Auction of Flexible-Use Service Licenses in the 3.7-3.98 GHz Band for Next-Generation Wireless Services; Comment Sought on Competitive Bidding Procedures for Auction 107
| Published date | 27 April 2020 |
| Record Number | 2020-06451 |
| Section | Proposed rules |
| Court | Federal Communications Commission |
Federal Register, Volume 85 Issue 81 (Monday, April 27, 2020)
[Federal Register Volume 85, Number 81 (Monday, April 27, 2020)]
[Proposed Rules]
[Pages 23287-23299]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-06451]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 1 and 27
[AU Docket No. 20-25; FCC 20-23; FRS 16583]
Auction of Flexible-Use Service Licenses in the 3.7-3.98 GHz Band
for Next-Generation Wireless Services; Comment Sought on Competitive
Bidding Procedures for Auction 107
AGENCY: Federal Communications Commission.
ACTION: Proposed rule; proposed auction procedures.
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SUMMARY: In this document, the Commission announces an auction of
flexible-use overlay licenses in the 3.7-3.98 GHz band (the 3.7 GHz
Service), designated as Auction 107. This document proposes and seeks
comment on competitive bidding procedures to be used for Auction 107.
[[Page 23288]]
DATES: Comments are due on or before May 1, 2020, and reply comments
are due on or before May 15, 2020.
ADDRESSES: Comments may be filed using the Commission's Electronic
Comment Filing System (ECFS) or by filing paper copies. Electronic
Filing of Documents in Rulemaking Proceedings, 63 FR 24121 (May 1,
1998). All filings in response to the Auction 107 Comment Public Notice
must refer to AU Docket No. 20-25. The Commission strongly encourages
interested parties to file comments electronically and requests that an
additional copy of all comments and reply comments be submitted
electronically to the following email address: [email protected].
Electronic Filers: Comments may be filed electronically using the
internet by accessing the ECFS: https://www.fcc.gov/ecfs. Filers should
follow the instructions provided on the website for submitting
comments. In completing the transmittal screen, filers should include
their full name, U.S. Postal Service mailing address, and the
applicable docket number, AU Docket No. 20-25.
Paper Filers: Parties who choose to file by paper must file an
original and one copy of each filing. If more than one docket or
rulemaking number appears in the caption of this proceeding, filers
must submit two additional copies for each additional docket or
rulemaking number. Filings can be sent by hand or messenger delivery,
by commercial overnight courier, or by first-class or overnight U.S.
Postal Service mail. All filings must be addressed to the Commission's
Secretary, Office of the Secretary, Federal Communications Commission.
All hand-delivered or messenger-delivered paper filings for the
Commission's Secretary must be delivered to FCC Headquarters at 445
12th St. SW, Room TW-A325, Washington, DC 20554. The filing hours are
8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with
rubber bands or fasteners. Any envelopes and boxes must be disposed of
before entering the building.
Commercial overnight mail (other than U.S. Postal Service Express
Mail and Priority Mail) must be sent to 9050 Junction Drive, Annapolis
Junction, MD 20701.
U.S. Postal Service first-class, Express, and Priority mail must be
addressed to 445 12th Street SW, Washington, DC 20554.
FOR FURTHER INFORMATION CONTACT: For auction legal questions, Erik
Beith or Tajma Rahimic in the Auctions Division of the Office of
Economics and Analytics at (202) 418-0660. For general auction
questions, the Auctions Hotline at (717) 338-2868. For 3.7 GHz Service
legal questions, Anna Gentry in the Wireless Telecommunications
Bureau's Mobility Division at (202) 418-1991. For 3.7 GHz Service
technical questions, Janet Young in the Wireless Telecommunications
Bureau's Broadband Division at (202) 418-0837.
SUPPLEMENTARY INFORMATION: This is a summary of the Public Notice
(Auction 107 Comment Public Notice), AU Docket No. 20-25, FCC 20-23,
adopted on February 28, 2020 and released on March 3, 2020. The Auction
107 Comment Public Notice includes the following attachment: Attachment
A, Proposed Upfront Payment and Minimum Opening Bid Amounts. The
complete text of the Auction 107 Comment Public Notice, including its
attachment, is available for public inspection and copying from 8:00
a.m. to 4:30 p.m. Eastern Time (ET) Monday through Thursday or from
8:00 a.m. to 11:30 a.m. ET on Fridays in the FCC Reference Information
Center, 445 12th Street SW, Room CY-A257, Washington, DC 20554. The
complete text is also available on the Commission's website at
www.fcc.gov/auction/107 or by using the search function for AU Docket
No. 20-25 on the Commission's ECFS web page at www.fcc.gov/ecfs.
Alternative formats are available to persons with disabilities by
sending an email to [email protected] or by calling the Consumer &
Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432
(TTY). Pursuant to sections 1.415 and 1.419 of the Commission's rules,
47 CFR 1.415, 1.419, interested parties may file comments and reply
comments on or before the dates indicated in the Auction 107 Comment
Public Notice in AU Docket No. 20-25.
I. Introduction
1. By the Auction 107 Comment Public Notice, the Commission seeks
comment on the procedures to be used for Auction 107, the auction of
new flexible-use overlay licenses in the 3.7-3.98 GHz band (the 3.7 GHz
Service). The Commission expects the bidding for licenses in Auction
107 to commence on December 8, 2020. The Commission proposes to use an
ascending clock auction format for the licenses offered in Auction 107
and then hold a sealed bid assignment phase. The Auction 107 Comment
Public Notice seeks comment on proposed auction procedures for bidding
to acquire licenses in Auction 107.
II. Licenses To Be Offered in Auction 107
2. Auction 107 will offer 5,684 new flexible-use overlay licenses
for spectrum in the 3.7-3.98 GHz band throughout the contiguous United
States subject to clearing requirements. The Commission adopted the 3.7
GHz Report and Order, [April 23, 2020], which describes in detail the
rules applicable to the licenses offered in these 280 megahertz of
spectrum. The Commission will offer up to 280 megahertz of spectrum
licensed on an unpaired basis in three blocks divided into 20-megahertz
sub-blocks by partial economic area (PEA) in the contiguous states and
the District of Columbia (PEAs 1-41, 43-211, 213-263, 265-297, 299-359,
and 361-411). The Commission will not issue flexible-use overlay
licenses for Honolulu, Anchorage, Kodiak, Fairbanks, Juneau, Puerto
Rico, Guam-Northern Mariana Islands, U.S. Virgin Islands, American
Samoa, and the Gulf of Mexico (PEAs numbers 42, 212, 264, 298, 360,
412-416). Specifically, the A Block will cover 100 megahertz from 3.7-
3.8 GHz in five 20-megahertz sub-blocks: 3700-3720 MHz (A1), 3720-3740
MHz (A2), 3740-3760 MHz (A3), 3760-3780 MHz (A4), and 3780-3800 MHz
(A5). The B Block will cover 100 megahertz from 3.8-3.9 GHz in five 20-
megahertz sub-blocks: 3800-3820 MHz (B1), 3820-3840 MHz (B2), 3840-3860
MHz (B3), 3860-3880 MHz (B4), and 3880-3900 MHz (B5). The C Block will
cover 80 megahertz from 3.9-3.98 GHz, and four 20-megahertz sub-blocks
will be licensed for flexible use: 3900-3920 MHz (C1), 3920-3940 MHz
(C2), 3940-3960 MHz (C3), and 3960-3980 MHz (C4). The 20 megahertz at
3980-4000 MHz will be a guard band and not available for auction. All
3.7 GHz Service licenses will be issued for 15-year, renewable license
terms. A licensee in the 3.7-3.98 GHz band may provide any services
permitted under terrestrial fixed or mobile allocations, as set forth
in the non-Federal Government column of the Table of Frequency
Allocations in section 2.106 of the Commission's rules, as modified by
the 3.7 GHz Report and Order.
3. A list of markets in which licenses will be offered in Auction
107, including proposed upfront payment and minimum opening bid
amounts, is available in Attachment A to the Auction 107 Comment Public
Notice.
4. Transition of Incumbent Operations. The 3.7-4.2 GHz band
currently is allocated in the United States exclusively for non-Federal
use on a primary basis for Fixed Satellite
[[Page 23289]]
Service (FSS) and Fixed Service (FS) services. In the 3.7 GHz Report
and Order, the Commission modified the licenses and market access
authorizations of incumbent FSS operators and FS licensees to clear the
3.7-4.0 GHz band for new flexible-use terrestrial operations. For
additional information about clearing and conditions on the licenses to
be offered in Auction 107, potential bidders should carefully review
the 3.7 GHz Report and Order.
