[Federal Register Volume 63, Number 230 (Tuesday, December 1, 1998)]
[Notices]
[Pages 66172-66176]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-32015]
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FEDERAL COMMUNICATIONS COMMISSION
[DA 98-2318; Report No. AUC-98-23-A (Auction No. 22)]
C Block PCS Spectrum Auction Scheduled for March 23, 1999 Comment
Sought on Auction Procedural Issues
AGENCY: Federal Communications Commission.
ACTION: Notice; seeking comment.
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SUMMARY: This Public Notice announces the auction of C block broadband
personal communications services (``PCS'') licenses set to begin on
March 23, 1999, and seeks comment on procedural issues relating to the
C block broadband PCS auction.
DATES: Comments are due on or before November 30, 1998. Reply comments
are due on or before December 7, 1998.
ADDRESSES: To file formally, parties must submit an original and four
copies to the Office of the Secretary, Federal Communications
Commission, 445 Twelfth Street, S.W., TW-A325, Washington, D.C. 20554.
In addition, parties must submit one copy to Amy Zoslov, Chief,
Auctions and Industry Analysis Division, Wireless Telecommunications
Bureau, Federal Communications Commission, Room 5202, 2025 M Street,
N.W., Washington, D.C. 20554. Comments and reply comments will be
available for public inspection during regular business hours in the
Wireless Telecommunications Bureau Reference Center, Room 5608, 2025 M
Street, N.W., Washington, D.C. 20554.
FOR FURTHER INFORMATION CONTACT: Audrey Bashkin, Bob Reagle, or Jeff
Garretson, Auctions and Industry Analysis Division, Wireless
Telecommunications Bureau, at (202) 418-0660.
[[Page 66173]]
SUPPLEMENTARY INFORMATION: This Public Notice was released on November
12, 1998, and is available in its entirety, including the Attachment,
for inspection and copying during normal business hours in the Wireless
Telecommunications Bureau Reference Center, Room 5608, 2025 M Street
N.W., Washington, D.C., and also may be purchased from the Commission's
copy contractor, International Transcription Services, (202) 857-3800,
fax (202) 857-3805, 1231 20th Street, N.W., Washington, D.C. 20036. It
is also available on the Commission's website at http://www.fcc.gov.
Synopsis of the Public Notice
1. By this Public Notice, the Wireless Telecommunications Bureau
(``Bureau'') announces an auction of C block broadband personal
communications services (``PCS'') licenses set to begin on March 23,
1999 (Auction No. 22). Auction No. 22 will cover licenses for operation
on frequencies that were previously licensed under now-cancelled
licenses, licenses for operation on 30 MHz and 15 MHz spectrum blocks
that were returned to the Commission pursuant to elections, and
licenses for operation on frequencies that had not been previously
licensed. A list of licenses is included at Appendix A. In addition,
future public notices could include information about other Commission
licenses in conjunction with Auction No. 22. Future public notices will
include further details regarding application filing and payment
deadlines, a seminar for potential bidders, and other pertinent
information. In this Public Notice, the Bureau seeks comment on
procedural issues relating to Auction No. 22.
I. Reserve Price or Minimum Opening Bid
2. The Balanced Budget Act of 1997 (``Budget Act'') calls upon the
Commission to prescribe methods by which a reasonable reserve price
will be required or a minimum opening bid established when FCC licenses
are subject to auction (i.e., because the Commission has accepted
mutually exclusive applications for those licenses), unless the
Commission determines that a reserve price or minimum bid is not in the
public interest.
3. Normally, a reserve price is an absolute minimum price below
which an item will not be sold in a given auction. Reserve prices can
be either published or unpublished. A minimum opening bid, on the other
hand, is the minimum bid price set at the beginning of the auction
below which no bids are accepted. It is generally used to accelerate
the competitive bidding process. Also, in a minimum opening bid
scenario, the auctioneer generally has the discretion to lower the
amount later in the auction.
