extent of any impairments that exist in the license. Accordingly, the 
Commission proposes here that it use the available information 
regarding the extent of the impairments when evaluating the final stage 
rule to discount the current clock price by the impairments. Doing so 
effectively will apply the same percentage discount that will be 
applied to the final price for the license, presuming the final stage 
rule is satisfied. The estimate used will be the lowest amount possible 
for the final price, which ultimately may be larger based on bidding in 
clock rounds and any additional bidding on the license in the 
assignment phase.
    60. It is more difficult to estimate the final effect of small 
business bidding credits on auction proceeds prior to the conclusion of 
the auction. In order to do so, the Commission proposes that the 
auction system will presume that the bidder with the largest bidding 
credit will win the blocks it is bidding on and then proceed to the 
bidder with the next largest bidding credit and so on, until there are 
no more blocks left. Moreover, the Commission proposes to presume that 
the bidders with the largest bidding credits will win the blocks that 
are least impaired and thus, subject to the least adjustment based on 
the extent of impairment. The Commission believes that this approach is 
appropriate in light of the purpose of the second component. The 
Commission notes that a more conservative approach would be to discount 
all bids by the largest bidding credit claimed by any bidder in the 
auction, thereby assuring that the final winning bids could not be any 
lower than the estimate. However, the Commission does not propose to 
take this more conservative approach because it likely would 
overestimate substantially the discounts on final winning bids.
    61. Unlike other bidding credits, winning bidders initially apply 
for Tribal lands bidding credits after the close of bidding, and so the 
amount of any Tribal lands bidding credits will not be known until 
after the auction, making it very difficult to assess their effect on 
auction proceeds. In past auctions, the Commission addressed this 
difficulty with a rule (47 CFR 1.2110(f)(3)(v)) that limits any amounts 
disbursed as Tribal lands bidding credits based on the available funds 
that exceed the relevant reserve price. The rule thus allows the award 
of Tribal lands bidding credits so long as the awards do not reduce the 
amount of funds otherwise required by a reserve price. The second 
component of the final stage rule specifically functions to assure that 
auction proceeds will equal or exceed the total of the four expenses 
that the second component reflects. Accordingly, the Commission 
proposes to apply 47 CFR 1.2110(f)(3)(v) with respect to the amount of 
the second component to preclude the possibility that the post-auction 
award of Tribal lands bidding credits could reduce auction proceeds 
below the total of the four expenses. Under this proposal, so long as 
there are sufficient proceeds to fund both the four expenses and any 
Tribal lands bidding credits, the credits will be awarded in full. If 
the proceeds are not sufficient to cover both the four expenses and any 
such Tribal lands bidding credits, the credits will be reduced 
proportionally as provided in 47 CFR 1.2110(f)(3)(v) so that the four 
expenses will be covered in full and any credits awarded will use only 
proceeds in excess of the total of the four expenses. Commenters 
objecting to this proposal should specify an alternative approach to 
prevent total auction proceeds from falling below the amount of the 
final stage rule's second component.

[[Page 4827]]

C. Stage Structure

    62. In the Incentive Auction R&O, the Commission decided that the 
incentive auction will begin with reverse auction bidding followed by 
forward auction bidding in the initial stage and that, if necessary, 
bidding will continue over multiple stages, each including reverse and 
forward auctions, for successively lower clearing targets, until the 
final stage rule is met. Here the Commission seeks comment on remaining 
issues related to the stage structure. In particular, the Commission 
proposes procedures to determine whether the auction is in its final 
stage. The Commission also proposes procedures for moving to an 
extended round if certain conditions are met, as well as steps for 
transitioning to a new stage if necessary.
i. Sequence of Reverse and Forward Auctions
    63. Consistent with the Commission's decision in the Incentive 
Auction R&O regarding the first stage, the Commission intends that in 
any stage, the reverse auction will occur first, to be followed by the 
forward auction. Under this proposal, the reverse auction will run 
until the reverse auction stopping rules are met. The forward auction 
will commence once the reverse auction has stopped.
    64. The Commission seeks to provide the minimum necessary time 
between the reverse and forward auctions in any stage. The Commission 
therefore proposes to start forward auction bidding in the initial 
stage on the second business day after the close of bidding in the 
stage's reverse auction. With respect to any subsequent stages, the 
Commission proposes to start forward auction bidding on the next 
business day after the close of reverse auction bidding. Before forward 
auction bidding commences in any stage of the auction, forward auction 
bidders will be informed of the number of blocks to be offered in each 
PEA and the degree to which any of those blocks are impaired. The 
Commission seeks comment on this proposal. If commenters suggest a 
longer interval, the Commission asks that they provide details on why a 
longer period is desirable.
ii. Final Stage Determination and Implementation of Extended Round
    65. The Commission proposes to evaluate whether the final stage 
rule is met throughout forward auction bidding in order to determine as 
quickly as possible whether the auction is in its final stage. This 
approach will allow the auction system to implement procedures 
triggered by satisfaction of the rule as early as possible and promote 
the speedy conclusion of the overall auction process. Specifically, the 
auction system will evaluate whether forward auction proceeds are 
sufficient to satisfy the final stage rule as part of the bid 
processing that occurs after each round of forward auction bidding. As 
prices and associated auction proceeds increase during the forward 
auction, the auction system will have the needed information to 
evaluate whether all required conditions of the final stage rule have 
been met.
    66. The Commission also proposes to implement an ``extended round'' 
in which bidders will have the opportunity to increase their bids to 
make up any shortfall in the final stage rule under specified 
circumstances. The purpose of an extended round is to attempt to 
satisfy the final stage rule without moving to a new stage and lower 
clearing target. In the absence of an extended round, the current stage 
of the auction would be deemed to have failed and the auction would 
move to a new stage with a reduced clearing target.
iii. Transition to Any Subsequent Stages
    67. After the conclusion of a stage that has ended without 
satisfying the final stage rule, and prior to beginning of any 
subsequent stage, the Commission proposes that the auction system will 
announce the new bidding schedule, including the date and time that 
bidding will start in the reverse auction portion of the next stage. If 
the auction must move to a new stage, the Commission proposes to set 
the clearing target for the next stage as the next lowest clearing 
target. Alternatively, the Commission seeks comment on whether the 
benefits outweigh the costs of skipping some clearing targets. For 
example, should the Commission skip the 108 MHz clearing target when 
moving to a lower clearing target because under that scenario two 
downlink blocks are separated from the remaining downlink blocks by 
channel 37?

D. After the Final Stage Rule Is Satisfied

    68. When forward auction bidding satisfies the final stage rule, 
that stage of the auction will be the final stage. Meeting the final 
stage rule will not ``close'' the forward auction, however, as long as 
demand exceeds supply in any PEA. Rather, bidding will continue until 
demand does not exceed supply for all blocks in all PEAs. When this 
clock phase of the auction ends, the next step in the forward auction 
will be the assignment phase in which successful forward auction 
bidders will bid for frequency-specific licenses equal to the number of 
blocks they won in the clock phase. The Commission proposes that 
bidding in the assignment phase of the forward auction will start five 
business days after the auction system provides more detailed 
information about the assignment phase. The Commission recognizes that 
forward auction bidders will need a period of time to develop bidding 
strategies for the assignment phase, particularly since this is the 
first time it has conducted a frequency assignment phase. However, the 
Commission's goal is to conclude the incentive auction as efficiently 
as possible. Thus, the Commission believes the interval it proposes 
before beginning the assignment phase should be adequate.

IV. Proposed Reverse Auction Procedures

A. Relinquishment Options and Information Available

    69. The Commission explained in the Incentive Auction R&O that the 
purpose of the reverse auction is to identify broadcasters willing to 
relinquish some or all of their spectrum usage rights, and the 
corresponding incentive payments those broadcasters will require, in 
order to clear a stage-specific spectrum clearing target. To this end, 
the Commission adopted a descending clock auction format, 
relinquishment options, and a repacking methodology that will be 
incorporated into the reverse auction system. Bidding will take place 
in a series of rounds in which a bidder will be presented with price 
offers for each of its valid options for relinquishing spectrum usage 
rights. The Commission seeks comment on procedures to implement the 
various relinquishment options it established. The Commission also 
addresses the information that will be made available to bidders and to 
the public during the reverse auction bidding process.
i. Options for Relinquishing Spectrum Usage Rights
    70. The Commission proposes to implement the relinquishment options 
established in the Incentive Auction R&O by giving each bidder the 
opportunity to bid for the various options that are open to it given 
the station's pre-auction band location (UHF, High-VHF, or Low-VHF). 
Specifically, a licensee with a UHF station can bid to relinquish all 
spectrum usage rights and go off-air, or to move to a High-VHF channel 
or a Low-VHF channel. A licensee with a High-VHF station can bid to go 
off-air or to move to a Low-VHF channel. A licensee with a Low-VHF 
station can bid

[[Page 4828]]

only to go off-air. To incorporate the channel sharing option into the 
bidding process, the Commission proposes that a participant that wishes 
to relinquish rights in order to share another licensee's channel will 
bid to go off-air, following the same bidding procedures as bidders 
that wish to go off-air without retaining a license. Throughout the 
auction, all bidders will maintain the option of declining to accept a 
price offer for an option, indicating that at this price or lower, they 
choose to drop out of the bidding.
    71. The Commission proposes to treat the various options available 
to broadcasters, from license relinquishment to remaining on the air in 
their pre-auction bands, as a hierarchy in order of relinquishment and 
value to the auction. With regard to a UHF station, bidding to go off-
air would be at the top, or first, in the hierarchy, followed by a move 
to Low-VHF, then to High-VHF, and finally, remaining on the air in its 
pre-auction band. Bidding to go off-air would be first in the hierarchy 
for High-VHF and Low-VHF stations as well, followed by a move to Low-
VHF (for High-VHF stations only), and then remaining on the air in 
their respective pre-auction bands. The Commission will later refer to 
this ordering in addressing several of its proposed reverse auction 
implementation procedures.
    72. The Commission proposes that a bidder will not be permitted to 
bid for options that would involve greater relinquishments than the 
most recent option selected. Under the Commission's proposal, the 
auction system will permit a bidder to move up (from greater 
relinquishment to less), but not down. For example, assuming a bidder 
with a UHF station selects all three relinquishment options in its 
application and then indicates its preferred option is to go off-air, 
the auction system will allow the bidder to choose the option of moving 
to a Low-VHF channel (if there is a vacancy in the Low-VHF band) later 
in the bidding, but not vice versa. If and when the auction system 
accepts that change in the bidder's preferred option, the bidder will 
not be allowed to request to go off-air later because that would 
represent a move down in the hierarchy of options. Likewise, selecting 
the option of moving to a High-VHF bid would preclude later bidding to 
go off-air. The Commission proposes this approach so that the auction 
system can calculate price offers based on consistent indications of 
bidder preferences, which will simplify bidding choices and lead to a 
speedier reverse auction.
    73. The Commission proposes to treat a channel-sharing bid as the 
Commission does a bid to go off-air because, from the perspective of 
the auction system, a channel sharing bid is identical to a license 
relinquishment bid. Under this proposal, a bidder that seeks to 
relinquish its rights and share a channel with another broadcaster will 
be required to enter into a channel sharing agreement before the 
bidding, and will continue to hold a broadcasting license following the 
auction, but will not be subject to different bidding procedures during 
the auction than other participants that are going off the air. A 
broadcaster that relinquishes spectrum usage rights in order to share a 
channel will have its post-auction channel determined according to its 
contract with its channel sharer--that is, another broadcaster that 
remains on-air. The Commission notes that parties to a channel sharing 
agreement bear the consequences of any defects in the agreement or the 
failure of either party to perform pursuant to its terms. The 
Commission is not a guarantor or an enforcer of channel sharing 
agreements.
ii. Reverse Auction Information Available During the Auction
    74. The Commission proposes to limit the disclosure of information 
regarding bidding during the auction. This proposal is separate and 
apart from the Commission's statutory obligation to maintain the 
confidentiality of information regarding the identity of participating 
broadcasters.
    75. Specifically, the Commission proposes that the auction system 
will offer each reverse auction bidder only the prices for options 
specific to its station(s). Under the Commission's proposed approach 
bidders will not know the prices being offered to other bidders.
    76. The Commission proposes that while the incentive auction is 
open, it will disclose to the public the current stage status, 
specifically the stage number and whether or not bidding is still open 
in the reverse auction for that stage. When bidding in the reverse 
auction for a stage is closed, the Commission also will disclose to the 
public the total of reverse auction bids that the forward auction 
proceeds must satisfy as part of the second component of the final 
stage rule.

B. Application To Participate and Commitment to Initial Relinquishment 
Option

    77. The Commission seeks comment on particular aspects of the 
reverse auction application process. Specifically, the Commission seeks 
comment on information to be provided from potential channel sharers, 
i.e., stations that may or may not participate directly in the auction 
and that have agreed to share a channel with an auction participant 
that relinquishes its spectrum usage rights in the auction. The 
Commission also seeks comment on information to be required from 
certain participants whose eligibility is uncertain, and from all 
participants with respect to their exercise of due diligence prior to 
participating. In addition, the Commission describes how each applicant 
will identify--and commit to--its initial preferred option among the 
available options for relinquishing spectrum usage rights.
i. Information From Channel Sharing Participants
    78. The Commission proposes that any auction applicant submitting a 
channel sharing agreement with its application also be required to 
submit a separate certification by the channel sharer that the channel 
sharing agreement submitted is a true, correct, and complete copy of 
the channel sharing agreement between the parties. This certification 
must be executed by a party with authority to make such representations 
on behalf of the channel sharer. The Commission adopted rules in the 
Incentive Auction R&O outlining the information required of an 
applicant seeking to participate in the auction in order to share a 
channel after the auction. Under these rules, channel sharers--stations 
that agree to share their channels after the auction with stations that 
relinquish rights in the auction in order to channel share--need not 
apply to participate in the auction. However, they must provide any 
``necessary'' certifications. The Commission believes that the proposed 
certification is necessary in order to smooth the post-auction 
transition by helping to assure the accuracy of the channel sharing 
agreement submitted with the application.
ii. Agreement to Escrow, if Necessary for Participation
    79. The Incentive Auction R&O considered the circumstances of 
broadcasters that have licenses that have expired or are subject to a 
revocation order (collectively a ``license validity proceeding''), or 
that have Class A stations subject to a downgrade order, when the 
license validity proceeding or Class A downgrade order has not become 
final and non-reviewable by a date prior to commencement of the auction 
that will be specified in the Procedures PN. If the license invalidity 
determination becomes final between

