*Pages 1--15 from Microsoft Word - 22788.doc* PUBLIC NOTICE FEDERAL COMMUNICATIONS COMMISSION 445 12th STREET SW WASHINGTON DC 20554 DA 02- 1441 November 7, 2002 AUCTION OF LICENSES FOR THE LOWER AND UPPER PAGING BANDS SCHEDULED FOR MAY 13, 2003 COMMENT SOUGHT ON RESERVE PRICES OR MINIMUM OPENING BIDS AND OTHER AUCTION PROCEDURES Report No. AUC- 02- 48- A (Auction No. 48) By this Public Notice, the Wireless Telecommunications Bureau (“ Bureau”) announces the auction of 8,874 licenses in the lower paging bands (35- 36 MHz, 43- 44 MHz, 152- 159 MHz, 454- 460 MHz) and 1,328 licenses in the upper paging bands (929- 931 MHz) scheduled to commence on May 13, 2003 (“ Auction No. 48”). 1 This auction will include licenses that remained unsold from a previous auction or were defaulted on by a winning bidder in a previous auction. Due to the large volume of licenses in Auction No. 48, the complete list of licenses available for this auction will be provided in electronic format only, available as “Attachment A” to this Public Notice at http:// wireless. fcc. gov/ auctions/ 48/. In the Paging Reconsideration Order, the Commission concluded that the lower bands licenses should be awarded in each of the 175 geographic areas known as Economic Areas (EAs), and the upper band licenses should be awarded in each of the 51 geographic areas known as Major Economic Areas (MEAs). 2 These EAs and MEAs both encompass the United States, Guam and Northern Mariana Islands, Puerto Rico and the United States Virgin Islands, and American Samoa. 1 See Revision of Part 22 and Part 90 of the Commission’s Rules to Facilitate Future Development of Paging Systems, Implementation of Section 309( j) of the Communications Act – Competitive Bidding, WT Docket No. 96- 18, PR Docket No. 93- 253, Memorandum Opinion and Order on Reconsideration and Third Report and Order, 14 FCC Rcd 10030 (1999) (“ Paging Reconsideration Order”). 2 See Paging Reconsideration Order, 14 FCC Rcd at 10043- 46, ¶¶ 14- 21. News Media Information: (202) 418- 0500 Fax- On- Demand: (202) 418- 2830 Internet: http:// www. fcc. gov ftp. fcc. gov 1 2 The following tables contain the Block/ Frequency Cross- Reference List for the paging bands: 35 MHz Lower Bands Unpaired Paging Channels Block (License Suffix) Frequency Block (License Suffix) Frequency Block (License Suffix) Frequency Block (License Suffix) Frequency CA 35.19 - 35. 21 CE 35.29 - 35. 31 CI 35.45 - 35. 47 CM 35.57 - 35. 59 CB 35.21 - 35. 23 CF 35.33 - 35. 35 CJ 35.49 - 35. 51 CN 35.59 - 35. 61 CC 35.23 - 35. 25 CG 35.37 - 35. 39 CK 35.53 - 35. 55 CO 35.61- 35.63 CD 35.25 - 35. 27 CH 35.41- 35.43 CL 35.55 - 35. 57 CP 35.65 - 35. 67 43 MHz Lower Bands Unpaired Paging Channels Block (License Suffix) Frequency Block (License Suffix) Frequency Block (License Suffix) Frequency Block (License Suffix) Frequency DA 43.19 - 43. 21 DE 43.29 - 43. 31 DI 43.45 - 43. 47 DM 43.57 - 43. 59 DB 43.21 - 43. 23 DF 43.33 - 43. 35 DJ 43.49 - 43. 51 DN 43.59 - 43. 61 DC 43.23 - 43. 25 DG 43.37 - 43. 39 DK 43.53 - 43. 55 DO 43.61 - 43. 63 DD 43.25 - 43. 27 DH 43.41 - 43. 43 DL 43.55 - 43. 57 DP 43.65 - 43. 67 152 MHz and 158 MHz Lower Bands Unpaired Paging Channels Block (License Suffix) Frequency Block (License Suffix) Frequency EA 152.230 - 152.250 EC 158.090 - 158.110 EB 152.830 - 152.850 ED 158.690 - 158.710 152 MHz Lower Bands Paired Paging Channels Block (License Suffix) Frequency Block (License Suffix) Frequency FA 152.015- 152.045 / 158. 475- 158.505 FJ 152.555- 152.585 / 157. 815- 157.845 FB 152.045- 152.075 / 158. 505- 158.535 FK 152.585- 152.615 / 157. 845- 157.875 FC 152.075- 152.105 / 158. 535- 158.565 FL 152.615- 152.645 / 157. 875- 157.905 FD 152.105- 152.135 / 158. 565- 158.595 FM 152.645- 152.675 / 157. 905- 157.935 FE 152.135- 152.165 / 158. 595- 158.625 FN 152.675- 152.705 / 157. 935- 157.965 FF 152.165- 152.195 / 158. 625- 158.655 FO 152.705- 152.735 / 157. 965- 157.995 FG 152.195- 152.225 / 158. 655- 158.685 FP 152.735- 152.765 / 157. 995- 158.025 FH 152.495- 152.525 / 157. 755- 157.785 FQ 152.765- 152.795 / 158. 025- 158.055 FI 152.525- 152.555 / 157. 785- 157.815 FR 152.795- 152.825 / 158. 