4. The Commission in the Second Report and Order and Further Notice
of Proposed Rule Making (``C Block Further Notice''), 62 FR 55375
(October 24, 1997), sought comment on the use of a minimum opening bid
and/or reserve price for the upcoming C block PCS auction. The
Commission stated that, for the upcoming C block auction, employing a
minimum opening bid, more than a reserve price, would help make certain
that the public is fairly compensated, the auction is expedited, and
the Commission is able to make adjustments based on the competitiveness
of the auction. Accordingly, the Commission proposed to use a minimum
opening bid, rather than a reserve price, for the upcoming C block
auction and requested comment on this proposal, as well as on which
methodology to employ and factors to consider in establishing minimum
opening bids. The Commission proposed minimum opening bids for each
market equal to ten percent of the corresponding net high bid for the
market in the original C block auction. The Commission asked commenters
to explain whether this proposal would be reasonable or would result in
a substantial number of unsold licenses. The Commission asked further
whether the amount of the minimum opening bid should be capped and
whether the Commission should establish a different amount.
5. In the Fourth Report and Order (``C Block Fourth Report and
Order''), 63 FR 50791 (September 23, 1998), which resolved issues
raised in the C Block Further Notice, the Commission decided that it
would be appropriate to establish minimum opening bids for each market
in the upcoming C block auction equal to ten percent of the
corresponding net high bid for the market in the original C block
auction. The Commission stated, however, that the Bureau may exercise
its discretion to set forth minimum opening bids smaller than ten
percent if, based upon further evaluation, the Bureau believes that a
smaller amount is warranted. In considering a reduction of the minimum
opening bid, the Bureau would consider such factors as the amount of
spectrum being auctioned, levels of incumbency, the availability of
technology to provide service, the size of the geographic service
areas, issues of interference with other spectrum bands, and any other
relevant factors that could reasonably affect valuation of the spectrum
being auctioned.
6. The Commission made no adjustment to the minimum opening bid for
those licenses which, in Auction No. 22, will be 15 MHz rather than 30
MHz. The Bureau, however, believes that such an adjustment is
appropriate and, accordingly, proposes to establish as the minimum
opening bid for each 15 MHz license available in Auction No. 22 an
amount equal to five percent of the most recent net high bid for the
corresponding 30 MHz license, but in no event lower than the upfront
payment amount for that license in Auction No. 22 (see discussion of
upfront payments immediately below). For 15 MHz licenses with minimum
opening bids that would otherwise be lower than upfront payment
amounts, the Bureau proposes to establish minimum opening bids that
equal the upfront payment amounts. For each 30 MHz license available in
Auction No. 22, the Bureau plans to establish a minimum opening bid
equal to ten percent of the most recent corresponding net high bid for
the license, but in no event lower than the upfront payment amount for
that license in Auction No. 22. For 30 MHz licenses with minimum
opening bids that would otherwise be lower than upfront payment
amounts, the Bureau plans to establish minimum opening bids that equal
the upfront payment amounts. Minimum opening bid amounts are provided
in Attachment A.
II. Upfront Payments and Initial Maximum Eligibility for Each
Bidder
7. In the C Block Further Notice, the Commission explained that, in
the Second Report and Order, 59 FR 22980 (May 4, 1994), (``Competitive
Bidding Second Report and Order''), it had indicated that the upfront
payment should be set using a formula based upon the amount of spectrum
and population (``pops'') covered by the license(s) for which the
parties intend to bid and that the amount of the upfront payment should
be determined on an auction-by-auction basis. The Commission proposed
in the C Block Further Notice to set an upfront payment for the
upcoming C block auction at $0.06 per MHz per pop. The Commission
determined that this amount was appropriate to further its goal of
allowing only serious, qualified applicants to participate in the
auction. The Commission noted that it had adopted the same upfront
payment for its most recent broadband PCS auction, the D, E, and F
block auction.
