Auction of Flexible-Use Service Licenses in the 2.5 GHz Band for Next-Generation Wireless Services; Comment Sought on Competitive Bidding Procedures for Auction 108
| Published date | 02 March 2021 |
| Citation | 86 FR 12146 |
| Record Number | 2021-03442 |
| Section | Proposed rules |
| Court | Federal Communications Commission |
Federal Register, Volume 86 Issue 39 (Tuesday, March 2, 2021)
[Federal Register Volume 86, Number 39 (Tuesday, March 2, 2021)]
[Proposed Rules]
[Pages 12146-12161]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-03442]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 1 and 27
[AU Docket No. 20-429; FCC 21-14; FRS 17455]
Auction of Flexible-Use Service Licenses in the 2.5 GHz Band for
Next-Generation Wireless Services; Comment Sought on Competitive
Bidding Procedures for Auction 108
AGENCY: Federal Communications Commission.
ACTION: Proposed rule; proposed auction procedures.
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SUMMARY: In this document, the Commission announces an auction of
approximately 8,300 geographic overlay licenses in the 2.5 GHz band,
designated as Auction 108. This document proposes and seeks comment on
auction procedures to be used for Auction 108.
DATES: Comments are due on or before May 3, 2021; and reply comments
are due on or before May 17, 2021.
ADDRESSES: Interested parties may file comments or reply comments in AU
Docket No. 20-429. Comments may be filed using the Commission's
Electronic Comment Filing System (ECFS) or by filing paper copies. The
Commission strongly encourages interested parties to file comments
electronically.
Electronic Filers: Comments may be filed electronically
using the internet by accessing the ECFS at https://www.fcc.gov/ecfs/.
Paper Filers: Parties who choose to file by paper must
file an original and one copy of each filing.
Filings in response to the Auction 108 Comment Public
Notice can be sent by commercial courier or by the U.S. Postal Service.
All filings must be addressed to the Commission's Secretary, Office of
the Secretary, Federal Communications Commission.
Commercial deliveries (other than U.S. Postal Service
Express Mail and Priority Mail) must be sent to 9050 Junction Dr.,
Annapolis Junction, MD 220701.
U.S. Postal Service first-class, Express, or Priority mail
must be addressed to 45 L Street NE, Washington, DC 20554.
Until further notice, the Commission no longer accepts any
hand or messenger delivered filings. This is a temporary measure taken
to help protect the health and safety of individuals, and to mitigate
the transmission of COVID-19.
Email: We also request that a copy of all comments and
reply comments be submitted electronically to the following address:
[email protected].
FOR FURTHER INFORMATION CONTACT:
Auction Legal Questions: Erik Beith, (202) 418-0660,
[email protected], or Daniel Habif, (202) 418-0660,
[email protected].
General Auction Questions: (717) 338-2868.
2.5 GHz Band Licensing Questions: Madelaine Maior, (202) 418-1466,
[email protected].
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's
document, Public Notice (Auction 108 Comment Public Notice), AU Docket
No. 20-429, FCC 21-14, adopted on January 13, 2021 and released on
January 13, 2021. The complete text of this document, including its
attachments, is available on the Commission's website at www.fcc.gov/auction/108 or by using the search function for AU Docket No. 20-429 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).
I. Introduction
1. By the Auction 108 Comment Public Notice, the Commission seeks
comment on the procedures to be used for Auction 108, the auction of
approximately 8,300 geographic overlay licenses in the 2.5 GHz band.
The Commission seeks comment on whether to use a single-round auction
format with user-defined package bidding, or a simultaneous multiple-
round (SMR) auction format.
[[Page 12147]]
II. Licenses To Be Offered in Auction 108
2. Auction 108 will offer geographic overlay licenses for
unassigned spectrum in the 2.5 GHz (2496-2690 MHz) band. With overlay
licenses, licensees obtain the rights to geographic area licenses
``overlaid'' on top of the existing incumbent licenses, 2.5 GHz Report
and Order, 84 FR 57343, October 25, 2019. As with an ordinary flexible-
use license, the overlay licensee may operate anywhere within its
geographic area, subject to protecting the licensed areas (i.e.,
circular Geographic Service Areas with a 35-mile radius) of incumbent
licensees. If an incumbent licensee in a county cancels or terminates
its license, then the overlay licensee obtains the rights to operate in
the geographic area and on the channel of the cancelled license. An
overlay licensee may clear its geographic area by purchasing the
incumbent licenses, but it does not have the exclusive right to
negotiate with the incumbent licensee for its spectrum rights or to
purchase an incumbent license in the geographic area in which it has
the overlay rights. The Commission will offer up to three blocks of
spectrum--49.5 megahertz, 50.5 megahertz, and 16.5 megahertz blocks,
respectively--licensed on a county basis. Specifically, the first
license block will include channels A1-A3, B1-B3, C1-C3 (49.5
megahertz); the second license block will include channels D1-D3, the J
channels, and channels A4-G4 (50.5 megahertz); and the third license
block will include channels G1-G3 and the relevant K channels (16.5
megahertz of contiguous spectrum and 1 megahertz of the K channels
associated with the G channel group). New overlay licenses in the
Educational Broadband Service (EBS) portion of the 2.5 GHz band will be
issued for 10-year, renewable license terms. A licensee in this 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 47 CFR 2.106.
3. The specific inventory of overlay licenses available in Auction
108 will be determined by the results of the Rural Tribal Priority
Window. During the Rural Tribal Priority Window, federally recognized
Tribes were given the opportunity to submit applications to acquire new
2.5 GHz licenses for currently unassigned white space spectrum to
provide broadband service on rural Tribal lands before the remaining
unassigned spectrum is made generally available through competitive
bidding. The Rural Tribal Priority Window opened on February 2, 2020,
and the original deadline was extended by 30 days to close on September
2, 2020. The Commission received over 400 applications through the
Rural Tribal Priority Window and the Wireless Telecommunications Bureau
(WTB) has already granted over 150 of these applications. Based on
review of applications received in the Rural Tribal Priority Window,
the Office of Economics and Analytics (OEA), in conjunction with WTB,
will release a public notice announcing the final inventory of 2.5 GHz
band overlay licenses to be offered in Auction 108. This public notice
will be released in advance of the deadline for the submission of
short-form applications to bid in Auction 108 so that potential
applicants can make informed decisions about whether to apply in light
of information as to existing incumbents and potential Tribal
licensees. Commission staff aims to process all pending Rural Tribal
Priority Window applications prior to announcing the final auction
inventory; however, there may be Tribal applications that remain
pending at the time the auction inventory is announced. Potential
bidders in Auction 108 should continue to investigate all factors that
may affect each license on which they seek to bid throughout the
auction process, including potential encumbrances that may result from
pending Tribal applications.
4. Concurrent with the release of the Auction 108 Comment Public
Notice, OEA and WTB have made available a file listing all county and
frequency block combinations potentially available for Auction 108,
subject to the results of the ongoing review of applications submitted
during the Rural Tribal Priority Window. This file is listed as an
``Attachment A'' file on the Auction 108 website at www.fcc.gov/auction/108. The file listing available county and frequency block
combinations does not include blocks or counties that are fully
encumbered by existing licenses.
5. OEA and WTB will also make available resources to assist
applicants in conducting due diligence research regarding potential
encumbrances in the band prior to the release of the public notice
announcing the final auction inventory. In addition to existing
incumbents in the band, the pending Rural Tribal Priority Window
applications represent the maximum potential additional encumbrances
that may affect the licenses available in the auction. These resources
will include a mapping tool to help identify and view existing licenses
and Rural Tribal Priority Window applications in the Commission's
Universal Licensing System (ULS) database. The mapping tool will be
updated to reflect changes due to the grant or dismissal of any pending
Tribal applications prior to the auction. Potential applicants are
reminded, however, that this tool will not represent complete licensing
information; all information should be confirmed in ULS for any
specific license or area. More information about Rural Tribal Priority
Window applications, including a current mapping tool to help identify
the location of pending, accepted for filing, and granted applications,
is available at www.fcc.gov/rural-tribal-window-updates. The licensing
information provided on this web page does not represent complete
licensing information. All information should be confirmed in ULS for
any specific license or area.
6. Notwithstanding Commission resources described in the Auction
108 Comment Public Notice, 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 108, including the availability of unassigned white
space in any particular market. In addition to the typical due
diligence considerations that the Commission encourages of bidders in
all auctions, the Commission calls particular attention in Auction 108
to potential encumbrances due to existing licenses and the Rural Tribal
Priority Window issues described above, which may impact the licenses
available in Auction 108. 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 2.5 GHz
band. The Commission makes no representations or warranties about the
use of this spectrum for particular services, or about the information
in Commission databases that is furnished by outside parties. 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.
[[Page 12148]]
III. Implementation of Part 1 Competitive Bidding Procedures
7. In the 2.5 GHz Report and Order, the Commission decided to
conduct any auction of new 2.5 GHz band licenses 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. Part 1,
subpart Q's, competitive bidding rules also contain a framework for the
implementation of a competitive bidding design, application and
certification procedures, reporting requirements, and the prohibition
of certain communications. The rules and requirements proposed in this
section would apply in either a single bidding round auction or an SMR
auction, unless clearly indicated otherwise.