055- 158.085 2 3 454 MHz Lower Bands Paired Paging Channels Block (License Suffix) Frequency Block (License Suffix) Frequency GA 454.0125- 454.0375 / 459.0125- 459.0375 GN 454.3375- 454.3625 / 459.3375- 459.3625 GB 454.0375- 454.0625 / 459.0375- 459.0625 GO 454.3625- 454.3875 / 459.3625- 459.3875 GC 454.0625- 454.0875 / 459.0625- 459.0875 GP 454.3875- 454.4125 / 459.3875- 459.4125 GD 454.0875- 454.1125 / 459.0875- 459.1125 GQ 454.4125- 454.4375 / 459.4125- 459.4375 GE 454.1125- 454.1375 / 459.1125- 459.1375 GR 454.4375- 454.4625 / 459.4375- 459.4625 GF 454.1375- 454.1625 / 459.1375- 459.1625 GS 454.4625- 454.4875 / 459.4625- 459.4875 GG 454.1625- 454.1875 / 459.1625- 459.1875 GT 454.4875- 454.5125 / 459.4875- 459- 5125 GH 454.1875- 454.2125 / 459.1875- 459.2125 GU 454.5125- 454.5375 / 459.5125- 459.5375 GI 454.2125- 454.2375 / 459.2125- 459.2375 GV 454.5375- 454.5625 / 459.5375- 459.5625 GJ 454.2375- 454.2625 / 459.2375- 459.2625 GW 454.5625- 454.5875 / 459.5625- 459.5875 GK 454.2625- 454.2875 / 459.2625- 459.2875 GX 454.5875- 454.6125 / 459.5875- 459.6125 GL 454.2875- 454.3125 / 459.2875- 459.3125 GY 454.6125- 454.6375 / 459.6125- 459.6375 GM 454.3125- 454.3375 / 459.3125- 454.3375 GZ 454.6375- 454.6625 / 459.6375- 459.6625 929- 931 MHz Upper Bands Paging Channels Block (License Suffix) Frequency Block (License Suffix) Frequency Block (License Suffix) Frequency Block (License Suffix) Frequency A 929.0125 AA 931.0125 AN 931.3375 BA 931.6625 B 929.1125 AB 931.0375 AO 931.3625 BB 931.6875 C 929.2375 AC 931.0625 AP 931.3875 BC 931.7125 D 929.3125 AD 931.0875 AQ 931.4125 BD 931.7375 E 929.3875 AE 931.1125 AR 931.4375 BE 931.7625 F 929.4375 AF 931.1375 AS 931.4625 BF 931.7875 G 929.4625 AG 931.1625 AT 931.4875 BG 931.8125 H 929.6375 AH 931.1875 AU 931.5125 BH 931.8375 I 929.6875 AI 931.2125 AV 931.5375 BI 931.8625 J 929.7875 AJ 931.2375 AW 931.5625 BJ 931.9625 K 929.9125 AK 931.2625 AX 931.5875 BK 931.9875 L 929.9625 AL 931.2875 AY 931.6125 AM 931.3125 AZ 931.6375 Note: For Auction No. 48, licenses are not available in every block listed in the above tables. The complete list of licenses available for Auction No. 48 will be provided in electronic format only, available as “Attachment A” to this Public Notice at http:// wireless. fcc. gov/ auctions/ 48/. 3 4 The Balanced Budget Act of 1997 requires the Commission to “ensure that, in the scheduling of any competitive bidding under this subsection, an adequate period is allowed . . . before issuance of bidding rules, to permit notice and comment on proposed auction procedures . . . .” 3 Consistent with the provisions of the Balanced Budget Act and to ensure that potential bidders have adequate time to familiarize themselves with the specific rules that will govern the day- to- day conduct of an auction, the Commission directed the Bureau, under its existing delegated authority, 4 to seek comment on a variety of auction- specific procedures prior to the start of each auction. 5 We therefore seek comment on the following issues relating to Auction No. 48. I. Auction Structure A. Simultaneous Multiple Round (SMR) Auction Design We propose to award the licenses included in Auction No. 48 in a simultaneous multiple- round auction. As described further below, this methodology offers every license for bid at the same time with successive bidding rounds in which bidders may place bids. We seek comment on this proposal. B. Upfront Payments and Initial Maximum Eligibility The Bureau has been delegated authority and discretion to determine an appropriate upfront payment for each license being auctioned, taking into account such factors as the population in each geographic license area, and the value of similar spectrum. 6 As described further below, the upfront payment is a refundable deposit made by each bidder to establish eligibility to bid on licenses. Upfront payments related to the specific spectrum subject to auction 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 the auction. 7 3 See 47 USC § 309( j) (as amended by Section 3002( a)( E)( i), Balanced Budget Act of 1997, Pub. L. 105- 33, 111 Stat. 251 (1997) (“ Balanced Budget Act”)). 