[[Page 4829]]

the time a broadcaster is found to be qualified to participate in the 
reverse auction and commencement of reverse auction bidding, the 
broadcaster will be excluded from participating in the reverse auction. 
In those circumstances, the Commission established that the broadcaster 
is allowed to participate provided that its reverse auction proceeds 
would be placed in escrow pending the final outcome of the license 
validity proceeding or order. The Commission similarly established that 
a broadcaster with a pending enforcement matter or a pending license 
renewal application that raises an enforcement issue is allowed to 
participate in the reverse auction, on condition that such a 
broadcaster that no longer would hold any broadcast licenses upon 
acceptance of a license relinquishment bid agrees that a share of its 
reverse auction proceeds be placed by the Commission in escrow to cover 
potential forfeiture costs. The Commission now proposes the mechanism 
for implementing this arrangement in those circumstances where it is 
appropriate. Specifically, the Commission proposes that broadcasters 
with pending enforcement, license renewal, or other potential 
eligibility impediments must agree, as part of their application to 
participate in the auction, that auction proceeds which they otherwise 
could receive for relinquishing spectrum usage rights will be held by 
the U.S. Treasury. The U.S. Treasury would maintain the funds that are 
held back in a manner that accounts for each broadcaster's potential 
share pending the final resolution of specified issues, or for two 
years, as described in the Incentive Auction R&O. In addition, all such 
broadcasters that would not control any other television stations if 
its bid or bids were accepted must agree to remain subject to the 
Commission's jurisdiction and authority to impose enforcement or other 
FCC liability post-auction. The Commission seeks comment on this 
proposal.
    80. This proposal implements the Commission's determination that 
such broadcasters may be qualified to participate even though they (a) 
have uncertain eligibility to participate due to particular 
circumstances or (b) have certain outstanding potential liabilities to 
the Commission. More specifically, the Commission provided that a 
broadcaster that has a license that is subject to pending proceedings 
that, if resolved against the broadcaster, would make the broadcaster 
ineligible to participate, might become qualified to bid if the 
broadcaster agrees to have the full amount of any incentive auction 
proceeds it might win held by the U.S. Treasury, pending resolution of 
the outstanding proceedings.
    81. The Commission also concluded that a broadcaster might 
participate in the reverse auction even though the relinquishment of 
its broadcast spectrum usage rights might otherwise limit the 
Commission's ability to recover potential liabilities to it, provided 
that the broadcaster agrees that some of any incentive payment would be 
held by the U.S. Treasury to cover potential forfeiture amounts. In the 
second case, when such a broadcaster is notified of its eligibility to 
participate in the reverse auction after filing an application, the 
Wireless Telecommunications, Media, and Enforcement Bureaus will 
provide that broadcaster with information about any pending enforcement 
matter that cannot be resolved before the reverse auction. In addition, 
the Bureaus will indicate the amount of reverse auction proceeds that 
will be held should the broadcaster relinquish its license(s) as a 
result of the auction and therefore otherwise no longer be subject to 
the Commission's jurisdiction.
    82. As to the amount to be held with respect to a particular 
broadcaster, all of the relevant auction proceeds would be held pending 
the final resolution of the status of the license in the case of a 
broadcaster with a license that may be determined post-auction not to 
have been eligible for relinquishment at the time of the auction. In 
the case of a broadcaster that has outstanding potential liabilities 
and might cease to be subject to Commission jurisdiction after 
relinquishing all of its broadcast spectrum usage rights, the amount 
determined prior to the auction by the Bureaus would be held. As 
described in the Incentive Auction R&O, amounts held will be released 
to the broadcaster or the Commission, as appropriate in light of the 
final resolution of the relevant specified issues.
    83. The Commission also invites comment on an alternative proposal, 
under which, instead of holding the funds in the U.S. Treasury, it 
would deposit the relevant amounts in a third party financial 
institution to serve as a private escrow agent. Under this alternative, 
prior to the auction, the Commission would designate a private escrow 
agent for each broadcaster agreeing to the escrow in its application. 
The Commission will require that any escrow agent maintain the 
confidentiality of Commission-held data of broadcasters participating 
in the reverse auction. The Commission seeks comment on this 
alternative, including the terms of any escrow agreement with a third-
party agent.
iii. Certification Regarding Due Diligence
    84. The Commission proposes that all applicants will be required to 
certify the truth of the following statement as a part of their 
application to participate in the reverse auction: ``The applicant 
acknowledges and agrees that any information provided by the 
Commission's outside contractors who are advising and assisting it with 
education and outreach in connection with the reverse auction is for 
informational purposes only and that neither the Commission nor any of 
its outside contractors makes any representations or warranties with 
respect to any such information and shall have no liability to the 
applicant in connection therewith.'' The Commission's rules already 
provide that an applicant to participate in the reverse auction must 
certify that it has sole responsibility for investigating and 
evaluating all technical and marketplace factors that may have a 
bearing on the bids it submits in the reverse auction. The Commission's 
proposed additional certification will likewise help assure that each 
applicant accepts responsibility for its bids and will not attempt to 
place responsibility for its bids on either the Commission or the 
information provided by third parties as part of the Commission's 
outreach. Requiring this proposed certification is also consistent with 
the Commission's rule providing that an application will contain ``such 
additional information as may be required,'' 47 CFR 1.2204(c)(11).
iv. Committing to an Initial Relinquishment Option
    85. The specific opening prices for each bidding option available 
to each station eligible to participate in the reverse auction will be 
provided at least 60 days in advance of the deadline to apply to 
participate in the reverse auction. The Commission proposes that each 
applicant to participate in the reverse auction will indicate for each 
of its stations listed in its application all of the spectrum 
relinquishment options available to it that it may be willing to 
consider. After Commission staff reviews a submitted application and 
the applicant has resolved any issues regarding the information 
provided, the applicant will be required to indicate a single preferred 
relinquishment option for each of its stations from among those that it 
previously indicated it would be willing to consider. An applicant must 
indicate a preferred relinquishment option and in certain cases may 
also specify alternative(s) for that preferred option. An applicant 
must specify a

[[Page 4830]]

preferred option (and any alternative(s), if it so chooses) for each 
station listed in its application in order to qualify as a bidder with 
respect to those stations in the reverse auction. This step will 
constitute a commitment by the applicant to fulfilling the terms of its 
preferred option (or alternative(s)) for a particular station, i.e., 
relinquishing the relevant spectrum usage rights in exchange for the 
opening price in the event the auction system can accommodate the 
preference (or an alternative). This first commitment will establish 
the starting point for bidding in the clock rounds.
    86. In order for an applicant's commitment for a station to be a 
valid starting point for bidding, it must be feasible for the auction 
system to accommodate an option for that station. The auction system 
can always accommodate going off-air as a preferred option because 
going off-air does not require finding a feasible channel assignment. 
However, the auction system may not be able to accommodate moving to 
either the Low-VHF or High-VHF band as a preferred option if there are 
not enough channels available in that band (vacancy) at the start of 
the auction to accommodate all stations with such a preference. 
Accordingly, the Commission proposes that an applicant that selects 
moving to either Low-VHF or High-VHF as its preferred option for a 
station may indicate alternative options for that station, which would 
be used in the event that the preferred option cannot be accommodated. 
Under the Commission's proposal, the auction system will attempt to 
accommodate the preferred option. If it cannot and the applicant 
indicated one or more alternative options for the station, the system 
will attempt to accommodate one of the alternative options when 
determining an initial assignment of stations to relinquishment 
options. If the system assigns the station to one of its alternative 
options, that option will constitute the applicant's commitment and 
become that station's assigned option at the start of bidding. If the 
auction system cannot accommodate an applicant's preferred option or 
any of its alternative options for a station, that station will be 
assigned a channel in its pre-auction band. Thus, an applicant that 
wants to guarantee a station's participation in the bidding should 
indicate going off-air as either its preferred option or as an 
alternative option, as a vacancy for every station to move to Low-VHF 
or High-VHF cannot be guaranteed.
    87. The Commission proposes that once bidding begins in the clock 
rounds a bidder will not be permitted to bid for options that would 
involve greater relinquishments than the previous option selected. 
Thus, under the Commission's proposal, an applicant considering 
multiple relinquishment options for a station will need to consider the 
restriction on moving one way up the hierarchy of options in deciding 
which option to commit to at the commitment stage of the application 
process, since its choice may preclude later being able to bid for 
other options below it. For example, initially committing to moving to 
Low-VHF would preclude later switching options to going off-air; 
initially committing to moving to High-VHF would preclude later 
switching options to going off-air or moving to Low-VHF; and initially 
committing only to moving to either Low-VHF or High-VHF, without 
committing as an alternative to going off-air, could result in non-
participation if there is no vacancy in either of these bands at the 
start of the auction.
    88. Initial Assignment. Once each station has made an initial 
commitment(s), the auction system will determine an initial assignment 
of stations to relinquishment options using optimization techniques. 
This initial assignment will determine the relinquishment option for 
which a station will be offered prices at the beginning of the reverse 
auction. Due to the limited availability of VHF channels, the 
Commission proposes to prioritize rules that will be used to determine, 
in the event that all participating stations cannot be assigned to 
their preferred options, how to choose an alternative option for some 
stations. If a station cannot be assigned to its preferred option or an 
alternative option, it will not participate in the reverse auction 
bidding and will be assigned to a channel in its pre-auction band. As 
set forth in detail in Appendix C of the Auction 1000 Request for 
Comment, the Commission proposes the following rules in order of 
priority: (1) Minimize the number of UHF participating stations that 
must be assigned to their pre-auction band; (2) minimize the number of 
VHF participating stations that must be assigned to their pre-auction 
band; (3) maximize the number of participating stations that can be 
assigned to their preferred relinquishment option; (4) maximize the 
number of participating stations that can be assigned to go off the air 
as an alternative option; and (5) minimize the sum of impaired 
weighted-pops across all licenses (i.e. solve for the primary objective 
of the clearing target optimization). The Commission proposes to give 
rules (1) and (2) the highest priority to minimize the number of 
stations that are assigned to their pre-auction band and, therefore, 
cannot participate in the reverse auction. Rule (1) precedes all others 
to minimize the likelihood of creating additional impairing stations in 
the 600 MHz Band. If not all stations can simultaneously be assigned to 
their preferred option pursuant to rule (3), rule (4) would ensure that 
the maximum number of stations that must be assigned an alternative 
option are assigned the option to go off the air, in order to provide 
the most opportunities for bidding in the reverse auction. Finally, 
rule (5) would require the optimization to choose among the remaining 
options based on the primary objective of minimizing the sum of 
impaired weighted-pops across all licenses in the 600 MHz Band.

C. Descending Clock Bidding Procedures

    89. In adopting a descending clock format for the reverse auction, 
the Incentive Auction R&O explained that ``bidders will be faced with 
relatively simple choices of determining whether or not they are still 
willing to accept the current prices for bid options.'' It determined 
that price offers for bid options generally will start high and descend 
between rounds for each participating station, and indicated that price 
offers for each station may be adjusted based upon factors reflecting 
that particular station's impact on the repacking process. In the 
Incentive Auction R&O, the Commission adopted rules allowing for the 
use of reserve pricing in the reverse auction, and noted that it may 
adopt procedures to implement a form of dynamic reserve pricing (DRP). 
The Commission also explained in general terms the descending clock 
auction procedures for selecting winning bids and determining prices to 
be paid to winning bidders.
    90. The Commission proposes procedures for determining the prices 
reverse auction bidders will be offered during the bidding rounds. The 
Commission then address the bidding process in detail, proposing 
procedures for the types of acceptable bidder responses to price offers 
in a round, including procedures for bidding for multiple 
relinquishment options. The Commission also addresses how the auction 
system will process bidder responses to determine which stations will 
have their bids accepted. Finally, the Commission proposes procedures 
to implement bidding activity and stopping rules.

[[Page 4831]]

i. Determining Price Offers
    91. The Commission clarifies that a ``bid'' in this descending 
clock auction means a response to a price that is offered to the 
bidder. This is consistent with the fundamental premise of a clock 
auction, where bidders do not initiate bids but rather indicate over a 
series of rounds whether they are willing to accept offered prices that 
increase or decrease, depending upon whether it is an auction to sell 
or buy. The clock prices stop increasing or decreasing when there is no 
longer competition among the bidders to buy or sell an item. For 
example, in a simple procurement auction to buy one item, the auction 
stops when only one bidder is left that is willing to supply the item 
at the current price offer. In the reverse auction, the Commission will 
aim to ``procure'' a targeted amount of cleared television spectrum and 
bidders will compete to relinquish spectrum usage rights to enable that 
clearing. Through their bids in each round, bidders will indicate their 
continued willingness to accept a given offer price for a 
relinquishment option, which will constitute a commitment to relinquish 
their spectrum usage rights at that price, or they will reject the 
offer, possibly indicating a lowest price they are willing to accept.
a. Opening Price Methodology
    92. Opening prices must be high enough to encourage robust 
participation in the reverse auction, but not so high that the reverse 
auction requires many hundreds of rounds to reach final clearing 
prices. In designing a system of competitive bidding, which includes 
setting opening prices, the Commission promotes several statutory 
goals, including ``recovery for the public of a portion of the value of 
the public spectrum resource made available for commercial use and 
avoidance of unjust enrichment through the methods employed to award 
uses of that resource,'' 47 U.S.C. 309(j)(3)(C). To balance these 
objectives, the Commission proposes to calculate an opening bid price 
for each station, using a station-specific ``volume'' factor and an 
underlying base clock price for a UHF station going off air. The 
opening bid for the UHF off-air and channel sharing options will be the 
same, as both would result in the return of a full six megahertz of UHF 
spectrum for reallocation to flexible-use licenses. Because the 
Commission will not know the initial clearing target prior to accepting 
bidder applications, and therefore will not exclude any stations or 
markets from the auction in advance, the Commission intends to provide 
opening prices to every eligible broadcaster. If, upon establishing the 
initial clearing target, the auction system identifies markets where 
broadcaster participation is not needed, it will so inform broadcasters 
in any such market and provisionally assign each of them channels in 
their pre-auction bands. The opening prices may be zero for stations 
that the auction system determines do not constrain the Commission from 
reorganizing the UHF band. The opening off-air bid for UHF stations 
would be the product of each station's volume factor and the base clock 
price. Opening bid prices for a move from the UHF band to the Low-VHF 
or High-VHF band would be calculated by applying a specific discount to 
the off-air bid amount for each of these options.
    93. The Commission proposes to calculate a station's volume using 
this formula: Station Volume = (Interference)\0.5\ * (Population)\0.5\. 
The Commission proposes to set interference equal to the number of co- 
and adjacent channel constraints a station would impose on repacking on 
a pairwise basis. The interference component measures a station's 
potential impact on repacking. More specifically, for each station 
pairing, the Commission first determines the maximum number of 
constraints that can exist between the two stations on any channel in 
bands into which both stations can be repacked. Thus, between two UHF 
stations, the Commission would consider all channels in the UHF, High-
VHF or Low-VHF bands (channels 2-51) to determine the maximum number of 
constraints that exist between the two stations consistent with the 
hierarchy of relinquishment options. Between a UHF station and a High-
VHF station, the Commission would consider only channels in the High-
VHF band (channels 7-13) and Low-VHF band (channels 2-6) to determine 
the maximum number of constraints that exist between the two stations. 
Between a UHF station and a Low-VHF station, the Commission would 
consider only channels in the Low-VHF band (channels 2-6) to determine 
the maximum number of constraints that exist between the two stations. 
The Commission then sums up these maximums for each station to set its 
interference metric. The Commission proposes to measure population as 
the number of people residing within the station's interference-free 
service area. A fuller description of this calculation is set out in 
Appendix D of the Auction 1000 Request for Comment.
    94. To calculate a station's opening bid price, the Commission will 
multiply its volume times a base clock price. The base clock price is a 
constant amount per unit of volume. Based on the Commission's work to 
date on the design of the incentive auction, it expects that a base 
predicated on an opening bid price of $900 million for the station with 
the highest volume will achieve robust participation by stations across 
multiple markets. The Commission therefore proposes to set the base 
clock price so as to yield an opening bid of $900 million for this 
station. It should be noted that if this highest volume station is not 
in UHF, its base clock price would be decreased by the discount applied 
to its pre-auction band. This discount is detailed in Appendix D to the 
Auction 1000 Request for Comment. The Commission will calculate volume 
for all stations and then rescale so that the maximum station volume is 
one million. Dividing the $900 million opening bid price for the 
highest volume station by one million results in a base clock price of 
900. The base clock price will drop in each round of the reverse 
auction, while a station's volume will remain constant. The price 
offered to a bidder to go off air in a given round will be the product 
of the base clock price in that round and the station's volume. The 
markets and stations needed in the reverse auction will depend on which 
stations choose to participate, and actual compensation to stations 
will be determined by the auction.
    95. The Commission tentatively concludes that this formula 
appropriately balances the manifold goals that Congress has charged it 
with in connection with the incentive auction. First, a combined 
interference-population volume establishes opening bid prices that 
should provide the necessary incentive for broadcaster participation. 
Consistent with the Commission's determination in the Incentive Auction 
R&O, its proposed approach will yield opening bid prices that 
reasonably approximate underlying relative differences in value of 
stations to the auction. The Commission's proposed formula is not based 
on a station's market or enterprise value. If a station has many 
constraints and blocks many other stations from being repacked, then 
under the Commission's proposal, its opening price will reflect that 
contribution to the auction's ability to clear spectrum. The population 
component complements the interference metric by enabling the 
Commission to clear more spectrum in markets where the forward auction