A. Certification of Notice of Auction 108 Requirements and Procedures
8. In addition to the certifications already required under 47 CFR
1.2105, the Commission proposes to require any applicant seeking to
participate in Auction 108 to certify in its short-form application,
under penalty of perjury, that it has read the public notice adopting
procedures for Auction 108 that will be released in advance of the
short-form deadline, and that it has familiarized itself with those
procedures and the requirements for obtaining a license and operating
facilities in the 2.5 GHz band. The Commission believes that this
requirement would help ensure that the applicant has reviewed the
procedures for participation in the auction process and has
investigated and evaluated those technical and marketplace factors that
may have a bearing on its potential use of any licenses won at auction.
Consequently, this requirement will promote an applicant's successful
participation and will minimize its risk of defaulting on its auction
obligations. As with other required certifications, an auction
applicant's failure to make the required certification in its short-
form application by the applicable filing deadline would render its
application unacceptable for filing, and its application would be
dismissed with prejudice. The Commission seeks comment on this
proposal. The Commission also seeks comment on whether there are
additional steps it should take with respect to the filing of short-
form applications to further ensure and promote auction integrity.
B. Bidding Credit Caps
9. Consistent with the Commission's decisions in the Updating Part
1 Report and Order, 80 FR 56764, September 18, 2015, the Commission
seeks comment on establishing reasonable caps on the total bidding
credit amount that an eligible small business, very small business, or
rural service provider may be awarded for Auction 108. The Commission
administers its bidding credit programs to promote small business and
rural service provider participation in auctions and in the provision
of spectrum-based services.
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 2.5 GHz Report and Order, the Commission
determined that eligibility for the small business bidding credit in
auctions of new licenses in the 2.5 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. To protect the integrity of the bidding credit program and to
mitigate the incentives for abuse, the Commission, in the Updating Part
1 Report and Order, established a process to implement a reasonable cap
on the total bidding credit amount 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 101-103, 105, and 107, the Commission adopted a $25 million
cap on the total bidding credit amount 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 108. As the Commission did for its recent auctions of
spectrum for next-generation wireless services, it believes that the
range of potential use cases suitable for spectrum in the 2.5 GHz band,
combined with the relatively small geographic areas for new flexible-
use overlay licenses of white space, may permit deployment of smaller-
scale networks with lower total costs. Moreover, past auction data
suggest that the proposed caps will allow the substantial majority of
eligible 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 participate in the
auction and in the provision of spectrum-based services, without
compromising its 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 bidding credit amount that may be awarded to an eligible
rural service provider in Auction 108. An entity is not eligible for a
rural service provider bidding credit if it has already claimed a small
business bidding credit. Based on its experience with other spectrum
auctions, 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 108.
In addition, to create parity in Auction 108 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 bidding credit amount that any winning small business bidder
may apply to licenses won in counties located within any partial
economic area (PEA) with a population of 500,000 or less.
14. The Commission seeks comment on these proposed caps.
Specifically, do the expected capital requirements
[[Page 12149]]
associated with operating in the 2.5 GHz band, the potential number and
value of new overlay 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 adopted in previous auctions of spectrum
suitable for 5G? Commenters are encouraged to identify unique
circumstances and characteristics of this mid-band auction that should
guide us 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) starting at the short-form
application filing deadline, against changes in ownership of the
applicant that would constitute an assignment or transfer of control.
Under 47 CFR 1.2107(c), the winning bidder must be the entity that
files the post-auction long-form application. Pursuant to 47 CFR
1.929(a)(2), any substantial change in ownership or control of an
applicant is classified as a major amendment. 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. This policy will help to ensure compliance with
the Commission's rules applicable to the award of bidding credits prior
to the start of bidding in this auction, which will involve competing
bids from those who do and do not seek bidding credits, and thus
preserves the integrity of the auction process. In furtherance of this
policy, 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. The Commission also believes
that this will meet its objectives in awarding licenses through the
competitive bidding process.
C. Prohibition of Certain Communications
16. Section 1.2105(c)(1) of the Commission's rules, 47 CFR
1.2105(c)(1), 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), 47 CFR 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.
17. Nationwide Providers Subject to the Prohibition of Certain
Communications. The operation of the rule prohibiting certain
communications requires that the Commission identify each ``nationwide
provider'' for purposes of Sec. 1.2105(c)(1) in connection with each
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, T-Mobile, and Verizon as
``nationwide providers'' for the purpose of implementing its
competitive bidding rules in Auction 108, including Sec. 1.2105(c),
the rule prohibiting certain communications. This is consistent with
the Commission's identification of nationwide providers in the 2020
Communications Marketplace Report. The Commission seeks comment on this
proposal.
D. Information Procedures During the Auction Process
18. As an additional safeguard to further prevent the sharing of
information about applicants' bids and bidding strategies and to
discourage unproductive and anti-competitive strategic behavior, the
Commission proposes to limit information available in Auction 108 in
order to prevent the identification of bidders placing particular bids
until after the bidding has closed. The Commission has instituted
limited information procedures in most recent spectrum auctions. While
the Commission generally makes available to the public information
provided in each applicant's FCC Form 175 following an initial review
by Commission staff, it proposes to not make public until after bidding
has closed: (1) The licenses that an applicant selects for bidding in
its FCC Form 175, (2) the amount of any upfront payment made by or on
behalf of an applicant for Auction 108, (3) any applicant's bidding
eligibility, and (4) any other bidding-related information that might
reveal the identity of the bidder placing a bid.
19. As in past Commission auctions, the Commission will not make
public during a bidding round any real-time information on bidding
activity. Bidders would have access both during and after a round to
information related to their own bidding activity and eligibility. For
example, bidders would be able to view their own levels of eligibility
and submitted activity through the FCC auction bidding system.
20. After the close of bidding, bidders' license selections,
upfront payment amounts, bidding eligibility, bids, and other bidding-
related information would be made publicly available.
21. The Commission seeks comment on the above details of its
proposal for implementing limited information procedures, or anonymous
bidding, in Auction 108. Commenters opposing the use of limited
information procedures in Auction 108 should explain their reasoning
and propose alternative information rules.
E. Upfront Payments and Bidding Eligibility
22. 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. As described below, 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 notes that its
rules require that any auction applicant that, pursuant to 47 CFR
1.2106(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. With these considerations in
[[Page 12150]]
mind, the Commission proposes upfront payments based on $0.003 per MHz-
pop, with a minimum of $500 per license. Given the uncertain total
amount of available white space spectrum in each 2.5 GHz band license
pending resolution of Rural Tribal Priority Window applications and
other factors, the Commission proposes to base upfront payments on the
total potential MHz-pops of each license offered in the auction, rather
than on available white space in each block. For the 49.5 megahertz and
50.5 megahertz blocks, the Commission proposes to base the calculation
on 50 megahertz. Additionally, when calculating upfront payment
amounts, the Commission proposes to round the results of calculations
as follows: Results below $1,000 will be rounded down to the nearest
$100; results between $1,000 and $10,000 will be rounded down to the
nearest $1,000; results between $10,000 and $100,000 will be rounded
down to the nearest $10,000; and results above $100,000 will be rounded
down to the nearest $100,000. The proposed rounding procedures would
lessen the differences between upfront payment amounts for licenses in
counties with similar population instead of reflecting relatively small
differences in total potential MHz-pops that are not necessarily
representative of the available white space.
23. The Commission seeks comment on these upfront payment amounts,
which are specified in the Attachment A file on the Auction 108 website
at www.fcc.gov/auction/108. If commenters believe that these upfront
payment amounts are not reasonable amounts, they should explain their
reasoning and suggest an alternative approach.
24. The Commission further proposes that the amount of the upfront
payment submitted by a bidder would determine its bidding eligibility
in bidding units, which are a measure of bidder eligibility and bidding
activity. The upfront payment does not limit the dollar amounts of the
bids that a bidder may submit. The Commission proposes to assign each
license that is available to be assigned a specific number of bidding
units, equal to one bidding unit per $100 of the upfront payment listed
in the Attachment A file. The number of bidding units for a given
license is fixed and does not change during the auction.
25. Calculating Upfront Payments in the Single-Round Format. To the
extent that a bidder wishes to bid on multiple licenses simultaneously,
it would need to ensure that its upfront payment provides enough
eligibility to cover the total bidding units associated with the
licenses that the bidder can win given the bids it intends to submit.
Under the single-round approach, a bidder's upfront payment would not
be attributed to specific licenses. A bidder may place bids on multiple
licenses consistent with its selections in its FCC Form 175, provided
that the maximum number of bidding units associated with the licenses
that the bidder can win does not exceed its bidding eligibility. Thus,
in calculating its upfront payment amount, and hence its bidding
eligibility, an applicant must determine the maximum number of bidding
units needed to cover licenses that it may wish to win in the auction
and submit an upfront payment amount covering that total number of
bidding units. The Commission seeks comment on these procedures.
26. Calculating Upfront Payments in the SMR Format. If the
Commission adopts the SMR auction format discussed below, a bidder that
wishes to bid on multiple licenses simultaneously similarly would need
to ensure that its upfront payment provides enough eligibility. A
bidder would be able to place bids on multiple licenses, provided that
the total number of bidding units associated with those licenses does
not exceed its current eligibility. Thus, in calculating its upfront
payment amount and hence its initial bidding eligibility under this
approach, an applicant must determine the maximum number of bidding
units on which it may wish to bid (or hold provisionally winning bids)
in any single round, and submit an upfront payment amount covering that
total number of bidding units. The Commission seeks comment on this
approach to upfront payments under an SMR auction format.