4 See Amendment of Part 1 of the Commission’s Rules — Competitive Bidding Proceeding, WT Docket No. 97- 82, Order, Memorandum Opinion and Order, and Notice of Proposed Rule Making, 12 FCC Rcd 5686, 5697- 98, ¶ 16 (1997) (“ Part 1 Order”) (“ We also clarify that pursuant to Section 0. 131 of our rules, the Chief, Wireless Telecommunications Bureau, has delegated authority to implement all of the Commission’s rules pertaining to auctions procedures.”). 5 See Amendment of Part 1 of the Commission’s Rules — Competitive Bidding Procedures, Allocation of Spectrum Below 5 GHz Transferred from Federal Government Use, 4660- 4685 MHz, WT Docket No. 97- 82, ET Docket No. 94- 32, Third Report and Order and Second Further Notice of Proposed Rule Making, 13 FCC Rcd 374, 448, ¶ 124 (1998) (“ Part 1 Third Report and Order”). The Commission directed the Bureau to seek comment on specific mechanisms related to day- to- day auction conduct including, for example, the structure of bidding rounds and stages, establishment of minimum opening bids or reserve prices, minimum accepted bids, initial maximum eligibility for each bidder, activity requirements for each stage of the auction, activity rule waivers, criteria for determining reductions in eligibility, information regarding bid withdrawal and bid removal, stopping rules, and information relating to auction delay, suspension or cancellation. Id. at ¶ 125. 6 See Part 1 Order, 12 FCC Rcd at 5697- 98, ¶ 16; see also Part I Third Report and Order, 13 FCC Rcd at 425, ¶ 86. 7 See Implementation of Section 309( j) of the Communications Act - Competitive Bidding, PP Docket No. 93- 253, Second Report and Order, 9 FCC Rcd 2348, 2378- 79, ¶¶ 171- 176 (1994) (“ Competitive Bidding Second Report and Order”). 4 5 For Auction No. 48, we propose to make the upfront payments equal to the minimum opening bids, which are established based on similar facts as described in section II. B., below. The specific upfront payments for each license are set forth in the list of licenses available for Auction No. 48 (“ Attachment A”), available with this public notice at http:// wireless. fcc. gov/ auctions/ 48/. We seek comment on this proposal. We further propose that the amount of the upfront payment submitted by a bidder will determine the number of bidding units on which a bidder may place bids. This limit is a bidder’s “maximum initial eligibility.” Each license is assigned a specific number of bidding units equal to the upfront payment, listed in the license inventory available for Auction No. 48 (“ Attachment A”), available with this public notice at http:// wireless. fcc. gov/ auctions/ 48/, on a bidding unit per dollar basis. This number does not change as prices rise during the auction. A bidder’s upfront payment is not attributed to specific licenses. Rather, a bidder may place bids on any combination of licenses as long as the total number of bidding units associated with those licenses does not exceed its maximum initial eligibility. Eligibility cannot be increased during the auction. Thus, in calculating its upfront payment amount, an applicant must determine the maximum number of bidding units it may wish to bid on (or hold high bids on) in any single round, and submit an upfront payment covering that number of bidding units. We seek comment on this proposal. C. Activity Rules In order to ensure that the auction closes within a reasonable period of time, an activity rule requires bidders to bid actively on a percentage of their maximum bidding eligibility during each round of the auction rather than wait until the end to participate. A bidder that does not satisfy the activity rule will either lose bidding eligibility in the next round or must use an activity rule waiver (if any remain). We propose to divide the auction into three stages, each characterized by an increased activity requirement. The auction will start in Stage One. We propose that the auction generally will advance to the next stage (i. e., from Stage One to Stage Two, and from Stage Two to Stage Three) when the auction activity level, as measured by the percentage of