Guidance Regarding the Prohibition of Certain Communications During the Incentive Auction, Auction 1000, 63215-63222 [2015-26525]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 80, Number 201 (Monday, October 19, 2015)]
[Notices]
[Pages 63215-63222]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-26525]


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FEDERAL COMMUNICATIONS COMMISSION

[AU Docket No. 14-252; GN Docket No. 12-268; WT Docket No. 12-269; DA 
15-1129]


Guidance Regarding the Prohibition of Certain Communications 
During the Incentive Auction, Auction 1000

AGENCY: Federal Communications Commission.

ACTION: Notice.

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SUMMARY: The Auction 1000 Prohibited Communications Guidance PN 
addresses the application of the Federal Communications Commission 
(Commission) rules prohibiting certain communications during the 
broadcast television spectrum incentive auction and related Auction 
1000 issues. This document also clarifies certain aspects of the rules 
that apply to applicants in both the reverse and the forward auctions.

FOR FURTHER INFORMATION CONTACT: Wireless Telecommunications Bureau, 
Auctions and Spectrum Access Division: Erik Salovaara at (202) 418-0660 
or Erik.Salovaara@fcc.gov for informal guidance on the applicability of 
the prohibited communications rules.

SUPPLEMENTARY INFORMATION: This is a summary of the Auction 1000 
Prohibited Communication Guidance Pubic Notice (PN), AU Docket No. 14-
252, GN Docket No. 12-268, WT Docket No. 14-252, DA 15-1129, released 
on October 6, 2015. The complete text of this document is available for 
public inspection and copying from 8:00 a.m. to 4:30 p.m. ET Monday 
through Thursday or from 8:00 a.m. to 11:30 a.m. ET on Fridays in the 
FCC's Reference Information Center, 445 12th Street SW., Room CY-A257, 
Washington, DC 20554. The complete text is also available on the 
Commission's Web site at https://wireless.fcc.gov, or by using the 
search function on the ECFS Web page at https://www.fcc.gov/cgb/ecfs/.

I. Introduction

    1. The Auction 1000 Prohibited Communications Guidance PN addresses 
the application of the Commission's rules prohibiting certain 
communications during the broadcast television spectrum incentive 
auction, Auction 1000, and related issues. The rules apply to 
applicants in both the reverse and the forward auction. In response to 
numerous questions on this topic, the Commission's Wireless 
Telecommunications Bureau (Bureau) also takes this opportunity to 
clarify certain aspects of the rules. Finally, the Bureau discusses the 
applicability of the antitrust laws and administrative issues.

II. The Reverse Auction Rule Prohibiting Certain Communications

A. Background

    2. 47 CFR 1.2205(b) provides that, subject to specified exceptions, 
``beginning on the deadline for submitting applications to participate 
in the reverse auction and until the results of the incentive auction 
are announced by public notice, all full power and Class A broadcast 
television licensees are prohibited from communicating directly or 
indirectly any incentive auction applicant's bids or bidding strategies 
to any other full power or Class A broadcast television licensee or to 
any forward auction applicant.'' For purposes of the rule, a full power 
or a Class A broadcast television licensee includes all controlling 
interests in the licensee, and all officers, directors, and governing 
board members of the licensee. With respect to the bids and bidding 
strategies that are the focus of the rule, ``an incentive auction 
applicant'' is the party identified as the applicant in an application 
to participate in either the reverse or forward auction. A forward 
auction applicant includes all controlling interests in the entity 
applying to participate in the forward auction, as well as all holders 
of partnership and other ownership interests and any stock interest 
amounting to 10 percent or more of the entity, or outstanding stock, or 
outstanding voting stock of the entity submitting a short-form 
application, and all officers and directors of that entity. Generally, 
a party that submits an application becomes an applicant under this 
rule at the deadline for submitting applications to participate in the 
reverse auction, and for purposes of the rule that party's status does 
not change based on subsequent developments during the auction process. 
The prohibition on communicating directly or indirectly includes public 
disclosures as well as private communications.
    3. 47 CFR 1.2205(b) applies solely to communications that directly 
or indirectly communicate an incentive auction applicant's bids or 
bidding strategies. The Commission has emphasized that the rule is 
limited in scope and only prohibits disclosure of information that 
affects, or has the potential to affect, bids and bidding strategies. 
Business discussions and negotiations that are unrelated to bids and 
bidding strategies and that do not convey information about bids and 
bidding strategies are not prohibited by the rule.
    4. There are three exceptions to 47 CFR 1.2205(b) under which 
communications regarding bids or bidding strategies are permissible. 
Under the first, such communications between covered broadcast 
licensees are permissible if the licensees share a common controlling 
interest, director, officer, or governing board member as of the 
deadline for submitting applications to participate in the reverse 
auction. The second exception permits such communications between a 
broadcast licensee and a forward auction applicant if a controlling 
interest, director, officer or governing board member of the broadcast 
licensee is also a controlling interest, director, officer, or holder 
of any 10 percent or greater ownership interest in the forward auction 
applicant as of the deadline for submitting application to participate 
in the reverse auction. The third exception permits such communications 
between broadcast licensees that are parties to a channel sharing 
agreement that was executed prior to the deadline for submitting 
applications to participate in the reverse auction and that was 
disclosed on an application to participate in the reverse auction.

