E7-22501. Auction of 700 MHz Band Licenses Revised Procedure for Auctions 73 and 76; Additional Default Payment for D Block Set at Ten Percent of Winning Bid Amount

AGENCY:

Federal Communications Commission.

ACTION:

Notice.

SUMMARY:

This document announces a revised procedure for the upcoming auction(s) of 700 MHz Band licenses scheduled to begin on January 24, 2008 (Auctions 73 and 76), specifically setting the additional default payment percentage at ten percent for the D Block license, and provides further guidance regarding negotiation of the Network Sharing Agreement between the winning bidder of D Block license and the new national Public Safety Broadband Licensee.

FOR FURTHER INFORMATION CONTACT:

Wireless Telecommunications Bureau, Auctions Spectrum and Access Division: For legal questions: William Huber or Scott Mackoul at [phone]. To request materials in accessible formats (Braille, large print, electronic files, audio format) for people with disabilities, send an e-mail to [e-mail] or call the Consumer and Governmental Affairs Bureau at [phone] or [phone] (TTY).

SUPPLEMENTARY INFORMATION:

This is a summary of the Auctions 73 and 76 Revised Procedure Public Notice released on November 2, 2007. The complete text of the Auctions 73 and 76 Revised Procedure Public Notice, as well as related Commission documents, are available for public inspection and copying from 8 a.m. to 4:30 p.m. Eastern Time (ET) Monday through Thursday or from 8 a.m. to 11:30 a.m. on Friday at the FCC Reference Information Center, Portals II, 445 12th Street, SW., Room CY-A257, Washington, DC 20554. The Auctions 73 and 76 Revised Procedure Public Notice and related Commission documents may also be purchased from the Commission's duplicating contractor, Best Copy and Printing, Inc. (BCPI), Portals II, 445 12th Street, SW., Room CY-B402, Washington, DC, 20554, telephone [phone], facsimile 202-488-5563, or Web site: http://www.BCPIWEB.com. When ordering documents from BCPI, please provide the appropriate FCC document number, for example, DA 07-4514 for the Auctions 73 and 76 Revised Procedure Public Notice. The Auctions 73 and 76 Revised Procedure Public Notice and related documents are also available on the Internet at the Commission's Web site: http://wireless.fcc.gov/​auctions/​73/​.

1. The Wireless Telecommunications Bureau (Bureau) announces a revised procedure for the upcoming auction(s) of licenses for services in the 700 MHz Band scheduled to begin on January 24, 2008 (Auctions 73 and 76). Specifically, the Bureau sets the additional default payment percentage at ten percent for the D Block license. The additional default payment percentage amount for licenses in the A, B, and E Blocks remains at fifteen percent, as previously announced. The Chiefs of the Public Safety and Homeland Security Bureau and the Wireless Telecommunications Bureau also provide further guidance as to how they intend to exercise their delegated authority in the event that disputes arise during the negotiation of the terms of the Network Sharing Agreement between the winning bidder for the D Block license and the new national Public Safety Broadband Licensee.

2. Any winning bidder that defaults or is disqualified after the close of an auction is liable for a default payment under § 1.2104(g)(2) of the Commission's rules. This payment consists of a deficiency payment, equal to the difference between the amount of the bidder's bid and the amount of the winning bid the next time a license covering the same spectrum is won in an auction, plus an additional payment equal to a percentage of the defaulter's bid or of the subsequent winning bid, whichever is less. In the 700 MHz Auction Procedures Public Notice, 72 FR 62360, November 2, 2007, the Bureau set the additional default payment percentage at fifteen percent of the defaulted bid for all licenses in blocks that are not subject to package bidding, including the D Block.