F. Auction Delay, Suspension, or Cancellation
27. For Auction 108, the Commission proposes that, at any time
before or during the bidding process, OEA, in conjunction with WTB, may
delay, suspend, or cancel bidding in Auction 108 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 round, or it may cancel the auction in its
entirety (subject to the scheduling in due course of another auction
for this spectrum). The Commission emphasizes that OEA and WTB would
exercise the authority to delay, suspend, or cancel bidding in Auction
108 solely at their discretion. The Commission seeks comment on this
proposal.
G. Additional Default Payment Percentage
28. 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 47 CFR
1.2104(g)(2). 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.
29. 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.
The level of this additional payment in each auction will be based on
the nature of the service and the licenses being offered.
30. For Auction 108, the Commission proposes to establish an
additional default payment of 15%, which is consistent with that
adopted for prior auctions of spectrum suitable for 5G and other
advanced wireless services. As noted in the Commercial Spectrum
Enhancement Act (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 108 are likely to be unusually great. In light of these
considerations, the Commission proposes for Auction 108 an additional
default payment of 15% of the relevant bid. The Commission seeks
comment on this proposal.
[[Page 12151]]
IV. Proposed Bidding Procedures
31. The Commission proposes to conduct Auction 108 using either a
single bidding round, after which the auction system will process the
bids to determine winning bidders, or a simultaneous multiple-round
ascending (SMR) auction format. Under the single-round format, winning
bidders would pay the amounts of their winning bids for the licenses
they are awarded (less any applicable bidding credit discount). The SMR
auction format would offer every license for bid at the same time and
consist of successive bidding rounds in which bidders may place bids on
individual licenses. Under this format, bidding would remain open on
all licenses until bidding stops on every license.
32. The procedures the Commission proposes for the single-round
format on which it seeks comment differ from FCC spectrum auctions it
has held in the past because the circumstances for Auction 108 differ
in many respects from more typical spectrum auction scenarios. However,
the Commission also outlines and seeks comment on SMR procedures that
may be more familiar to potential auction participants.
33. The Commission notes the delegated authority of OEA to develop
auctions jointly with WTB and expects that OEA and WTB will release a
technical guide supplementing the information in the Auction 108
Comment Public Notice and including the mathematical details and
algorithms of the single-round auction design. The corresponding
technical information for an SMR auction is contained in the Auction
108 Comment Public Notice.
A. Single Bidding Round Auction Design
34. The Commission seeks comment on use of a single bidding round
that would remain open long enough to give bidders ample time to
submit, review and potentially resubmit, and confirm their bids. Bids
submitted during the round would need to meet the activity rule. After
the round closes, the submitted bids would be processed by the bidding
system to determine the winning bids.
35. While this format departs from the multiple-round procedures
that the Commission typically has used in auctioning spectrum licenses,
the inventory of licenses available in Auction 108 will be very large
(approximately 8,300 licenses) and, as a result, a multiple-round
auction could require a number of months to complete. Although a clock
auction of generic blocks with an assignment phase to assign frequency-
specific licenses can shorten the duration of a multiple-round auction
relative to the Commission's SMR auction format, a clock auction format
would not be appropriate here because each overlay license being
offered is unique. Within a county, each block has a different amount
of bandwidth--though not all frequency blocks are available in all
counties--and even where a given frequency block is available in a
county, white space may not be available throughout the county due to
existing incumbent licensee operations. An SMR auction could last for
months, which would require participating bidders to monitor the
auction consistently, a resource commitment that is demanding for all
bidders, but particularly for smaller entities, many of which the
Commission expects will compete in Auction 108. In addition, a longer
auction entails a longer prohibited communications quiet period, in
which all applicants--including but not limited to all officers and
directors of the entity submitting an application and all controlling
interests of that entity--are subject to the rule prohibiting certain
discussions of bids or bidding strategies. Moreover, smaller entities
that are seeking only a limited number of relatively low value licenses
may consider such a resource commitment to be too onerous and may
choose not to participate in this auction. In contrast, the Commission
anticipates that, based on estimated processing time, a single bidding
round giving bidders ample time to submit their bids and bid processing
could be completed within a week.
36. In addition, a single-round auction format may help overcome
some of the inherent advantages of incumbent rights holders in the band
and increase overall competition in the auction. Specifically, the
Commission seeks comment on using a single-round auction format in the
context of the existing licensing and leasing landscape of the 2.5 GHz
band where a single entity holds a large share of the spectrum rights.
A multiple-round auction will always give a bidder an opportunity to
outbid its competitors, and given that the majority license-holder in
this band is a nationwide service provider and is likely to be better
funded than many other entities that are potentially interested in
Auction 108, these other, smaller entities may feel as though they have
little chance of winning when competing against the larger license-
holder. Moreover, given that the larger entity's interests are
geographically broad while the smaller entities tend to have more
localized interests, the larger entity would be able to ``cost-
average'' by paying more for some licenses than its stand-alone
valuation would otherwise indicate because it would be able to leverage
savings from other licenses that it wins at less than its valuation.
Other bidders, recognizing these advantages, consequently are likely to
be deterred from participating in an auction where they expect that
they would have little opportunity to win. Absent the participation of
the smaller entities, the advantages to the majority license-holding
entity would be even stronger. As a result of the diminished
competition in the auction, prices may likely be lower than they would
have been had the smaller entities participated. Conversely, in a
single-round, pay-as-bid auction, the weak bidder has a better
opportunity to win, it is more likely to participate in the auction,
and prices can therefore be expected to be closer to the winning
bidder's valuation. The Commission asks commenters to consider whether
a single-round format would encourage greater participation in this
auction than would an SMR auction. Would a smaller entity be more
likely to participate if other, possibly larger entities did not always
have an opportunity to place a higher bid, as is the case in a
multiple-round ascending auction format?
37. The Commission recognizes that a single-round auction precludes
the price discovery across licenses that is possible in a multiple-
round auction. Price discovery is intended to help inform a bidder's
decision to shift its resources across areas as relative prices change
over the course of the auction, which is particularly helpful for a
bidder with multiple alternative business plans but without sufficient
resources to pursue all of them. The single-round auction on which the
Commission seeks comment considers the potential losses in efficiency
from the price discovery process and, on balance, finds that any losses
are likely to be less consequential in this auction than is generally
true for spectrum auctions. Based on input in the proceeding and the
characteristics of the licenses offered in Auction 108--county-based,
with non-uniform and occasionally significant encumbrances across
areas, making them less suitable for larger-scale operations--it is the
Commission's understanding that the majority of potential bidders in
Auction 108 likely will be entities with specific local or regional
interests, and therefore, they will not be hampered significantly by a
lack of price discovery over multiple rounds for alternative areas. To
determine their bid amounts, bidders
[[Page 12152]]
can incorporate information from significant secondary market activity
in the 2.5 GHz band, including through auction or auction-like
processes that have been used by incumbents to find interested parties
and set prices, as well as data in ULS, and spectrum values from recent
mid-band spectrum auctions, such as the recently-concluded Commission
auction of Priority Access Licenses in the 3550-3650 MHz Band.
Moreover, it has been suggested that smaller operators may have better
knowledge of the local landscape and may be able to price their bids
more accurately than larger entities without ties to such local rural
areas.
38. The bidding procedures the Commission proposes for the single-
round format include several mechanisms for ensuring that many
important benefits of a multiple-round auction can be accommodated
under the single-round format. Importantly, the Commission seeks
comment on procedures to ensure that certain potentially critical
aggregations of licenses can be bid on with an either/or indicator so
that a bidder can indicate that it wishes to be assigned only one of a
group of substitutable licenses. This procedure offers a useful
advantage that is not feasible in a multiple-round auction where a
large number of items precludes flexible package bidding. With these
mechanisms, the Commission is confident that bidders can simply and
effectively represent their bidding interests in a single-round format.
39. The Commission seeks comment on any specific aspects of this
single-round auction with which commenters agree or disagree. In
particular, do potential bidders see the time savings of a single-round
auction as valuable relative to the SMR auction that could last for
several months? Do commenters believe that the single-round format
would disproportionately favor one group of bidders or another? Is
there any reason to conclude that its understanding of the type of
entities likely to participate in Auction 108 is inaccurate or
unsupported by the record in the Transforming the 2.5 GHz Band
proceeding, WT Docket No. 18-120?
40. Prior to the start of Auction 108, the Commission would make
available to bidders various educational materials.
1. Pay-As-Bid Pricing Rule
41. Under the single-round auction format, each winning bidder
would pay the sum of its winning bid amounts for the licenses it is
awarded, less any applicable bidding credit discount. Accordingly, a
bidder with bidding credits should bid an undiscounted (full-price)
amount for the licenses it wishes to wwin.