B. Discussion

    5. Overview. The Commission has previously explained that the rule 
prohibiting certain communications should result in minimal intrusion 
into broadcasters' routine business practices, since covered television 
licensees may structure their business practices to avoid violations. 
The Bureau recognizes that broadcast licensees engage in a myriad of 
business arrangements with one another, or with affiliated entities, 
that are not directly related to bids and bidding strategies in the 
incentive auction. Such arrangements include, but are not limited to, 
network affiliation

[[Page 63216]]

agreements, retransmission consent agreements, and syndicated 
exclusivity arrangements, as well as tower sharing or other agreements 
related to shared physical facilities. Broadcasters also routinely 
engage in financial undertakings that may be affected by their auction 
activities, such as raising funds from lenders or, in the case of 
noncommercial broadcasters, from the public or underwriters. The Bureau 
provides guidance regarding the applicability of the reverse auction 
rule prohibiting certain communications during the ``quiet period'' 
covered by the rule to enable broadcasters to carry on business as 
usual to the fullest extent possible during the quiet period while 
complying with the rule.
    6. Communicating Merely Whether a Licensee Has or Has Not Applied 
to Participate Does Not Violate the Rule. Communicating directly or 
indirectly that a licensee has or has not filed an application to 
participate in the reverse auction does not constitute communication 
regarding an applicant's bids or bidding strategies and therefore does 
not violate the reverse auction rule prohibiting certain 
communications. Filing an application is a prerequisite to bidding in 
the reverse auction, but the mere fact that an application has been 
filed does not require the applicant to bid, nor does it reveal an 
applicant's specific bids or bidding strategies, e.g., the applicant's 
selected bid options, an applicant's decision to switch bid options 
during the course of the bidding, or an applicant's decision to drop 
out of the bidding.
    7. Accordingly, a licensee may explain in the course of its 
business communications that it has applied to participate in the 
auction, for example, as the basis for seeking a short-term extension 
of an agreement rather than a full term renewal or in communications 
with legislators. Alternatively, a licensee seeking a multi-year 
contract may state that it has not applied. Noncommercial broadcasters 
may refer to their decision to apply or not to apply to participate in 
the auction when engaging in fundraising activities, including public 
pledge drives and private discussions with existing and potential 
donors. Such communications would not violate the rule. Moreover, while 
another broadcast licensee or forward auction applicant might attempt 
to infer specific bids or bidding strategies based solely on a 
licensee's status as an applicant, such an inference without more 
support does not constitute a communication regarding the applicant's 
bids or bidding strategies.
    8. Communicating How a Licensee Will Participate in the Auction Is 
Prohibited by the Rule. In contrast to communications solely about 
whether or not a licensee has applied to participate in the auction, 
communications regarding the specific nature of a licensee's 
participation, including without limitation the bid options or bidding 
actions that have been or will be selected or taken, may convey bids 
and bidding strategy and are therefore prohibited by the rule after the 
quiet period commences. Unlike the submission of an application, such 
communications convey information about specific bids or bidding 
strategies; some of these may represent irrevocable obligations or 
commitments by an applicant. The rule prohibits such communications 
whether direct or indirect, express or implied. An applicant that 
communicates details regarding its application or bidding actions, such 
as indicating which option or options it has selected or stating that 
it has dropped out of bidding, may be disclosing its bids and bidding 
strategy in violation of the rule. A communication concerning the 
existence or details of a channel sharing agreement during the quiet 
period is also potentially a disclosure in violation of the rule. The 
Commission recognizes that broadcasters will continue operations during 
the auction and any broadcaster, regardless of its bids or bidding 
strategies, may need to do so indefinitely after the auction. 
Accordingly, a broadcaster communicating that it will continue 
broadcasting does not thereby disclose any bids or bidding strategies, 
whether or not it is an applicant. For instance, a noncommercial 
station that states that it has applied to participate in the incentive 
auction and subsequently undertakes a pledge drive could lead others to 
draw an inference that the station intends to either channel share or 
move to a new band, or perhaps anticipates that it will not accept the 
prices ultimately offered in the auction. Merely undertaking the pledge 
drive does not, however, create a clear or reliable inference with 
respect to its particular strategy, and in connection with the pledge 
drive the station may state publicly that it will continue broadcasting 
after the auction.
    9. Although communications regarding whether or not a broadcaster 
has applied to participate in the auction are permissible under the 
rule, licensees should take care when communicating about their 
applicant or non-applicant status that their communications does not 
convey or appear to convey information about specific bids or bidding 
strategies. For example, a communication that a broadcaster ``is not 
bidding'' in the auction, in contrast to ``is not an applicant,'' could 
constitute an apparent violation of the rule--and create issues with 
respect to any failure to make a violation report.
    10. Routine Business Communications Do Not Violate the Rule if They 
Do Not Convey Bids or Bidding Strategies. If no prohibited 
communications occur during normal course transactions, other 
information communicated in the course of such transactions would not 
be considered communications regarding an applicant's bids or bidding 
strategies. Absent express statements of bids or bidding strategies, 
communications regarding legitimate, non-auction-related business 
topics are unlikely to support reliable inferences by other covered 
entities regarding bids or bidding strategies. While another 
broadcaster or forward auction applicant might attempt to infer bids or 
bidding strategies based on communications regarding a licensee's 
decision whether or not to apply to bid in the auction, circumstances 
make it unlikely that anyone will be able to reliably infer a covered 
broadcast licensee's detailed bids or bidding strategies from 
communications on other topics. While a bidder cannot control what 
inferences another covered entity may draw from the bidder's 
communication regarding whether or not it has applied to bid in the 
auction, the bidder's use of inferences or other indirect communication 
to convey information regarding bids or bidding strategy could 
constitute an apparent violation of the rule. So, for example, an 
applicant's statements or actions premised on continuing broadcast 
operations do not necessarily support an inference about the licensee's 
bids or bidding strategies in the auction. Conversely, a licensee might 
consider near term operational changes for any of several reasons, 
including auction-related ones (such as bidding to go off-air and cease 
operations, bidding to go off air to share a channel, changing its 
current operations to host another station), or for other reasons 
completely unrelated to the auction (such as plans to sell the station 
or change programming).
    11. Moreover, no one can know with certainty what the outcome of 
the auction will be. Accordingly, no licensee can count on a bid being 
accepted, whether the bid is to go off-air and cease operations, to go 
off-air to share a channel, or to move to a new band. Non-applicants 
can count, of