[[Page 66174]]
8. In the C Block Fourth Report and Order, the Commission noted
that there was support among commenters for setting the upfront payment
amount at the proposed $0.06 per MHz per pop and expressed its belief
that in the upcoming C block auction the upfront payment should be no
higher than this amount. Accordingly, the Bureau plans to set the
upfront payment amount for each license in Auction No. 22 at $0.06 *
MHz * Pops (rounded up to the next dollar). The Bureau notes, however,
that in the C Block Fourth Report and Order the Commission stated that
the Bureau may establish a lower upfront payment if it deems a lower
amount to be reasonable.
9. As required by the C Block Fourth Report and Order, the upfront
payment amount for ``former defaulters,'' i.e., applicants that have
ever been in default on any Commission licenses or have ever been
delinquent on any non-tax debt owed to any Federal agency, will be
fifty percent more than the normal amount required to be paid.
10. For Auction No. 22, the Commission proposes that the amount of
the upfront payment submitted by a bidder will determine the initial
maximum eligibility (as measured in bidding units) for each bidder.
Upfront payments will not be attributed to specific licenses, but
instead will be translated into bidding units to define a bidder's
initial maximum eligibility, which cannot be increased during the
auction. Thus, in calculating the upfront payment amount, an applicant
must determine the maximum number of bidding units it may wish to bid
on (or hold high bids on) in any single round, and submit an upfront
payment covering that number of bidding units. The Commission seeks
comment on this proposal.
III. Attribution Rules
11. The attribution rules set forth in Section 24.709 of the
Commission's rules will apply to Auction No. 22.
IV. Other Auction Procedural Issues
12. The Budget Act requires the Commission to ``ensure that, in the
scheduling of any competitive bidding under this subsection, an
adequate period is allowed * * * before issuance of bidding rules, to
permit notice and comment on proposed auction procedures * * *''
Consistent with the provisions of the Budget Act and to ensure that
potential bidders have adequate time to familiarize themselves with the
specific provisions that will govern the day-to-day conduct of an
auction, the Commission directed the Bureau, under its existing
delegated authority, to seek comment on a variety of auction-specific
issues prior to the start of each auction. The Bureau therefore seeks
comment on the following issues.
a. Auction Sequence and License Groupings
13. In the C Block Further Notice, the Commission proposed a
simultaneous multiple-round design for the upcoming C block auction,
and it received no comments opposing this proposal. Accordingly, in the
C Block Fourth Report and Order, the Commission stated that the
simultaneous multiple-round design would be appropriate for the
upcoming C block auction. The Commission noted, however, that it
remains within the Bureau's authority to seek comment on, and to
modify, the competitive bidding design of the upcoming C block auction,
if the Bureau determines that another design might be warranted. In
light of this history, and because a simultaneous multiple-round design
allows bidders to take advantage of any synergies that exist among
licenses, the Bureau proposes to award all C block PCS licenses
currently available for auction in a single, simultaneous multiple-
round auction. The Bureau seeks comment on this proposal.
b. Structure of Bidding Rounds, Activity Requirements, and Criteria for
Determining Reductions in Eligibility
14. In the C Block Further Notice, the Commission tentatively
concluded that a C block auction should be conducted in three stages.
The Commission proposed to use high activity requirements, with bidders
required to be more active in each subsequent stage than they had been
in the last. The Commission also proposed requiring the Bureau to use
its delegated authority to schedule bidding rounds aggressively, to
move quickly into the next stage of the auction when bidding activity
falls, and to use higher minimum bid increments for very active
licenses. In the Third Report and Order and Second Further Notice of
Proposed Rule Making, 63 FR 2315 (January 15, 1998), (``Part 1 Third
Report and Order''), the Commission directed the Bureau to seek comment
prior to the start of each auction on activity requirements for each
stage of the auction and activity rule waivers.