5. Each potential bidder is solely responsible for investigating
and evaluating all technical and marketplace factors that may have a
bearing on the potential uses of a license that it may seek in Auction
107. In addition to the typical due diligence considerations that the
Commission encourages of bidders in all auctions, the Commission calls
particular attention in Auction 107 to the clearing process and license
conditions described in the 3.7 GHz Report and Order. Each applicant
should closely follow releases from the Commission concerning these
issues and consider carefully the technical and economic implications
for commercial use of the 3.7-3.98 GHz band. The Commission makes no
representations or warranties about the use of this spectrum for
particular services. Each applicant should be aware that a Commission
auction represents an opportunity to become a Commission licensee,
subject to certain conditions and regulations. This includes the
established authority of the Commission to alter the terms of existing
licenses by rulemaking, which is equally applicable to licenses awarded
by auction. A Commission auction does not constitute an endorsement by
the Commission of any particular service, technology, or product, nor
does a Commission license constitute a guarantee of business success.
III. Proposed Pre-Bidding Procedures
6. In the 3.7 GHz Report and Order, the Commission decided to
conduct any auction of new flexible-use licenses for the 3.7 GHz
Service in conformity with the amended Part 1 rules. The Commission's
Part 1 rules require each applicant seeking to bid to acquire licenses
in a spectrum auction to provide certain information in a short-form
application (FCC Form 175), including ownership details and numerous
certifications.
7. Prohibition of Certain Communications. Section 1.2105(c)(1) of
the Commission's rules provides that, subject to specified exceptions,
after the short-form application filing deadline, 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. Section
1.2105(c)(5)(i) defines ``applicant'' as including all officers and
directors of the entity submitting a short-form application to
participate in the auction, all controlling interests of that entity,
as well as all holders of partnership and other ownership interests and
any stock interest amounting to 10% or more of the entity, or
outstanding stock, or outstanding voting stock of the entity submitting
a short-form application.
8. The operation of the rule prohibiting certain communications
requires that the Commission identify nationwide providers in
connection with each auction. Because the applicable service rules for
the 3.7-3.98 GHz band will allow a licensee to provide flexible
terrestrial wireless services, including mobile services, the
Commission's identification of four nationwide providers in the
Communications Marketplace Report suggests that it should identify
those same entities as nationwide providers for purposes of 3.7 GHz
licenses and Auction 107. This is consistent with the Commission's
identification of ``nationwide providers'' for the purpose of
implementing its competitive bidding rules in Auctions 101, 102, 103
and the forward auction portion of the Broadcast Incentive Auction.
Accordingly, consistent with the procedures adopted for prior auctions
of flexible-use licenses for advanced wireless services, the Commission
proposes to identify AT&T, Sprint, T-Mobile, and Verizon Wireless as
``nationwide providers'' for the purpose of implementing the
Commission's competitive bidding rules in Auction 107, including
section 1.2105(c), the rule prohibiting certain communications. The
Commission seeks comment on this proposal.
A. Bidding Credit Caps
9. The Commission seeks comment on establishing reasonable caps on
the total amount of bidding credits that an eligible small business,
very small business, or rural service provider may be awarded for
Auction 107.
10. Eligibility for the small business bidding credit is determined
according to a tiered schedule of small business size definitions that
are based on an applicant's average annual gross revenues for the
relevant preceding period, and which determine the size of the bidding
credit discount. In the 3.7 GHz Report and Order, the Commission
determined that eligibility for the small business bidding credit in
the auction of licenses in the 3.7-3.98 GHz band would be defined using
two of the thresholds of the standardized schedule of small business
sizes. Specifically, the Commission determined that an entity with
average annual gross revenues for the preceding five years not
exceeding $55 million would be designated as a ``small business''
eligible for a 15% bidding credit, and that an entity with average
annual gross revenues for the preceding five years not exceeding $20
million would be designated as a ``very small business'' eligible for a
25% bidding credit. The Commission further determined that entities
providing commercial communication services to a customer base of fewer
than 250,000 combined wireless, wireline, broadband, and cable
subscribers in primarily rural areas would be eligible for the 15%
rural service provider bidding credit. The Commission defined rural
area as a county with a population density of 100 persons or fewer per
square mile.
11. In the Updating Part 1 Report and Order, 80 FR 56764, September
18, 2015, the Commission established a process to implement a
reasonable cap on the total amount of bidding credits that an eligible
small business or rural service provider may be awarded in any auction,
based on an evaluation of the expected capital requirements presented
by the particular service and inventory of licenses being auctioned.
The Commission determined that bidding credit caps would be implemented
on an auction-by-auction basis, but resolved that, for any particular
auction, the total amount of the bidding credit cap for small
businesses would not be less than $25 million, and the bidding credit
cap for rural service providers would not be less than $10 million. For
Auctions 101, 102, and 103, the Commission adopted a $25 million cap on
the total amount of bidding credits that may be awarded to an eligible
small business in each auction and a $10 million cap on rural service
provider bidding credits in each auction.
12. The Commission proposes to adopt the same bidding credit caps
for Auction 107. Like Auctions 101, 102, and 103, the Commission
believes that the range of potential use cases suitable
[[Page 23290]]
for spectrum in the 3.7-3.98 GHz band, combined with the relatively
small geographic areas for new flexible-use overlay licenses in the 3.7
GHz Service, may permit deployment of smaller scale networks with lower
total costs. Moreover, past auction data suggests that the proposed
caps will allow the substantial majority of eligible small businesses
in the auction to take advantage of the bidding credit program. The
Commission therefore believes that its proposed caps will promote the
statutory goals of providing meaningful opportunities for bona fide
small businesses to compete in auctions and in the provision of
spectrum-based services, without compromising the Commission's
responsibility to prevent unjust enrichment and ensure efficient and
intensive use of spectrum.
13. Similarly, the Commission proposes to adopt a $10 million cap
on the total amount of bidding credits that may be awarded to an
eligible rural service provider in Auction 107. An entity is not
eligible for a rural service provider bidding credit if it has already
claimed a small business bidding credit. The Commission anticipates
that a $10 million cap on rural service provider bidding credits will
not constrain the ability of any rural service provider to participate
fully and fairly in Auction 107. No rural service provider exceeded the
$10 million cap in the Broadcast Incentive Auction, Auction 101, or
Auction 102. In addition, to create parity in Auction 107 among
eligible small businesses and rural service providers competing against
each other in smaller markets, the Commission proposes a $10 million
cap on the overall amount of bidding credits that any winning small
business bidder may apply to winning licenses in markets with a
population of 500,000 or less. This proposal is consistent with the
approach adopted by the Commission in the Broadcast Incentive Auction,
Auction 101, Auction 102, and Auction 103.
14. The Commission seeks comment on these proposed caps.
Specifically, do the expected capital requirements associated with
operating in the 3.7-3.98 GHz band, the potential number and value of
3.7 GHz Service licenses, past auction data, or any other
considerations justify a higher cap for either type of bidding credit?
Moreover, are there convincing reasons for not maintaining parity with
the bidding credit caps in Auctions 101, 102, and 103? Commenters are
encouraged to identify unique circumstances and characteristics of this
mid-band auction that should guide the Commission in establishing
bidding credit caps, and to provide specific, data-driven arguments in
support of their proposals.
15. The Commission reminds applicants applying for designated
entity bidding credits that they should take due account of the
requirements of the Commission's rules and implementing orders
regarding de jure and de facto control of such applicants. These rules
include a prohibition, which applies to all applicants (whether or not
they are seeking bidding credits), against changes in ownership of the
applicant that would constitute an assignment or transfer of control.
Applicants should not expect to receive any opportunities to revise
their ownership structure after the filing of their short- and long-
form applications, including making revisions to their agreements or
other arrangements with interest holders, lenders, or others in order
to address potential concerns relating to compliance with the
designated entity bidding credit requirements. Applicants will not be
permitted to change their bidding credit type selection (i.e., from
small business to rural service provider, or vice versa) after the
short-form deadline.
B. Information Procedures During the Auction Process
16. As with most recent Commission spectrum license auctions, the
Commission proposes to limit information available in Auction 107 in
order to prevent the identification of bidders placing particular bids
until after the bidding has closed. More specifically, the Commission
proposes to not make public until after bidding has closed: (1) The
PEAs that an applicant selects for bidding in its short-form
application (FCC Form 175), (2) the amount of any upfront payment made
by or on behalf of an applicant for Auction 107, (3) any applicant's
bidding eligibility, and (4) any other bidding-related information that
might reveal the identity of the bidder placing a bid.
17. Bidders would have access to additional information related to
their own bidding and bid eligibility. For example, bidders would be
able to view their own level of eligibility before and during the
auction through the FCC auction bidding system.
18. After the close of bidding, bidders' PEA selections, upfront
payment amounts, bidding eligibility, bids, and other bidding-related
information would be made publicly available.
19. The Commission seeks comment on the details of its proposal for
implementing limited information procedures, or anonymous bidding, in
Auction 107. Commenters opposing the use of anonymous bidding in
Auction 107 should explain their reasoning and propose alternative
information rules.