[[Page 63217]]

course, on the fact that they will not relinquish spectrum usage rights 
in the auction. But even non-applicants may be subject to channel 
reassignment in the repacking process and cannot rule out the 
possibility of a sale or other transfer of their license in the wake of 
the auction. Consequently, a covered broadcaster that takes care not to 
communicate expressly about its bids or bidding strategies should be 
able to communicate with another covered party as needed for non-
auction-related business purposes, even during the prohibition period, 
without violating the rule.
    12. Communications With Third Parties. The prohibited 
communications rule prohibits only communications among covered parties 
(that is, eligible broadcast television licensees and forward auction 
applicants), not necessarily communications to third parties. During 
the period the prohibition on certain communications is in effect, 
covered parties may want or need to communicate bids or bidding 
strategies to third parties such as counsel, consultants or lenders. 
The rule does not prohibit such communications, provided that the 
covered entity takes any steps necessary to prevent the third party 
from becoming a conduit for communicating bids or bidding strategies to 
other covered parties.
    13. Commission precedent provides guidance for how a covered party 
can guard against a third party becoming a conduit for prohibited 
communications to other covered parties. For instance, a licensee might 
require a third party, such as a lender, to sign a non-disclosure 
agreement before the licensee communicates any information regarding 
bids or bidding strategy to the third party. This approach might be 
useful where the third party needs to know the licensee's bids or 
bidding strategies but will not be advising other covered parties about 
bids or bidding strategies. For third parties that may advise multiple 
licensees on bids or bidding strategies, such as attorneys or auction 
consultants, firewalls and other compliance procedures should be 
implemented to help prevent such third parties from becoming conduits 
for the communication of bids or bidding strategies of one covered 
party to another.
    14. Information firewalls or equivalent procedures are not an 
absolute defense against an alleged violation of the prohibited 
communications rule. As the Bureau has explained, however, such 
procedures are strongly encouraged because demonstrating that 
precautionary actions were taken places the respondent to claims of a 
violation in a stronger legal position. At the very least, claims of 
negligent ignorance of the situation can be rejected with some 
dispatch. In the Nevada Wireless case, for example, the parties did not 
certify in their application what measures had been taken to prevent 
communications between two attorneys in the same firm when each was 
listed as an authorized bidder by two different applicants. See 
Application of Nevada Wireless for a License to Provide 800 MHz 
Specialized Mobile Radio Service in the Farmington, NM-CO Economic Area 
(EA 155) Frequency Band A, Memorandum Opinion and Order, DA 98-1137. 
After a claim was made that the applicants engaged in prohibited 
communications, an investigation was conducted. The parties produced 
sworn testimony, including a statement that a ``Chinese Wall'' was 
constructed between relevant attorneys at the firm. In addition, there 
was undisputed testimony that the attorney for one of the applicants 
was listed as a bidder solely in the event of emergency and in fact 
never learned any bidding information from the applicant. Even with 
such a record, the Bureau also looked at the bidding patterns in the 
auction before concluding that the parties did not coordinate their 
bidding.
    15. Based in part on the foregoing precedent, the Mass Media 
Practice Committee (MMPC) of the Federal Communications Bar Association 
contends that an individual attorney or law firm may be informed of 
bids and bidding strategies by multiple clients covered by the reverse 
auction rule without becoming a conduit for prohibited communications 
so long as those attorneys do not reveal such information provided by 
one client to another client. The MMPC further asserts that the canons 
of ethics applicable to attorneys should provide the Commission with 
sufficient comfort that the effectiveness of its anti-collusion rule 
would not be compromised by attorneys possessing bids or bidding 
strategy information with respect to more than one client. The Bureau 
disagrees with MMPC's suggestion that the fact that an individual or 
law firm is subject to a canon of ethics should be sufficient, without 
more, to demonstrate that no violation has occurred. Other 
professionals also have raised this issue. See, e.g., Ex Parte Filing 
of Terence P. Dunn, GN Docket 12-268 (filed Sept. 22, 2015). This 
guidance applies to those other professionals as well. Other 
suggestions, e.g., to revise the prohibited communication rule, delay 
the start of the auction, and hold a second auction for non-commercial 
stations, would require Congressional or Commission action and, 
therefore, exceed the scope of this Public Notice. For the same 
reasons, the Bureau declines proposals by J.H. Snider to revise the 
rules in various ways, e.g., requiring additional personal 
certifications from chief officers of licensees and banning any and all 
communications among stations in the same local TV market. See J.H. 
Snider Comments, AU Docket No. 14-252, at 1 (filed Feb. 24, 2015). 
Under Commission precedent, the fact that an individual or law firm is 
subject to a canon of ethics will not, by itself, suffice to 
demonstrate that no violation has occurred or could have occurred. The 
Bureau notes that while a law firm taking appropriate precautions may 
represent more than one covered licensee that has bids or bidding 
strategies, in the case of an individual the objective precautionary 
measure of a firewall is not available. Thus, an individual possessing 
information regarding the bids and bidding strategies of more than one 
covered party could provide advice to another covered party that is 
influenced by the information he or she possesses, perhaps 
unintentionally, thereby resulting in a violation of the rule. The 
canons of ethics would not necessarily prevent this from happening. 
Whether a prohibited communication has taken place in a given case will 
depend on all of the facts pertaining to the case, including who 
possessed what information, what information was conveyed to whom, and 
the course of bidding in the auction. The Bureau cautions that an 
individual practitioner that holds bids or bidding information of more 
than one covered party presents a greater risk of engaging in such a 
communication.
    16. Disclosures Required by Other Laws. Representatives of some 
potential reverse auction applicants have raised the concern that legal 
obligations to disclose information could result in a violation of the 
prohibited communications rule. For example, they have raised the 
concern that a non-commercial broadcaster might be required by state or 
local sunshine laws to publicly disclose its decision making, financial 
status, or operational plans, all of which might include reverse 
auction bids or bidding strategies. Given the limited duration of the 
prohibition period imposed by the rule and the customary sunshine law 
exemptions with respect to sensitive business information, however, 
such concerns may not be realized. If a licensee can