3. In establishing the percentage used to calculate the additional default payment, the Bureau seeks to deter defaults and thereby promote the public interest in rapid deployment of new wireless services. As the Bureau noted in the 700 MHz Auction Procedures Public Notice, the public interest costs of a default on the D Block are likely to be high given the role of the D Block in the establishment of a public/private partnership for the provision of public safety broadband services. At the same time, the Bureau recognizes that factors that may contribute to a default by a winning bidder for the D Block may be different in nature from those affecting winning bidders in other blocks. For example, the D Block winning bidder must negotiate and enter into a Commission-approved Network Sharing Agreement with the new national Public Safety Broadband Licensee consistent with terms and procedures set forth in the 700 MHz Second Report and Order, 72 FR 48814, August 24, 2007.

4. In the 700 MHz Auction Comment Public Notice, 72 FR 48272, August 23, 2007, the Bureau proposed adopting a fifteen percent additional default payment for the A, B, D and E Blocks. The Bureau made this proposal with respect to the A, B, and E Blocks because the possibility that no licenses in those blocks will be assigned if the reserve price is not met may give bidders an additional incentive to bid on a license and later default (after determination that the reserve price has been met), in order to help ensure that the reserve price is met and other initial licenses in the block are assigned. In contrast, the Bureau made its proposal with respect to the D Block, for which there is a single nationwide license which will not be assigned unless the D Block reserve price is met, because a default by the winning bidder will delay the especially time-sensitive process of establishing a public/private partnership for the provision of public safety broadband services. As noted in the 700 MHz Auction Procedures Public Notice, none of the parties responding to the 700 MHz Auction Comment Public Notice addressed the specific percentage for the additional default payment for licenses in any of the blocks.

5. On further review, the Bureau concludes that a slightly lower percentage should be used for the additional default payment in the case of the D Block license. The Commission must balance the public interest in avoiding defaults on winning bids against the risk of deterring otherwise qualified bidders from participating in the auction. A winning bidder of the D Block license may be presented with unique issues that may result in the bidder defaulting on its bid. The potential impact of those issues is difficult to quantify, and may vary from bidder to bidder. On further review, the Bureau concludes that the additional default percentage on the D Block should be lower than it is with respect to the A, B, and E Blocks, where the structure of the auction actually may provide an incentive for bidders to default. Accordingly, for the D Block license the Bureau sets the additional default payment percentage at ten percent of the defaulted bid or of the subsequent winning bid, whichever is less. While the Bureau remains mindful that a default could harm the public interest by delaying the deployment of service to the public safety community as well as to consumers, the Bureau concludes that the ten percent additional payment used in several recent auctions serves as a sufficient deterrent to defaults for the D Block.

6. In the 700 MHz Second Report and Order, the Commission delegated to the Chiefs of the Public Safety and Homeland Security Bureau and the Wireless Telecommunications Bureau (Bureaus) the authority to take certain actions jointly in the public interest in the event of a dispute between the winning bidder for the D Block license and the Public Safety Broadband Licensee at the end of the six-month negotiation period for the Network Sharing Agreement (NSA), or on their own motion at any time. In particular, the Commission indicated that these actions may include but are not limited to one or more of the following: (1) Granting additional time for negotiation; (2) issuing a decision on the disputed issues and requiring the submission of a draft agreement consistent with that decision; (3) directing the parties to further brief the remaining issues in full for immediate Commission decision; and/or (4) immediate denial of the long-form application filed by the winning bidder for the D Block license.

7. The Bureaus believe that it is in the public interest to provide potential bidders for the D Block license, as well as the public safety community, with further guidance as to how the Bureaus intend to exercise their delegated authority in the event that disputes arise with respect to the negotiation of the terms of the NSA. As a result, the Bureaus announce that they will not exercise their authority for immediate denial of the long-form application filed by the winning bidder for the D Block license, as a result of any dispute over the negotiation of the terms of the NSA, until the Bureaus take one of two steps: (1) Issuing a decision on the disputed issues and requiring the submission of a draft agreement consistent with their decision; or (2) referring the issues to the Commission for an immediate decision and the Commission issues such a decision.

Federal Communications Commission.

Gary D. Michaels,

Deputy Chief, Auctions and Spectrum Access Division, WTB.