C. Upfront Payments and Bidding Eligibility
20. In keeping with the Commission's usual practice in spectrum
license auctions, the Commission proposes that applicants be required
to submit upfront payments as a prerequisite to becoming qualified to
bid. The upfront payment is a refundable deposit made by an applicant
to establish its eligibility to bid on licenses. Upfront payments
protect against frivolous or insincere bidding and provide the
Commission with a source of funds from which to collect payments owed
at the close of bidding. The Commission's rules require that any
auction applicant that, pursuant to 47 CFR 1.2105(a)(2)(xii), certifies
that it is a former defaulter must submit an upfront payment equal to
50% more than the amount that otherwise would be required. The
Commission proposes upfront payments based on $0.015 per MHz-pop. The
results of these calculations will be rounded using the Commission's
standard rounding procedures for auctions: Results above $10,000 are
rounded to the nearest $1,000; results below $10,000 but above $1,000
are rounded to the nearest $100; and results below $1,000 are rounded
to the nearest $10. The proposed upfront payments equal approximately
half the proposed minimum opening bids, which are established as
described in Section IV.A.7.a of the Auction 107 Comment Public Notice.
The Commission seeks comment on these upfront payment amounts, which
are specified in Attachment A to the Auction 107 Comment Public Notice.
If commenters believe that these upfront payment amounts are not
reasonable amounts, they should explain their reasoning and suggest an
alternative approach. Commenters may wish to suggest other
modifications to our proposal, such as weighting the minimum opening
bid calculation using past auction prices.
21. The Commission further proposes that the amount of the upfront
payment submitted by a bidder would determine its initial bidding
eligibility in bidding units, which are a measure of bidder eligibility
and bidding activity. The Commission proposes to assign each generic
spectrum block in a given PEA a specific number of bidding units, equal
to one bidding unit per $10 of the upfront payment listed in Attachment
A to the Auction 107 Comment Public Notice. The number of bidding units
for one block in a given PEA is fixed, since it is based on the MHz-
pops in the block, and does not change during the
[[Page 23291]]
auction as prices change. To the extent that bidders wish to bid on
multiple generic blocks simultaneously, whether within the same PEA or
in different PEAs, they would need to ensure that their upfront payment
provides enough eligibility to cover multiple blocks.
22. Under the Commission's proposed approach, a bidder's upfront
payment would not be attributed to blocks in a specific PEA or PEAs, or
to particular categories of blocks, if there is more than one. A bidder
may place bids on multiple blocks in PEAs that it selected for bidding
in its FCC Form 175, provided that the total number of bidding units
associated with those blocks does not exceed its eligibility-based
limit for the round. A bidder cannot increase its eligibility during
the auction; it can only maintain its eligibility or decrease its
eligibility. Thus, in calculating its upfront payment amount, and hence
its initial bidding eligibility, an applicant must determine the
maximum number of bidding units on which it may wish to bid in any
single round and submit an upfront payment amount covering that total
number of bidding units. The Commission seeks comment on these
proposals.
D. Auction Delay, Suspension, or Cancellation
23. For Auction 107, the Commission proposes that, at any time
before or during the bidding process, the Office of Economics and
Analytics (OEA), in conjunction with the Wireless Telecommunications
Bureau (WTB), may delay, suspend, or cancel bidding in Auction 107 in
the event of a natural disaster, technical obstacle, network
interruption, administrative or weather necessity, evidence of an
auction security breach or unlawful bidding activity, or for any other
reason that affects the fair and efficient conduct of competitive
bidding. In such a case, OEA would notify participants of any such
delay, suspension, or cancellation by public notice and/or through the
FCC auction bidding system's announcement function. If the bidding is
delayed or suspended, OEA, in its sole discretion, may elect to resume
the auction starting from the beginning of the current round or from
some previous round, or it may cancel the auction in its entirety. The
Commission emphasizes that OEA and WTB would exercise this authority
solely at their discretion. The Commission seeks comment on this
proposal.
IV. Proposed Bidding Procedures
24. The Commission proposes to conduct Auction 107 using an
ascending clock auction design. Under the proposed auction format,
bidding would take place in two phases. The first phase of the
auction--the clock phase--would consist of successive clock bidding
rounds in which bidders indicate their demands for categories of
generic license blocks in specific PEAs, followed by a second phase--
the assignment phase--with bidding for frequency-specific license
assignments. The Commission seeks comment on bidding procedures for the
two phases of Auction 107.
25. The Commission directs OEA, in conjunction with WTB, to prepare
and release a technical guide supplementing the information in the
Auction 107 Comment Public Notice and including the mathematical
details and algorithms of the proposed auction design.
A. Clock Phase
1. Clock Auction Design
26. During the clock phase of Auction 107, bidders will indicate
their demands for generic license blocks in two bidding categories in
specific geographic areas--in this case, PEAs. The Commission's
proposed clock auction format would proceed in a series of rounds, with
bidding being conducted simultaneously for all spectrum blocks in all
PEAs available in the auction. During each bidding round, the bidding
system would announce a per-block clock price for each category in each
PEA, and qualified bidders would submit, for each category and PEA for
which they wish to bid, the number of blocks they seek at the clock
prices associated with the current round. Bidding rounds would be open
for predetermined periods of time. Bidders would be subject to activity
and eligibility rules that govern the pace at which they participate in
the auction.
27. Under the Commission's proposal, for each product--a category
in a PEA--the clock price for a generic license block would increase
from round to round if bidders indicate total demand for blocks in that
product that exceeds the number of blocks available. The bidding rounds
would continue until, for all products, the total number of blocks that
bidders demand does not exceed the supply of available blocks. At that
point, those bidders indicating demand for a product at the final price
would be deemed winning bidders.
28. Following the clock phase, the assignment phase will offer
clock phase winners the opportunity to bid an additional amount for
licenses with specific frequencies. All winning bidders, regardless of
whether they bid in the assignment phase, will be assigned licenses for
contiguous blocks within a category in a PEA.
29. The Commission seeks comment on specific procedures to
implement this ascending clock auction and on alternative procedures
for conducting, in a timely manner, an auction of 3.7-3.98 GHz
licenses.
2. Generic License Blocks in Two Categories
30. The 3.7 GHz Report and Order determined that the 3.7-3.98 GHz
band will be reconfigured and licensed in uniform 20-megahertz sub-
blocks in each of 406 PEAs. The 3.7 GHz Report and Order also
establishes a two-phase accelerated relocation process. In Phase I,
participating incumbent space station operators would relocate their
services out of blocks A1-A5 and relocate incumbent earth stations in
the 46 PEAs that are subject to the Phase I deadline out of those
blocks. In Phase II, participating space station operators would
relocate their services out of blocks B1-B5 and C1-C4 and transition
all incumbent earth stations out of all the blocks. To facilitate
bidding in the clock phase, the Commission proposes to establish two
categories of generic blocks in each PEA.
31. The Commission proposes that the first category of generic
blocks will consist of the 20-megahertz subblocks between 3.7-3.8 GHz.
This category, designated Category A, will comprise a total of five
blocks: A1-A5. A second category, Category BC, will consist of the
remaining sub-blocks between 3.8-3.98 GHz for a total of nine blocks:
(B1-B5, C1-C4).
32. In each bidding round, a bidder will have the opportunity to
bid for the quantity of generic blocks it demands in each of the two
bidding categories. Bidding in the clock phase will determine a single
price for all the generic blocks in each category in each PEA.
33. The Commission's proposal for bidding on generic blocks in two
categories is based on the close similarity of the blocks within each
bidding category. The Commission distinguishes between Category A and
Category BC to recognize that bidders may value early access to blocks
A1-A5, both in the 46 PEAs subject to the Phase I incumbent earth
station deadline and in other PEAs where a bidder might seek voluntary
early transition of incumbent earth stations. To the extent a bidder
has a preference for specific frequency licenses, the bidder may bid
for its preferred blocks in the assignment phase. However, a bidder for
a generic block cannot be assured that it will be assigned, or not be
assigned,
[[Page 23292]]
any particular frequency block. The Commission asks that commenters
explain any concerns they may have about the interchangeability of
generic blocks within the two proposed categories of generic blocks,
bearing in mind potential tradeoffs between the number of categories
and auction length, the ability of the auction system to assign
contiguous blocks to winners of multiple blocks, and bidder
manageability.