[[Page 63218]]

avoid communications that might violate the rule, it should refrain 
from those communications. In the event that a licensee believes that a 
particular disclosure required by law or regulation in fact will result 
in a violation of the rule, the Commission strongly encourage 
applicants to consult with the Commission staff in the Auctions and 
Spectrum Access Division before making the disclosure.
    17. Reporting by the News Department of a Broadcast Licensee. As 
part of its operations, broadcast licensees often report news to the 
public. In that role, a licensee's reporter-employee might obtain 
information regarding the licensee's or another covered party's bids 
and bidding strategies to be used in a news story. The Bureau will not 
automatically impute a reporter's dissemination of the licensee's bids 
and bidding strategy, or the bids or bidding strategies of other 
incentive auction applicants, to the licensee. In determining whether 
to impute to the licensee the reporter's dissemination of such 
information, the Bureau will consider all of the facts and 
circumstances, including the existence of separation between a 
licensee's management and editorial decision-making functions. Covered 
entities can limit their potential risk by undertaking careful and 
comprehensive compliance education for their employees in advance of 
the auction, particularly for those employees with access to 
information about bids and bidding strategies, and establish internal 
safeguards to limit the availability of this information to those with 
a need to know. This approach provides some certainty to covered 
entities and is consistent with First Amendment objectives.
    18. Communicating Pursuant to Exceptions to the Prohibition. 
Licensees that may communicate with one or more other covered parties 
under the exceptions to the reverse auction rule prohibiting certain 
communications must take care that their communications related to bids 
or bidding strategies with particular parties fall within the scope of 
the exception. Thus, consistent with the Commission's intent in 
establishing the exception that channel sharing partners should be able 
to fully engage as various options are presented during the auction 
process, bidding-related communications are permitted solely between 
the specific licensees covered by a particular channel sharing 
arrangement (CSA) that is submitted with one of the licensee's auction 
applications, and only with regard to the stations involved in the 
arrangement. A broadcast licensee owning multiple licenses must execute 
separate CSAs for each of its stations that will be channel sharing 
with a different, not commonly owned, licensee. Further, the channel 
sharing exception does not permit coordination across multiple markets. 
Permissible communication between unaffiliated (i.e., non-commonly-
owned or -controlled) parties under the channel sharing exception will 
be limited to DMA-specific bidding, i.e., to the bidding of prospective 
channel partners under a particular channel sharing arrangement. 
Similarly, communications among parties that are commonly owned must be 
confined to the commonly owned parties.
    19. The exceptions are not cumulative. Accordingly, the parent of 
multiple stations may be informed of the bids and bidding strategies of 
all of its stations, as well as the terms and conditions of any CSAs 
its stations entered into before the auction. However, the licensee 
that entered into a CSA may not communicate to its parent or other 
commonly owned licensees the bids and bidding strategies of the channel 
sharing station's channel sharing partner(s). Similarly, while parties 
to a channel sharing agreement disclosed on an auction application may 
communicate about the bids or bidding strategies of the stations 
covered by their agreement, they may not communicate regarding the bids 
or bidding strategies of any commonly owned stations of a party to the 
agreement that are not subject to the agreement.
    20. A covered licensee that is permitted to communicate with more 
than one other covered licensee under the exceptions to the rule must 
take precautions to prevent the prohibited communication of bids or 
bidding strategies with other licensees. A covered party might 
implement information firewalls to prevent the inadvertent sharing of 
information regarding bids or bidding strategies among parties that are 
not covered by the same exception. Such firewall might, for example, 
take the form of separate teams informed of bids and bidding strategies 
for stations that are involved in a particular channel sharing 
agreement disclosed in an auction application, but are not informed of 
the bids and bidding strategies for other, commonly owned stations that 
are involved in a different channel sharing agreement. As an 
alternative to establishing separate teams of personnel and information 
firewalls, a covered party might instead share a bidder with a 
prospective channel sharing partner, possibly the other licensee, or a 
corporate affiliate, to execute bids in accordance with instructions 
developed prior to the application deadline. In such a case, the party 
using a shared bidder in place of a firewall would be precluded from 
communicating with the bidder during the prohibition period.
    21. License Assignments and Transfers of Control. Licensees that 
file an application to bid in the auction or that have information 
regarding another applicant's bids or bidding strategies must take care 
not to communicate such information in any context, including the 
negotiation or execution of license assignments or transfers of 
control. Thus, after the auction application deadline, the negotiations 
necessary to reach agreement between or among covered licensees 
regarding a transaction for the assignment of any such licenses that 
are the subject of an auction application or the transfer of control of 
the applicant could create the risk of a violation of the prohibited 
communications rule. The Bureau emphasizes, however, that the rule does 
not per se preclude the negotiation or execution of sales agreements 
even when a license subject to the sales agreement is in the auction. 
For example, an entity that owns a license could apply to participate 
in the auction and have one team of personnel informed of and handling 
auction activities, including bids and bidding strategies, while 
another team of personnel engage in negotiations with respect to the 
assignment of that license, or the acquisition of another license.
    22. Separate and apart from the prohibited communications rule, the 
Commission's auction application rules require that the applicant on a 
reverse auction application must be the broadcast licensee that would 
relinquish spectrum usage rights if it becomes a winning bidder in the 
auction. In addition, the rules bar changes in control of an applicant 
after the auction application filing deadline if such changes would 
constitute an assignment or transfer of control. These rules could 
effectively prevent a licensee from changing hands after the 
application is filed until after the auction is over.
    23. The Bureau sua sponte waives the bar in the auction rules on 
the assignment of licenses or transfer of control of an applicant in 
the reverse auction, provided that the assignment or transfer 
application (1) has been accepted for filing with the Commission as of 
the deadline to submit an application to participate in the reverse 
auction, and (2) includes the express representation that the party 
that will hold the license(s) upon consummation agrees to be bound by 
the original