42. The Commission would use a pay-as-bid payment rule to give
bidders more certainty about the cost of their winning bids than would
a ``second price'' payment rule, in which the winning bidder would pay
a price corresponding to the next best bid or set of bids. In the
simple case of an individual item and no package bids, the ``second
price'' would be the second-highest bid. In the context of a
combinatorial winner determination process such as the Commission
proposes here, the bidding system would compare the revenue of the
winning combination of bids with the highest revenue possible absent
the winning bidder's bid, and subtract the difference from the winning
bidder's bid to determine the second, or Vickrey, price. A pay-as-bid
rule may also be useful in discouraging undesirable strategic behavior.
In a second-price auction where the highest bidder would win but pay
only the amount of the second-highest bid, a dominant entity may
overbid on a large group of licenses if it anticipates that competing
bids for most of those licenses would be considerably lower, so that
expected gains would outweigh any losses. In contrast, with a pay-as-
bid rule, each bidder would have to pay the amount of its high bid for
each license it wins, discouraging such aggressive strategies by
entities with interests in a large number of areas. Moreover, given the
very large inventory of licenses offered in Auction 108, the
computation of ``second prices'' (or Vickrey prices) would be
exceedingly complex and potentially intractable within a reasonable
amount of processing time. The determination of a single Vickrey price
involves solving an additional combinatorial optimization problem,
which could take a significant amount of time to solve. The Commission
has computed Vickrey prices during the assignment phase of several
recent spectrum clock auctions where, in each assignment phase market,
the number of licenses being assigned was less by orders of magnitude
and only a relatively small number of bidders were being assigned
licenses.
43. Might a resource-constrained smaller bidder be more inclined to
compete at auction because it has more certainty over the amount it
might pay? Or might a small entity be more likely to participate
because a dominant entity will have less incentive to strategically
overbid than in a second-price auction? The Commission seeks comment on
the use of a pay-as-bid payment rule.
2. Bidding Activity and Eligibility
44. Consistent with its proposal to determine bidding eligibility
in bidding units based on the amount of a bidder's upfront payment, the
Commission proposes to determine bidding activity in terms of bidding
units, as well. Each license will be assigned a certain number of
bidding units. For a single round of bidding, the Commission would
limit a bidder's total bidding activity such that the maximum number of
bidding units associated with the licenses that the bidder can win does
not exceed its total eligibility in bidding units.
45. To implement this procedure, when a bidder uploads a set of
bids via the internet to the FCC auction bidding system, the system
would calculate the maximum bid amount and the maximum number of
bidding units associated with the bids. If the bids do not exceed the
bidder's eligibility and otherwise are valid bids, the bidding system
would accept the bid submission. If the submitted bids exceed the
bidder's eligibility, the bids would be rejected and new bids could be
submitted before the close of the round. In addition, during the
bidding round, the bidding system would inform the bidder of a running
total of its activity in terms of bidding units and the total value of
all of its submitted bids. The Commission asks for comment on these
procedures.
3. Minimum Bids and Reserve Prices
46. As part of the pre-bidding process for each auction, section
309(j) of the Communications Act of 1934, as amended, mandates that the
Commission prescribes methods for establishing reasonable minimum bid
amounts for licenses subject to auction unless such bid amounts are not
in the public interest. Accordingly, the Commission proposes to
establish minimum bid amounts for Auction 108.
47. Given the potential lack of accurate information on available
white space in the 2.5 GHz band, the Commission proposes to establish
the minimum bid amounts in Auction 108 using the total potential MHz-
pops of each license offered in the auction, rather than on available
white space in each block. The Commission proposes to base these
calculations on $0.006 per MHz-pop, with a minimum of $500 per license.
For the 49.5-megahertz and 50.5-megahertz blocks, the Commission
proposes to base the calculation on 50 megahertz. Additionally, when
calculating minimum bid amounts, the Commission proposes to round the
results of calculations as follows:
[[Page 12153]]
Results below $1,000 will be rounded down to the nearest $100; results
between $1,000 and $10,000 will be rounded down to the nearest $1,000;
results between $10,000 and $100,000 will be rounded down to the
nearest $10,000; and results above $100,000 will be rounded down to the
nearest $100,000. The proposed rounding procedures would lessen the
differences between minimum bid amounts for licenses in counties with
similar population instead of reflecting relatively small differences
in total potential MHz-pops that are not necessarily representative of
the available white space. The Commission seeks comment on these
minimum bid amounts, which are specified in the Attachment A file on
the Auction 108 website at www.fcc.gov/auction/108. If commenters
believe that these minimum bid amounts would result in unsold licenses
or are not reasonable amounts, they should explain their reasoning and
propose an alternative approach. Commenters should support their claims
with valuation analyses and suggested amounts or formulas for minimum
bids. The Commission does not propose a separate aggregate reserve
price, below which the auction would not conclude, and it seeks comment
on that proposal. The Commission is not aware at this time of
circumstances that require establishment of an aggregate reserve price
in the public interest for this auction of overlay licenses in the 2.5
GHz band and propose only the minimum bids that it discusses here.
4. Package Bidding
48. For the single-round format, the Commission proposes a flexible
form of package bidding, which would allow bidders to submit bids for
packages of multiple licenses within the same county or for multiple
geographic area licenses, i.e., licenses covering multiple metropolitan
counties within a specified geographic region.
49. Packages of Multiple Blocks within a County. For the single-
round format, the Commission proposes to allow a bidder to submit
package bids for two or three licenses in a single county, in order to
give the bidder more control in this single-round auction over the
number and combination of licenses that it may win. By contrast, in a
multiple-round auction, a bidder has greater ability to shape the
combination of licenses that it is assigned. The Commission proposes
these limited package bidding procedures for the single-round format to
address a bidder's need to win at least two or three blocks in a county
if it wins any blocks. This would enable a bidder to ensure that if it
won any licenses in a county, it would win sufficient licenses to
facilitate high-bandwidth services and applications. A package bid
would consist of a group of licenses and a single price that would
apply to the entire group. The bidding system would determine the
winning combination of licenses taking into account that all or none of
the licenses in a package bid are to be assigned to the bidder.
50. For example, if a bidder is interested in winning any two
license blocks in a county, but not a single license or all three
licenses, it could submit three package bids for each of the two-
license block combinations in the county. The bidder would be ensured
of winning two licenses if it wins any of them.
51. Packages of Multiple Metropolitan Counties. The Commission
proposes procedures to permit certain package bids that include
licenses in multiple metropolitan counties, as long as the counties in
a bid are within a given geographic region or area. The Commission
proposes to define ``metropolitan'' for this purpose as those counties
that are not subject to the small-market bidding credit cap. Counties
located within any PEA with a population of 500,000 or less are subject
to the small-market bidding credit cap. Thus, metropolitan counties are
those located within any PEA with a population greater than 500,000.
52. For the single round format, the Commission proposes to limit
an individual package bid further to include licenses only in
metropolitan counties that lie within the same Major Economic Area
(MEA). This limitation would enable packaging across the interdependent
counties in a metropolitan market, would prevent the submission of
overly broad packages, and recognizes the need to maintain bidding and
computational manageability. There are 51 MEAs nationwide; MEAs are
intermediate in size between Economic Areas (EAs) and Regional Economic
Area Groupings (REAGs). In addition, the Commission will license Guam
and the Northern Mariana Islands, Puerto Rico and the U.S. Virgin
Islands, and American Samoa, which have been assigned Commission-
created MEA numbers 49-51, respectively. Therefore, a single package
bid could include licenses in two or more metropolitan counties in a
given MEA; the non-metropolitan counties in the MEA could be bid for
only as single counties (but potentially as packages of two or three
licenses in a single county). Finally, for computational reasons, the
Commission proposes that the total number of package and/or individual
bids that a bidder may submit involving metropolitan counties in an MEA
is limited to 250. If the number of individual licenses available in
the metropolitan counties in a single MEA exceeds 250, an exception to
the limit would permit a bidder to submit a bid for each individual
license. The Commission does not propose a limit on individual county-
level bids, package or otherwise, that do not involve metropolitan
counties.
53. A package bid would consist of a set of licenses in a set of
counties and a single price applicable to the entire set of licenses in
those counties. Within the proposed limits the Commission sets forth
here, a bidder could include any combination of counties in a package--
i.e., packages would not be pre-defined.
54. In proposing these procedures for package bidding for the
single-round format, the Commission aims to balance the needs of
smaller entities with very localized interests with the requirements of
entities that wish to create larger networks. Permitting packages of
the licenses within a county provides a simple mechanism for a bidder
to guard against winning an undesirable combination or number of
licenses in a single county, which is likely to be useful to all
bidders. Allowing multiple-county packages of licenses only for
metropolitan areas addresses the needs of entities with larger networks
to ensure that they do not win an undesired patchwork of more heavily
populated areas. In such areas, counties of smaller and greater
competitiveness may make winning such patchworks potentially more
likely. At the same time, limiting the scope of multiple-county
packages to metropolitan counties within a single MEA reduces the
potential for a bidder to leverage a highly-valued aggregation in one
area in order to win licenses in other areas where bidders for
individual counties may be the more efficient users of those licenses.
Moreover, limits on package bids help reduce complexity for the bidder
and enhance computational feasibility.
55. The Commission seeks comment on these procedures to allow
bidding for packages of multiple licenses within a single county and
for packages of bids for multiple metropolitan counties within an MEA.