34. The Commission also seeks comment on an alternative approach to
establishing bidding categories, grouping the available blocks
according to the specific clearing deadline to which incumbent earth
stations are subject, i.e., Phase I or Phase II. Specifically, the
Commission could designate blocks A1-A5 in the 46 PEAs that are subject
to the Phase I deadline as Category P1 for clock phase bidding. And the
Commission could designate all other blocks as Category P2 for clock
phase bidding. Thus, under this alternative approach, the 46 PEAs that
are subject to the Phase I deadline would each have two bidding
categories and the 360 PEAs that are not subject to the Phase I
incumbent earth station deadline would each have a single bidding
category. The Commission asks commenters to consider whether the A
Block licenses that would not be subject to the Phase I deadline are
sufficiently interchangeable with the B and C Block licenses to be bid
as a single bidding category in the clock phase, and whether this
categorization would facilitate contiguous assignment across all blocks
in the assignment phase.
3. Bidding Rounds
35. Under the proposed clock auction format, Auction 107 would
consist of sequential bidding rounds, each followed by the release of
round results. The Commission proposes to conduct bidding
simultaneously for all spectrum blocks in both bidding categories for
all PEAs available in the auction. In the first bidding round of
Auction 107, a bidder would indicate, for each product, how many
generic license blocks it demands at the minimum opening bid price.
During each subsequent bidding round, the bidding system would announce
a per-block clock price for each product, and qualified bidders would
submit, for each product for which they wish to bid, the number of
blocks they seek at the clock prices associated with the current round.
Bidding rounds would be open for predetermined periods of time. Bidders
would be subject to activity and eligibility rules that govern the pace
at which they participate in the auction.
36. For each product, the clock price for a generic license block
would increase from round to round if bidders indicate total demand for
that product that exceeds the number of blocks available. The bidding
rounds would continue until, for all products, the total number of
blocks that bidders demand does not exceed the supply of available
blocks. At that point, those bidders indicating demand for a block at
the final price would be deemed winning bidders.
37. The initial bidding schedule would be announced in a public
notice to be released at least one week before the start of bidding.
Under the Commission's proposal, OEA would retain the discretion to
adjust the bidding schedule in order to foster an auction pace that
reasonably balances speed with the bidders' need to study round results
and adjust their bidding strategies. Such adjustments may include
changes in the amount of time for bidding rounds, the amount of time
between rounds, or the number of rounds per day, and would depend upon
bidding activity and other factors. The Commission seeks comment on
this proposal. Commenters should address the role of the bidding
schedule in managing the pace of the auction and should specifically
discuss the tradeoffs in managing auction pace by bidding schedule
changes, by changing the activity requirement percentage or the bid
increment percentage, or by using other means.
38. The Commission proposes to conduct Auction 107 over the
internet. A bidder would be able to submit its bids using the bidding
interface screens and/or using the bidding system's upload function
that allows bid files in a CSV format to be uploaded. The bidding
system would not allow bids to be submitted unless the bidder selected
the PEAs on its FCC Form 175 and the bidder has sufficient bidding
eligibility.
39. During each round of the bidding, a bidder would also be able
to remove bids placed in the current bidding round. If a bidder
modifies its bids for blocks in a PEA in a round, the system would take
the last bid submission as that bidder's bid for the round. No bids may
be withdrawn after the close of a round.
4. Stopping Rule
40. The Commission proposes a simultaneous stopping rule for
Auction 107, under which all blocks in both categories in all PEAs
would remain available for bidding until the bidding stops in every
PEA. Specifically, the Commission proposes that bidding close for all
blocks after the first round in which there is no excess demand in any
product. Excess demand is calculated as the difference between the
number of blocks of aggregate demand and supply. Consequently, under
this approach, it is not possible to determine in advance how long
Auction 107 would last. The Commission seeks comment on its proposed
simultaneous stopping rule.
5. Availability of Bidding Information
41. The Commission proposes to make public after each round of
Auction 107, for each category in each PEA: The supply; the aggregate
demand; the posted price of the last completed round; and the clock
price for the next round. The posted price of the previous round is,
generally: The start-of-round price if supply exceeds demand; the clock
price of the previous round if demand exceeds supply; or the price at
which a reduction caused demand to equal supply. The identities of
bidders demanding blocks in a specific category or PEA would not be
disclosed until after Auction 107 concludes (i.e., after the close of
bidding).
42. Under the Commission's proposal, each bidder would have access
to additional information related to its own bidding and bid
eligibility. Specifically, after the bids of a round have been
processed, the bidding system would inform each bidder of the number of
blocks it holds after the round (its processed demand) for every PEA
and its eligibility for the next round.
43. Limiting the availability of bidding information during the
auction balances the Commission's interest in providing bidders with
sufficient information about the status of their own bids and the
general level of bidding in all areas and license categories to allow
them to bid confidently and effectively, while restricting the
availability of information that may facilitate identification of
bidders placing particular bids, which could potentially lead to
undesirable strategic bidding.
6. Activity Rule, Activity Upper Limit, and Reducing Eligibility
44. To ensure that the auction closes within a reasonable period of
time, an activity rule requires bidders to bid actively throughout the
auction, rather than wait until late in the auction before
participating. For this clock auction, a bidder's activity in a round
for purposes of the activity rule would be the sum of the bidding units
associated with the bidder's demands as applied by the auction system
during bid processing. Bidders are required to be active on a specific
percentage (the activity
[[Page 23293]]
requirement percentage) of their current bidding eligibility during
each round of the auction. Failure to maintain the requisite activity
level would result in a reduction in the bidder's eligibility, possibly
curtailing or eliminating the bidder's ability to place additional bids
in the auction.
45. The Commission proposes to require that bidders maintain a
fixed, high level of activity in each round of Auction 107 in order to
maintain bidding eligibility. Specifically, the Commission proposes to
require that bidders be active on between 90% and 100% of their bidding
eligibility in all clock rounds, with the specific percentage within
this range to be set for each round. Thus, the activity rule would be
satisfied when a bidder has bidding activity on blocks with bidding
units that total 90% to 100% of its current eligibility in the round.
If the activity rule is met, then the bidder's eligibility does not
change for the next round. If the activity rule is not met in a round,
the bidder's eligibility would be reduced. The Commission proposes to
calculate bidding activity based on the bids that are applied by the
FCC auction bidding system. That is, if a bidder requests a reduction
in the quantity of blocks it demands in a PEA, but the FCC auction
bidding system cannot apply the request because demand would fall below
the available supply, then the bidder's activity would reflect its
unreduced demand. Under the ascending clock auction format, the FCC
auction bidding system will not allow a bidder to reduce the quantity
of blocks it demands in an individual PEA if the reduction would result
in aggregate demand falling below (or further below) the available
supply of blocks in the PEA.
46. Because a bidder's eligibility for the next round is calculated
based on the bidder's demands as applied by the auction system during
bid processing, a bidder's eligibility may be reduced even if the
bidder submitted bids with activity that exceeds the required activity
for the round. This may occur, for example, if the bidder bids to
reduce its demand in PEA X by two blocks (with 10 bidding units each)
and bids to increase its demand by one block (with 20 bidding units) in
PEA Y. If the bidder's demand can only be reduced by one block in PEA X
(because there is only one block of excess demand), the increase in PEA
Y cannot be applied, and absent other bidding activity the bidder's
eligibility would be reduced. To potentially help a bidder avoid having
its eligibility reduced as a result of submitted bids that could not be
accepted during bid processing, the Commission seeks comment on
additional procedures that would allow a bidder to submit bids with
associated bidding activity greater than its current bidding
eligibility. For example, depending upon the bidder's overall bidding
eligibility and the activity limit percentage, a bidder could submit an
``additional'' bid or bids that would be considered (in price point
order with its other bids) and applied as available eligibility permits
during the bid processing. However, under these additional procedures,
the bidder's activity as applied by the auction system during bid
processing would not exceed the bidder's current bidding eligibility.
That is, if a bidder were allowed to submit bids with associated
bidding units exceeding 100% of its current bidding eligibility, its
processed activity would never exceed its eligibility.
47. Specifically, the Commission seeks comment on additional
procedures by which, after Round 1, a bidder may submit bids with
bidding units totaling up to an activity upper limit equal to the
bidder's current bidding eligibility for the round times a percentage
(the activity limit percentage) equal to or greater than 100%. For
Round 1, the activity upper limit would be 100% of the bidder's initial
bidding eligibility. The Commission seeks comment on setting an initial
activity limit percentage of 120% to apply to Round 2 and subsequent
rounds (potentially changing it during the auction within a range of
100% and 140%), in which the Commission would implement this approach.
In any bidding round, the auction bidding system would advise the
bidder of its current bidding eligibility, its required bidding
activity, and its activity upper limit.
48. Under the Commission's proposed procedures, OEA would retain
the discretion to change the activity requirement percentage during the
auction, and the Commission seeks comment in connection with potential
additional procedures on whether OEA should similarly retain the
discretion to change the activity limit percentage during the auction.
The bidding system would announce any such changes in advance of the
round in which they would take effect, giving bidders adequate notice
to adjust their bidding strategies.