[[Page 63219]]

applicant's actions in the auction with respect to the license(s). 
While the parties to the transaction may continue to communication 
regarding the transaction during the auction, they may not communicate 
regarding their respective bids or bidding strategies during the quiet 
period unless one of the exception to the rule applies. In contrast to 
the forward auction, for which parties may create bidding entities that 
are insulated from a transaction involving existing wireless licenses, 
an assignment or transfer of control affecting broadcast licenses would 
result in a change in control of the very licenses that are the subject 
of bids in the reverse auction. Consequently, the bar on the assignment 
of a station subject to an auction application or transfer of control 
of a reverse auction applicant would have a greater preclusive effect 
on potential transactions among broadcast licensees than the similar 
bar necessarily does for parties with an interest in the forward 
auction. Moreover, while licenses offered in the forward auction may 
become available after the auction in the well-established secondary 
market for wireless licenses, there is no additional incentive auction 
contemplated in which the Commission would acquire a broadcaster's 
spectrum usage rights for later auction. Finally, application of the 
bar on the assignment of the station involved in the reverse auction, 
or the transfer of control of its licensee, might discourage 
broadcasters from participating in the auction, contrary to the 
Commission's policy of facilitating such participation in order to 
promote its goals for the incentive auction.
    24. For all of these reasons, the Bureau waives the bar on 
assignments of a license subject to an auction application or transfers 
of control of reverse auction applicants during the incentive auction. 
The waiver is limited to those instances in which the transaction 
resulting in the assignment of license or transfer or control of the 
licensee, has been accepted for filing with the Commission at the 
deadline for submitting reverse auction applications. This preserves in 
the reverse auction one of the safeguards of the underlying rule by 
assuring that all relevant parties are identified to the Commission 
prior to the auction. Furthermore, the Commission limits the waiver to 
transactions in which the party that will hold the licenses upon 
consummation of the transaction agrees, in the agreement filed with the 
application, to be bound by the original applicant's actions in the 
auction with respect to the licensee. This assures that the 
application, and all attendant representations and certifications, 
remain effective and enforceable notwithstanding the transaction.

III. The Forward Auction Rule Prohibiting Certain Communications

A. Background

    25. 47 CFR 1.2105(c) provides that, subject to specified 
exceptions, after the deadline for filing applications to participate 
in the forward auction ``all applicants are prohibited from cooperating 
or collaborating with respect to, communicating with or disclosing, to 
each other or any nationwide provider [of communications services] that 
is not an applicant, or, if the applicant is a nationwide provider, any 
non-nationwide provider that is not an applicant, in any manner the 
substance of their own, or each other's, or any other applicants' bids 
or bidding strategies (including post-auction market structure), or 
discussing or negotiating settlement agreements, until after the down 
payment deadline.'' In addition, beginning at the ``application filing 
deadline for the forward auction and until the results of the incentive 
auction are announced by public notice, all forward auction applicants 
are prohibited from communicating directly or indirectly any incentive 
auction applicant's bids or bidding strategies to any full power or 
Class A broadcast television licensee.''
    26. ``Applicant'' for purposes of this rule includes the officers 
and directors of the applicant, all controlling interests in the entity 
applying to participate in the forward auction, as well as all holders 
of interests amounting to 10 percent or more of the entity. As with the 
reverse auction, a party that submits an application becomes an 
``applicant'' under the rule at the application deadline and that 
status does not change based on subsequent developments.
    27. The forward auction rule prohibiting certain communications 
does not apply to an applicant's communications regarding any 
arrangement relating to the licenses being auctioned that is excluded 
from the prohibition on joint bidding, provided such arrangement is 
disclosed on the applicant's auction application. Arrangements 
expressly excluded from the rule prohibiting joint bidding include 
solely operational agreements relating to roaming, spectrum leasing and 
other spectrum use arrangements, or device acquisition. Similarly, the 
Commission expressly noted that agreements solely for funding purposes, 
and not with regard to bids, bidding strategies, or post-auction market 
structure relating to the licenses being auctioned, are not prohibited 
arrangements. Permissible arrangements also include agreements to form 
consortia or joint ventures that will become the applicant in the 
auction. Additionally, they include agreements for assignment or 
transfer of licenses, provided that any such agreement does not both 
relate to the licenses at auction and address or communicate directly 
or indirectly bidding at auction (including prices) or bidding 
strategies (including the specific licenses on which to bid) or post-
auction market structure. The forward auction rule also provides an 
exception for communications between forward auction applicants and 
covered broadcast licensees that have certain ownership interests or 
management officials in common, mirroring the exception to the reverse 
auction rule.
    28. The Commission expressly requires that an applicant establish 
internal controls to preclude any person or entity with a disclosable 
interest in more than one applicant in a spectrum license auction from 
possessing information about the bids or bidding strategies of more 
than one applicant and from communicating information that it has about 
one applicant to another applicant.