15. No party opposed the Commission's tentative conclusion to
conduct a C block auction in three stages. Accordingly, in the C Block
Fourth Report and Order, the Commission expressed its continued belief
that this structure would be reasonable for the upcoming C block
auction. The Commission noted, however, that the Bureau normally
determines the structure of the auction and stated that it remains
within the Bureau's discretion to deviate from the proposed three-stage
structure if, after appropriate notice and comment, the Bureau
determines that a different structure would better serve the public
interest.
16. Accordingly, the Bureau proposes to divide the auction into
three stages: Stage One, Stage Two and Stage Three. The auction will
start in Stage One. The Bureau proposes that the auction will generally
advance to the next stage (i.e., from Stage One to Stage Two, and from
Stage Two to Stage Three) when the auction activity level, as measured
by the percentage of bidding units receiving new high bids, is below
ten percent for three consecutive rounds of bidding in each Stage.
However, the Bureau further proposes that the Bureau retain the
discretion to change stages unilaterally by announcement during the
auction. In exercising this discretion, the Bureau will consider a
variety of measures of bidder activity including, but not limited to,
the auction activity level, the percentages of licenses (as measured in
bidding units) on which there are new bids, the number of new bids, and
the percentage increase in revenue. The Bureau seeks comment on these
proposals.
17. In order to ensure that auctions close within a reasonable
period of time, the Commission imposes an activity rule that requires
bidders to bid actively on a percentage of their maximum bidding
eligibility during each round of an auction rather than waiting until
the end to participate. A bidder that does not satisfy the activity
rule will either lose bidding eligibility in the next round or use an
activity rule waiver.
18. For Auction No. 22, the Bureau proposes that, in each round of
Stage One of the auction, a bidder desiring to maintain its current
eligibility must remain active on licenses encompassing at least 80
percent of its current bidding eligibility. Failure to maintain the
requisite activity level will result in a reduction in the bidder's
bidding eligibility in the next round of bidding (unless an activity
rule waiver is used). During Stage One, reduced eligibility for the
next round will be calculated by multiplying the current round activity
by five-fourths (\5/4\). In each round of the second stage of the
auction, a bidder desiring to maintain its current eligibility is
required to be active on at least 90 percent of its current bidding
eligibility. During Stage Two, reduced eligibility for the next round
will be
[[Page 66175]]
calculated by multiplying the current round activity by ten-ninths
(\10/9\). In each round of Stage Three, a bidder desiring to maintain
its current eligibility is required to be active on 98 percent of its
current bidding eligibility. In this final stage, reduced eligibility
for the next round will be calculated by multiplying the current round
activity by fifty forty-ninths (\50/49\). The Bureau seeks comment on
these proposals.
c. Minimum Accepted Bids
19. Once there is a standing high bid on a license, a bid increment
will be applied to that license to establish a minimum acceptable bid
for the following round. For Auction No. 22, the Bureau proposes to use
a smoothing methodology to calculate bid increments. This methodology
will be designed to vary the increment for a given license between a
maximum and minimum value based on the bidding activity on that
license. A similar methodology was used in previous auctions, including
the original LMDS auction and the 220 MHz auction. The Bureau proposes
initial values for the maximum of 0.2 or 20% of the license value, and
a minimum of 0.1 or 10% of the license value. The Bureau seeks comment
on this proposal.
20. The Bureau retains the discretion to change these values if
circumstances so dictate, such as raising the minimum increment toward
the end of the auction to enable bids to reach their final values more
quickly. The Bureau will do so by announcement in the Automated Auction
System. Under its discretion, the Bureau may also implement an absolute
dollar floor for the bid increment to further facilitate a timely close
of the auction. The Bureau further seeks comment on the advantages and
disadvantages of using the discretion to adjust the minimum bid
increment without prior notice. The Bureau additionally seeks comment
on the advantages and disadvantages of, as an alternative approach,
adjusting the minimum bid increment gradually over a number of rounds
as opposed to single large changes in the minimum bid increment. The
Bureau also retains the discretion to use alternate methodologies for
Auction No. 22 if circumstances warrant. The Bureau seeks comment on
these proposals.
d. Activity Rule Waivers and Reducing Eligibility
21. Use of an activity rule waiver preserves the bidder's current
bidding eligibility despite the bidder's activity in the current round
being below the required minimum level. An activity rule waiver applies
to an entire round of bidding and not to a particular license. Activity
waivers are principally a mechanism for auction participants to avoid
the loss of auction eligibility in the event that exigent circumstances
prevent them from placing a bid in a particular round.