[[Page 4832]]

value of relinquished spectrum usage rights is apt to be higher. 
Second, the opening bid price set using the proposed methodology will 
enable the Commission to close the auction in a reasonable number of 
rounds, providing ease of participation for broadcasters and enhancing 
the prospects for a successful auction. Third, the balanced approach 
the Commission proposes will meet its statutory obligation to promote 
the interests of taxpayers in getting a portion of the value of the 
spectrum sold at the forward auction. Finally, use of a population 
factor is consistent with the fact that the spectrum recovered from 
broadcasters will enable flexible use licenses to be offered in the 
forward auction subject to procedures that are based, among other 
things, on the population covered by each PEA.
    96. Under the Commission's proposed approach, opening bid prices 
for moving from the UHF band to the Low-VHF or to the High-VHF band 
(the VHF options) will be set at a value relative to the opening price 
for going off-air. For moving from UHF or High-VHF to Low-VHF, the 
Commission tentatively concludes that a station's opening price should 
be between 67 and 80 percent of the station's price to go off-air. For 
moving from UHF to High-VHF, the Commission tentatively concludes that 
a station's opening bid price should be between 33 and 50 percent of 
the station's off-air price. The Commission seeks comment on where in 
these ranges it should set the discounts or whether some other discount 
is appropriate for these bid options. The Commission emphasizes that 
these would only be opening discounts. Final discounts for the VHF 
options will be determined by the demand by bidders for VHF channels 
and the availability of those channels.
    97. The Commission proposes to calculate the opening prices for the 
VHF options as a discount off the off-air opening price because a 
winning bidder electing one of the VHF options will retain a full six 
megahertz channel, and thus should not receive the same compensation as 
bidder that relinquishes its rights to a six megahertz channel. The 
proposed level of the discounts reflects a comparison of the technical 
characteristics of UHF and VHF channels and of the characteristics of 
Low-VHF and High-VHF channels. In particular, VHF frequencies are more 
susceptible to interference than UHF frequencies. Specifically, noise 
from nearby electrical devices can disrupt reception on these lower 
frequencies, especially indoor reception. While present across the VHF 
bands, this issue is more pronounced on low-VHF channels than on High-
VHF channels. Thus, while the opening price for a VHF option should not 
be the same as for the off-air relinquishment option, it should be high 
enough to offset the potential loss in value associated with this 
increased interference potential.
    98. The smaller discount for the Low-VHF option as compared to 
High-VHF reflects that television receivers are subject to greater 
interference in the Low-VHF band. The proposed respective discounts for 
the Low-VHF and High-VHF options also reflect the relative number of 
unoccupied channels in each band. There are substantially more 
unoccupied Low-VHF channels than High-VHF channels. As a result, in 
nearly all markets, a station could move to a Low-VHF channel without 
the need to reassign any channels in that band. Conversely, there are 
relatively few markets where a station could move to High-VHF channels 
unless other stations vacate that band or are repacked within the band. 
In at least some scenarios, therefore, the Commission may need to pay 
two stations in connection with a UHF-to-High-VHF move: A High-VHF 
station to vacate its channel, and UHF licensee to move to High-VHF. A 
smaller discount, i.e., a higher opening price, for the Low-VHF option 
would signal the greater value of this option to the auction. The 
Commission seeks comment on its proposed approach to setting opening 
prices for the VHF options, the appropriate discount levels, or whether 
there are additional factors or approaches that the Commission should 
consider.
b. Price Offers in Initial and Subsequent Rounds
    99. The Commission proposes that, in the first clock round of the 
reverse auction, a bidder whose commitment to a preferred or assigned 
alternative option at the opening price is not provisionally accepted 
by the auction system will be offered a lower price for the assigned 
option. As long as the bidder indicates it is willing to accept the 
offered prices, and if a feasible channel assignment exists for the 
station in its pre-auction band, the auction system will progressively 
offer lower prices for that option. When the Commission refers to 
checking a feasible channel assignment in a station's pre-auction band 
when determining price offers, for stations with a pre-auction band of 
UHF, the Commission is referring to the remaining television portion of 
the UHF band. A bidder that indicates it will consider multiple bidding 
options will be informed of current prices for those options and will 
have the opportunity to request to switch to bidding for another 
option. A bidder that switches bidding options will then be offered 
progressively lower prices for that option, but only so long as a 
feasible channel assignment exists for the station in its pre-auction 
band.
    100. The Commission proposes to offer a bidder lower prices for 
relinquishment options as long as the bidder is still competing with 
other stations to relinquish rights, consistent with the basic clock 
auction's competitive framework. When a station's relinquishment 
becomes essential to meeting the clearing target (because there is no 
longer room for it in its pre-auction band), the auction system will 
stop offering lower prices to that station, and will provisionally 
accept the station's offer to relinquish its usage rights.
    101. More specifically, whenever a station is provisionally 
assigned to a band, either because it dropped out of bidding or because 
its bid to switch to a different relinquishment option was applied, the 
repacking feasibility checker will consider for each station that 
remains active whether a channel can still be found in its pre-auction 
band, given all other stations that need to be assigned channels in 
that band (i.e., non-participants and other stations that have 
previously dropped out of the bidding and are assigned to that band). 
When the feasibility checker cannot find a way to repack a station into 
its pre-auction band because of the other stations that must be 
accommodated, the auction system will not reduce the station's price in 
that auction round. If the feasibility checker determines that the 
station cannot be repacked in its pre-auction band for the remainder of 
the stage, then the auction system will notify the bidder that the 
station's prices and relinquishment offer are ``frozen'' for the 
remainder of the stage. An exception to the general case may occur for 
VHF stations. For a VHF station, the amount of vacancy in its pre-
auction band may increase as bidding rounds progress, so a station that 
had a relinquishment bid frozen because it was infeasible to 
accommodate in its pre-auction band can later become feasible. For 
instance, if a UHF station is currently assigned to move to upper-VHF 
but subsequently drops out of the bidding to remain in UHF, that move 
may create a vacancy in upper-VHF. Because of this, unlike UHF 
stations, stations with pre-auction channels in the VHF band may 
unfreeze in later rounds of the same stage if it becomes possible to 
accommodate the station in its pre-auction VHF band. If the system 
determines that the station can feasibly

[[Page 4833]]

be assigned a channel, the station will be offered a lower price in the 
next bidding round.
    102. Price reductions in each round, explained in detail in 
Appendix D of the Auction 1000 Request for Comment, will be based on 
the base clock price. The base clock price is calculated for the case 
of a station whose pre-auction band is UHF that is still feasible to 
repack in the UHF band and still bidding to go off-air. The Commission 
proposes to reduce this base clock price by between three percent and 
10 percent per round. The Commission also proposes that the amount may 
be changed at any point during the reverse auction based on bidding 
activity during the auction. Using smaller decrements is likely to 
increase the number of rounds necessary to reach final auction prices. 
The Commission seeks comment on the possibility of using proxy bidding, 
which could reduce the bidders' need to closely monitor numerous, 
frequent bidding rounds. With proxy bidding, a bidder could ask the 
system to continue to bid for its current relinquishment option in 
every round until either its price falls below a bidder-specified 
threshold or the bidder intervenes to change its bid, whichever happens 
first. In each round, the bidder would be informed of the first round 
in which the price of its option could possibly fall below its 
specified threshold. This notice would allow the bidder to anticipate 
the timing of when it may need to change its bid or update its proxy 
bid. The range of potential reductions will enable the auction to move 
at an appropriate pace while also providing the flexibility to offer 
bidders appropriate price choices as the auction progresses. For 
instance, if the decrement in a round is four percent, this means that 
the price offered per volume in this round to a UHF station for going 
off-air is four percent lower than what the base clock price was after 
the bid processing of the previous round. Appendix D of the Auction 
1000 Request for Comment describes how the Commission proposes to 
compute the prices that are offered to VHF stations for going off-air 
and/or for relinquishment options that are different from going off-
air. Appendix D alternatively considers adjusting the decrement of each 
station as a function of its vacancy in the various bands. The 
Commission seeks comment on this alternative proposal.
c. Dynamic Reserve Prices in Early Rounds of the First Stage
    103. The Commission proposes to implement dynamic reserve price 
(DRP) procedures in the early rounds of the reverse auction in the 
first stage. The DRP procedures the Commission proposes implement a 
limited exception to the proposal regarding price reductions and enable 
the auction system to reduce the price offered a station below the 
opening or previous round's price even when the station cannot feasibly 
be assigned a channel in its pre-auction band, so long as assigning the 
station a channel in the 600 MHz Band will not result in inter-service 
interference that exceeds the nationwide standard for market variation. 
Accordingly, while DRP procedures are in effect, a UHF station may be 
offered a lower price for an option even if it cannot feasibly be 
assigned a channel in the remaining TV portions of the UHF band; if it 
refuses the offer, it may be assigned to a channel in the 600 MHz Band. 
By mitigating the risk that a station may be awarded its opening price 
merely because there is no channel to offer in its pre-auction band--a 
result that would have little or nothing to do with what the station 
would be willing to accept in exchange for relinquishing its spectrum 
usage rights--these procedures will increase the likelihood of a 
successful auction. This is because DRP procedures make it possible to 
offer higher opening prices, thereby attracting greater broadcaster 
participation, than would otherwise be the case. Absent DRP, lower 
opening prices would be necessary. Because the procedures the 
Commission proposes for discontinuing DRP will limit the extent to 
which opening prices can fall, even as reduced by DRP, the higher 
opening prices may ultimately provide higher incentive payments to 
broadcasters. In addition, by enabling the reduction in broadcaster 
payments where such payments are acceptable to broadcasters, the 
proposed DRP procedures will make it easier to satisfy the second 
component of the final stage rule.
    104. Under the Commission's proposed approach, the reverse auction 
will begin in the first stage with DRP procedures in effect. While DRP 
procedures are in effect, participating UHF stations that cannot 
feasibly be assigned a channel in the remaining TV portion of the UHF 
band will be treated differently than when DRP procedures are not in 
effect: the prices offered to such stations will be reduced. In 
contrast, the prices of such stations will not be reduced when DRP 
procedures are not in effect. Regardless of whether dynamic reserve 
pricing procedures are in effect, the prices of a participating VHF 
station will not be reduced during bid processing if that station 
cannot be feasibly assigned a channel in its pre-auction band. Should a 
UHF station decline to accept a price offer when DRP procedures are in 
effect, the station may provisionally be assigned a channel in the 600 
MHz Band, creating potential impairments to one or more 600 MHz Band 
blocks.
    105. The Commission proposes to discontinue DRP procedures when 
their application risks exceeding the less than 20 percent nationwide 
standard for limiting market variation proposed. More specifically, the 
Commission proposes that DRP procedures be discontinued when, if the 
Commission were to assign all of the participating UHF stations for 
which the auction system cannot find a feasible channel in the 
remaining TV portion of the UHF band, the predicted aggregate level of 
impairments to licenses in the 600 MHz Band would exceed this standard.
    106. The Commission seeks comment on this proposal and on how to 
determine whether the standard would be exceeded, as a full channel 
assignment optimization would be too time consuming to run during the 
reverse auction clock rounds. One approach would be for the auction 
system to use a limited version of the channel assignment optimization 
procedures proposed for setting a clearing target to determine when the 
aggregate level of potential impairments from participating stations 
dropping out of the auction could exceed the proposed national 
standard. Once DRP procedures are discontinued, however, the Commission 
proposes that the system fully optimize the provisional channel 
assignments to minimize the impact of any impairments created during 
DRP.
    107. The Commission also seeks comment on alternative approaches 
for determining when DRP would be discontinued in order to avoid these 
risks. For instance, DRP procedures could be discontinued when there is 
the potential that the next participating station for which the auction 
system cannot find a feasible channel in the remaining TV portion of 
its pre-auction band, if it chose to drop out of the auction, would 
cause the predicted aggregate level of impairments to licenses in the 
600 MHz Band to exceed this threshold. This alternative approach would 
always result in aggregate impairment that is just one station short of 
the threshold, while the proposed approach could result in a lower 
level of impairment, and possibly even no additional impairment, due to 
DRP. The Commission also seeks comment on whether, instead of 
determining when to discontinue DRP