B. Discussion

    29. Overview. In the course of providing service, wireless service 
providers engage in a wide variety of communications and business 
arrangements with one another, or with affiliated entities, that are 
not directly related to licenses offered in pending auctions and 
auction bids or bidding strategies or post-auction market structure. 
Such arrangements range from industry-wide matters, such as technical 
standards setting for spectrum bands, to matters concerning particular 
service providers, such as tower-siting and use arrangements.
    30. In the Incentive Auction R&O, 79 FR 48411, August 15, 2014, the 
Commission stressed that ``business discussions and negotiations that 
are unrelated to bids and bidding strategies or to post-auction market 
structure are not prohibited by the rule,'' in response to Verizon's 
contentions regarding uncertainties about the scope of the rule. 
Verizon argued in later comments on auction procedures that the rule 
should be modified to apply only to qualified bidders in the incentive 
auction, rather than all applicants. See Verizon Comments, AU Docket 
No. 14-252, at 20-21 (filed Feb. 20, 2015). Verizon's suggestion would 
require Commission action and therefore

[[Page 63220]]

exceeds the scope of this Public Notice. The Commission also explained 
that consistent with the approach it has taken in spectrum license 
auctions generally, forward auction applicants may continue to 
communicate with covered television licensees and competing forward 
auction applications regarding matters wholly unrelated to the 
incentive auction. Furthermore, the Commission emphasized that the rule 
is limited in scope and only prohibit[s] disclosure of information that 
affects, or has the potential to affect, bids and bidding strategies.
    31. More recently, the Commission clarified in the Part 1 R&O, 80 
FR 56764, September 18, 2015, the types of arrangements and 
communications that do not present concerns in Commission auctions. The 
Bureau now provides further guidance in order to enable wireless 
service providers to comply with the rule and continue conducting 
operations and providing service to the fullest extent possible during 
the time period covered by the rule.
    32. Permissible Communications. The Commission's recently adopted 
provisions banning joint bidding, and the relevant exceptions, help 
clarify the scope of the ``applicant's bids or bidding strategies 
(including post-auction market structure)'' that are the subject of the 
prohibition on communications in 47 CFR 1.2105(c). In the Part 1 R&O, 
the Commission revised the forward auction rule prohibiting certain 
communications to expressly allow communications that fall within the 
scope of a variety of pre-existing agreements to which an applicant may 
be party, provided that such agreements are disclosed as required on 
the applicant's auction application. Only agreements relating to 
licenses in the auction must be disclosed, and the required disclosure 
is limited to the parties to the agreement and a brief description of 
the agreement. This removes uncertainty that the prohibition might 
disrupt existing operational agreements and transactions where such 
arrangements do not violate the ban on joint bidding. The ban on joint 
bidding spells out that the ban applies only to understandings of any 
kind relating to the licenses being auctioned that address or 
communicate, directly or indirectly, bidding at auction (including 
specific prices to be bid) or bidding strategies (including the 
specific licenses on which to bid or not to bid), or post-auction 
market structure. Thus, bid or bidding strategies or post-auction 
market structure must relate to the licenses being auctioned to be 
subject to the ban.
    33. The Bureau further clarifies that the communication of ``bids 
or bidding strategies (including post-auction market structure)'' 
prohibited by 47 CFR 1.2105(c) must relate to the licenses being 
auctioned, as does the prohibition on joint bidding agreements in 47 
CFR 1.2105(a)(2). In that regard, agreements, arrangements, or 
understandings not subject to the prohibition on joint bidding 
arrangements under 47 CFR 1.2105(a)(2)(ix) similarly are not subject to 
the prohibition on communications in 47 CFR 1.2105(c). As the 
Commission noted in the Incentive Auction R&O, past application of the 
rule prohibiting communications has never required total suspension of 
essential ongoing business.
    34. The Bureau also clarifies that a forward auction applicant may 
negotiate new agreements after the application deadline, provided that 
the communications involved do not relate both to the licenses being 
auctioned and to bids or bidding strategies or post-auction market 
structure. Such agreements include, for example, agreements addressing 
operational aspects of providing a mobile service, including but not 
limited to agreements for roaming, device acquisition, and spectrum 
leasing and other spectrum use arrangements that do not otherwise 
involve prohibited communications. Other such agreements could include 
spectrum partitioning and disaggregation and interconnection 
agreements. The standard for evaluating whether an agreement is exempt 
from the prohibited communications rule hinges on whether the agreement 
relates to (1) the licenses being auctioned; and (2) bids or bidding 
strategies or post-auction market structure. Under the rules, forward 
auction applicants that enter into any such agreements during the 
auction would be subject to the same disclosure obligations as they 
would for agreements existing at the deadline for filing the 
application.
    35. In addition, the Bureau clarifies that, absent communication 
both relating to the licenses being auctioned and communicating or 
addressing bids or bidding strategies or post-auction market structure, 
broad industry discussions regarding setting technical standards for 
the spectrum band for which licenses will be auctioned do not 
constitute communications prohibited by 47 CFR 1.2105(c). Though the 
technical standards may be applied to the licenses after the auction, 
such discussion does not by itself raise post-auction market structure 
issues within the rule's concern in the absence of discussion relating 
to which parties may or may not obtain particular licenses through the 
auction. Likewise, discussions in connection with the First Responder 
Network Authority (FirstNet) draft request for proposals for 
construction of the Nationwide Public Safety Broadband Network that may 
involve discussions of post-auction market structure will not violate 
the rule so long as they do not relate to the licenses being auctioned 
in the incentive auction.
    36. Ongoing discussions between broadcast licensees and wireless 
service providers that become forward auction applicants with respect 
to voluntary relocation of the broadcasters out of channel 51 also may 
continue, so long as the discussions do not communicate ``an incentive 
auction applicant's bids or bidding strategies.'' Discussions involving 
forward auction applicants and broadcast licensees are subject to 
similar provisions of the forward auction and reverse auction rules, 
which prohibit only communication of ``an incentive auction applicant's 
bids or bidding strategies.'' The fact that the channel 51 license is 
in the reverse auction would not be itself preclude such discussions. A 
channel 51 licensee may communication whether or not it applied to 
participate in the reverse auction without violating the rule.
    37. Of course, participants in the discussions can take additional 
steps to help prevent these discussions from becoming a forum for 
prohibited communications by, for example, utilizing different 
personnel for auction operations and for other discussions, such as 
technical standards settings, FirstNet discussions, or channel 51 
relocation arrangements.
    38. Application Requirements and Additional Precautions May Help 
Prevent Potential Violations of the Prohibition on Certain 
Communications. Certain arrangements and relationships that may 
facilitate the communication of bids and bidding strategies through 
conduits are specifically addressed by the revised rule. For example, 
with limited exceptions relating to specified rural partnerships, no 
party may have a controlling interest in more than one application in a 
spectrum license auction such as the forward auction. Consistent with 
the ban on most joint bidding agreements in spectrum license auctions, 
the revised rule also expressly bars an individual from serving as an 
authorized bidder for more than one auction applicant. This bar does 
not apply to the reverse auction and there may be circumstances in 
which reverse auction applicants might share the same bidder.
    39. As in the past, forward auction applicants must take care to 
avoid unintentional communication of bids and bidding strategies in the 
course of