22. The FCC auction system assumes that bidders with insufficient
activity would prefer to use an activity rule waiver (if available)
rather than lose bidding eligibility. Therefore, the system will
automatically apply a waiver (known as an ``automatic waiver'') at the
end of any bidding period where a bidder's activity level is below the
minimum required unless: (1) There are no activity rule waivers
available; or (2) the bidder overrides the automatic application of a
waiver by reducing eligibility thereby meeting the minimum
requirements.
23. A bidder with insufficient activity that wants to reduce its
bidding eligibility rather than use an activity rule waiver must
affirmatively override the automatic waiver mechanism during the
bidding period by using the reduce eligibility function in the
software. In this case, the bidder's eligibility is permanently reduced
to bring the bidder into compliance with the activity rules as
described above. Once eligibility has been reduced, a bidder will not
be permitted to regain its lost bidding eligibility.
24. A bidder may proactively use an activity rule waiver as a means
to keep the auction open without placing a bid. If a bidder submits a
proactive waiver (using the proactive waiver function in the bidding
software) during a bidding period in which no bids are submitted, the
auction will remain open and the bidder's eligibility will be
preserved. An automatic waiver invoked in a round in which there are no
new valid bids will not keep the auction open.
25. The Bureau proposes that each bidder in Auction No. 22 be
provided with five activity rule waivers that may be used in any round
during the course of the auction as set forth above. The Bureau seeks
comment on this proposal.
e. Information Regarding Bid Withdrawal and Bid Removal
26. In the C Block Fourth Report and Order, the Commission directed
the Bureau, in conducting the upcoming C block auction, to follow the
Part 1 rule on bid withdrawal, Section 1.2104(g), to the extent
applicable. Accordingly, for Auction No. 22, the Bureau proposes the
following bid removal and bid withdrawal procedures. Before the close
of a bidding period, a bidder has the option of removing any bids
placed in that round. By using the remove bid function in the software,
a bidder may effectively ``unsubmit'' any bid placed within that round.
A bidder removing a bid placed in the same round is not subject to
withdrawal payments.
27. Once a round closes, a bidder may no longer remove a bid.
However, in the next round, a bidder may withdraw standing high bids
from previous rounds using the withdraw bid function. A high bidder
that withdraws its standing high bid from a previous round is subject
to the bid withdrawal payment provisions. The Bureau seeks comment on
these bid removal and bid withdrawal procedures.
28. In the Part 1 Third Report and Order, the Commission recently
explained that allowing bid withdrawals facilitates efficient
aggregation of licenses and the pursuit of efficient backup strategies
as information becomes available during the course of an auction. The
Commission noted, however, that in some instances bidders may seek to
withdraw bids for improper reasons, including to delay the close of the
auction for strategic purposes. The Bureau, therefore, has discretion,
in managing the auction, to limit the number of withdrawals to prevent
strategic delay of the close of the auction or other abuses. The
Commission stated that the Bureau should assertively exercise its
discretion, consider limiting the number of rounds in which bidders may
withdraw bids, and prevent bidders from bidding on a particular market
if the Bureau finds that a bidder is abusing the Commission's bid
withdrawal procedures.