[[Page 4834]]

using predicted aggregate impairments, the Commission should use the 
population served by UHF stations that cannot be feasibly assigned a 
channel in the TV portion of UHF as a proxy for predicted aggregate 
impairments.
ii. Bidding and Bid Processing
    108. Some bidders in the reverse auction will be interested in only 
a single relinquishment option (single-option bidder). Other bidders 
may wish to consider price offers for multiple relinquishment options 
(multiple-option bidder). The Commission proposes detailed procedures 
for bidder responses and bid processing for bidders in both categories.
a. Bidding for a Single Relinquishment Option
    109. At the start of the clock rounds, the Commission proposes that 
a single-option bidder whose commitment to a bid option at the opening 
price is not provisionally accepted will be presented with a price 
offer lower than the opening price it committed to accept and asked if 
it is willing to accept the lower price. The Commission proposes that 
the bidder will have three choices: it may accept the offered price 
(i.e., submit a bid at the clock price), submit an intra-round bid, or 
not respond. If the bidder accepts the offered price, it will be 
finished bidding for that round and can await the results of the round.
    110. If the bidder does not place a bid, the auction system will 
treat the bidder as unwilling to relinquish its rights for less than it 
previously accepted. If the bidder places an intra-round bid, the 
bidder's intra-round bid will indicate to the auction system that, at 
prices at least as high as the intra-round bid (including the opening 
price), the bidder is willing to relinquish its spectrum usage rights, 
but at lower prices the bidder's station must be provisionally assigned 
a channel in its pre-auction band.
    111. During each subsequent bidding round, a bidder that continues 
to participate in the bidding--that is, a bidder that accepted the 
clock price offered during the previous round--will be presented with a 
new, lower price offer, and will have the same response choices as 
during the first round.
    112. Under the Commission's proposed procedures, which are 
described in detail in Appendix D of the Auction 1000 Request for 
Comment, the auction system will process the bids submitted during a 
bidding round at the close of the round based on bid prices. If prices 
in the round drop below the level of an intra-round bid, the single 
option bidder will drop out of further bidding in the auction. The 
auction system will then evaluate the feasibility of repacking (that 
is, assigning permissible channels to) all other stations that continue 
to participate in the bidding in their pre-auction bands. If the system 
determines that a participating station cannot feasibly be accommodated 
in its pre-auction band, the system will stop reducing the station's 
price at the point at which the station is infeasible to repack. 
Acceptance of a bid will be provisional until the final stage rule is 
satisfied, at which point provisionally-accepted bids will become 
winning bids. Appendix D describes in detail the process by which the 
Commission proposes to integrate the repacking feasibility checking 
methodology into the reverse auction process.
    113. As the auction system iteratively considers bids and potential 
channel assignments, it may determine that it will accept a 
relinquishment offer at a price higher than the lowest price the bidder 
indicated it would accept. Hence, a bidder that makes an intra-round 
bid during a round may have its bid accepted at a price higher than the 
intra-round bid.
    114. Once the auction system has processed all of the bids 
submitted in a round and the results of the round have been determined, 
the auction system will indicate to each bidder its status--that is, 
whether its relinquishment bid has been provisionally accepted, whether 
it is still bidding for the option, or whether it is designated to be 
assigned a channel in its pre-auction band because it dropped out of 
the bidding. A bidder that accepted the clock price offered during the 
round whose station feasibly can be repacked in its pre-auction band 
will be offered a lower price for the next round.
    115. The Commission invites comment on whether it should simplify 
the reverse auction bidding process by not providing the option to 
place an intra-round bid, and instead simply ask each bidder if it is 
willing to accept the new lower price for its relinquishment option. If 
the bidder is unwilling to accept the lower offered price, the auction 
system would not ask for an intra-round bid. This approach could 
simplify both bidding and bid processing, as all bids would be 
processed at the clock prices. This would eliminate uncertainty about 
the price a bidder may receive at the start of the next round for the 
different relinquishment options. Implementing this alternative would 
require that the Commission use generally smaller increments for price 
reductions, and could reduce to some degree the flexibility afforded to 
bidders to choose specific price points within a round.
b. Multiple Option Bidding
    116. The Commission has proposed that with respect to a particular 
station a bidder's initial commitment will determine which option the 
bidder will be bidding for initially and explained that the station's 
bid option selections on the pre-auction application will determine 
which options it may later consider, consistent with the proposed 
hierarchy of options. Accordingly, at the start of the first clock 
round, as for a single-option bidder, a multiple-option bidder in an 
area where there are more stations willing to accept relinquishment 
options than needed to meet the clearing target will be presented with 
a price offer for its option that is lower than the opening price it 
committed to accept. The multiple-option bidder will also be able to 
see current prices for each of its other bid options.
    117. In addition to being able to accept the lower price for its 
preferred option or place an intra-round bid, a multiple-option bidder 
will have the option, at current prices, to request to switch to any 
other of its eligible relinquishment options, consistent with the 
option hierarchy. The auction system will implement the switch if the 
feasibility checker determines that it is feasible to assign the 
station to a channel in the band associated with the new option. The 
bidder will then be offered a lower price for the new relinquishment 
option in the next round unless the bidder becomes frozen. However, if 
the system is unable to assign the bidder a channel in its newly 
preferred option, the system will still consider the bidder to be 
bidding for its previous option at the last price it agreed to accept.
    118. In the event that multiple bidders request to switch to bid on 
moving to the same band in the same round, the auction system may not 
be able to accommodate each request. As a result, the Commission 
proposes that a multiple-option bidder requesting to switch options 
must also indicate whether it is willing to accept the lower clock 
price for its currently assigned option, in case the system cannot 
accommodate its request to switch. A bidder unwilling to accept the 
lower price offer for its current option may place an intra-round bid 
to indicate a specific price at which it wishes to drop out of bidding 
for its current option. If there is not a channel available in the 
option to which a multiple-option bidder requests to switch, and the 
price for its assigned option drops below the

[[Page 4835]]

intra-round bid amount during bid processing for the round, the bidder 
will drop out of the bidding and be designated to be assigned a channel 
in its pre-auction band.
    119. At the close of the bidding round the auction system will 
process the bids submitted during the round as in the single option 
bidder scenario, by considering the bids in decreasing order of bid 
price, consistent with the descending clock format. Once the auction 
system has processed all of the bids submitted in a round, the auction 
system will indicate to each bidder whether its request to switch 
bidding options was accepted, as well as whether it had a bid 
provisionally accepted or whether it dropped out of the bidding during 
the round.
    120. Under the alternative ``no intra-round bidding,'' multi-option 
bidders would simply respond to single price offers without the 
opportunity to place intra-round bids. Submitted bids would be 
processed by attempting to accommodate a station's requests to switch 
options (if any) and processing the station's election to drop out of 
the bidding (if any). If as a result of another station's bid, a bidder 
cannot be feasibly assigned a channel in its pre-auction band, the 
system would not lower the bidder's prices.
iii. Stopping Rule
    121. The Commission proposes a stopping rule for the reverse 
auction whereby bidding rounds will continue until no stations are 
still bidding--that is, each participating station either has had a bid 
to relinquish rights accepted or has been assigned to a channel in its 
pre-auction band. Both acceptance of a bid and assignment to a channel 
will be provisional until the final stage of the auction.

D. New Stage Procedures

    122. If a stage of the auction fails to satisfy the final stage 
rule, the Commission will run a new stage of the auction at the next 
lower clearing target as identified in the Technical Appendix of the 
Incentive Auction R&O. The Commission proposes that at the start of any 
subsequent stages of the incentive auction, the auction system will 
conduct another clearing target optimization that will take into 
account the additional channel that will be available for broadcasting 
in the UHF band as a result of the reduction in the amount of UHF 
spectrum reallocated for flexible-use licenses under the next lower 
clearing target. The optimization procedure will ``re-shuffle'' the 
assignment of stations in the UHF band (both the television portion and 
the 600 MHz Band) using the ISIX constraints and based upon the new 
clearing target with the objective of minimizing the number of impaired 
``weighted-pops.''
    123. With a reduced clearing target, the auction system may be able 
to find a feasible channel assignment for some bidders that had been 
provisional winners in the prior stage, that is, bidders that were 
frozen in a relinquishment option when the auction system determined 
that they could no longer be assigned a channel in their pre-auction 
bands. These bidders will resume bidding. Stations that dropped out of 
the bidding in a prior stage to be assigned a channel in their pre-
auction band will retain that status and will not resume bidding. The 
Commission proposes to reset the base clock price to the highest point 
at which any newly-feasible bidder was frozen in a prior stage. Then, 
in each round, as the clock price descends to reach the point at which 
a newly-feasible bidder was frozen in the previous stage, the bidder 
will again see lower price offers and will resume active bidding. 
Consequently, in a new stage, such bidders may not see their prices 
decrease for many rounds as the clock catches up to the point where 
each station had been previously frozen.
    124. The auction system will calculate price offers for bidders 
that can now be assigned a channel in their pre-auction bands using the 
descending clock pricing procedures, provided that the clock price is 
at or below the level at which these bidders had their relinquishment 
offers provisionally accepted in the prior stage. Bidders will respond 
to these prices, and reverse auction bidding rounds in the new stage 
will continue, according to the bidding procedures.
    125. The Commission seeks comment generally on these proposed 
procedures for initiating bidding in a new stage of the reverse 
auction. The Commission also seeks comment more specifically on 
whether, in order to reduce the number of rounds, especially where some 
bidders may have had their offers accepted in significantly earlier 
rounds of the prior stage, the Commission should increase the rate at 
which price offers descend for all newly-feasible bidders that are 
again actively bidding.

E. Determining a Final Television Channel Assignment Plan

    126. The Commission invites comment on appropriate objectives in 
optimizing the final television channel assignment plan and on how to 
prioritize those objectives. Further detail on this process can be 
found in Appendix E of the Auction 1000 Request for Comment. At the end 
of each reverse auction stage, all channel assignments in the remaining 
television bands will be provisional. After the final stage rule is 
satisfied, the Commission will determine final television channel 
assignments. The reassigned broadcasters will have the opportunity, 
after the release of the final channel assignment plan, to seek an 
alternative channel. Like the provisional assignments made during the 
clearing target optimization and repacking processes, final TV channel 
assignments will be subject to the constraints adopted in the Incentive 
Auction R&O in order to preserve each eligible station's coverage area 
and population served. Unlike the provisional assignments made during 
the reverse auction clock rounds, which will be based solely on such 
constraints, final channel assignments will be made applying 
optimization techniques that take into account additional objectives. 
The Commission stated in the Incentive Auction R&O that it would seek 
comment on the details of the final channel assignment optimization in 
the Auction 1000 Request for Comment, and expressed its intention to 
optimize the final channel assignment plan to minimize relocation 
costs. In the recent ISIX R&O and Further Notice, the Commission 
adopted two additional objectives for the final optimization: Avoiding 
channel assignments that would result in aggregate new interference to 
any individual station over one percent and avoiding significant viewer 
losses due to terrain losses. The Commission deferred a decision as to 
how to optimize for the latter objective, recognizing that it could be 
accomplished in different ways.
    127. Consistent with the Commission's prior determinations, it now 
proposes to determine the final TV channel assignment plan based on the 
following objectives, listed in order of priority: (1) Maximizing the 
number of stations assigned to their pre-auction channel; (2) 
minimizing the number of stations predicted to receive aggregate (that 
is, from multiple stations) new interference above one percent; and (3) 
avoiding reassignments of stations with high anticipated relocation 
costs in order to minimize total relocation costs. The Commission 
discusses these objectives and how they might work together and seeks 
comment on any other possible final TV channel assignment plan 
objectives.
    128. Maximizing Channel ``Stays.'' In order to repurpose a 
contiguous portion of the current UHF television band for new, flexible 
uses, some television stations currently operating on higher

[[Page 4836]]

UHF channels will need to be reassigned lower channels in the UHF band. 
While some channel reassignments are inevitable in order to clear any 
spectrum, the Commission seeks to minimize the disruption that channel 
reassignments will have on both broadcasters and their viewers, as well 
as to reduce the overall cost of the repacking process. In addition, 
avoiding new channel assignments where possible will help to avoid 
viewer losses due to terrain losses that can result when a station is 
reassigned to a different channel. The Commission therefore proposes to 
maximize the number of stations that stay on their pre-auction channel 
as its first objective in the final channel assignment optimization. By 
maximizing the number of stations that stay on their pre-auction 
channels, the Commission can reduce repacking costs, avoid disruption 
to broadcasters and their viewers and avoid losses in viewers and 
coverage area due to terrain that may result from channel 
reassignments.
    129. Minimizing Aggregate New Interference Over One Percent. As the 
Commission previously determined, it will optimize the final channel 
assignment plan to avoid channel assignments that would result in 
aggregate new interference of more than one percent to any individual 
station. The Commission invites comment on two possible approaches to 
implementing this objective using optimization techniques. The first 
approach is to minimize the maximum amount of aggregate new 
interference that any one station could receive. The second approach is 
to minimize the number of stations predicted to receive aggregate new 
interference above one percent. The former approach will ensure that 
the amount of aggregate new interference that any one station receives 
is as small as possible but could have the drawback of creating more 
stations with aggregate new interference above one percent. The latter 
approach ensures that the number of stations with aggregate new 
interference above one percent is minimal but could have the drawback 
of not explicitly restricting the amount of aggregate new interference 
for any one station. As the Commission discussed recently in the ISIX 
Order, however, it anticipates that the worst cases will be limited in 
number and will not exceed two percent, and stations may remedy any 
such situations by seeking alternative channel assignments in the post-
auction transition process. The Commission also invites comment on 
combining the two approaches. The Commission seeks comment on these and 
other possible approaches to optimizing to reduce aggregate new 
interference.
    130. Minimizing Relocation Expenses. The costs associated with 
reassigning a station to a new channel in the repacking process vary 
from station to station. For example, some stations broadcast from 
antenna structures that may be particularly difficult to modify due to 
height, geography, or weather conditions; other stations may need to 
acquire significant new equipment in order to broadcast from their 
reassigned channels. In the Incentive Auction R&O, the Commission 
stated its intention to disburse funds from the $1.75 billion TV 
Broadcaster Relocation Fund as fairly and efficiently as possible. In 
order to carry out this intention, the Commission proposes to minimize 
the total relocation costs using the most accurate publicly available 
data to measure such costs. Recognizing that the Commission may not 
have perfectly accurate data on equipment, facilities, and other 
factors relevant to determining anticipated relocation costs, the 
Commission seeks comment on this proposal and specifically on how to 
determine these expenses.
    131. Prioritizing Multiple Objectives. The Commission further seeks 
comment on prioritizing objectives in the final TV channel assignment 
plan objectives. In order to combine the objectives into a single 
process, the Commission proposes that the final TV channel assignment 
procedure first solve or optimize for a primary objective and use that 
outcome as a constraint on solving the secondary objective, which would 
then constrain solving the tertiary objective. Given that minimizing 
channel moves will promote multiple objectives, the Commission proposes 
to make it the primary objective. Under the Commission's proposed 
approach, the final channel optimization procedure first would 
determine an assignment of stations that maximizes the number of 
stations assigned to their pre-auction channel. The procedure then 
would apply the Commission's proposed secondary objective by 
determining another assignment that minimizes the total number of 
stations predicted to receive new aggregate interference over one 
percent, but would restrict that assignment such that the number of 
stations assigned to their pre-auction channel is within 95 percent of 
the maximum number in the first step. The Commission proposes to set 
the percentage to 95 percent to allow some flexibility in the second 
assignment while mostly restricting the assignment to maintain the 
maximum number in the first assignment. Finally, the procedure would 
apply these two restrictions to the determination of a third assignment 
of stations that minimizes anticipated relocation expenses. The 
Commission seeks comment on these priorities given that the objective 
with highest priority necessarily restricts the objective with next 
priority and so on.