bidding units receiving new high bids, is approximately twenty percent or below for three consecutive rounds of bidding. However, we further propose that the Bureau retain the discretion to change stages unilaterally by announcement during the auction. In exercising this discretion, the Bureau will consider a variety of measures of bidder activity, including, but not limited to, the auction activity level, the percentages of licenses (as measured in bidding units) on which there are new bids, 8 the number of new bids, and the percentage increase in revenue. We seek comment on these proposals. For Auction No. 48, we propose the following activity requirements: Stage One: In each round of the first stage of the auction, a bidder desiring to maintain its current eligibility is required to be active on licenses representing at least 80 percent of its current bidding eligibility. Failure to maintain the requisite activity level will result in a reduction in the bidder’s 8 For example, when monitoring activity for determining when to change stages, if total upfront payments for the auction do not purchase at least as many bidding units of eligibility as there are bidding units available in the auction, we may consider the percentage of bidding units of the total eligibility receiving new high bids, and not the percentage of bidding units available in the auction receiving new high bids. 5 6 bidding eligibility in the next round of bidding (unless an activity rule waiver is used). During Stage One, reduced eligibility for the next round will be calculated by multiplying the current round activity by five- fourths (5/ 4). Stage Two: In each round of the second stage, a bidder desiring to maintain its current eligibility is required to be active on 90 percent of its current bidding eligibility. During Stage Two, reduced eligibility for the next round will be calculated by multiplying the current round activity by ten-ninths (10/ 9). Stage Three: In each round of the third stage, a bidder desiring to maintain its current eligibility is required to be active on 98 percent of its current bidding eligibility. In this final stage, reduced eligibility for the next round will be calculated by multiplying the current round activity by fifty/ forty- ninths (50/ 49). We seek comment on these proposals. Commenters that believe these activity rules should be modified should explain their reasoning and comment on the desirability of an alternative approach. Commenters are advised to support their claims with analyses and suggested alternative activity rules. D. Activity Rule Waivers and Reducing Eligibility Use of an activity rule waiver preserves the bidder’s current bidding eligibility despite the bidder’s activity in the current round being below the required minimum level. An activity rule waiver applies to an entire round of bidding and not to a particular license. Activity waivers can be either proactive or automatic and are principally a mechanism for auction participants to avoid the loss of auction eligibility in the event that exigent circumstances prevent them from placing a bid in a particular round. Note: Once a proactive waiver is placed during a round, that waiver cannot be unsubmitted. The FCC Automated Auction System assumes that bidders with insufficient activity would prefer to use an activity rule waiver (if available) rather than lose bidding eligibility. Therefore, the system will automatically apply a waiver (known as an “automatic waiver”) at the end of any bidding period where a bidder’s activity level is below the minimum required unless: (1) there are no activity rule waivers available; or (2) the bidder overrides the automatic application of a waiver by reducing eligibility, thereby meeting the minimum requirements. Note: If a bidder has no waivers remaining and does not satisfy the required activity level, its current eligibility will be permanently reduced, possibly eliminating the bidder from the auction. A bidder with insufficient activity may wish to reduce its bidding eligibility rather than use an activity rule waiver. If so, the bidder must affirmatively override