The Commission asks commenters to consider how changes they suggest to
these procedures might impact the different needs of the wide variety
of potential bidders that may be interested in Auction 108. In
particular, the Commission seeks comment on the use of MEAs as the
relevant ``region'' for limiting the metropolitan counties that
[[Page 12154]]
can be included in a single package bid. Would a smaller aggregation,
such as EAs, be more appropriate? Alternatively, would larger areas,
such as REAGs be preferable? The Commission also asks commenters to
address the proposed definition of ``metropolitan.'' Would an
alternative definition of more heavily populated counties be simple to
implement and consistent with other definitions used in this and other
recent Commission spectrum auctions?
5. Either/Or Indicator
56. Because a single-round auction does not give a bidder an
opportunity to move its bids from one area to another as prices change,
or from one block to another within an area, as does a multiple-round
auction, the Commission proposes to allow a bidder to indicate that two
or more of its bids are to be treated as mutually exclusive by the
bidding system when assigning winning bids. In other words, a bidder
can indicate that it wants to win only one of the bids in a group of
bids it specifies. For example, if a bidder is interested in winning
one of the three licenses available in a county, it could submit
separate bids for each of the three licenses and indicate that it
wishes to win only one of them. A bidder's upfront payment amount and
its activity and eligibility calculations would be based on the largest
set of bids that the bidder can win taking into account that some bids
may be mutually exclusive.
57. The Commission proposes that a bidder may indicate that it
wants the bidding system to consider the bids in a specified group as
mutually exclusive as long as either all the bids in the group involve
the same non-metropolitan county or all the bids in the group involve
only metropolitan counties in the same MEA. The Commission further
seeks comment on allowing each bid to be included in at most one
mutually exclusive group of bids. The Commission proposes these limits
on either/or bids to ensure that the combinatorial optimization winner
determination problem is feasible, given the extremely large number of
potential combinations of bids that must be considered. A group of
mutually exclusive bids can include individual and/or package bids.
58. The Commission asks commenters to consider whether these
procedures to allow a bidder to use an either/or indicator to instruct
the bidding system to assign only one of a specified group of bids
would be helpful in managing the bidder's potential winnings if this
single-round auction format is adopted.
6. Bid Processing and Winning Bids
59. To determine winning bids in the single-round format, the
Commission proposes that after the single bidding round, the bidding
system would use optimization software to determine the value-
maximizing combination of (package and individual) bids, taking into
account each bidder's mutually exclusive either/or bids. A bid of a
bidder with a bidding credit would be considered in the optimization at
its undiscounted bid price. In contrast, for payment purposes, the
bidding credit discount for a bidder with a bidding credit will be
subtracted from the bidder's total winning bids, applying any bidding
credit caps, to determine its net winning bids.
60. The Commission also seeks comment on assigning each individual
or package bid a pseudo-random number upon submission, such that, if
there are ties among the value-maximizing combinations of bids, the
bidding system would determine the winning bids by finding the set that
maximizes the sum of pseudo-random numbers.
61. Because there is a very small but positive probability that the
optimization software would be unable to provide an exact solution to
the problem of determining the value-maximizing combination of bids
within a reasonable amount of time, the Commission seeks comment on use
of an ``escape clause.'' Under the proposed escape clause, if the
optimization software does not yield an exact solution within 48 hours,
then the winning set of bids would be determined by the best solution
identified to that point. Winning bidders would pay the amounts of
their winning bids, consistent with the pay-as-bid pricing rule.
62. The Commission seeks comment on these proposed bid processing
procedures for this novel single-round auction with package bidding,
including the tie-breaking mechanism, the escape clause generally, and
the proposed 48-hour computational period.
B. Simultaneous Multiple-Round Auction Design
63. The Commission also seeks comment on using its SMR auction
format for this auction. This type of auction offers every license for
bid at the same time and consists of successive bidding rounds in which
bidders may place bids on individual licenses. The SMR procedures on
which the Commission seeks comment below are consistent with those
adopted in prior Commission SMR auctions. Typically, bidding remains
open on all licenses until bidding stops on every license. This format
would not provide for package bidding because of the significant
complexity that this would present, for both bidders and the bidding
system, given that the 2.5 GHz band plan has a potential inventory of
approximately 8,300 licenses.
64. The Commission has predominantly used an SMR format for
spectrum auctions, and therefore this format is familiar to potential
bidders that have participated in past Commission spectrum auctions. An
SMR format allows price discovery, so that a bidder may observe how
prices differ across areas or frequency blocks, and to modify its
bidding strategies accordingly. In addition, multiple rounds of bidding
may give a bidder more confidence in its bid amounts in cases where
there is a significant ``common'' value element to the licenses being
auctioned beyond the particular value to the bidder in its business
plan.
65. The Commission seeks comment on whether using an auction design
that is familiar to bidders is important in helping potential
participants feel more comfortable with participating in Auction 108.
The Commission also asks whether allowing price discovery through a
multiple round auction format is particularly important in this
auction, and whether such benefits would warrant the additional time
required to conduct an SMR auction relative to a single-round. Would
such benefits outweigh the potential advantages of a single-round
format to smaller entities discussed above?
1. Bidding Rounds
66. Under the SMR format, Auction 108 would consist of sequential
bidding rounds, each of which would be followed by the release of round
results. The initial bidding schedule would be announced in a public
notice to be released at least one week before the start of bidding.
Details on viewing round results, including the location and format of
downloadable results files for each round would be included in the same
public notice.
67. Under this auction format, the Commission would conduct Auction
108 over the internet using the FCC auction bidding system. Bidders
would have the option of placing bids online or by telephone through a
dedicated auction bidder line.
68. OEA would retain the discretion to change 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. This would allow
[[Page 12155]]
OEA to change the amount of time for bidding rounds, the amount of time
between rounds, or the number of rounds per day, depending upon bidding
activity and other factors. The large number of licenses available in
the 2.5 GHz band implies that the SMR format could involve a large
number of bidding rounds, potentially lasting several months. The
Commission seeks comment on this approach. Commenters on this issue
should address the role of the bidding schedule in managing the pace of
the auction, specifically discussing the tradeoffs in managing auction
pace by bidding schedule changes, by changing the activity requirements
or bid amount parameters, or by using other means.
2. Stopping Rule
69. The Commission has discretion to establish stopping rules
before or during multiple-round auctions in order to complete the
auction within a reasonable time. Under this SMR auction format, the
Commission would employ a simultaneous stopping rule approach, which
means all licenses remain available for bidding until bidding stops on
every license. Specifically, bidding would close on all licenses after
the first round in which no bidder submits any new bids, applies a
proactive waiver, or withdraws any provisionally winning bids (if bid
withdrawals are permitted). Provisionally winning bids are bids that
would become final winning bids if the auction were to close in that
given round. Under this simultaneous stopping rule, bidding would
remain open on all licenses until bidding stops on every license.
Consequently, under this approach, it is not possible to determine in
advance precisely how long the bidding in Auction 108 would last.
70. Further, OEA would retain the discretion to exercise any of the
following stopping options during Auction 108:
Option 1. The auction would close for all licenses after the first
round in which no bidder applies a waiver, no bidder withdraws a
provisionally winning bid (if withdrawals are permitted in Auction
108), or no bidder places any new bid on a license for which it is not
the provisionally winning bidder. Thus, absent any other bidding
activity, a bidder placing a new bid on a license for which it is the
provisionally winning bidder would not keep the auction open under this
modified stopping rule.
Option 2. The auction would close for all licenses after the first
round in which no bidder applies a waiver, no bidder withdraws a
provisionally winning bid (if withdrawals are permitted in Auction
108), or no bidder places any new bid on a license that already has a
provisionally winning bid. Thus, absent any other bidding activity, a
bidder placing a new bid on an FCC-held license (a license that does
not have a provisionally winning bid) would not keep the auction open
under this modified stopping rule.
Option 3. The auction would close using a modified version of the
simultaneous stopping rule that combines Option 1 and Option 2 above.
Option 4. The auction would close after a specified number of
additional rounds (special stopping rule) to be announced by OEA. If
OEA invokes this special stopping rule, it would accept bids in the
specified final round(s), after which the auction would close.
Option 5. The auction would remain open even if no bidder places
any new bid, applies a waiver, or withdraws any provisionally winning
bids (if withdrawals are permitted in Auction 108). In this event, the
effect would be the same as if a bidder had applied a waiver. The
activity rule would apply as usual, and a bidder with insufficient
activity would lose bidding eligibility or use a waiver.
71. Under the SMR format, OEA would exercise these options only in
certain circumstances, for example, where the auction is proceeding
unusually slowly or quickly, there is minimal overall bidding activity,
or it appears likely that the auction will not close within a
reasonable period of time or will close prematurely. Before exercising
these options, OEA would likely attempt to change the pace of Auction
108. For example, OEA could adjust the pace of bidding by changing the
number of bidding rounds per day and/or the minimum acceptable bids.
Under this approach, OEA would retain continuing discretion to exercise
any of these options with or without prior announcement by OEA during
the auction. The Commission seeks comment on these procedures.
3. Activity Rule
72. In order to avoid unduly prolonging the length of the auction,
an activity rule requires bidders to bid actively throughout the
auction, rather than wait until late in the auction before
participating. The bidding system calculates a bidder's activity in a
round as the sum of the bidding units associated with any licenses upon
which it places bids during the current round and the bidding units
associated with any licenses for which it holds provisionally winning
bids. Bidders are required to be active on a specific percentage of
their current bidding eligibility during each round of the auction.