F. Incentive Payments

    132. As noted in the Incentive Auction R&O, the process by which 
auction proceeds will become available to pay reverse auction 
participants their shares precludes a specific deadline for sharing 
proceeds. The Commission will share auction proceeds with broadcasters 
relinquishing spectrum usage rights as soon as practicable following 
the conclusion of the incentive auction. The Commission notes that 
circumstances regarding the post-auction clearing and relocation of 
broadcasters may make it in the public interest to prioritize payments 
to some broadcasters over others in order to expedite the entire post-
auction transition process. For example, the Commission determined in 
the Incentive Auction R&O that winning bidders in the reverse auction 
would be required to vacate their pre-auction channels within three 
months of receiving payment of their share of auction proceeds. As the 
Commission explained in the Incentive Auction R&O, the ability of 
stations that are assigned to new channels in the repacking process may 
be dependent on other stations' moves. Hence, there may be situations 
in which prioritizing payment to a particular winning bidder may 
expedite the transition process for other broadcasters. The Commission 
retains discretion to take factors that facilitate the transition 
process into account when determining the sequence of payments sharing 
auction proceeds.

V. Proposed Forward Auction Procedures

A. Information Available During the Auction, Inventory, and 
Implementation of the Spectrum Reserve

    133. This section addresses proposals regarding the information 
that will be available to forward auction bidders at various times 
during the auction, the categories of generic licenses that will be 
available for forward auction bidding, and creation of separate 
categories of ``reserved'' and ``unreserved'' spectrum blocks at the 
time the final stage rule is met pursuant to the Mobile Spectrum 
Holdings R&O, 79 FR 39977, July 11, 2014.

[[Page 4837]]

i. Forward Auction Information Available During the Auction
    134. As with most recent spectrum license auctions, the Commission 
proposes to limit information available in the forward auction in order 
to prevent the identification of bidders placing particular bids until 
after the auction is over. More specifically, the Commission proposes 
to not make public the PEAs that an applicant selects for bidding in 
its application, the amount of any upfront payment made by or on behalf 
of the applicant, or any other bidding-related information that might 
reveal the identity of the bidder placing the bid. Concerns about anti-
competitive bidding and other factors that the Commission has relied on 
to prevent identification of particular bidders during auctions also 
apply to the forward auction portion of the incentive auction. The 
Commission invites commenters that disagree with its proposal to 
address why they support a different approach.
    135. Notwithstanding the foregoing, in order to facilitate 
compliance with 47 CFR 1.2105(c) which prohibits parties seeking 
licenses in the same geographic area from communicating with one 
another regarding certain bidding-related information, the Commission 
proposes to notify each forward auction applicant of the identities of 
other forward auction applicants that have selected geographic areas 
that overlap with the applicant's own selection and, therefore, fall 
within the scope of the rule. As the information the Commission will 
provide relates to the bids and bidding strategies of the other 
participants, applicants are prohibited from communicating the 
information that they receive to other auction participants unless 
doing so comes within one of the exceptions provided in the rule.
    136. The Commission also proposes that the auction system will 
provide forward auction bidders with the following information, at the 
times indicated: (1) Prior to bidding in the clock phase of each stage, 
the clearing target for that stage; (2) after the reverse auction 
portion of any stage ends, the number of spectrum blocks in each 
license category in each PEA and the percentage impairment of each 
block and the location of those impairments, as well as the ISIX data 
for such impairments; and (3) after the reverse auction portion of each 
stage ends, the total dollar amount of forward auction proceeds needed 
to satisfy the second component of the final stage rule.
    137. In connection with the reverse auction, the Commission 
proposes to make public the total of reverse auction bids when bidding 
in the reverse auction for a stage is closed, as that is part of the 
second component of the final stage rule. Similarly, the Commission 
will make public the forward auction bid amounts at the end of each 
round, as those are the amounts that will be used to determine whether 
the first component of the final stage rule has been satisfied.
ii. Forward Auction Inventory: Determining Categories of Generic 
Licenses
    138. In the Incentive Auction R&O, the Commission decided it would 
conduct bidding for categories of generic licenses in the clock phase 
of the forward auction, recognizing that the Commission would need to 
consider ``a number of factors, such as proximity to television 
stations or guard bands'' when determining how to group license blocks 
into categories for bidding. Here the Commission seeks comment on a 
proposal to offer two categories of licenses in the clock phase of the 
forward auction based on relative levels of impairment caused by 
proximity to television stations in the 600 MHz Band.
    139. The Commission proposes to offer spectrum blocks in two 
different categories of generic licenses for bidding in the forward 
auction (``Category 1'' and ``Category 2''), based on the extent of 
potential impairments in those specific PEA license areas. The 
Commission also proposes thresholds for distinguishing between the two 
categories, as well as for determining when a license is sufficiently 
impaired that it will not be offered for sale in the clock phase of the 
forward auction. In addition, the Commission proposes a price 
adjustment procedure to account for varying degrees of impairment in 
the licenses offered. The Commission emphasizes that, consistent with 
its determination in the Incentive Auction R&O to accommodate market 
variation to a limited extent only, and with its proposal to strictly 
limit the amount of market variation in determining an initial clearing 
target, the Commission anticipates that most licenses offered in the 
forward auction will fall into Category 1, therefore, will have 
potential impairments affecting 15 percent or less of the population in 
the license area. Nevertheless, the Commission must be able to 
distinguish between Category 1 and Category 2 licenses in order to 
achieve its auction goals. The Incentive Auction R&O adopted a strong 
interoperability rule that requires that any user equipment certified 
to operate in any portion of the 600 MHz Band must be capable of 
operating, using the same technology that the licensee has elected to 
use, throughout the entire 600 MHz Band. The Commission emphasizes that 
offering multiple categories of licenses during the auction will have 
no effect on interoperability because the same rules apply to all 600 
MHz Band licenses regardless of whether the license is offered in 
Category 1 or Category 2.
    140. Minimizing the number of separate bidding categories to the 
extent possible serves the Commission's goal of speeding up the forward 
auction bidding process. In light of this goal, and because the 
Commission created the 600 MHz Band guard bands in the Incentive 
Auction R&O to provide sufficient protection from harmful interference 
to make 600 MHz Band licenses fungible in areas not affected by market 
variation, the Commission does not propose to establish separate 
categories of generic licenses based on proximity to television 
stations or guard bands in areas that are not affected by market 
variation.
    141. The Commission proposes to categorize as Category 1 any 
license with potential impairments that affect zero to 15 percent of 
the population of the PEA and as Category 2 any license with potential 
impairments that affect greater than 15 percent but less than or equal 
to 50 percent of the population. Under this proposal, a license with 
potential impairments that affect more than 50 percent of the 
population will not be offered in the forward auction. The Commission 
proposes to calculate the extent of impairment on a granular basis, 
using cell-level data. Specifically, the Commission proposes to 
calculate the percentage of population impaired in each block at a two-
by-two kilometer cell level by applying the ISIX methodology to the 
assignment plan determined by the clearing target optimization 
procedure. With regard to the proposed 15 percent threshold for 
Category 1 licenses, wireless operators normally can expect some degree 
of interference to service in their license areas due to terrain and 
other factors. A 15 percent threshold would provide flexibility for the 
auction system to assign licenses to Category 1 even if they are 
subject to a limited degree of inter-service interference, and winners 
of generic licenses will have the opportunity to bid for frequency-
specific licenses within each category during the assignment phase of 
the forward auction. Moreover, the Commission proposes to apply 
discounts at the end of the assignment phase to reflect the extent to 
which a generic license is subject to impairment,

[[Page 4838]]

i.e., the Commission would discount Category 1 licenses based on their 
specific degree of predicted impairment. Accordingly, the Commission 
believes that licenses with potential impairments that affect between 
zero and 15 percent of the population reasonably may be considered 
fungible. The Commission invites comment on this proposal. As an 
alternative, the Commission seeks comment on whether to limit the 
proposed Category 1 to licenses that are not predicted to be subject to 
any inter-service interference, that is, with potential impairments 
that affect zero percent of the PEA population. This would enhance 
fungibility but reduce the number of licenses available in Category 1.
    142. The Commission proposes a 50 percent threshold for determining 
whether an impaired license will be offered in the clock phase of the 
forward auction for several reasons. The Commission believes that even 
with up to 50 percent impairment, particularly given the proposed 
availability of discounts based on degree of impairment at the end of 
the assignment phase, bidders would find a license usable. At the same 
time, the Commission recognizes that there is a limit to the extent 
that impaired licenses reasonably can be considered fungible, and even 
assuming that bidders would be interested in bidding for highly 
impaired licenses, its goal of simplicity militates against creation of 
an additional generic category. Under the circumstances, the Commission 
believes that 50 percent represents a reasonable threshold. The 
Commission seeks comment on this proposal. If given the opportunity, 
would bidders be interested in bidding on licenses that are more than 
50 percent impaired? If the Commission adopts the alternative proposal 
of strictly limiting Category 1, should the Commission modify the 
proposed range of Category 2 licenses or expand it to between one and 
50 percent? Commenters who advocate alternative thresholds or 
approaches should address the potential tradeoffs associated with their 
proposed alternatives.
    143. The Commission further proposes to incorporate a price 
adjustment into the auction system at the end of the assignment phase 
of the forward auction to account for varying degrees of predicted 
impairment to the licenses offered for sale, regardless of whether such 
licenses are in Category 1 or Category 2. Specifically, the Commission 
proposes to discount the final clock price by one percent for each one 
percent of predicted impairment. For example, under this proposal a 10 
percent discount would be applied to a license that is 10 percent 
impaired following the clock phase of the forward auction impairment. 
The Commission proposes such price adjustments in order to help 
accommodate a range of values among generic licenses within a proposed 
category, while minimizing the number of bidding categories in the 
interest of simplicity. The Commission also seeks comment on an 
alternative approach, under which the proposed discount would be 
applied only to licenses in Category 2 in light of the wider range of 
degrees of impairment in that category.
    144. The Commission also invites comment on how to treat heavily 
impaired spectrum blocks (i.e., those in which more than 50 percent of 
the population is impaired in a PEA) that the Commission does not 
propose to offer in the clock round of the forward auction. Should the 
Commission make such ``overlay'' licenses available to bidders in the 
assignment phase in conjunction with adjacent licenses offered in the 
same PEA? Under this alternative, in the assignment phase, the 
Commission would bundle these heavily impaired licenses with the most 
impaired frequency-adjacent licenses. The Commission asks commenters to 
address tradeoffs of this alternative compared to its main proposal 
and, specifically, to address performance requirements in the context 
of heavily-impaired overlay licenses.
iii. Implementation of the Spectrum Reserve
    145. Here the Commission seeks comment on implementing the market-
based spectrum reserve at the time the final stage rule is satisfied, 
consistent with the decisions made in the Mobile Spectrum Holdings R&O 
to reserve a portion of the licensed spectrum made available in the 
forward auction for reserve-eligible entities and to determine the 
amount of reserved spectrum through a market-based process during the 
auction. The Commission proposes procedures for implementing the 
market-based spectrum reserve in various potential contexts, including 
how the Commission will offer Category 2 licenses and the presence of 
only one reserve-eligible bidder in a PEA.
a. Determining the Number and Category of Reserved Licenses.
    146. The Commission proposes that the maximum number of reserved 
licenses, as set forth in the Mobile Spectrum Holdings R&O, will be 
based on the total number of Category 1 and Category 2 blocks offered 
in a PEA. For example, if there are 60 megahertz of Category 1 blocks 
and 10 megahertz of Category 2 blocks made available in a PEA, under 
its proposal the Commission will consider the available amount of 
spectrum offered in that PEA to be 70 megahertz, with a corresponding 
reserve of 30 megahertz.
    147. The Commission proposes that only Category 1 blocks will be 
designated for bidding by reserve-eligible entities. The Mobile 
Spectrum Holdings R&O determined that the actual amount of reserved 
spectrum will be based on the quantity of blocks demanded by reserve-
eligible bidders. Under the Commission's proposal, the actual number of 
blocks reserved in a PEA will be based on demand for Category 1 blocks 
by reserve-eligible bidders at the time the auction reaches the 
trigger, i.e., when the final stage rule is satisfied. That is, if 
demand for Category 1 blocks in a PEA by reserve-eligible bidders is 
less than the maximum reserved spectrum, then fewer reserved blocks 
will be available in that PEA. Consistent with this proposal, the 
actual amount of reserved spectrum can be no greater than that 
corresponding to the supply of Category 1 blocks in the PEA. The 
Commission seeks comment on this proposal. Alternatively, the 
Commission seeks comment on whether it should include Category 2 blocks 
in the spectrum reserve in any PEAs with fewer Category 1 blocks than 
in the maximum spectrum reserve, assuming sufficient demand for 
Category 2 blocks by reserve-eligible bidders at the time the auction 
reaches the final stage rule trigger. Under this approach, the total 
number of Category 1 and Category 2 blocks in the reserve would be no 
greater than the maximum spectrum reserve.
    148. Overall, the Commission's approach seeks to ensure that the 
need to offer fewer Category 1 blocks in certain PEAs in order to 
accommodate market variation does not reduce the benefits to 
competition and consumers from providing opportunities for multiple 
providers to gain access to low-band spectrum. First, because the 
Commission anticipates that most licenses offered for sale in the 
forward auction will fall into Category 1 the impact of the proposals 
should be limited to the relatively few markets that are affected by 
market variation. In such markets, however, the Commission believes its 
proposal to count both categories of licenses toward determining the 
maximum number of reserved licenses is consistent with the competition 
goals discussed in the Mobile Spectrum Holdings R&O,