49. The Commission invites comment on this activity rule proposal
and it further seeks comment on using an activity upper limit to
address the potential for loss of bidding eligibility under some
circumstances. The Commission also encourages commenters to address
whether the Commission should set the activity requirement percentage
between 90% and 100% for each round and, should the Commission adopt an
activity upper limit, whether to set the activity limit percentage
between 100% and 140%. Further, the Commission seeks comment on where
to set these percentages initially. The Commission also seeks comment
on the relationship between the proposed activity rules and the ability
of bidders to switch their demands across PEAs. The Commission
encourages any commenters that oppose the proposed range for the
activity requirement percentage and the activity limit percentage range
described herein to explain their reasons with specificity.
50. Missing bids. The Commission points out that under the proposed
clock auction format, bidders are required to indicate their demands in
every round, even if their demands at the new round's prices are
unchanged from the previous round. Missing bids--bids that are not
reconfirmed--are treated by the auction bidding system as requests to
reduce to a quantity of zero blocks for the product. If these requests
are applied, or applied partially, then a bidder's bidding activity,
and its bidding eligibility for the next round, may be reduced.
51. For Auction 107, the Commission does not propose to provide for
activity rule waivers to preserve a bidder's eligibility. The
Commission notes that its proposal to permit a bidder to submit bids
with bidding activity greater than its eligibility, within the precise
limits described herein, would address some of the circumstances under
which a bidder risks losing bidding eligibility and otherwise could
wish to use a bidding activity waiver, while minimizing any potential
adverse impacts on bidder incentives to bid sincerely and on the price
setting mechanism of the clock auction. This approach not to allow
waivers is consistent with the ascending clock auction procedures used
in other FCC clock auctions. The clock auction relies on precisely
identifying the point at which demand decreases to equal supply to
determine winning bidders and final prices. Allowing waivers would
create uncertainty with respect to the exact level of bidder demand and
interfere with the basic clock price-setting and winner determination
mechanism. Moreover, uncertainty about the level of demand would affect
the way bidders' requests to reduce demand are processed by the bidding
system. The Commission seeks comment on this approach.
[[Page 23294]]
7. Acceptable Bids
a. Minimum Opening Bids
52. As part of the pre-bidding process for each auction, the
Commission seeks comment on the use of a minimum opening bid amount
and/or reserve price, as mandated by section 309(j) of the
Communications Act of 1934, as amended.
53. The Commission proposes to establish minimum opening bid
amounts for Auction 107. The bidding system will not accept bids lower
than these amounts. Based on the Commission's experience in past
auctions, setting minimum opening bid amounts judiciously is an
effective tool for accelerating the competitive bidding process. For
Auction 107, the Commission proposes to establish initial clock prices,
or minimum opening bids, by PEA.
54. The Commission does not propose to establish any aggregate
reserve price in Auction 107. The Commission is not aware at this time
of circumstances that require establishment of an aggregate reserve
price in the public interest for the auction of 3.7 GHz Service
licenses and propose only the per product minimum opening bids that it
discusses here. The Commission seeks comment on this issue.
55. For Auction 107, the Commission proposes to calculate minimum
opening bid amounts using a formula based on bandwidth and license area
population, which is similar to its approach in many previous spectrum
auctions. The Commission proposes to use a calculation based on $0.03
per MHz-pop. The Commission seeks comment on these minimum opening bid
amounts, which are specified in Attachment A to the Auction 107 Comment
Public Notice. If commenters believe that these minimum opening bid
amounts would result in unsold licenses, are not reasonable amounts, or
should instead operate as reserve prices, they should explain their
reasoning and propose an alternative approach. Commenters may wish to
suggest other modifications to the Commission's proposal, such as
weighting the minimum opening bid calculation using past auction
prices. Commenters should support their claims with valuation analyses
and suggested amounts or formulas for reserve prices or minimum opening
bids.
56. In establishing minimum opening bid amounts, the Commission
particularly seeks comment on factors that could reasonably affect
bidders' valuation of the spectrum, including the type of service
offered, market size, population covered by the proposed facility, and
any other relevant factors.
57. Commenters may also wish to address the general role of minimum
opening bids in managing the pace of the auction. For example,
commenters could compare using minimum opening bids--e.g., by setting
higher minimum opening bids to reduce the number of rounds it takes
licenses to reach their final prices--to other means of controlling
auction pace, such as changing the bidding schedule, the activity
requirement percentage, or the bid increment percentage.
b. Clock Price Increments
58. Under the Commission's proposed clock phase procedures for
Auction 107, after bidding in the first round and before each
subsequent round, the FCC auction bidding system would announce the
start-of-round price and the clock price for the upcoming round--that
is, the lowest price and the highest price at which bidders can specify
the number of blocks they demand during the round. The start-of-round
price is also referred to as the posted price of the previous round. As
long as aggregate demand for blocks in the product exceeds the supply
of blocks, the start-of-round price would be equal to the clock price
from the prior round. If demand equaled supply at a price in a previous
round, then the start-of-round price for the next round would be equal
to the price at which demand equaled supply. If demand was less than
supply in the previous round, then the start-of-round price for the
next round would not increase.
59. The Commission proposes to set the clock price for blocks in a
specific product for a round by adding a percentage increment to the
start-of-round price. For example, if the start-of-round price for a
block in a given PEA is $10,000, and the percentage increment is 20%,
then the clock price for the round will be $12,000. The result will be
rounded up to the nearest $1,000.
60. The Commission proposes to set the increment percentage within
a range of 5% to 20% inclusive, to set the initial increment percentage
at 10%, and potentially to adjust the increment as rounds continue. The
proposed 5% to 20% increment range will allow the Commission to set a
percentage that manages the auction pace and takes into account
bidders' needs to evaluate their bidding strategies while moving the
auction along quickly.
61. The Commission seeks comment on these proposed procedures.
c. Intra-Round Bids
62. The Commission proposes generally to permit a bidder to make
intra-round bids by indicating a point between the start-of-round price
and the clock price at which its demand for blocks changes. In placing
an intra-round bid, a bidder would indicate a specific price and a
quantity of blocks it demands if the price for blocks should increase
beyond that price. For example, if a bidder has processed demand of 3
blocks at the start of the round price of $200, but wishes to hold only
2 blocks if the price increases by more than $10 (assuming the bid
increment is more than $10), the bidder will indicate a bid quantity of
2 at a price of $210 ($200+$10). Similarly, if the bidder wishes to
reduce its demand to 0 if the price increases above $200 at all, the
bidder will indicate a bid quantity of 0 at the start-of-round price of
$200.
63. Intra-round bids would be optional; a bidder may choose to
express its demands only at the clock prices. This proposal to permit
intra-round bidding would allow the auction system to use relatively
large increments, thereby speeding the auction, without running the
risk that a jump in the clock price will overshoot the market clearing
price--the point at which demand for blocks equals the available
supply. The Commission seeks comment on the proposal to allow intra-
round bids.
8. Bids To Change Demand, Bid Types, and Bid Processing
64. Under the ascending clock auction format the Commission
proposes for Auction 107, a bidder would indicate in each round the
number of blocks in each product that it demands at a given price. A
bidder that wishes to change the quantity it demands (relative to its
demands from the previous round as processed by the bidding system)
would express its demands at the clock price or at an intra-round
price. A bidder that is willing to maintain the same demand in a
product at the new clock price would bid for that quantity at the clock
price, indicating that it is willing to pay up to that price, if need
be, for the specified quantity. Bids to maintain demand would always be
applied by the auction bidding system.
65. In order to facilitate bidding for multiple blocks in a PEA,
the Commission proposes that bidders will be permitted to make two
types of bids: Simple bids and switch bids. A ``simple'' bid indicates
a desired quantity of blocks in a category at a price (either the clock
price or an intra-round price). A ``switch'' bid allows the
[[Page 23295]]
bidder to request to move its demand for a quantity of blocks from the
A category to the BC category, or vice versa, within the same PEA at a
price for the ``from'' category (either the clock price or an intra-
round price).
66. The Commission does not propose to incorporate any form of
package bidding procedures into the clock phase of Auction 107. Package
bidding would add complexity to the bidding process, and the Commission
does not see significant benefit from such procedures, given the clock
auction and assignment phase format it is proposing. A bidder may bid
on multiple blocks in a PEA and in multiple PEAs. The Commission
proposes that the assignment phase will assign contiguous blocks to
winners of multiple blocks in a category in a PEA and give bidders an
opportunity to express their preferences for specific frequency blocks,
thereby facilitating aggregations of licenses.