the automatic waiver mechanism during the bidding period by using the reduce eligibility function in the bidding system. In this case, the bidder’s eligibility is permanently reduced to bring the bidder into compliance with the activity rules as described above. Once eligibility has been reduced, a bidder will not be permitted to regain its lost bidding eligibility. A bidder may proactively use an activity rule waiver as a means to keep the auction open without placing a bid. If a bidder submits a proactive waiver (using the proactive waiver function in the bidding system) during a bidding period in which no bids or withdrawals are submitted, the 6 7 auction will remain open and the bidder’s eligibility will be preserved. An automatic waiver invoked in a round in which there are no new valid bids or withdrawals will not keep the auction open. We propose that each bidder in Auction No. 48 be provided with five activity rule waivers that may be used at the bidder’s discretion during the course of the auction as set forth above. We seek comment on this proposal. E. Information Relating to Auction Delay, Suspension, or Cancellation For Auction No. 48, we propose that, by public notice or by announcement during the auction, the Bureau may delay, suspend, or cancel the auction in the event of natural disaster, technical obstacle, evidence of an auction security breach, unlawful bidding activity, administrative or weather necessity, or for any other reason that affects the fair and efficient conduct of competitive bidding. 9 In such cases, the Bureau, in its sole discretion, may elect to resume the auction starting from the beginning of the current round, resume the auction starting from some previous round, or cancel the auction in its entirety. Network interruption may cause the Bureau to delay or suspend the auction. We emphasize that exercise of this authority is solely within the discretion of the Bureau, and its use is not intended to be a substitute for situations in which bidders may wish to apply their activity rule waivers. We seek comment on this proposal. F. Information Available to Bidders During the Course of the Auction In the Paging Second Report and Order, the Commission concluded that, due to the large number of licenses to be auctioned, limiting the disclosure of information to bidders during the course of paging auctions (e. g., revealing only high bids and total number of bids on each license and withholding bidder identities) might help to speed the pace of the auctions. 10 In the Paging Reconsideration Order, the Commission directed the Bureau to seek further comment on this issue. Based on its experience in Auctions No. 26 and No. 40, in which the information was disclosed, the Bureau tentatively concludes that it is unnecessary to withhold bidder identities in Auction No. 48. We seek comment on this tentative conclusion. In addition, as in Auctions No. 26 and No. 40, we propose to disclose all information relating to the bids during Auction No. 48 after each round of bidding closes, including all bids and withdrawals placed in each round, the identity of the bidder placing each bid or withdrawal, and the net and gross amounts of each bid or withdrawal. We seek comment on this proposal. 9 See 47 C. F. R. § 1.2104( i). 10 Revision of Part 22 and Part 90 of the Commission’s Rules to Facilitate Future Development of Paging Systems, Second Report and Order and Further Notice of Proposed Rulemaking, 12 FCC Rcd 2732, 2786, ¶ 106 (1997) (“ Paging Second Report and Order”). 