[[Page 4839]]

including facilitating access to below-1-GHz spectrum by multiple 
providers.
    149. The Commission's competition goals will be further 
accomplished by designating only Category 1 blocks for reserve-eligible 
bidders, which are likely to be more reliant on 600 MHz Band spectrum 
to expand coverage and to compete in the mobile wireless marketplace. 
As discussed in the Mobile Spectrum Holdings R&O, the Commission is 
striving ``to promote competition by ensuring that in the near future, 
more providers would hold a sufficient mix of spectrum to compete 
robustly.'' The Commission believes this proposal is also consistent 
with its statutory obligation to promote access to spectrum for a 
variety of licensees, including entities seeking to serve rural areas 
or improve services in rural areas.
    150. It would significantly complicate the auction to create an 
additional generic bidding category to implement separate reserved 
categories for both Category 1 and Category 2 licenses. Doing so would 
undercut the benefits from bidding for categories of generic licenses, 
potentially extending the length of the auction, necessitating 
additional procedures for dividing bidder demands, and making it harder 
for bidders to switch their demands across categories. Therefore, the 
Commission's proposed approach of reserving only Category 1 licenses 
for reserve-eligible bidders promotes good auction design and is 
consistent with its established policy to promote access to spectrum 
for a variety of licensees, including entities seeking to serve rural 
areas or improve services in rural areas.
    151. One Reserve-Eligible Bidder. In the Mobile Spectrum Holdings 
R&O, the Commission indicated that it intended, after opportunity for 
comment in the Auction 1000 Request for Comment, not to allow reserve-
eligible bidders to acquire more than 20 megahertz of reserved spectrum 
in a PEA unless there is another bidder for reserved spectrum in that 
PEA. The Commission does not believe the public interest benefits of a 
maximum of 30 megahertz of reserved spectrum would be realized without 
more than one reserve-eligible bidder in a PEA. In particular, the 
Commission explained in the Mobile Spectrum Holdings R&O that a maximum 
of 30 megahertz of reserved spectrum could permit at least two reserve-
eligible bidders to acquire paired 5+5 megahertz blocks in a PEA for 
deployment of next-generation networks, with one of the bidders 
potentially acquiring two paired blocks (20 megahertz). The Commission 
also anticipated that a maximum of 30 megahertz--three paired 5+5 
megahertz spectrum blocks--would facilitate competition among bidders 
seeking to acquire two paired 5+5 megahertz blocks. In contrast, more 
than 20 megahertz of reserved spectrum is neither necessary for a 
single reserve-eligible bidder to deploy next-generation networks nor 
likely to facilitate competitive bidding. Accordingly, the Commission 
proposes to limit the maximum amount of reserved spectrum in a PEA to 
20 megahertz if there is only one reserve-eligible bidder demanding 
blocks when the trigger is reached.
b. Bidding on Reserved Licenses
    152. The Commission proposes specific procedures to govern bidding 
on the reserved licenses after the final stage rule is met. The 
Commission proposes to implement separate bidding for the reserved 
licenses in the clock bidding round that follows the round in which the 
final stage rule is met, regardless of whether the final stage rule is 
met in the course of regular clock bidding rounds or an extended round. 
Up to the point at which the auction reaches the spectrum reserve 
trigger, all bidders, including reserve-eligible bidders, will be 
bidding on a single category of Category 1 blocks in a PEA. In order to 
implement bidding on reserved spectrum after the final stage rule is 
met, the Commission proposes to split the Category 1 licenses in each 
PEA into two new categories, a reserved category, on which only 
reserve-eligible bidders may bid, and an unreserved category, on which 
any bidder may bid. Because a uniform clock price will apply to all the 
Category 1 spectrum blocks in a PEA at the time of the split, the clock 
price will be the same for both the reserved and the unreserved 
Category 1 blocks in the first bidding round after the auction reaches 
the spectrum reserve trigger. From that point forward, however, the 
Commission proposes to treat the reserved and the unreserved Category 1 
blocks as separate bidding categories. That is, bids will be processed 
separately following the split for the license categories in each PEA 
of reserved Category 1, unreserved Category 1, and Category 2, as they 
were for Category 1 and Category 2 prior to the split. Prices for 
generic blocks in each category will be based on relative supply and 
demand for each, and thus may diverge based on the bidding in 
subsequent rounds.
    153. The Commission proposes to allocate the demands for Category 1 
blocks in each PEA among the available reserved and unreserved blocks. 
The auction system will have to allocate demand for that single 
category between the two new categories (reserved Category 1 and 
unreserved Category 1) of blocks as a starting point for bidding in the 
following round. Under the Commission's proposal, the auction system 
first will assign all demand by non-reserve-eligible bidders to 
unreserved Category 1, and then will assign demand by reserve-eligible 
bidders to the reserved category up to the point where demand for 
reserved Category 1 blocks is equal to supply. The auction system will 
apply the remaining demand of reserve-eligible bidders to unreserved 
Category 1. Accordingly, the auction system will first allocate demand 
for one block to the reserved category for each reserve-eligible bidder 
in turn, then a second block, and so on until the total demands 
allocated to the reserved category equal the supply of reserved blocks. 
The Commission proposes to choose the order of reserve-eligible bidders 
pseudo-randomly. In the bidding rounds that follow the implementation 
of the spectrum reserve, bidders will be able to switch their bids 
between the separate categories of reserved Category 1, unreserved 
Category 1, and Category 2 blocks, subject to their eligibility for 
reserved blocks and procedures on acceptable bids proposed.
    154. Once the Commission applies its proposed approach, demand in 
the reserved category will equal supply, and any excess demand for the 
pre-split Category 1 blocks will be allocated to the unreserved 
category. The Commission proposes to allocate demands in this way--as 
opposed to assigning all demand by reserve-eligible bidders to the 
reserved category--to avoid the possibility of excess supply for 
unreserved blocks after the split in the case that the pre-split 
Category 1 does not have excess supply, which could result in auction 
revenue declining below the level required by the final stage rule at a 
point at which the final stage rule had been declared satisfied.

B. Forward Auction Application Process

    155. The Commission's general competitive bidding rules, as 
modified in the Incentive Auction R&O, apply to the forward auction. 
Those rules require that parties apply to participate in the forward 
auction and that applicants satisfy certain requirements before bidding 
in the auction. The Commission seeks comment on discrete issues 
relating to the upfront payment each applicant must make and on how an 
applicant must certify its eligibility to bid for reserved licenses if 
it wishes to do so. The Commission will provide detailed instructions 
for the pre-auction

[[Page 4840]]

application process in the Procedures PN.
i. Bidding Units
    156. Consistent with prior FCC spectrum license auctions, the 
Commission proposes to assign to each spectrum block that will be 
available in the forward auction a specific number of bidding units. 
The Commission proposes to use the bidding units for purposes of 
calculating minimum opening bids, upfront payments, and bidder 
eligibility, and for measuring bidding activity. Under the Commission's 
proposed approach, the number of bidding units for a given license will 
be fixed and will not change during the auction, regardless of price 
changes.
    157. In assigning bidding units to licenses, the Commission 
proposes to use a weighted population method similar to what the 
Commission proposes for its ``near nationwide'' threshold. The 
Commission starts with the total population in each PEA. Because the 
600 MHz Band Plan consists entirely of paired 5+5 megahertz blocks, 
bidding units do not need to reflect differences in bandwidth across 
licenses; thus, there is no need to use megahertz per population (MHz-
pops), as the Commission typically does for spectrum license auctions. 
Further, the Commission proposes to assign Category 1 and Category 2 
blocks in a PEA the same number of bidding units to facilitate bidding 
across categories. Hence, all generic licenses in a PEA would be 
assigned the same number of bidding units.
    158. The Commission proposes to weight population using an index of 
relative prices for each geographic area based on data from previous 
auctions. Consistent with the approach the Commission used for Auction 
97, the auction of Advanced Wireless Services (AWS-3) licenses, it will 
multiply the population of each PEA by an index value for the PEA. As 
the Commission did for Auction 97, it proposes to group the price index 
by deciles and apply the lowest index value in each decile to all PEAs 
in that decile. Appendix F of the Auction 1000 Request for Comment sets 
forth the indices and number of bidding units that would be assigned to 
licenses in each PEA under its proposed approach using currently-
available data. The Commission further proposes to incorporate the 
final results of Auction 97 (the AWS-3 auction) in calculating the 
index of relative prices for PEAs that will be used to determine 
bidding units, upfront payments, and minimum opening bids.
    159. By incorporating past prices, the Commission's proposed 
approach better reflects the relative weight bidders have assigned to 
the different markets in the past than would a calculation based solely 
on population. Consequently, service areas that have received similar 
winning bid amounts in past auctions will be similar to one another 
with respect to the activity rule. To simplify the number of units, the 
Commission proposes to divide the result of the calculation by 1,000 
and round it using its standard rounding procedures for auctions. 
Specifically, the Commission would round numbers greater than 10,000 to 
the nearest thousand; numbers less than 10,000 and greater than 1,000 
to the nearest hundred; numbers less than 1,000 and more than 10 to the 
nearest ten; and numbers less than 10 to the nearest one. All PEAs 
would have at least one bidding unit. Thus, the Commission proposes to 
calculate bidding units for most licenses as (pops * index)/1000, 
rounded. Because there were no winning bidders for several licenses 
covering US territories and protectorates in past auctions, for 
licenses in the PEAs for Puerto Rico, Guam-Northern Mariana Islands, US 
Virgin Islands, and American Samoa, the Commission proposes to divide 
the results of the weighted population calculation by 2,000 and round 
the results. Finally, the Commission proposes to assign one bidding 
unit to licenses for the Gulf of Mexico.
ii. Upfront Payments
    160. In keeping with the Commission's usual practice in spectrum 
license auctions, it proposes that applicants be required to submit 
upfront payments as a prerequisite to being found qualified to bid. An 
upfront payment is a refundable deposit made by each bidder to 
establish its eligibility to bid on licenses. Upfront payments 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. A Commission rule, 47 CFR 1.2106(a), requires that any 
auction applicant previously in default on a Commission license or 
previously delinquent on a non-tax debt to a Federal agency must submit 
upfront payments equal to 50 percent more than otherwise would be 
required.
    161. The Commission proposes to base the upfront payment for each 
license on the number of bidding units associated with that license. 
Specifically, the Commission proposes an upfront payment amount of 
$2,500 per bidding unit, rounded. These bidding unit amounts pertain to 
a single 5+5 megahertz generic license for each PEA. To the extent that 
bidders wish to bid on multiple generic licenses simultaneously, they 
will need to ensure that their upfront payment provides enough 
eligibility to cover more than one 5+5 megahertz generic license in a 
given PEA. The number of bidding units for a given license will be 
fixed and will not change during the auction as prices change. Appendix 
F of the Auction 1000 Request for Comment shows the upfront payment 
amounts that would be calculated based on current data. The Commission 
proposes to incorporate the final results of Auction 97 in the 
calculation of bidding units.
    162. Under the Commission's proposed approach, a bidder's upfront 
payment will not be attributed to a specific license or licenses. 
Rather, the bidder may place bids on any combination of the licenses it 
selects on its application to participate in the forward auction, 
provided that the total number of bidding units associated with those 
licenses will not exceed its eligibility when it places the bid(s). 
Bidders will not be able to increase their eligibility during the 
auction; bidders only will be able to maintain or decrease their 
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 in any 
single round and submit an upfront payment amount covering that total 
number of bidding units. The Commission seeks comment on these 
proposals.
    163. For the forward auction, the Commission proposes to set a 
deadline for the submission of upfront payments that will occur after 
determination of the initial clearing target, based on commitments of 
reverse auction applicants. This proposed deadline will enable a 
participant to take into account the number of licenses in the initial 
clearing target when determining the amount of its upfront payment. The 
Commission notes that an applicant will be able to consider the amount 
of its upfront payment and prepare accordingly well in advance of this 
date. For example, an applicant would be able to determine the number 
of licenses it is likely to seek in various PEAs prior to knowing the 
number of licenses that will be available. Nevertheless, given that the 
upfront payment will determine the participant's maximum bidding 
eligibility in the forward auction, the Commission concludes that it 
should require the submission of the upfront payment only after the 
determination of the initial clearing target.

[[Page 4841]]

iii. Eligibility for Spectrum Reserve
    164. The Commission proposes to require an applicant seeking to 
participate in the forward auction as a reserve-eligible entity to 
certify in its application that it is a reserve-eligible entity with 
respect to each PEA in which it wishes to be able to bid for reserved 
blocks. The Commission further proposes that an applicant must make 
this certification in its application and that it shall not be able to 
revise its certification thereafter. Under the Mobile Spectrum Holdings 
R&O, reserve-eligible entities may bid on unreserved spectrum blocks as 
well as reserved spectrum blocks. Nevertheless, applicants that 
otherwise would be eligible to bid on reserved spectrum blocks may 
prefer to forego reserved-eligible status generally, or with respect to 
licenses in particular areas. In particular, reserved spectrum blocks 
will be subject to restrictions on subsequent transactions to which 
unreserved spectrum blocks will not be subject. The approach the 
Commission proposes will enable potentially reserve-eligible applicants 
to forego reserve-eligible status on a PEA-by-PEA basis. In addition, 
by requiring applicants intending to bid for reserved spectrum blocks 
to affirmatively declare their eligibility to do so the Commission's 
proposed approach will avoid any subsequent ambiguity or uncertainty 
regarding an applicant's status.

C. Clock Phase Bidding Procedures

    165. The first phase of the forward auction will include the clock 
bidding rounds, and after the clock bidding for generic licenses ends 
in the final stage, the assignment phase will commence. The Commission 
proposes specific bidding procedures for the clock rounds of the 
forward auction. The Commission seeks comment on setting the minimum 
opening prices, setting prices between rounds of the auction and 
between stages of the auction. Consistent with a clock auction format 
with categories of generic licenses, a uniform minimum opening price or 
clock price applies to all the blocks in a category and a PEA. The 
Commission proposes and seeks comment on specific types of bids that 
participants will be able to place in the forward auction, including 
how those types of bids will be processed by the auction system, as 
well as the activity rule that bidders must meet to retain their 
eligibility. The Commission proposes a number of changes to the 
procedures it has traditionally used when holding forward auctions, 
such as bid withdrawals and proactive waivers. The Commission is 
changing these procedures for this auction to reduce complexity and 
uncertainty about bidder demand for spectrum. The Commission seeks 
comment on what effect these changes could have on participation by 
small business in the forward auction. The Commission also sets out 
detailed proposals on implementing the extended round and seeks comment 
on those.
i. Setting Prices in the Clock Rounds
    166. Minimum Opening Bids in the First Stage. At the beginning of 
the clock phase of the forward auction in the initial stage, a bidder 
will indicate how many blocks in a generic license category in a PEA it 
demands at the minimum opening bid price. The Commission proposes to 
establish initial clock prices, or minimum opening bids, for each 
license based on the number of bidding units associated with the 
license. The Commission's proposed approach is intended to be 
consistent with section 309(j) of the Communications Act, as amended, 
which calls for prescribed methods of establishing minimum opening bid 
amounts when FCC licenses are subject to auction, unless it determines 
that a minimum opening bid amount is not in the public interest.
    167. Specifically, the Commission proposes a minimum opening bid 
amount of $5,000 per bidding unit. This proposal is consistent with the 
precedent of the Commission's AWS-3 auction procedures, where it set 
the minimum opening bid amount at twice the upfront payment for each 
license. Because the number of bidding units for each license 
incorporates pricing information from previous auctions, this proposal 
appropriately adjusts opening bids to reflect value differences that 
bidders have placed on different geographic areas. Appendix F of the 
Auction 1000 Request for Comment shows the minimum opening bid amounts 
that would be calculated based on current data. The Commission proposes 
to incorporate the final results of Auction 97 in the calculation of 
bidding units.
    168. The Commission's experience in past auctions indicates that 
minimum opening bid amounts calculated in this manner will be an 
effective tool for accelerating the competitive bidding process, a 
particularly important goal for the incentive auction given the 
interdependency between the reverse and forward auctions. One of the 
primary purposes of a minimum opening bid is to speed up the course of 
an auction. By incorporating past pricing information into the 
Commission's calculation of minimum opening prices, it intends to 
reduce the number of rounds it will take for demand to equal supply in 
markets that have historically commanded relatively higher prices.
    169. The Commission seeks comment on its proposal. If commenters 
believe that this approach will result in unsold licenses or 
unreasonable minimum opening bid amounts, they should explain why this 
is so, suggest an alternative approach, and explain why such an 
alternative is desirable. The Commission also seeks comment on whether 
it should discount minimum opening bids for licenses in Category 2.
    170. Clock Price Increments Across Rounds. After bidding in the 
first round and before each subsequent round, the system will announce 
a clock price for the next round, which is the highest price to which 
bidders can respond during the round. The Commission proposes to set 
the clock price for each category available in each specific PEA for a 
round by adding a fixed percentage increment to the price for the 
previous round. As long as total demand for blocks in a category 
exceeds the supply of blocks, the percentage increment will be added to 
the clock price from the prior round. If demand equaled supply at an 
intra-round bid price in a previous round, then the clock price for the 
next round will be set by adding the percentage increment to the intra-
round bid price.
    171. The Commission proposes to apply an increment that is between 
five and 15 percent and generally to apply the same increment 
percentage to all categories in all PEAs. The Commission proposes to 
set the initial increment within this range, and to adjust the 
increment as stages and rounds continue. The proposed five-to-15 
percent increment range will allow the auction system to set a 
percentage that manages the auction pace, taking into account bidders' 
needs to evaluate their bidding strategies while moving the forward 
auction along quickly. The Commission also proposes that increments may 
be changed during the auction on a PEA-by-PEA or category-by-category 
basis based on bidding activity to assure that the system can offer 
appropriate price choices to bidders.
ii. Acceptable Bids
a. Types of Bids
    172. Here the Commission proposes specific bidding procedures for 
the clock phase of the forward auction, and addresses how the auction 
system will process the proposed types of permitted bids. The 
Commission provides