[[Page 63221]]

other communications. In contrast to the reverse auction, in which 
every licensee must prepare for a wide range of potential outcomes 
regardless of its bids and bidding strategies, forward auction 
applicants may be at greater risk of disclosing bids and bidding 
strategies through other communications. For example, the Commission 
consistently has cautioned that prohibited communications concerning 
bids and bidding strategies may include communications regarding 
capital calls or requests for additional funds in support of bids or 
bidding strategies, but only to the extent such communications convey 
information concerning the bids and bidding strategies directly or 
indirectly.
    40. As with any communication, all of the surrounding facts and 
circumstances must be considered when determining whether a particular 
communication violates the rule. As an initial matter, the 
communication must be to another party covered by the rule for it to 
constitute a violation. In other words, confidential communications 
within the applicant or to a third party source of funding would not 
violate the rule, unless it created a conduit for communication to a 
covered party. Thus, for instance, a capital call that does not 
expressly communicate bids or bidding strategies and that, after 
consideration of all the facts and circumstances, does not strongly 
support an inference of specific bids or bidding strategies likely 
would not violate the rule. On the other hand, the Commission has found 
a violation of 47 CFR 1.2105(c) where an applicant used the 
Commission's bidding system to disclose its bidding strategy in a 
manner that explicitly invited other auction participants to cooperate 
and collaborate in specific markets, and has placed auction 
participants on notice that the use of its bidding system to disclose 
market information to competitors will not be tolerated and will 
subject bidders to sanctions.
    41. Forward auction applicants should use caution in their dealings 
with third parties, such as members of the press, financial analysts, 
or others who might become conduits for the prohibited communication of 
regarding bids or bidding strategies. For example, when bidding 
eligibility information is not public, an applicant's statement to the 
press that it has lost bidding eligibility or intends to stop bidding 
in the auction could give rise to a finding of a 47 CFR 1.2105(c) 
violation. Similarly, once it has filed an application to participate 
and the prohibition period has begun, an applicant's public statement 
of intent not to bid could also violate the rule, as it would disclose 
the bidding strategy of a party covered by the rule. Public disclosure 
of information relating to bidder interests and bidder identities that 
has not yet been made public by the Commission at the time of 
disclosure may violate the forward auction rule that prohibits certain 
communications.
    42. In addition, when submitting its application to participate, 
each applicant should avoid any statements or disclosures that may 
violate 47 CFR 1.2105(c). Specifically, an applicant should avoid 
including any information in its short-form applications that might 
convey information regarding its license selection, such as using 
applicant names that refer to licenses being offered, referring to 
certain licenses or markets in describing bidding agreements, or 
including any information in attachments that may otherwise disclose 
the applicant's license selections.