7 8 II. Bidding Procedures A. Round Structure The Commission will conduct Auction No. 48 over the Internet. Telephonic Bidding will also be available. As a contingency, the FCC Wide Area Network, will be available as well. The telephone number through which the backup FCC Wide Area Network may be accessed will be announced in a later public notice. Full information regarding how to establish such a connection, and related charges, will be provided in the public notice announcing details of auction procedures. The initial bidding schedule will be announced in a public notice to be released at least one week before the start of the auction, and will be included in the registration mailings. The simultaneous multiple round format will consist of sequential bidding rounds, each followed by the release of round results. Details regarding the location and format of round results will be included in the same public notice. The Bureau has 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. The Bureau may increase or decrease the amount of time for the bidding rounds and review periods, or the number of rounds per day, depending upon the bidding activity level and other factors. We seek comment on this proposal. B. Reserve Price or Minimum Opening Bid The Balanced Budget Act calls upon the Commission to prescribe methods for establishing a reasonable reserve price or a minimum opening bid when FCC licenses are subject to auction, unless the Commission determines that a reserve price or minimum opening bid is not in the public interest. 11 Consistent with this mandate, the Commission has directed the Bureau to seek comment on the use of a minimum opening bid and/ or reserve price prior to the start of each auction. 12 Normally, a reserve price is an absolute minimum price below which an item will not be sold in a given auction. Reserve prices can be either published or unpublished. A minimum opening bid, on the other hand, is the minimum bid price set at the beginning of the auction below which no bids are accepted. It is generally used to accelerate the competitive bidding process. Also, the auctioneer often has the discretion to lower the minimum opening bid amount later in the auction. It is also possible for the minimum opening bid and the reserve price to be the same amount. 11 See 47 U. S. C. § 309( j) (as amended by Balanced Budget Act, Section 3002( a)). The Commission’s authority to establish a reserve price or minimum opening bid is set forth in 47 C. F. R. § 1.2104( c) and (d). 12 See Part 1 Third Report and Order, 13 FCC Rcd at 454- 455, ¶ 141. 8 9 In light of the Balanced Budget Act’s requirements, the Bureau proposes to establish minimum opening bids for Auction No. 48. The Bureau believes a minimum opening bid, which has been utilized in other auctions, is an effective auction tool. 13 Because multiple licenses in the same geographic area are being auctioned at the same time, under the same general conditions, the Commission believes that it is appropriate to use a common baseline to establish the minimum opening bid formula for all the licenses in the auction. The gross high bids from the prior Lower and Upper Paging Bands Auction (Auction No. 40) provide the most comprehensive paging baseline. Therefore, we propose to base the minimum opening bid for each license available in Auction No. 48 on the average of the corresponding gross high bids received in Auction No. 40, as follows: € For a license being auctioned by MEA, the minimum opening bid will be 20% of the average gross high bid received in Auction No. 40 in the same MEA. € For a license being auctioned by EA, the minimum opening bid will be 20% of the average gross high bid received in Auction No. 40 in the same EA. The Commission will set a “floor” for minimum opening bids at $500 for licenses in both the upper paging bands (929- 931 MHz) and the lower paging bands (35- 36 MHz, 43- 44 MHz, 152- 159 MHz, and 454- 460 MHz). This formula is intended to apply to all geographic paging licenses in Auction No. 48, and takes into account considerations discussed above. The specific proposed minimum opening bid for each license available in Auction No. 48 is set forth in the list of licenses provided in electronic format as “Attachment A” to this Public Notice at http:// wireless. fcc. gov/ auctions/ 48/. Comment is sought on this proposal. If commenters believe that these minimum opening bids will result in substantial numbers of unsold licenses, or are not reasonable amounts, or should instead operate as reserve prices, they should explain why this is so, and comment on the desirability of an alternative approach. Commenters are advised to support their claims with valuation analyses and suggested