[[Page 4842]]

complete forward auction clock phase bid types and bid processing 
details in Appendix G of the Auction 1000 Request for Comment. As an 
initial matter, the Commission proposes that the auction system not 
allow a bidder to reduce the quantity of blocks it demands in a 
category if the reduction will result in aggregate demand falling below 
the available supply of licenses in the category. The alternative would 
risk significant reductions in aggregate forward auction proceeds from 
round to round, impeding progress toward satisfying the final stage 
rule. It could also potentially undermine a prior determination that 
the final stage rule had been satisfied. Under the ascending clock 
format adopted for the forward auction, a bidder will indicate in each 
round the quantity of blocks in each category in each PEA that it 
demands at a given price, indicating that it is willing to pay up to 
that price for its current quantity. In addition to making bids at the 
clock price, the adopted clock auction format will permit bidders to 
make bids at amounts smaller than the clock price (intra-round bids).
    173. Under the Commission's proposal, if a bidder demands fewer 
blocks in a category than it did in the previous round, the auction 
system will treat the bid as a request to reduce demand which will be 
implemented only if aggregate demand will not fall below the available 
supply of licenses in the category.
    174. Once a round ends, the auction system will process the bids 
submitted in the round and determine the extent to which there is 
excess demand for each category in each PEA in order to determine 
whether a bidder's requested change(s) in demand can be implemented.
    175. In order to facilitate bidding for multiple licenses in a 
category, and to help bidders manage their bidding given the 
requirement that a request to reduce demand may not be accepted, the 
Commission proposes that bidders will be permitted to make the 
following three types of bids: simple bids, all-or-nothing bids, and 
switch bids. All three types of bids can indicate multiple quantities 
of licenses. Appendix G of the Auction 1000 Request for Comment 
provides examples of each of the proposed types of bids and discusses 
how the auction system would treat them under the Commission's 
proposal. First, a ``simple'' bid indicates a desired quantity of 
licenses in a category at a price (either the clock price or an intra-
round price). A simple bid may be implemented partially if it involves 
a reduction from the bidder's previous demands, and aggregate excess 
demand is insufficient to support the entire reduction. Second, an 
``all-or-nothing'' bid also indicates a desired quantity of licenses in 
a category, but allows the bidder to indicate that it wants the bid to 
be implemented fully or not at all. And, third, a ``switch'' bid allows 
the bidder to request to move its demand for a quantity of licenses 
from one category of generic licenses to another category within the 
same PEA. A switch bid may be applied partially, but the increase in 
demand in the ``to'' category will always match in quantity the 
reduction in the ``from'' category.
    176. The Commission emphasizes that the proposed bid types will 
allow bidders to express their demand for blocks in the next clock 
round without running the risk that they will be forced to purchase 
more spectrum at a higher price than they wish. When a bid can be 
applied only partially, the uniform price for the category will stop 
increasing at that point, since the partial application of the bid 
results in demand falling to equal supply. Hence, a bidder that makes a 
simple bid or a switch bid that cannot be fully applied will not face a 
price for the remaining demand that is higher than its bid price. On 
the other hand, if a bidder uses an all-or-nothing bid to request a 
reduction that cannot be applied because excess demand is insufficient 
to cover the entire requested reduction, the price for the category may 
continue to increase if there is any excess demand. In such cases, the 
Commission provides for an optional ``backstop'' bid to ensure the 
price for the category does not go above the amount the bidder 
specifies in its bid, as explained and illustrated with examples in 
Appendix G of the Auction 1000 Request for Comment.
    177. Because bids to reduce demand will not be accepted (or not 
fully accepted) to the extent they would bring demand below the 
available supply, and because in any given round some bidders may 
increase demands for licenses in a category while others may request 
reductions, the order in which the bids are considered can affect which 
bids are accepted. The Commission proposes that bids be considered by 
the auction system first in order of increasing ``price point'' 
(expressed as a percentage of the bidding interval for the round) and 
in the case of ties, then using a pseudo-random number applied to the 
bid when it is submitted. The Commission further proposes that bids not 
accepted because of insufficient aggregate demand or insufficient 
eligibility be held in a queue and considered, again in order, if there 
should be excess supply or sufficient eligibility later in the 
processing after other bids are processed.
    178. More specifically, under the Commission's proposed procedures, 
once a round closes, the auction system will process the bids by first 
considering the bid submitted at the lowest price point and determine 
whether it can be accepted given aggregate demand as determined most 
recently and given the associated bidder's eligibility. If the bid can 
be accepted, or if it is a simple bid or a switch bid that can be only 
partially accepted, the number of licenses the bidder demands will be 
adjusted, and aggregate demand will be recalculated accordingly. If the 
bid cannot be accepted in part or in full, the unfulfilled bid, or 
portion thereof, will be held in a queue to be considered later during 
bid processing for that round. The auction system will then consider 
the bid submitted at the next highest price point, accepting it in 
full, in part, or not at all, given recalculated aggregate demand and 
given the associated bidder's eligibility. Any unfulfilled requests 
will again be held in a queue, and aggregate demand will again be 
recalculated. Every time a bid or part of a bid is accepted and 
aggregate demand has been recalculated, the unfulfilled bids held in 
queue will be reconsidered, in the order of their original price points 
(and by pseudo-random number, in the case of tied price points). The 
auction system will not carry over unfulfilled bid requests to the next 
round, however. The auction system will advise bidders of the status of 
their bids when round results are released.
    179. After the bids are processed in each round, the auction system 
will announce new clock prices to indicate a range of acceptable bids 
for the next round. Each bidder will be informed of the number of 
blocks in a category on which it holds bids, the extent of excess 
demand for each category, and, if demand fell to equal supply during 
the round, the intra-round price point at which that occurred.
b. No Bidding Aggregation
    180. In the Incentive Auction R&O, the Commission stated that it 
did not intend to incorporate package bidding procedures into the 
forward auction because of the additional complexity such procedures 
would introduce into the auction, but that the Commission would seek 
input in the Auction 1000 Request for Comment on an alternative to 
package bidding under which the Commission would create an aggregation 
of the largest PEAs in advance of the auction. The Commission has 
significant concerns

[[Page 4843]]

with a ``major markets'' aggregation approach, however. The Commission 
tentatively concludes that such an approach would not be consistent 
with its goal of encouraging entry by providers that contemplate 
offering wireless broadband service on a localized basis. As the 
Commission discussed when adopting PEAs rather than the larger Economic 
Area (EA) service areas, offering single PEA licenses in the largest 
markets will best promote entry by the broadest range of potential 
wireless service providers. In addition, the Commission is concerned an 
aggregation approach would discourage bidders, particularly small or 
regional entities with an interest in only a subset of ``major 
markets,'' from participating in the forward auction. For these 
reasons, the Commission does not propose to adopt a ``major markets'' 
aggregation. The Commission invites comment on its tentative 
conclusion. Commenters supporting a ``major markets'' aggregation 
should explain how such an approach would be consistent with the 
Commission's goals of promoting competition in the provision of mobile 
wireless services and broad participation in the forward auction.
    181. In the event the Commission decided to adopt a ``major 
markets'' aggregation approach, it seeks comment on which PEAs should 
be included in the ``major markets'' aggregation, and on how to apply 
the market-based spectrum reserve to the aggregation.
iii. Activity Rule
    182. To ensure that the auction moves as quickly as possible, the 
Commission proposes to require that bidders maintain a fixed, high 
level of activity in each round of the auction in order to maintain 
bidding eligibility. Specifically, the Commission proposes to require 
that bidders be active on between 92 and 97 percent of their bidding 
eligibility in all regular clock rounds. The Commission proposes to 
calculate activity using bidding units. Thus, the activity rule would 
be satisfied when a bidder has bidding activity on blocks with bidding 
units that total 92 to 97 percent of its current eligibility in the 
round. If the activity rule is met, then the bidder's eligibility does 
not change in the next round. The Commission further proposes to 
calculate bidding activity based on the bids that are accepted by the 
auction system. That is, if a bidder requests a reduction in the 
quantity of blocks it demands in a category, but the auction system 
does not accept the request because demand for the category would fall 
below the available supply, the bidder's activity will reflect its 
unreduced demand. If the activity rule is not met in a round, a 
bidder's eligibility automatically would be reduced. The Commission 
invites comment on this proposal, in particular on where to set the 
activity requirement between 92 and 97 percent. Commenters may wish to 
address the relationship between the proposed activity rule and the 
ability of bidders to switch their demands across PEAs or across 
categories of licenses within a PEA. The Commission encourages any 
commenters that oppose an activity rule in this range to explain their 
reasons with specificity.
    183. In addition, the Commission proposes that if subsequent stages 
of the auction are required, a bidder will begin the first round of a 
new stage with its eligibility reset to equal its bidding activity when 
the final round of the previous stage concluded. This eligibility will 
be based on bidding in the extended round for licenses for which there 
was bidding in the extended round, and for other licenses on bidding in 
the last regular clock round.
    184. The Commission does not propose to provide for activity rule 
waivers to preserve a bidder's eligibility. In previous FCC multiple 
round auctions, when a bidder's eligibility in the current round was 
below a required minimum level, the bidder was able to preserve its 
current level of eligibility with a limited number of activity rule 
waivers. The clock auction portion of the forward auction, however, 
relies on precisely identifying the point at which demand falls to 
equal supply to determine winning bidders and final prices. Allowing 
waivers would create uncertainty with respect to the exact level of 
bidder demand, interfering with the basic clock price-setting and 
winner determination mechanism. Moreover, uncertainty about the level 
of demand would affect the way bidders' requests to reduce demand are 
processed by the auction system. Under the Commission's proposal, 
bidders would be required to reconfirm their bids in every round.
iv. Extended Round
    185. In the Incentive Auction R&O, the Commission provided for an 
extended bidding round ``to increase the likelihood that the auction 
will conclude at the end of the current stage, thereby avoiding the 
need to move to another stage in which less spectrum would be available 
for licensing in the forward auction.'' The Commission proposes to 
implement an extended round whenever a round of the forward auction 
ends and (1) the demand for licenses in ``high-demand'' PEAs does not 
exceed the available supply, and (2) the final stage rule has not been 
met. The extended round will interrupt the clock phase of the forward 
auction, which will resume if bidding in the extended round satisfies 
the final stage rule. If the final stage rule is not satisfied at the 
conclusion of the extended round, the auction stage will end and a new 
stage will commence with a reduced clearing target.
    186. The Commission proposes to base the extended round clock price 
on the additional proceeds needed to meet the final stage rule, which 
is consistent with the purpose of the extended round of attempting to 
meet the final stage rule and avoid the need for a new stage with a 
lower clearing target. Specifically, the Commission proposes to 
increase the extended round clock prices for Category 1 in the ``high-
demand'' PEAs in aggregate by 33 percent more than the additional 
proceeds needed to meet the final stage rule. The Commission proposes a 
percentage that is greater than the minimum amount required to meet the 
final stage rule to account for the possibility that, in some PEAs, 
demand may not be sufficient to increase prices to the minimum amount 
required, whereas in others, demand may be more than sufficient to meet 
the minimum, in order to increase the likelihood of satisfying the 
final stage rule.
    187. The Commission further proposes to conduct extended round 
bidding only for Category 1 blocks in the ``high-demand'' PEAs with no 
excess supply. This approach is consistent with the Commission's 
proposal to implement an extended round when bidding activity for such 
blocks stops in such areas (that is, when demand does not exceed 
supply). Because spectrum auctions typically reach near-final auction 
prices in such areas much sooner than in other areas, this approach 
will obviate the need to wait for bidding to stop in all areas before 
deciding that a subsequent stage is necessary.
    188. The Commission proposes to permit bidders in the extended 
round to make a single simple bid for Category 1 blocks in each ``high-
demand'' PEA, indicating a desired quantity of blocks, and it proposes 
to allow for intra-round bidding as in the regular clock rounds of the 
forward auction. Under the Commission's proposal, in each ``high-
demand'' PEA, a bidder can either maintain its current demand or 
request to reduce its demand by one block at a specified intra-round 
price point. The auction system will process requested