IV. Applicability of Antitrust Laws

    43. The prohibited communications rule does not supplant the 
antitrust laws, which are designed to prevent anticompetitive behavior 
in the marketplace. For instance, a violation of the antitrust laws 
could arise out of actions taking place before the deadline for auction 
applications, which is the start of the prohibition period under the 
Commission's rules. In addition, compliance with the rule does not 
insulate parties from the antitrust laws. Where specific instances of 
collusion in the competitive bidding process are alleged, the 
Commission may conduct an investigation or refer such complaints to the 
Department of Justice for investigation.
    44. Parties that violate the antitrust laws or related Commission 
rules are subject to severe sanctions. These may include, but are not 
limited to, forfeiture of reverse auction winning bid incentive 
payments and revocation of licenses, where applicable, forfeiture of 
forward auction upfront payments, or forward auction winning bid down 
or final payments, where applicable. Furthermore, parties may be barred 
from participating in future Commission auctions, and Commission 
licensees may be subject to revocation of their license(s).

V. Administering the Reverse Auction and Forward Auction Rules 
Prohibiting Certain Communications

    45. Prohibition Period. The prohibition has a limited duration. 
Pursuant to both the rule for the reverse auction and the rule for the 
forward auction, the prohibition on certain communications begins with 
the deadline for filing applications to participate. Thus, the 
prohibition period under the reverse auction rule commences with the 
reverse auction application filing deadline, and the prohibition period 
under the forward auction rule commences with the forward auction 
application filing deadline. Under the reverse auction rule, the 
prohibition period ends with the announcement of the incentive auction 
results. For communications between forward auction applicants and 
broadcast television licensees, the mirroring forward auction rule 
prohibition period likewise ends with the announcement of the results 
of the incentive auction in the Channel Reassignment Public Notice. For 
communications between forward auction applicants and related parties, 
by contrast, the prohibition period continues until the post-auction 
deadline for making down payments on winning bids. The ultimate 
duration of the prohibition period will depend on the length of the 
auction.
    46. Duty to Report. The rules require covered parties to report 
violations to the Commission. For Auction 1000, reports must be filed 
with Margaret W. Wiener, the Chief of the Auctions and Spectrum Access 
Division, Wireless Telecommunications Bureau, by the most expeditious 
means available. Any such report should be submitted by email to Ms. 
Wiener at the following email address: auction1000@fcc.gov. Any report 
in hard copy must be delivered only to Margaret W. Wiener, Chief, 
Auctions and Spectrum Access Division, Wireless Telecommunications 
Bureau, Federal Communications Commission, 445 12th Street SW., 
Washington, DC 20554. Failure to make a timely report under the rule 
constitutes a continuing violation of the rule, with attendant 
consequences.
    47. Any party subject to either the reserve or forward auction rule 
should take special care in circumstances where their employees or 
subsidiaries may receive information directly or indirectly relating to 
any incentive auction applicant's bids or bidding strategies. Precedent 
has not addressed a situation where non-principals of a party subject 
to the rule (i.e., those who are not officers or directors, and thus 
not considered to be the party) receive information regarding bids or 
bidding strategies. Nor has it addressed whether that information 
should be presumed to be communicated to the party. The more attenuated 
the relationship between the recipient of the information and the party 
subject to the rule, of course, the less likely there is to be any 
presumptive communication. For

[[Page 63222]]

example, without additional information, there is no apparent reason 
that a corporate affiliate not within the control of an applicant or an 
applicant's direct owner should be presumed to share information with 
the applicant. Nevertheless, the corporate affiliate, much like a third 
party, must take care not to become a conduit for a prohibited 
communication.
    48. Compliance Education. All eligible broadcast television 
licensees are subject to the reverse auction rule and all forward 
auction applicants are subject to the forward auction rule. 
Accordingly, all these parties should become familiar with the relevant 
rule in advance of the auction application process. The Bureau 
reiterates that the rules apply only with respect to communications 
regarding bids and bidding strategies of incentive auction applicants. 
The rules should not impose any significant burden on full power and 
Class A television broadcasters that neither participate in the auction 
nor have information regarding bids or bidding strategies of any 
applicants. The main burden of the reverse auction rule will fall on 
broadcasters that apply to participate in the auction, or that may 
possess information regarding the bids and bidding strategies of others 
that do. These broadcasters and forward auction applicants also should 
become familiar with the Commission precedent regarding application of 
the prohibition of communications regarding bids and bidding 
strategies. These precedents apply slightly different rules in the 
context of past Commission auctions, and the details of the rules 
applied have changed over time. Nevertheless, the purpose underlying 
the prohibition reflected in all versions of the rule has remained 
consistent, making the precedents a potentially helpful resource for 
parties with respect to particular circumstances.
    49. Parties also should educate employees and agents regarding 
compliance, particularly those employees and agents with access to bids 
and bidding strategy information. Limiting such access to persons with 
a definite need will both strengthen and simplify compliance.

Federal Communications Commission.

Gary D. Michaels,
Deputy Chief, Auctions and Spectrum Access Division, WTB.
[FR Doc. 2015-26525 Filed 10-16-15; 8:45 am]
BILLING CODE 6712-01-P