reserve prices or minimum opening bid levels or formulas. In establishing the minimum opening bids, we particularly seek comment on such factors as the amount of spectrum being auctioned, levels of incumbency, the availability of technology to provide service, the size of the geographic service areas, issues of interference with other spectrum bands and any other relevant factors that could reasonably have an impact on valuation of the paging bands. Alternatively, comment is sought on whether, consistent with the Balanced Budget Act, the public interest would be served by having no minimum opening bid or reserve price. 13 See, e. g., Auction of 800 MHz SMR Upper 10 MHz Band, Minimum Opening Bids or Reserve Prices, Order, 12 FCC Rcd 16354 (1997); Auction of the Phase II 220 MHz Service Licenses, Auction Notice and Filing Requirements for 908 Licenses Consisting of Economic Area (EA), Economic Area Grouping (EAG), and Nationwide Licenses, Scheduled for September 15, 1998, Minimum Opening Bids and Other Procedural Issues, Public Notice, 13 FCC Rcd 16445 (1998). 9 10 C. Minimum Acceptable Bids and Bid Increments In each round, eligible bidders will be able to place bids on a given license in any of nine different amounts. 14 The Automated Auction System interface will list the nine acceptable bid amounts for each license. Until a bid has been placed on a license, the minimum acceptable bid for that license will be equal to its minimum opening bid. In the rounds after an acceptable bid is placed on a license, the minimum acceptable bid for that license will be equal to the standing high bid plus the defined increment. For Auction No. 48, we propose to set the defined increment for each license based on a percentage of the standing high bid on the license or, if no bid has been placed on the license, a percentage of the minimum opening bid for the license. The defined increment will be calculated as follows. Presuming, for example, that the percentage being used is 20 percent, we will multiply the standing high bid (or, if no standing high bid exists for the particular license, the minimum opening bid) by 1.2. (If the percentage being used is 30 percent, we would multiply by 1.3, etc.) The product will be rounded as follows: amounts below $1,000 will be rounded to the nearest $10; amounts above $1,000 but below $10,000 will be rounded to the nearest $100; and amounts above $10,000 will be rounded to the nearest $1,000. The defined increment then will be determined by subtracting the standing high bid (or, if applicable, the minimum opening bid) from the rounded result. At the start of the auction, we propose to use 20 percent to calculate the defined increment. We also propose to retain discretion to change the percentage used to calculate the defined increment if we determine that circumstances so dictate. Further, we propose to retain discretion to set a floor for the increment used to calculate the minimum acceptable bid at an absolute dollar amount. 15 In addition, we propose that the Bureau have discretion to use a smaller defined increment to calculate acceptable bids higher than the minimum acceptable bid. The smaller defined increment would be calculated using a smaller percentage than the percentage used to calculate the defined increment that sets the minimum acceptable bid. For example, 20 percent might be used to calculate the defined increment for the minimum acceptable bid and 10 percent might be used to calculate the smaller defined increment used to calculate higher acceptable bids. In all other respects, the smaller defined increment would be calculated in exactly the manner described above for the initial defined increment, including rounding. 14 Bidders must have sufficient eligibility to place a bid on the particular license. See Section I. B. “Upfront Payments and Initial Maximum Eligibility,” supra. 15 Bids higher than the minimum acceptable bid would be calculated using the current percentage, even if the resulting increment is less than the absolute dollar amount imposed on the initial increment. 