[[Page 4844]]

demand reductions differently depending upon whether the final stage 
rule is met, in keeping with its proposed rule that bidders will not be 
allowed to reduce their demand if the reduction would result in demand 
falling below the available supply. Accordingly, if the final stage 
rule cannot be met in the extended round, so that the auction will move 
to a new stage with fewer available licenses, the system will process a 
demand reduction of up to one block per ``high-demand'' PEA, because 
there is little likelihood of demand being below supply when bidding 
resumes in the next stage. However, if the final stage rule is met in 
the extended round, the system will not process any requested 
reductions in demand, to avoid reducing demand below supply at the 
current clearing target with the current supply of blocks.
    189. Once bids in the extended round are placed, the Commission 
proposes that the auction system will consider the bids sequentially in 
ascending order of price points for the regular clock rounds of the 
forward auction. The auction system will process bids and set clock 
prices for the subsequent bidding round--either a regular clock bidding 
round with the spectrum reserve in place or the first round of a new 
stage--differently according to whether the final stage rule is 
satisfied. If the final stage rule cannot be met in the extended round, 
the auction system will allow for a single reduction and otherwise 
process bids as they are processed in regular clock rounds.
    190. If the final stage rule can be met in the extended round, the 
auction system will process extended round bids only up to the lowest 
price point at which the rule is satisfied. Clock prices for the next 
round will be based on that price point, unless a reduction was 
requested at a lower price point in a PEA, in which case the clock 
price in that PEA will be based on the intra-round price at which the 
reduction was requested (but not accepted). Regular clock bidding 
rounds will resume for all categories in all PEAs, with the spectrum 
reserve in place. For those blocks not subject to extended round 
bidding, that is, non-``high-demand'' PEAs as well as Category 2 blocks 
of the ``high-demand'' PEAs, rounds will resume with clock prices for 
the next round based on prices from the round preceding the extended 
round. If the final stage rule is not met, clock prices for the next 
round--that is, the first round of the new stage--will also be based on 
prices from the round preceding the extended round for blocks not 
subject to extended round bidding. Under the Commission's proposed 
procedures, the price for blocks in the same category in a PEA will be 
the same for all bidders at the end of an extended round, as is also 
the case for the other clock rounds. Accordingly, in a PEA, clock 
prices for reserved spectrum blocks going into the next round will be 
the same as for unreserved spectrum blocks.
v. Stopping Rule
    191. Consistent with the Commission's practice of using stopping 
rules in multi-round auctions to ensure completion within a reasonable 
time, it proposes to employ a simultaneous stopping rule for the clock 
phase of the forward auction in the final stage. Under this proposal, 
all categories of licenses in all PEAs would remain available for 
bidding until the bidding stops on every category. More specifically, 
if the final stage rule has been met, with or without an extended 
round, the clock phase of bidding will end for all categories of 
licenses following the first round in which there is no excess demand 
in any category in any PEA. Since bidding will remain open on all 
categories of licenses until bidding stops on every category, it is not 
possible to determine in advance how long the forward auction will 
last. The Commission seeks comment on permitting new bids to be made in 
one additional bidding round following the first round in which there 
is no excess demand.
vi. New Stage Transition
    192. The Commission proposes to initiate bidding in any subsequent 
stage of the forward auction based on the bidder demands and prices 
from the end of the previous stage. In some cases, these demands and 
prices will have been determined in the extended round, and in others, 
from the last regular clock round. The price increment in the first 
round of the next stage will be added to the last clock price from the 
previous stage, or to the intra-round price at which a reduction that 
brought demand down to equal supply was processed.
    193. The Commission proposes that for categories of blocks for 
which all bidders indicated that they were willing to accept the full 
extended round price increment, bidder demands will carry over from the 
extended round. Because the Commission's proposed procedures for 
processing extended round bids when the final stage rule is not met 
will allow at most one request for a reduction in demand to be accepted 
in each category, in categories where a reduction was accepted, bidder 
demands from the start of the extended round will carry over to the new 
stage for all but the bidder whose requested reduction was accepted. 
That bidder's demand will reflect the reduction, consistent with 
extended round bid processing. For blocks that were not included in 
bidding in the extended round, the Commission proposes that bidder 
demands that were accepted by the auction system at the end of the last 
regular clock round of the previous stage will carry over to the 
beginning of the next stage.
    194. Under the Commission's proposal, a bidder will begin the first 
round of a new stage with its eligibility reset to equal its bidding 
activity when the final round of the previous stage concluded. Because 
the re-optimization at the start of a new stage may ``re-shuffle'' the 
assignment of stations to the 600 MHz Band, the extent and location of 
impairments to the blocks available may change from stage to stage of 
the forward auction. The auction system will advise forward auction 
bidders of any such changes before bidding begins. Because the 
Commission recognizes that bidder demand for Category 2 blocks in a PEA 
may be reduced if the extent of impairments increase, the Commission 
proposes that the auction system will accept requests to reduce demand 
for Category 2 blocks in the first round of a new stage, even if the 
reduction will result in demand falling below supply for that category.

D. Bidding Procedures in Assignment Phase

    195. In the Incentive Auction R&O, the Commission adopted a two-
step forward auction procedure, with a separate assignment phase ``in 
which bidders will bid for priority in selecting bands or for a 
preferred frequency within a geographic area.'' Here the Commission 
proposes procedures to implement the assignment phase, which it also 
explains in detail in Appendix H of the Auction 1000 Request for 
Comment. Under the Commission's proposal, winning bidders from the 
clock phase that have a preference for specific frequencies will have 
an opportunity to submit sealed bids for particular frequency blocks in 
a separate single assignment round for each particular PEA or group of 
PEAs. The Commission proposes that this assignment phase be voluntary: 
Winning bidders in the clock phase of the forward auction need not 
participate in order to be assigned a number of licenses corresponding 
to the outcome of the clock phase. The Commission proposes to group 
bidding for multiple PEAs where possible, so as to reduce the number of 
separate assignment rounds

[[Page 4845]]

required, and to sequence the bidding for the various PEAs.
    196. In determining specific frequency assignments during the 
assignment phase of the forward auction, the auction system will take 
into account bid amounts as well as other efficiency objectives, such 
as maximizing contiguity for winners of multiple blocks in an area. 
Under the Commission's proposed approach, these overall efficiency 
considerations will affect the way the auction system processes the 
bids to determine the optimal assignment of frequencies. The Commission 
seeks comment on these proposed objectives and their relative priority 
in determining the best way to structure bidding and bid processing in 
each assignment round.
i. Grouping of PEAs
    197. The Commission proposes to conduct bidding for specific 
frequencies grouped by different geographic areas in each assignment 
round. This will reduce the complexity for the bidder and the auction 
system that would be inherent in considering simultaneously the 
preferences of multiple bidders for various configurations of Category 
1 and Category 2 license blocks in hundreds of PEAs. However, to the 
extent that the set of clock-phase winning bidders and their winning 
bids for Category 1 and Category 2 blocks are consistent across a group 
of PEAs, the Commission proposes to conduct the single-round bidding 
jointly for multiple areas. Under such circumstances, joint bidding 
would not increase the complexity of the bidding or the winner 
determination process. Moreover, joint bidding can reduce the overall 
number of assignment rounds needed and facilitate assigning contiguous 
blocks to bidders that won multiple blocks in a group, potentially 
enhancing the efficiency of the assignment.
    198. Specifically, the Commission proposes to group together: (1) 
``high-demand'' PEAs with the same number of Category 1 and Category 2 
blocks, where the same frequency blocks are in Category 2, and where 
the same bidders won the same quantities of Category 1 and Category 2 
blocks; and (2) all PEAs other than the ``high-demand'' PEAs in a 
Regional Economic Area Grouping (``REAG'') with the same number of 
Category 1 and Category 2 blocks, where the same frequency blocks are 
in Category 2, and where the same bidders won the same quantities of 
Category 1 and Category 2 blocks. The Commission further proposes to 
group PEAs together when to do so will not create any conflicting 
interests among bidders. This could occur, for example, if the bidder 
mix of generic blocks differs only in that there is an unsold license 
in one PEA but not in another. Under the Commission's proposal, bidders 
would bid for their specific preferred frequencies across all the PEAs 
in a group, and the auction system will determine a frequency 
assignment that will apply to all the licenses in the group.
ii. Sequencing of PEAs
    199. The Commission proposes to sequence assignment rounds so as to 
make it easier for bidders to incorporate frequency assignments from 
previously-assigned areas into their bid preferences for other areas, 
recognizing that bidders winning multiple blocks of licenses generally 
will prefer contiguous blocks across adjacent PEAs. To that end, the 
Commission proposes to conduct rounds for the largest groups of markets 
first to enable bidders to establish a ``footprint'' from which to 
work. Specifically, the Commission proposes to conduct assignment 
rounds sequentially, generally in order of ``weighted-pops.'' Under 
this proposal, the Commission will first conduct an assignment round 
for the largest PEA or PEA group, based on total weighted-pops, and 
continue in order of weighted-pops until specific frequencies have been 
assigned for all the ``high-demand'' PEAs (individually or in groups).
    200. Once frequencies have been assigned for the ``high-demand'' 
PEAs, the Commission proposes to conduct for each REAG a series of 
assignment rounds for non-high-demand PEAs within that region, in 
descending order of weighted-pops for a PEA group or individual PEAs. 
The Commission further proposes, to the extent practical, to conduct 
the assignment rounds for the different REAGs in parallel, to reduce 
the total amount of time required.
iii. Acceptable Bids and Bid Processing
    201. Under the Commission's proposal, described in more detail in 
Appendix H of the Auction 1000 Request for Comment, bidders will be 
asked to assign a price to their various frequency preferences, 
consistent with their winning bids for generic blocks in the clock 
phase. The Commission proposes not to differentiate in the assignment 
rounds between licenses that were reserved for certain eligible bidders 
pursuant to the Mobile Spectrum Holdings R&O and unreserved blocks. 
This proposed approach is consistent with the auction design the 
Commission adopted in the Incentive Auction R&O: Bidders in the clock 
phase will have competed for generic blocks, not specific licenses. The 
Commission also believes this approach is consistent with its 
competitive goals in the Mobile Spectrum Holdings R&O, as winning 
bidders will be assured of low-band spectrum based on the results of 
the clock phase. Winners of either reserved or unreserved Category 1 
blocks will be able to bid for the available frequencies in Category 1, 
and the auction system will assign specific frequencies without regard 
to the reserve-eligible status of the bidder.
    202. In each assignment round, a bidder will be asked to assign a 
price to one or more possible frequency assignments for which it wishes 
to express a preference. The price will represent a maximum payment 
that the bidder is willing to pay, in addition to the base price 
established in the clock phase for the generic blocks, for the 
frequency-specific license or licenses. At the end of the assignment 
phase, the clock price will be discounted to the extent the licenses 
included are subject to impairments. The Commission proposes to apply a 
discount on the clock prices of generic blocks to reflect the varying 
degrees of impairment to the blocks within a category. Specifically, 
for a given frequency-specific license, the Commission proposes to 
reduce the base price for the assignment round by one percent of the 
final clock price for each one percent of impairment to the license. 
Under this proposal and the Commission's proposed assignment phase 
procedures, if a bidder indicates it is willing to pay an additional 
amount in the assignment round for a specific block that is available 
in the category, and it wins that license, the additional payment will 
be applied to a base price that reflects a discount from the final 
clock price for the category.
    203. It may not be possible to assign contiguous blocks to all 
bidders within a PEA. Contiguity cannot be guaranteed because of the 
possibility that some contiguous blocks are in different categories due 
to the amount of their impairment, and in the case of clearing targets 
over 84 megahertz, TV Channel 37 will separate some blocks. Given this, 
the Commission proposes to use an optimization approach to determine 
the winning frequency assignment for each assignment round. The 
Commission proposes that the auction system will consider a number of 
objectives aimed at assigning contiguous blocks fairly and to the 
extent possible. As set forth in Appendix H of the Auction 1000 Request 
for Comment, the Commission proposes a sequence of optimizations using 
the following objectives: (1) Maximizing the number of bidders that

[[Page 4846]]

won multiple blocks that are assigned at least two contiguous blocks; 
(2) minimizing for all bidders that won two or more blocks in the clock 
phase the number of blocks that are non-contiguous to any of the 
bidder's other blocks; and (3) maximizing the number of bidders that 
are assigned only contiguous blocks. Under the Commission's proposed 
procedures, the auction system will first solve or optimize for the 
first objective and use that outcome as a constraint in solving the 
second objective, which would then constrain solving the third 
objective. The winning bids in each assignment round will be bids for 
which the assignment satisfies these three constraints and for which 
the bidders in that round are willing to pay the most.
    204. As described in Appendix H of the Auction 1000 Request for 
Comment, the Commission proposes that the additional price a bidder 
will pay for a specific frequency (above the discounted final clock 
price) will be calculated consistent with a generalized ``second 
price'' approach--that is, the winner will pay a price that would be 
just sufficient to result in the bidder receiving that same winning 
frequency assignment. This price will be less than or equal to the 
price the bidder indicated it was willing to pay for the assignment. 
The Commission proposes to determine prices in this way because it 
facilitates bidding strategy for the bidders, giving them an incentive 
to bid their full value for the assignment, knowing that if the 
assignment is selected, they will pay no more than would have been 
necessary to ensure that the assignment won.

E. Additional Default Payment Percentage

    205. The Commission's competitive bidding rules provide that it 
shall establish the percentage of any defaulted bid that will be 
assessed as a payment owed by the defaulter in addition to the 
difference between with defaulted bid and a subsequent winning bid for 
the same license. In an auction without combinatorial bidding, such as 
the forward auction the Commission proposes here, the percentage shall 
be between three and 20 percent. The Commission proposes that the 
percentage shall be 20 percent in the forward auction. The Commission 
tentatively concludes that the maximum amount is in the public 
interest, given the importance of deterring defaults in order to 
minimize the possibility that the auction will not generate shortly 
after its conclusion the full amount of the proceeds indicated by 
winning bids.

VI. Ex Parte

    206. 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).

VII. Regulatory Flexibility Act Analysis

    207. As required by the Regulatory Flexibility Act of 1980 (RFA), 5 
U.S.C. 603, the Commission prepared an Initial Regulatory Flexibility 
Analysis (IRFA) in connection with the Notice of Proposed Rulemaking, 
``Expanding the Economic and Innovation Opportunities of Spectrum 
Through Incentive Auction,'' 77 FR 69933, November 21, 2012 (Incentive 
Auction NPRM) and a Final Regulatory Flexibility Analysis (FRFA) in 
connection with the Incentive Auction R&O. While no commenter directly 
responded to the IRFA, the FRFA addressed concerns about the impact on 
small business of various auction design issues. The Commission seeks 
comment on how the proposals in the Auction 1000 Request for Comment 
could affect either the IRFA or the FRFA. Such comments must be filed 
in accordance with the same filing deadlines for responses to the 
Auction 1000 Request for Comment and have a separate and distinct 
heading designating them as responses to the IRFA and FRFA.
    208. The IRFA and FRFA set forth the need for and objectives of the 
Commission's rules for the broadcast spectrum incentive auction; the 
legal basis for those rules, a description and estimate of the number 
of small entities to which the rules apply; a description of projected 
reporting, recordkeeping, and other compliance requirements for small 
entities; steps taken to minimize the significant economic impact on 
small entities and significant alternatives considered; and a statement 
that there are no federal rules that may duplicate, overlap, or 
conflict with the rules. The proposals in the Auction 1000 Request for 
Comment do not change any of those descriptions.
    209. The Auction 1000 Request for Comment does, however, detail 
proposed procedures implementing those rules. The Commission seeks 
comment on how the proposals in the Auction 1000 Request for Comment 
could affect either the IRFA or the FRFA. These proposals include 
procedures for setting the initial broadcast spectrum clearing target, 
determining whether the final stage rule is satisfied and the steps 
triggered by that determination, determining how much market variation 
will be accommodated, and a process of moving from one stage of the 
auction to any subsequent stage(s), if necessary. The Auction 1000 
Comment PN also addresses detailed proposals for setting opening 
prices, applying to participate in the reverse or forward auction, 
establishing bidding procedures for each auction, optimizing the final 
television assignment channel plan, providing information to forward 
auction bidders, grouping license blocks into categories for bidding, 
implementing the market-based spectrum reserve, repacking broadcasting 
stations in conjunction with the reverse auction, and assigning 
licenses with specific frequencies in the forward auction.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 2015-01607 Filed 1-28-15; 8:45 am]
BILLING CODE 6712-01-P