67. The Commission proposes bid processing procedures that the
auction bidding system would use, after each bidding round, to process
bids to change demand to determine the processed demand of each bidder
for each product and a posted price for each product that would serve
as the start-of-round price for the next round.
a. No Excess Supply Rule for Bids To Reduce Demand
68. Under the ascending clock auction format, the FCC auction
bidding system will not allow a bidder to reduce the quantity of blocks
it demands in a product if the reduction would result in aggregate
demand falling below (or further below) the available supply of blocks
in the product. Therefore, if a bidder submits a simple bid to reduce
the number of blocks for which it has processed demand as of the
previous round, the FCC auction bidding system will treat the bid as a
request to reduce demand that will be applied only if the ``no excess
supply'' rule would be satisfied. Similarly, if a bidder submits a
switch bid to move its demand for a quantity of blocks from the A
category to the BC category within the same PEA, the FCC auction
bidding system will treat the bid as a request that will be applied
only if the ``no excess supply'' rule would be satisfied for the A
category in the PEA.
b. Eligibility Rule for Bids To Increase Demand
69. The bidding system will not allow a bidder to increase the
quantity of blocks it demands in a product if the total number of
bidding units associated with the bidder's demand exceeds the bidder's
bidding eligibility for the round. Therefore, if a bidder submits a
simple bid to increase the number of blocks for which it has processed
demand as of the previous round, the FCC auction bidding system will
treat the bid as a request to increase demand that will be applied only
if that would not cause the bidder's activity to exceed its
eligibility. The eligibility rule for bids to increase demand does not
apply to switch bids because the bidder's processed activity does not
change when a switch bid is applied.
c. Partial Application of Bids
70. Under our proposed bid processing procedures, a bid (simple bid
or switch bid) that involves a reduction from the bidder's previous
demands could be applied partially--that is, reduced by fewer blocks
than requested in the bid--if excess demand is insufficient to support
the entire reduction. A switch bid may be applied partially, but the
increase in demand in the ``to'' category will always match in quantity
the reduction in the ``from'' category. A simple bid to increase a
bidder's demand could be applied partially if the total number of
bidding units associated with the bidder's demand exceeds the bidder's
bidding eligibility for the round.
d. Processed Demands
71. The Commission proposes to process bids to change demand in
order of price point after a round ends, where the price point
represents the percentage of the bidding interval for the round. For
example, if the start-of-round price is $5,000 and the clock price is
$6,000, a price of $5,100 will correspond to the 10% price point, since
it is 10% of the bidding interval between $5,000 and $6,000. Bids to
maintain demand are always applied before the bidding system considers
bids to change demand. Under this proposal, the FCC auction bidding
system would process bids to change demand in ascending order of price
point, first considering intra-round bids in order of price point and
then bids at the clock price. The system would consider bids at the
lowest price point across all PEAs, then look at bids at the next price
point in all areas, and so on. The Commission proposes that, if there
are multiple bids at a single price point, the system will process bids
in order of a bid-specific pseudo-random number. As it considers each
submitted bid during bid processing, the FCC auction bidding system
would determine the extent to which there is excess demand in each PEA
at that point in the processing in order to determine whether a
bidder's request to reduce demand can be applied. Likewise, the auction
bidding system would evaluate the activity associated with the bidder's
most recently determined demands at that point in the processing to
determine whether a request to increase demand can be applied.
72. Because in any given round some bidders may request to increase
demands for licenses while others may request reductions, the price
point at which a bid is considered by the auction bidding system can
affect whether it is applied. In addition to proposing that bids be
considered by the system in increasing order of price point, the
Commission further proposes that bids not applied because of
insufficient aggregate demand or insufficient eligibility be held in a
queue and considered, again in order, if there should be excess demand
or sufficient eligibility later in the processing after other bids are
processed.
73. Therefore, under the Commission's proposed procedures, once a
round closes, the auction system would process bids to change demand by
first considering the bid submitted at the lowest price point and
determining the maximum extent to which that bid can be applied given
bidders' demands as determined at that point in the bid processing. If
the bid can be applied (either in full or partially), the number of
licenses the bidder holds at that point in the processing would be
adjusted, and aggregate demand would be recalculated accordingly. If
the bid cannot be applied in full, the unfulfilled bid, or portion
thereof, would be held in a queue to be considered later during bid
processing for that round. The FCC auction bidding system would then
consider the bid submitted at the next highest price point, applying it
in full, in part, or not at all, given the most recently determined
demands of bidders. Any unfulfilled requests would again be held in the
queue, and aggregate demand would again be recalculated. Every time a
bid or part of a bid is applied, the unfulfilled bids held in the queue
would be reconsidered, in the order of the original price points of the
bids (and by pseudo-random number, in the case of tied price points).
The auction bidding system would not carry over unfulfilled bid
requests to the next round, however. The bidding system would advise
bidders of the status of their bids when round results are released.
e. Price Determination
74. The Commission further proposes bid processing procedures that
would determine, based on aggregate demand, the posted price for each
product for the
[[Page 23296]]
round that will serve as the start-of-round price for the next round.
Under the Commission's proposal, the uniform price for all of the
blocks in a product would increase from round to round as long as there
is excess demand for blocks in the product but would not increase if
aggregate demand does not exceed the available supply of blocks.
75. The Commission proposes that if, at the end of a round, the
aggregate demand for blocks in the product exceeds the supply of
blocks, the posted price would equal the clock price for the round. If
a reduction in demand was applied during the round and caused demand in
the product to equal supply, the posted price would be the price at
which the reduction was applied. If aggregate demand is less than or
equal to supply and no bid to reduce demand was applied for the
product, then the posted price would equal the start-of-round price for
the round. The range of acceptable bid amounts for the next round would
be set by adding the percentage increment to the posted price.
76. When a bid to reduce demand can be applied only partially, the
uniform price for the product would stop increasing at that point,
since the partial application of the bid would result in demand falling
to equal supply. Hence, a bidder that makes a bid to reduce demand that
cannot be fully applied would not face a price for the remaining demand
that is higher than its bid price.
77. After the bids of the round have been processed, if the
stopping rule has not been met, the FCC auction bidding system would
announce clock prices to indicate a range of acceptable bids for the
next round. Each bidder would be informed of its processed demand and
the extent of excess demand for blocks in each product.
78. The Commission seeks comment on its proposals regarding bid
processing for Auction 107.
9. Winning Bids in the Clock Phase
79. Under the Commission's proposed clock auction format for
Auction 107, bidders with processed demand for a product at the time
the stopping rule is met will become the winning bidders of licenses
corresponding to that number of blocks and will be assigned specific
frequencies in the assignment phase. The final clock phase price for a
generic block in a product would be the posted price for the final
round. This and other Auction 107 bid processing details are addressed
in the Clock Phase Technical Guide.
B. Assignment Phase
80. Following the conclusion of the clock phase, the Commission
proposes to conduct an assignment phase using a series of single-round
sealed-bid bidding rounds, where each clock phase winning bidder will
have the opportunity to indicate its preferences for specific frequency
licenses corresponding to the generic blocks it won in the clock phase.
A bidder will be assigned contiguous frequencies for blocks it wins
within each category and PEA regardless of whether it chose to bid in
the assignment phase.
1. Sequencing and Grouping of PEAs
81. The Commission proposes to sequence assignment rounds to make
it easier for bidders to incorporate frequency assignments from
previously assigned areas into their bid preferences for other areas,
recognizing that bidders winning multiple blocks of licenses generally
will prefer contiguous blocks across adjacent PEAs. To that end, the
Commission proposes to conduct rounds for the largest markets first to
enable bidders to establish a ``footprint'' from which to work.
82. Specifically, the Commission proposes to conduct a separate
assignment round for each of the top 20 PEAs and to conduct these
assignment rounds sequentially, beginning with the largest PEAs. Once
the top 20 PEAs have been assigned, the Commission proposes to conduct,
for each Regional Economic Area Grouping (REAG), a series of assignment
rounds for the remaining PEAs within that region. In Auction 1002, the
Commission conducted sequential rounds for the top 40 PEAs and for
Auction 102, it did the same. The Commission altered its proposal for
Auction 103, in order to further speed up the assignment phase by
including PEAs 21-40 in the simultaneous REAG assignment rounds. The
Commission's experience in Auction 1002 and Auction 102 suggests that
this proposed change will not adversely affect bidders. The Commission
will consider the results of Auction 103, as well as any commenter
input, before determining its final procedures. The six REAGs are:
Northeast, Southeast, Great Lakes, Mississippi Valley, Central, and
West.
83. The Commission further proposes, where feasible, to group into
a single market for assignment any non-top 20 PEAs within a region in
which the same winning bidders need to be assigned the same number of
blocks in each category, and all are subject to the small markets
bidding cap or all are not subject to the cap, which will also help
maximize contiguity across PEAs. The Commission proposes to sequence
the assignment rounds within a REAG in descending order of population
for a PEA group or individual PEA. The Commission further proposes to
conduct the bidding for the different REAGs in parallel in order to
reduce the total amount of time required to complete the assignment
phase.
84. The Commission seeks comment on these proposals for sequencing
assignment rounds, including conducting separate rounds for the top 20
PEAs, and on our proposal to group PEAs for bidding under some
circumstances within REAGs.