Failure to maintain the requisite activity level will result in the use
of an activity rule waiver, if any remain, or a reduction in the
bidder's eligibility, possibly curtailing or eliminating the bidder's
ability to place additional bids in the auction.
73. Under an SMR auction format, the Commission would consider
dividing the auction into at least two stages, each characterized by a
different activity requirement. For example, in a first stage, bidders
could be required to be active on 80% of their bidding units, while in
a later stage, they could be required to be active on 95% of their
bidding units. The Commission would also consider conducting the
auction in a single stage, potentially with a 100% activity
requirement. If the Commission does not conduct a single stage, the
auction would start in Stage One. OEA would then have the discretion to
advance the auction to another stage by announcement during the
auction. In exercising this discretion, the Commission anticipates that
OEA would consider a variety of measures of auction activity, including
but not limited to, the length of the auction, the percentage of
bidding units associated with licenses on which there are new bids, the
number of new bids, and the increase in revenue. For example, when
monitoring activity for determining when to change stages, OEA could
consider the percentage of bidding units of the licenses receiving new
provisionally winning bids, excluding any FCC-held licenses. In past
auctions, OEA has generally--but not always--changed stages when this
measure was approximately 20% or below for three consecutive rounds of
bidding. The Commission seeks comment on these procedures for activity
requirements.
4. Activity Rule Waivers and Reducing Eligibility
74. For the SMR auction format, when a bidder's activity in the
current round is below the required minimum level, it could preserve
its current level of eligibility through an activity rule waiver, if
available. An activity rule waiver applies to an entire round of
bidding, not to a particular license. Activity rule waivers can be
either proactive or automatic. Activity rule waivers are primarily a
mechanism for a bidder to avoid the loss of bidding eligibility in the
event that exigent circumstances prevent it from bidding in a
particular round.
75. Under an SMR auction format, each bidder in Auction 108 would
be
[[Page 12156]]
provided with three activity rule waivers that could be used as set
forth at the bidder's discretion during the course of the auction. The
FCC auction bidding system would assume that a bidder that does not
meet the activity requirement would prefer to use an activity rule
waiver (if available) rather than lose bidding eligibility. Therefore,
the system would automatically apply a waiver at the end of any bidding
round in which a bidder's activity level is below the minimum required
unless: (1) The bidder has no activity rule waivers remaining; or (2)
the bidder overrides the automatic application of a waiver by reducing
eligibility, thereby meeting the activity requirement. If a bidder has
no waivers remaining and does not satisfy the required activity level,
the bidder's current eligibility would be permanently reduced, possibly
curtailing or eliminating the ability to place additional bids in the
auction.
76. A bidder with insufficient activity might wish to reduce its
bidding eligibility rather than use an activity rule waiver. If so,
then the bidder affirmatively would have to override the automatic
waiver mechanism during the bidding round by using the reduce
eligibility function in the FCC auction bidding system. In this case,
the bidder's eligibility would be permanently reduced to bring it into
compliance with the activity rule described above. Reducing eligibility
is an irreversible action; once eligibility has been reduced, a bidder
could not regain its lost bidding eligibility.
77. Under the simultaneous stopping rule for this auction format, a
bidder would be permitted to apply an activity rule waiver proactively
as a means to keep the auction open without placing a bid. If a bidder
proactively were to apply an activity rule waiver (using the proactive
waiver function in the FCC auction bidding system) during a bidding
round in which no bids are placed or withdrawn (if bid withdrawals are
permitted in Auction 108), the auction would remain open and the
bidder's eligibility would be preserved. An automatic waiver applied by
the FCC auction bidding system in a round in which there is no new bid,
no bid withdrawal (if bid withdrawals are permitted in Auction 108), or
no proactive waiver would not keep the auction open. The Commission
seeks comment on this approach.
5. Reserve Price or Minimum Opening Bids
78. If the Commission adopts an SMR auction format, then it would
also establish minimum opening bid amounts. The bidding system would
not accept bids lower than these amounts.
79. The Commission would calculate minimum opening bid amounts on a
license-by-license basis using the same calculations outlined for the
single bidding round auction design based on $0.006 per MHz-pop. The
Commission seeks comment on these minimum opening bid amounts, which
are specified in Attachment A to the Auction 108 Comment Public Notice.
If commenters believe that these minimum opening bid amounts would
result in unsold licenses or are not reasonable amounts under an SMR
format, they should explain why this is so. Commenters should support
their claims with valuation analyses and suggested amounts or formulas
for minimum opening bids for this auction design.
80. In establishing minimum opening bid amounts under the SMR
format, the Commission particularly seeks comment on factors that
reasonably could have an impact on bidders' valuation of the spectrum,
including the type of service offered, market size, population covered
by the proposed facility, and any other relevant factors.
81. 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 changes to bidding schedules or activity
requirements.
82. The Commission would not establish any aggregate reserve price
for licenses offered through an SMR auction format. The Commission is
not aware at this time of circumstances that require establishment of
an aggregate reserve price in the public interest for this auction of
overlay licenses in the 2.5 GHz band and seek comment only on the per
license minimum opening bids that it discusses here. The Commission
seeks comment on this issue. If commenters believe the Commission
should establish an aggregate reserve price, they should explain why
and support their claims with valuation analyses and suggested amounts
or formulas for reserve prices.
6. Bid Amounts
83. Under an SMR auction format, an eligible bidder with sufficient
eligibility, in each round, would be able to place a bid on a given
license in any of up to nine different amounts--the minimum acceptable
bid amounts and additional bid amounts discussed below. Under this
approach, the FCC auction bidding system would list the acceptable bid
amounts for each license.
84. Minimum Acceptable Bid Amounts. The first of the acceptable bid
amounts is called the minimum acceptable bid amount. The minimum
acceptable bid amount for a license would be equal to its minimum
opening bid amount until there is a provisionally winning bid on the
license. Once there is a provisionally winning bid for a license, the
minimum acceptable bid amount for that license would be equal to the
amount of the provisionally winning bid plus a percentage of that bid
amount calculated using the activity-based formula described below. In
general, the percentage would be higher for a license receiving many
bids than for a license receiving few bids. In the case of a license
for which the provisionally winning bid has been withdrawn (if
withdrawals are allowed in Auction 108), the minimum acceptable bid
amount would equal the second highest bid received for the license.
85. The percentage of the provisionally winning bid used to
establish the minimum acceptable bid amount (the additional percentage)
would be calculated based on an activity index at the end of each
round. The activity index is a weighted average of (a) the number of
distinct bidders placing a bid on the license in that round, and (b)
the activity index from the prior round. Specifically, the activity
index is equal to a weighting factor times the number of bidders
placing a bid covering the license in the most recent bidding round
plus one minus the weighting factor times the activity index from the
prior round. For Round 1 calculations, because there is no prior round
(i.e., no round 0), the activity index from the prior round would be
set at 0. The additional percentage is determined as one plus the
activity index times a minimum percentage amount, with the result not
to exceed a given maximum. The additional percentage is then multiplied
by the provisionally winning bid amount to obtain the minimum
acceptable bid for the next round. The result 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. Under the SMR auction format, the
weighting factor would be set initially at 0.5, the minimum percentage
at 0.1 (10%), and the
[[Page 12157]]
maximum percentage at 0.2 (20%). Hence, at these initial settings, the
minimum acceptable bid for a license would be between 10% and 20%
higher than the provisionally winning bid, depending upon the bidding
activity for the license. Equations and examples are shown in
Attachment B to the Auction 108 Comment Public Notice. The Commission
seeks comment on whether to use this activity-based formula or a
different approach for the SMR auction format. In particular, the
Commission asks whether it should set the maximum percentage at a
higher amount, for example 30% or more, in light of concerns over the
large number of rounds that may be required for this auction.
86. Additional Bid Amounts. The FCC auction bidding system would
calculate any additional bid amounts using the minimum acceptable bid
amount and an additional bid increment percentage. The minimum
acceptable bid amount would be multiplied by the additional bid
increment percentage, and that result (rounded) would be the additional
increment amount. The first additional acceptable bid amount would
equal the minimum acceptable bid amount plus the additional increment
amount. The second additional acceptable bid amount would equal the
minimum acceptable bid amount plus two times the additional increment
amount; the third additional acceptable bid amount would be the minimum
acceptable bid amount plus three times the additional increment amount;
etc. The Commission would set the additional bid increment percentage
at 5% initially. Hence, the calculation of the additional increment
amount would be (minimum acceptable bid amount) * (0.05), rounded. The
Commission seeks comment on this approach.