29. Applying this reasoning, the Bureau proposes to limit each
bidder in Auction No. 22 to withdrawals in no more than two rounds
during the course of the auction. To permit a bidder to withdraw bids
in more than two rounds would likely encourage insincere bidding or the
use of withdrawals for anti-competitive strategic purposes. The two
rounds in which withdrawals are utilized will be at the bidder's
discretion; withdrawals otherwise must be in accordance with the
Commission's rules. There is no limit on the number of standing high
bids that may be withdrawn in either of the rounds in which withdrawals
are utilized. Withdrawals will remain subject to the bid withdrawal
payment provisions specified in the Commission's rules. The Bureau
seeks comment on this proposal.
f. Stopping Rule
30. For Auction No. 22, the Bureau proposes to employ a
simultaneous stopping approach. The Bureau has
[[Page 66176]]
discretion ``to establish stopping rules before or during multiple
round auctions in order to terminate the auction within a reasonable
time.'' See, Section 1.2104 of the Commission's Rules, 47 CFR
1.2104(c). A simultaneous stopping rule means that all licenses remain
open until the first round in which no new acceptable bids, proactive
waivers, or withdrawals are received. After the first such round,
bidding closes simultaneously on all licenses. Thus, unless
circumstances dictate otherwise, bidding would remain open on all
licenses until bidding stops on every license.
31. The Bureau seeks comment on a modified version of the
simultaneous stopping rule. The modified stopping rule would close the
auction for all licenses after the first round in which no bidder
submits a proactive waiver, a withdrawal, or a new bid on any license
on which it is not the standing high bidder. Thus, absent any other
bidding activity, a bidder placing a new bid on a license for which it
is the standing high bidder would not keep the auction open under this
modified stopping rule. The Bureau further seeks comment on whether
this modified stopping rule should be used unilaterally or only in
stage three of the auction.
32. The Commission proposes that the Bureau retain the discretion
to keep an auction open even if no new acceptable bids or proactive
waivers are submitted and no previous high bids are withdrawn. In this
event, the effect will be the same as if a bidder had submitted a
proactive waiver. The activity rule, therefore, will apply as usual;
and a bidder with insufficient activity will either lose bidding
eligibility or use a remaining activity rule waiver.
33. Finally, the Commission proposes that the Bureau reserve the
right to declare that the auction will end after a specified number of
additional rounds (``special stopping rule''). If the Bureau invokes
this special stopping rule, it will accept bids in the final round(s)
only for licenses on which the high bid increased in at least one of
the preceding specified number of rounds. The Bureau proposes to
exercise this option only in certain circumstances, such as, for
example, where the auction is proceeding very slowly, there is minimal
overall bidding activity, or it appears likely that the auction will
not close within a reasonable period of time. Before exercising this
option, the Bureau is likely to attempt to increase the pace of the
auction by, for example, moving the auction into the next stage (where
bidders would be required to maintain a higher level of bidding
activity), increasing the number of bidding rounds per day, and/or
increasing the amount of the minimum bid increments for the limited
number of licenses where there is still a high level of bidding
activity. The Bureau seeks comment on these proposals.
g. Information Relating to Auction Delay, Suspension or Cancellation
34. For Auction No. 22, the Commission proposes that, by public
notice or by announcement during the auction, the Bureau may delay,
suspend or cancel the auction in the event of natural disaster,
technical obstacle, evidence of an auction security breach, unlawful
bidding activity, administrative or weather necessity, or for any other
reason that affects the fair and competitive conduct of competitive
bidding. In such cases, the Bureau, in its sole discretion, may elect
to: resume the auction starting from the beginning of the current
round; resume the auction starting from some previous round; or cancel
the auction in its entirety. Network interruption may cause the Bureau
to delay or suspend the auction. The Commission emphasizes that
exercise of this authority is solely within its discretion, and its use
is not intended to be a substitute for situations in which bidders may
wish to apply their activity rule waivers. The Bureau seeks comment on
this proposal.
Federal Communications Commission.
Daniel B. Phythyon,
Chief, Wireless Telecommunications Bureau.
[FR Doc. 98-32015 Filed 11-27-98; 11:51 am]
BILLING CODE 6712-01-P