2. Acceptable Bids and Bid Processing
85. Under the Commission's proposal, in each assignment round, a
bidder will be asked to assign a price to one or more possible
frequency assignments for which it wishes to express a preference,
consistent with its winnings for generic blocks in the clock phase. The
price will represent a maximum payment that the bidder is willing to
pay, in addition to the base price established in the clock phase for
the generic blocks, for the frequency-specific license or licenses in
its bid. If there are two categories, the Commission proposes that a
bidder will submit its preferences for blocks it won in the 3.7-3.8 GHz
and 3.8-3.98 GHz bands separately, rather than submitting bids for
preferences that include blocks in both categories. That is, if a
bidder won one block in Category A and two blocks in Category BC, it
would not be able to submit a single bid amount for an assignment that
included both categories. Instead, it would submit its bid or bids for
assignments in Category A separately from its bid or bids for
assignments in Category BC.
86. The Commission proposes to use an optimization approach to
determine the winning frequency assignment for each category in each
PEA or PEA group. The Commission proposes that the auction system will
select the assignment that maximizes the sum of bid amounts among all
assignments that satisfy the contiguity requirements. Furthermore, if
multiple blocks in a category in a PEA remain unsold, the unsold
licenses will be contiguous. The Commission proposes that the
additional price a bidder will pay for a specific frequency assignment
(above the base price) will be calculated consistent with a generalized
``second price'' approach--that is, the winner will pay a price that
would be just sufficient to result in the bidder receiving that same
winning frequency assignment while ensuring that no group of bidders is
willing to pay more
[[Page 23297]]
for an alternative assignment that satisfies the contiguity
restrictions. The Assignment Phase Technical Guide provides
mathematical details of this proposal. This price will be less than or
equal to the price the bidder indicated it was willing to pay for the
assignment. The Commission proposes to determine prices in this way
because it facilitates bidding strategy for the bidders, encouraging
them to bid their full value for the assignment, knowing that if the
assignment is selected, they will pay no more than would be necessary
to ensure that the outcome is competitive. The Commission proposes to
determine prices using the Vickrey-nearest approach, which is described
in the Assignment Phase Technical Guide.
87. The Commission seeks comment on these proposed procedures.
V. Post-Auction Process
A. Deficiency Payments and Additional Default Payment Percentage
88. Any winning bidder that defaults or is disqualified after the
close of an auction (i.e., fails to remit the required down payment by
the specified deadline, fails to submit a timely long-form application,
fails to make full and timely final payment, or is otherwise
disqualified) is liable for a default payment under section
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 winning bid and the amount of the winning bid the next time a
license covering the same spectrum is won in an auction, plus an
additional payment equal to a percentage of the defaulter's bid or of
the subsequent winning bid, whichever is less.
89. The Commission's rules provide that, in advance of each
auction, it will establish a percentage between 3% and 20% of the
applicable winning bid to be assessed as an additional default payment.
As the Commission has indicated, the level of this additional payment
in each auction will be based on the nature of the service and the
licenses being offered.
90. For Auction 107, the Commission proposes to establish an
additional default payment of 15%, which is consistent with that
adopted for Auctions 101, 102, and 103. As noted in the CSEA/Part 1
Report and Order, 71 FR 6214, February 7, 2006, defaults weaken the
integrity of the auction process and may impede the deployment of
service to the public, and an additional default payment of up to 20%
will be more effective in deterring defaults than the 3% used in some
earlier auctions. At the same time, the Commission does not believe the
detrimental effects of any defaults in Auction 107 are likely to be
unusually great. In light of these considerations, the Commission
proposes for Auction 107 an additional default payment of 15% of the
relevant bid. The Commission seeks comment on this proposal.
91. In case they are needed for post-auction administrative
purposes, the bidding system will calculate individual per-license
prices that are separate from final auction payments, which are
calculated on an aggregate basis. The bidding system will apportion to
individual licenses any assignment phase payments and any capped
bidding credit discounts, since in both cases, a single amount may
apply to multiple licenses.
VI. Tutorials and Additional Information for Applicants
92. The Commission intends to provide additional information on the
bidding system and to offer demonstrations and other educational
opportunities for applicants in Auction 107 to familiarize themselves
with the FCC auction application system and the auction bidding system.
For example, the Commission intends to release online tutorials that
will help applicants understand the procedures to be followed in the
filing of their auction short-form applications (FCC Form 175) and on
the bidding procedures for Auction 107.
VII. Procedural Matters
93. Supplemental Initial Regulatory Flexibility Analysis. As
required by the Regulatory Flexibility Act of 1980, as amended (RFA),
the Commission has prepared a Supplemental Initial Regulatory
Flexibility Analysis (Supplemental IRFA) of the possible significant
economic impact on small entities of the policies and rules addressed
in the Auction 107 Comment Public Notice to supplement the Commission's
Initial and Final Regulatory Flexibility Analyses completed in the 3.7
GHz NPRM and 3.7 GHz Report and Order, and other Commission orders
pursuant to which Auction 107 will be conducted. Written public
comments are requested on the Supplemental IRFA. Comments must be
identified as responses to the Supplemental IRFA and must be filed by
the same deadline for comments specified on the first page of the
Auction 107 Comment Public Notice. The Commission will send a copy of
the Auction 107 Comment Public Notice, including the Supplemental IRFA,
to the Chief Counsel for Advocacy of the Small Business Administration
(SBA). In addition, the Auction 107 Comment Public Notice and
Supplemental IRFA (or summaries thereof) will be published in the
Federal Register.
94. Need for, and Objectives of, the Proposed Rules. The Auction
107 Comment Public Notice sets forth the proposed auction procedures
for those entities that seek to bid to acquire licenses in Auction 107.
The Auction 107 Comment Public Notice seeks comment on proposed
procedural rules to govern Auction 107, which will auction flexible-use
overlay licenses for the 3.7 GHz Service in the 3.7-3.98 GHz band. This
process is intended to provide notice of and adequate time for
potential applicants to comment on proposed auction procedures. To
promote the efficient and fair administration of the competitive
bidding process for all Auction 107 participants, the Commission seeks
comment on the following proposed procedures:
Use of anonymous bidding/limited information procedures
which will not make public: (1) The license areas that an applicant
selects for bidding in its auction application (FCC Form 175); (2) the
amount of any upfront payment made by or on behalf of an applicant for
Auction 107; (3) an applicant's bidding eligibility; and (4) any other
bidding-related information that might reveal the identity of the
bidder placing a bid, until after bidding has closed;
Establishment of bidding credit caps for eligible small
businesses and rural service providers in Auction 107;
Retention by OEA of discretion to adjust the bidding
schedule in order to manage the pace of Auction 107;
Use of a simultaneous stopping rule for Auction 107, under
which all blocks in both categories in all PEAs would remain available
for bidding until the bidding stops in every PEA;
Provision of discretionary authority to OEA, in
conjunction with WTB, to delay, suspend, or cancel bidding in Auction
107 for any reason that affects the ability of the competitive bidding
process to be conducted fairly and efficiently;
Use of a clock auction format for Auction 107 under which
each qualified bidder will indicate in successive clock bidding rounds
its demands for categories of generic blocks in specific geographic
areas;
Use of an activity rule that would require bidders to be
active on between 90% and 100% of their bidding eligibility in all
regular clock rounds;
Use of an activity rule that does not include a waiver of
the rule to preserve a bidder's eligibility;
[[Page 23298]]
A specific minimum opening bid amount for products
available in Auction 107;
A specific upfront payment amount for products available
in Auction 107;
Establishment of a bidder's initial bidding eligibility in
bidding units based on that bidder's upfront payment through assignment
of a specific number of bidding units for each generic block;
Establishment of acceptable bid amounts, including clock
price increments and intra-round bids, along with a proposed
methodology for calculating such amounts;
A proposed methodology for processing bids and requests to
reduce and increase demand;
Establishment of an assignment phase that will determine
which frequency-specific licenses will be won by the winning bidders of
generic blocks during the clock phase; and
Establishment of an additional default payment of 15%
under section 1.2104(g)(2) of the Commission's rules in the event that
a winning bidder defaults or is disqualified after the auction.
95. The proposed procedures for the conduct of Auction 107
constitute the more specific implementation of the competitive bidding
rules contemplated by Parts 1 and 30 of the Commission's rules, the 3.7
GHz Report and Order, and relevant competitive bidding orders, and are
fully consistent therewith.
96. Legal Basis. The Commission's statutory obligations to small
businesses under the Communications Act of 1934, as amended, are found
in sections 309(j)(3)(B) and 309(j)(4)(D). The statutory basis for the
Commission's competitive bidding rules is found in various provisions
of the Communications Act of 1934, as amended, including 47 U.S.C.