87. Bid Amount Changes. Under this auction format, OEA would retain
the discretion to change the minimum acceptable bid amounts, the
additional bid amounts, the number of acceptable bid amounts, and the
parameters of the formulas used to calculate minimum acceptable bid
amounts and additional bid amounts if OEA determines that circumstances
so dictate. Further, OEA would retain the discretion to do so on a
license-by-license basis. Commenters should address the size of changes
in the bid amounts, in particular, the additional percentage. Should
the Commission increase the size of the minimum acceptable bid amounts
in order to manage expeditiously the pace of an SMR auction with
approximately 8,300 licenses? At what size do changes in bid amounts
make it too difficult for bidders to align their bid amounts with their
budgets and willingness to pay? OEA would also retain the discretion to
limit (a) the amount by which a minimum acceptable bid for a license
may increase compared with the corresponding provisionally winning bid,
and (b) the amount by which an additional bid amount may increase
compared with the immediately preceding acceptable bid amount. For
example, OEA could set a limit on increases in minimum acceptable bid
amounts over provisionally winning bids. Thus, if calculating a minimum
acceptable bid using the activity-based formula results in a minimum
acceptable bid amount that exceeds the provisionally winning bid on a
license by more than the limit, the minimum acceptable bid amount would
instead be capped at the provisionally winning bid plus the amount of
the limit. The Commission seeks comment on the circumstances under
which OEA should employ such a limit, factors OEA should consider when
determining the dollar amount of the limit, and the tradeoffs in
setting such a limit or changing other parameters--such as the minimum
and maximum percentages of the activity-based formula. If OEA were to
exercise this discretion, it would alert bidders by announcement in the
FCC auction bidding system. The Commission seeks comment on these
procedures.
88. The Commission seeks comment on the above procedures for the
SMR auction format, including whether to use the activity-based formula
to establish the additional percentage or a different approach. If
commenters disagree with beginning the auction with nine acceptable bid
amounts per license as described above, they should suggest an
alternative number of acceptable bid amounts to use at the beginning of
the auction and an alternative number to use later in the auction.
Commenters may wish to address the role of the minimum acceptable bids
and the number of acceptable bid amounts in managing the pace of the
auction and the tradeoffs in managing auction pace by changing the
bidding schedule, activity requirements, or bid amounts, or by using
other means.
7. Provisionally Winning Bids
89. Under an SMR auction format, the FCC auction bidding system
would determine provisionally winning bids consistent with practices in
past auctions. At the end of each bidding round, the bidding system
would determine a provisionally winning bid for each license based on
the highest bid amount received for the license. A provisionally
winning bid would remain the provisionally winning bid until there is a
higher bid on the same license at the close of a subsequent round.
Provisionally winning bids at the end of the auction would become the
winning bids.
90. If identical high bid amounts were submitted on a license in
any given round (i.e., tied bids), the FCC auction bidding system would
use a pseudo-random number generator to select a single provisionally
winning bid from among the tied bids. The auction bidding system would
assign a pseudo-random number to each bid when the bid is entered. The
tied bid with the highest pseudo-random number would become the
provisionally winning bid. The remaining bidders, as well as the
provisionally winning bidder, would be permitted to submit higher bids
in subsequent rounds. However, if the auction were to end with no other
bids being placed, the winning bidder would be the one that placed the
provisionally winning bid. If the license received any bids in a
subsequent round, the provisionally winning bid again would be
determined by the highest bid amount received for the license
91. A provisionally winning bid would be retained until there is a
higher bid on the license at the close of a subsequent round, unless
the provisionally winning bid is withdrawn (if bid withdrawals are
permitted in Auction 108). Under the SMR auction design, provisionally
winning bids would count toward activity for purposes of the activity
rule.
8. Bid Removal and Bid Withdrawal
92. The FCC auction bidding system would allow each bidder to
remove any of the bids it placed in a round before the close of that
round. By removing a bid placed within a round, a bidder would
effectively ``unsubmit'' the bid. In contrast to the bid withdrawal
provisions described below, a bidder removing a bid placed in the same
round would not be subject to a withdrawal payment. Once a round
closes, a bidder would no longer be permitted to remove a bid.
93. The Commission seeks comment on whether bid withdrawals should
be permitted should it adopt an SMR auction format for Auction 108.
When permitted in an auction, bid withdrawals provide a bidder with the
option of withdrawing bids placed in prior rounds that have become
provisionally winning bids. A bidder would be able to withdraw its
provisionally winning bids using the withdraw function in the FCC
auction bidding system.
[[Page 12158]]
94. The Commission has recognized that bid withdrawals may be a
helpful tool for bidders seeking to efficiently aggregate licenses or
implement backup strategies in certain auctions. The Commission has
also acknowledged that allowing bid withdrawals may encourage insincere
bidding or increase opportunities for undesirable strategic bidding in
certain circumstances.
95. Applying this reasoning to Auction 108, each bidder would be
allowed to withdraw provisionally winning bids in no more than two
rounds during the course of the auction. To permit a bidder to withdraw
bids in more than two rounds may encourage insincere bidding or the use
of withdrawals for undesirable strategic bidding purposes. The two
rounds in which a bidder may withdraw provisionally winning bids would
be at the bidder's discretion, and there would be no limit on the
number of provisionally winning bids that a bidder may withdraw in
either of the rounds in which it withdraws bids. Withdrawals must be in
accordance with the Commission's rules, including the bid withdrawal
payment provisions specified in 47 CFR 1.2104(g).
96. A bidder that withdraws its provisionally winning bid(s), if
permitted, is subject to the bid withdrawal payment provisions of the
Commission's rules. The Commission proposes the interim bid withdrawal
payment be set at 15% of the withdrawn bid for the purposes of an SMR
auction. A bidder that withdraws a bid during an auction is subject to
a withdrawal payment equal to the difference between the amount of the
withdrawn bid and the amount of the winning bid in the same or a
subsequent auction. The withdrawal payment amount is deducted from any
upfront payments or down payments that the withdrawing bidder has
deposited with the Commission. No withdrawal payment is assessed for a
withdrawn bid if either the subsequent winning bid or any of the
intervening subsequent withdrawn bids equals or exceeds that withdrawn
bid. However, if a license for which a bid had been withdrawn does not
receive a subsequent higher bid or winning bid in the same auction, the
FCC cannot calculate the final withdrawal payment until that license
receives a higher bid or winning bid in a subsequent auction. In such
cases, when that final withdrawal payment cannot yet be calculated, the
FCC imposes on the bidder responsible for the withdrawn bid an interim
bid withdrawal payment, which will be applied toward any final bid
withdrawal payment that is ultimately assessed.
97. The amount of the interim bid withdrawal payment is established
in advance of bidding in each auction and may range from 3% to 20% of
the withdrawn bid amount. The Commission has determined that the level
of the interim withdrawal payment in a particular auction will be based
on the nature of the service and the inventory of the licenses being
offered. The Commission noted specifically that a higher interim
withdrawal payment percentage is warranted to deter the anti-
competitive use of withdrawals when, for example, bidders will not need
to aggregate the licenses being offered in the auction or when there
are few synergies to be captured by combining licenses. With respect to
the flexible-use 2.5 GHz band licenses being offered in Auction 108,
the service rules permit a variety of advanced spectrum-based services,
some of which may best be offered by combining licenses on adjacent
frequencies or in adjacent areas. Balancing the potential need for
bidders to use withdrawals to avoid winning incomplete combinations of
licenses with the Commission's interest in deterring undesirable
strategic use of withdrawals, the Commission proposes to establish an
interim bid withdrawal payment of 15% of the withdrawn bid for Auction
108, should it adopt an SMR auction format.
98. The Commission seeks comment on allowing bid withdrawals and an
interim bid withdrawal payment of 15% of the withdrawn bid under a
potential SMR auction design. If commenters disagree, then the
Commission asks them to support their arguments by taking into account
the licenses available, the impact on auction dynamics and the pricing
mechanism, and the effects on the bidding strategies of other bidders.
V. Tutorials and Additional Information for Applicants
99. The Commission intends to provide additional information on the
bidding system and to offer demonstrations and other educational
opportunities for applicants in Auction 108 to familiarize themselves
with the FCC auction application system and the auction bidding system.
100. In addition, OEA and WTB will make available an interactive
mapping tool to identify and assess potential encumbrances in the band,
including as a result of pending Rural Tribal Priority Window
applications. Potential applicants are again reminded, however, that
this tool will not represent complete licensing information; all
information should be confirmed in ULS for any specific license or
area.
VI. Procedural Matters
A. Supplemental Initial Regulatory Flexibility Analysis
101. As required by the Regulatory Flexibility Act of 1980, as
amended (RFA), the Commission has prepared this 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 108 Comment Public Notice to supplement the
Commission's Initial and Final Regulatory Flexibility Analyses
completed in the 2.5 GHz Notice of Proposed Rulemaking (NPRM), 83 FR
26396, June 7, 2018, and 2.5 GHz Report and Order, and other Commission
orders pursuant to which Auction 108 will be conducted. Written public
comments are requested on this 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 108 Comment Public Notice. The Commission will send a copy of
the Auction 108 Comment Public Notice, including this Supplemental
IRFA, to the Chief Counsel for Advocacy of the Small Business
Administration (SBA). In addition, the Auction 108 Comment Public
Notice and Supplemental IRFA (or summaries thereof) will be published
in the Federal Register.
102. Need for, and Objectives of, the Proposed Rules. The Auction
108 Comment Public Notice sets forth the proposed auction procedures
for those entities that seek to bid to acquire licenses in Auction 108.