154(i), 301, 302, 303(e), 303(f), 303(r), 304, 307, and 309(j). The
Commission has established a framework of competitive bidding rules,
updated most recently in 2015, pursuant to which it has conducted
auctions since the inception of the auctions program in 1994 and would
conduct Auction 107. In promulgating those rules, the Commission
conducted numerous RFA analyses to consider the possible impact of
those rules on small businesses that might seek to participate in
Commission auctions. In addition, a Final Regulatory Flexibility
Analysis (FRFA) is included in the concurrent rulemaking order that
adopts rule provisions relevant to the Auction 107 Comment Public
Notice.
97. Description and Estimate of the Number of Small Entities to
Which the Proposed Rules Will Apply. The RFA directs agencies to
provide a description of, and, where feasible, an estimate of the
number of small entities that may be affected by the proposed rules and
policies, if adopted. The RFA generally defines the term ``small
entity'' as having the same meaning as the terms ``small business,''
``small organization,'' and ``small governmental jurisdiction.'' In
addition, the term ``small business'' has the same meaning as the term
``small business concern'' under the Small Business Act. Pursuant to 5
U.S.C. 601(3), the statutory definition of a small business applies
unless an agency, after consultation with the Office of Advocacy of the
Small Business Administration and after opportunity for public comment,
establishes one or more definitions of such term which are appropriate
to the activities of the agency and publishes such definition(s) in the
Federal Register. A ``small business concern'' is one which: (1) Is
independently owned and operated; (2) is not dominant in its field of
operation; and (3) satisfies any additional criteria established by the
SBA.
98. Regulatory Flexibility Analyses were incorporated into the 3.7
GHz NPRM and the 3.7 GHz Report and Order. In those analyses, the
Commission describes in detail the small entities that might be
significantly affected. In the Auction 107 Comment Public Notice, the
Commission incorporated by reference the descriptions and estimates of
the number of small entities from the previous Regulatory Flexibility
Analyses in the 3.7 GHz NPRM and the 3.7 GHz Report and Order.
99. Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements for Small Entities. The Commission designed the
auction application process itself to minimize reporting and compliance
requirements for applicants, including small business applicants. In
the first part of the Commission's two-phased auction application
process, parties desiring to participate in an auction file
streamlined, short-form applications in which they certify under
penalty of perjury as to their qualifications. Eligibility to
participate in bidding is based on an applicant's short-form
application and certifications, as well as its upfront payment. In the
second phase of the process, winning bidders file a more comprehensive
long-form application. Thus, an applicant which fails to become a
winning bidder does not need to file a long-form application and
provide the additional showings and more detailed demonstrations
required of a winning bidder.
100. The Commission does not expect the processes and procedures
proposed in the Auction 107 Comment Public Notice will require small
entities to hire attorneys, engineers, consultants, or other
professionals to participate in Auction 107 and comply with the
procedures the Commission ultimately adopts because of the information,
resources, and guidance the Commission makes available to potential and
actual participants. For example, the Commission intends to release an
online tutorial that will help applicants understand the procedures for
filing of the auction short-form application (FCC Form 175). The
Commission also intends to make information on the bidding system
available and offer demonstrations and other educational opportunities
for applicants in Auction 107 to familiarize themselves with the FCC
auction application system and the auction bidding system. By providing
these resources as well as the resources discussed in the Auction 107
Comment Public Notice, the Commission expects small business entities
who use the available resources to experience lower participation and
compliance costs. Nevertheless, while the Commission cannot quantify
the cost of compliance with the proposed procedures, it does not
believe that the costs of compliance will unduly burden small entities
that choose to participate in the auction because the proposals for
Auction 107 are similar in many respects to the procedures in recent
auctions conducted by the Commission.
101. Steps Taken to Minimize the Significant Economic Impact on
Small Entities, and Significant Alternatives Considered. The RFA
requires an agency to describe any significant, specifically small
business, alternatives that it has considered in reaching its proposed
approach, which may include the following four alternatives (among
others): (1) The establishment of differing compliance or reporting
requirements or timetables that take into account the resources
available to small entities; (2) the clarification, consolidation, or
simplification of compliance and reporting requirements under the rule
for such small entities; (3) the use of performance rather than design
standards; and (4) an exemption from coverage of the rule, or any part
thereof, for such small entities.
102. The Commission has taken steps to minimize any economic impact
of its auction procedures on small businesses through, among other
things, the many resources the Commission provides potential auction
participants. Small entities and other auction participants
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may seek clarification of or guidance on complying with competitive
bidding rules and procedures, reporting requirements, and the FCC's
auction bidding system. An FCC Auctions Hotline provides access to
Commission staff for information about the auction process and
procedures. The FCC Auctions Technical Support Hotline is another
resource which provides technical assistance to applicants, including
small entities, on issues such as access to or navigation within the
electronic FCC Form 175 and use of the FCC's auction bidding system.
Small entities may also use the web-based, interactive online tutorial
produced by Commission staff to familiarize themselves with auction
procedures, filing requirements, bidding procedures, and other matters
related to an auction.
103. The Commission also makes various databases and other sources
of information, including the Auctions program websites and copies of
Commission decisions, available to the public without charge, providing
a low-cost mechanism for small entities to conduct research prior to
and throughout the auction. Prior to and at the close of Auction 107,
the Commission will post public notices on the Auctions website, which
articulate the procedures and deadlines for the auction. The Commission
makes this information easily accessible and without charge to benefit
all Auction 107 applicants, including small entities, thereby lowering
their administrative costs to comply with the Commission's competitive
bidding rules.
104. Prior to the start of bidding, eligible bidders are given an
opportunity to become familiar with auction procedures and the bidding
system by participating in a mock auction. Further, the Commission
intends to conduct Auction 107 electronically over the internet using
its web-based auction system that eliminates the need for bidders to be
physically present in a specific location. Qualified bidders also have
the option to place bids by telephone. These mechanisms are made
available to facilitate participation in Auction 107 by all eligible
bidders and may result in significant cost savings for small business
entities that use these alternatives. Moreover, the adoption of bidding
procedures in advance of the auction, consistent with statutory
directive, is designed to ensure that the auction will be administered
predictably and fairly for all participants, including small entities.
105. For Auction 107, the Commission proposes a $25 million cap on
the total amount of bidding credits that may be awarded to an eligible
small business and a $10 million cap on the total amount of bidding
credits that may be awarded to a rural service provider. In addition,
the Commission propose a $10 million cap on the overall amount of
bidding credits that any winning small business bidder may apply to
winning licenses in markets with a population of 500,000 or less. Based
on the technical characteristics of the 3.7-3.98 band and the
Commission's analysis of past auction data, the Commission anticipates
that its proposed caps will allow the majority of small businesses to
take full advantage of the bidding credit program, thereby lowering the
relative costs of participation for small businesses.
106. The proposed procedures for the conduct of Auction 107
constitute the more specific implementation of the competitive bidding
rules contemplated by Parts 1 and 30 of the Commission's rules, the 3.7
GHz Report and Order, and relevant competitive bidding orders, and are
fully consistent therewith.
107. Federal Rules that May Duplicate, Overlap, or Conflict with
the Proposed Rules. None.
108. Ex Parte Rules. This proceeding has been designated as a
``permit-but-disclose'' proceeding in accordance with the Commission's
ex parte rules. Persons making oral ex parte presentations must file a
copy of any written presentations or memoranda summarizing any oral
presentation within two business days after the presentation (unless a
different deadline applicable to the Sunshine Period applies). Persons
making oral ex parte presentations are reminded that memoranda
summarizing the presentations must (1) list all persons attending or
otherwise participating in the meeting at which the ex parte
presentation was made, and (2) summarize all data presented and
arguments made during the presentation. If the presentation consisted
in whole or in part of the presentation of data or arguments already
reflected in the presenter's written comments, memoranda, or other
filings in the proceeding, the presenter may provide citations to such
data or arguments in his or her prior comments, memoranda, or other
filings (specifying the relevant page and/or paragraph numbers where
such data or arguments can be found) in lieu of summarizing them in the
memorandum. Documents shown or given to the Commission staff during ex
parte meetings are deemed to be written ex parte presentations and must
be filed consistent with Commission rule 1.1206(b). In proceedings
governed by Commission rule 1.49(f) or for which the Commission has
made available a method of electronic filing, written ex parte
presentations and memoranda summarizing oral ex parte presentations,
and all attachments thereto, must be filed through the electronic
comment filing system available for that proceeding, and must be filed
in their native format (e.g., .doc, .xml, .ppt, searchable .pdf).
Participants in this proceeding should familiarize themselves with the
Commission's ex parte rules.
Federal Communications Commission.
Cecilia Sigmund,
Federal Register Liaison Officer.
[FR Doc. 2020-06451 Filed 4-24-20; 8:45 am]
BILLING CODE 6712-01-P