The Auction 108 Comment Public Notice seeks comment on proposed
procedural rules to govern Auction 108, which will auction geographic
overlay licenses of unlicensed spectrum in the 2.5 GHz band (2496-2690
MHz). The specific overlay licenses available in Auction 108 will be
determined by the results of the Rural Tribal Priority Window, which
gave federally recognized Tribes the opportunity to submit applications
to acquire new 2.5 GHz band overlay licenses to provide broadband
service on rural Tribal lands before the remaining unassigned spectrum
is made generally available to all entities through competitive
bidding. The Rural Tribal Priority Window closed on September 2, 2020.
Based on review of applications received in the Rural Tribal Priority
Window, OEA, in conjunction with WTB, will release a public notice
announcing the final inventory of 2.5 GHz band overlay licenses to be
offered in Auction 108. This public notice will be released in advance
of the deadline
[[Page 12159]]
for the submission of short-form applications to bid in Auction 108 so
that potential applicants can make informed decisions about whether to
apply. OEA and WTB will also make available resources to assist
applicants in conducting due diligence research regarding potential
encumbrances in the band prior to the release of the public notice
announcing the final auction inventory.
103. The Auction 108 Comment Public Notice and 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
108 participants, the Commission seeks comment on the following
procedures that would apply to Auction 108 under either the single-
round auction format or the SMR auction format:
Requirement of an additional certification by each
applicant in its short-form application, under penalty of perjury, that
it has read the public notice adopting procedures for Auction 108 and
that it has familiarized itself with those procedures and the
requirements for obtaining a license and operating facilities in the
2.5 GHz band;
use of limited information procedures under which the
Commission will not make public until after the bidding has closed: (1)
The licenses 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 108; (3) an applicant's
bidding eligibility; and (4) any other bidding-related information that
might reveal the identity of the bidder placing a bid;
establishment of bidding credit caps for eligible small
businesses and rural service providers in Auction 108;
provision of discretionary authority to OEA, in
conjunction with WTB, to delay, suspend, or cancel bidding in Auction
108 for any reason that affects the ability of the competitive bidding
process to be conducted fairly and efficiently;
a specific upfront payment amount for each license
available in Auction 108;
establishment of an additional default payment of 15%
under Sec. 1.2104(g)(2) of the rules in the event that a winning
bidder defaults or is disqualified after the auction.
104. The Auction 108 Comment Public Notice also seeks comment on
the following procedures under the single-round auction format:
Use of a single-round auction format for Auction 108 with
limited package bidding;
use of a pay-as-bid pricing rule whereby each winning
bidder will pay the sum of its winning bid amounts for the licenses it
is awarded, less any applicable bidding credit discount;
establishment of a bidder's bidding eligibility in bidding
units based on that bidder's upfront payment through assignment of a
specific number of bidding units for each license;
establishment of a minimum bid amount for each license
available in Auction 108 based on each license's potential MHz-pops;
use of an either/or indicator to allow a bidder to
indicate that two or more of its bids are to be treated as mutually
exclusive by the bidding system when assigning winning bids; and
a methodology for processing bids.
105. In addition, the Auction 108 Comment Public Notice seeks
comment on the following procedures under the SMR auction format:
Use of a simultaneous multiple-round auction format for
Auction 108, consisting of sequential bidding rounds with a
simultaneous stopping rule (with discretion by OEA to exercise
alternative stopping rules under certain circumstances);
use of an activity rule that would require bidders to bid
actively during the auction rather than waiting until late in the
auction before participating;
an auction with one or more stages, in which, for example,
a bidder is required to be active on 80% of its bidding eligibility in
each round of the first stage, and on 95% of its bidding eligibility in
each round of the second stage;
provision of three activity rule waivers for each bidder
to allow it to preserve eligibility during the course of the auction;
use of minimum acceptable bid amounts and additional bid
increments, along with a methodology for calculating such amounts, with
OEA retaining discretion to change its methodology if circumstances
dictate;
a procedure for breaking ties if identical high bid
amounts are submitted on a license in a given round;
bid removal procedures;
whether to permit bid withdrawals; and
establishment of an interim bid withdrawal percentage of
15% of the withdrawn bid if the Commission were to allow bid
withdrawals in Auction 108.
106. The proposed procedures for the conduct of Auction 108
constitute the more specific implementation of the competitive bidding
rules contemplated by parts 1 and 27 of the Commission's rules, the 2.5
GHz Report and Order, and relevant competitive bidding orders, and are
fully consistent therewith.
107. Legal Basis. The Commission's statutory obligations to small
businesses under the Communications Act of 1934, as amended, are found
in 47 U.S.C. 309(j)(3)(B) and 47 U.S.C. 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 108. 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) was included in the 2.5 GHz Report and
Order that adopted rule provisions relevant to this notification.
108. 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. 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.
109. As noted above, Regulatory Flexibility Analyses were
incorporated into the 2.5 GHz NPRM and the 2.5 GHz Report and Order. In
those analyses, the Commission described in detail the small entities
that might be significantly affected. In the Auction 108 Comment Public
Notice, the Commission adopts by reference the descriptions and
estimates of the number of small entities from the previous Regulatory
Flexibility Analyses in the 2.5 GHz NPRM and the 2.5 GHz Report and
Order.
[[Page 12160]]
110. 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 entity 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.
111. The Commission does not expect the processes and procedures
proposed in the Auction 108 Comment Public Notice will require small
entities to hire attorneys, engineers, consultants, or other
professionals to participate in Auction 108 and comply with the
procedures it 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 108 to familiarize themselves with the FCC auction
application system and the auction bidding system. By providing these
resources as well as the resources discussed below, the Commission
expects small entities that 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 108 are similar in many respects to
the procedures in recent auctions conducted by the Commission.
112. 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.
113. The Commission has taken steps to minimize any economic impact
of its auction procedures on small entities through, among other
things, the Commission's potential use of a single bidding round and a
pay-as-bid pricing rule. The Commission expects that many small
entities will bid in Auction 108 and the use of a single-round auction
would significantly reduce the time and resource commitment required
for participation, if adopted. Due to the large inventory of licenses
that will be available in Auction 108, the multiple-round auction
format that the Commission has typically used in auctioning spectrum
licenses could require several months to complete and require
participating bidders to expend resources to consistently monitor the
auction during that time. In contrast, the Commission anticipates that
with a single bidding round, bid processing for Auction 108 could be
completed within a week. In addition, the use of a pay-as-bid pricing
rule, which requires each winning bidder to pay the sum of its winning
bid amounts for the licenses it is awarded, less any applicable bidding
credit discount, should also benefit small entities by giving them more
certainty about the costs of their winning bids.
114. In the event the Commission adopts the SMR auction format, it
has also taken steps to minimize any economic impact of its auction
procedures on small entities through, among other things, the many
resources the Commission provides potential auction participants. OEA
and WTB propose to make resources available to assist applicants in
conducting due diligence research regarding potential encumbrances in
the band prior to the release of the public notice announcing the final
auction inventory. Small entities and other auction participants 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.
115. 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 108,
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 108 applicants, including small entities, thereby lowering
their administrative costs to comply with the Commission's competitive
bidding rules.
116. Prior to the start of bidding, the Commission also proposes to
make available to bidders various educational materials. Eligible
bidders will be 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 108 electronically
over the internet using a 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 108 by all eligible bidders and may result in significant cost
savings for small 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.
117. For Auction 108, the Commission proposes a $25 million cap on
the total bidding credit amount that may be awarded to an eligible
small business and a $10 million cap on the total bidding credit amount
that may be
[[Page 12161]]
awarded to a rural service provider. In addition, the Commission
proposes a $10 million cap on the overall amount of bidding credits
that any winning small business bidder may apply to licenses won in
counties located within any PEA with a population of 500,000 or less.
Based on the technical characteristics of the 2.5 GHz band and its
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.
118. These proposed procedures for the conduct of Auction 108
constitute the more specific implementation of the competitive bidding
rules contemplated by parts 1 and 30 of the Commission's rules, 47 CFR
parts 1 and 30, the 2.5 GHz Report and Order, and relevant competitive
bidding orders, and are fully consistent therewith.
119. Federal Rules that May Duplicate, Overlap, or Conflict with
the Proposed Rules. None.
B. Paperwork Reduction Act Analysis
120. The Auction 108 Comment Public Notice contains proposed new
information collection requirements. The Commission, as part of its
continuing effort to reduce paperwork burdens, invites the general
public and the Office of Management and Budget (OMB) to comment on the
information collection requirements contained in this document, as
required by the Paperwork Reduction Act of 1995, Public Law 104-13. In
addition, pursuant to the Small Business Paperwork Relief Act of 2002,
Public Law 107-198, 44 U.S.C. 3506(c)(4), the Commission seeks specific
comment on how it might further reduce the information collection
burden for small business concerns with fewer than 25 employees.
C. Deadlines and Filing Procedures
121. Pursuant to 47 CFR 1.415, 1.419, interested parties may file
comments or reply comments on or before the dates indicated on the
first page of the Auction 108 Comment Public Notice in AU Docket No.
20-429. Comments may be filed using the Commission's Electronic Comment
Filing System (ECFS) or by filing paper copies.
122. Ex Parte Requirements. 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 47 CFR 1.1206(b). In proceedings governed by
47 CFR 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.
Marlene Dortch,
Secretary.
[FR Doc. 2021-03442 Filed 3-1-21; 8:45 am]
BILLING CODE 6712-01-P