10 11 For example, the Bureau could calculate bids using 20 percent to calculate the defined increment for the minimum acceptable bid and 10 percent to calculate the smaller defined increment. Assuming that the standing high bid on a given license is $50,000, in the next round, Defined Increment = Rounded( Standing High Bid * 1.2) – Standing High Bid = Rounded($ 50,000 * 1.2) – $50,000 = Rounded($ 60,000) – $50,000 = $60,000 – $50,000 = $10,000 Minimum Acceptable Bid = Standing High Bid + Defined Increment = $50,000 + $10,000 = $60,000 Smaller Defined Increment = Rounded( Standing High Bid * 1.1) – Standing High Bid = Rounded($ 50,000 * 1.1) – $50,000 = Rounded($ 55,000) – $50,000 = $55,000 – $50,000 = $5,000 One Increment Higher Than Minimum Acceptable Bid = Minimum Acceptable Bid + (Smaller Defined Increment * 1) = $60,000 + ($ 5,000 * 1) = $60,000 + $5,000 = $65,000 Two Increments Higher Than Minimum Acceptable Bid = Minimum Acceptable Bid + (Smaller Defined Increment * 2) = $60,000 + ($ 5,000 * 2) = $60,000 + $10,000 = $70,000 11 12 This procedure would enable bidders unwilling to raise the standing high bid by twice the defined increment to place bids higher than the minimum acceptable bid. Thus, in the above example, a bidder wanting to bid above the minimum acceptable bid but unwilling to raise the standing high bid of $50,000 by twice the defined increment of $10,000 ($ 20,000 or 40 percent) would have the flexibility to bid $65,000, raising the standing high bid by $15,000. In the case of a license for which the standing high bid has been withdrawn, 16 the minimum acceptable bid will equal the second highest bid received for the license. The additional bid amounts are calculated using the defined increment, as stated above. In summary, we propose the Bureau have discretion at any time during the auction to change the initial 20 percent used to calculate the defined increment and/ or to set an absolute dollar amount floor for the increment used to calculate the minimum acceptable bid. We also propose that the Bureau have additional discretion to calculate the minimum acceptable bid using one percentage and to calculate higher acceptable bids using another percentage, as described above. The Bureau’s decision to exercise its discretion with regard to minimum acceptable bids and bid increments would be announced via the Automated Auction System. We seek comment on these proposals. D. High Bids At the end of a bidding round, the high bids will be determined based on the highest gross bid amount received for each license. In the event of identical high bids on a license in a given round (i. e., tied bids), we propose to use a random number generator to select a high bid from among the tied bids. The remaining bidders, as well as the high bidder, will be able to submit a higher bid in a subsequent round. If no bidder submits a higher bid in a subsequent round, the high bid from the previous round will win the license. If any bids are received on the license in a subsequent round, the high bid will again be determined on the highest gross bid amount received for the license. We seek comment on this proposal. A high bid will remain the high bid until there is a higher bid on the same license at the close of a subsequent round. A high bid from a previous round is sometimes referred to as a “standing high bid.” Bidders are reminded that standing high bids confer activity credit. 17 E. Information Regarding Bid Withdrawal and Bid Removal For Auction No. 48, we propose the following bid removal and bid withdrawal procedures. Before the close of a bidding period, a bidder has the option of removing any bid placed in that round. By using the remove selected bids function in the bidding system, a bidder may effectively “unsubmit” any bid placed within that round. A bidder removing a bid placed in the same round is not subject to a withdrawal payment. Once a round closes, a bidder may no longer remove a bid. A high bidder may withdraw its standing high bids from previous rounds using the withdrawal function in the bidding system. A high bidder that withdraws its standing high bid from a 16 See Section II. E. “Information Regarding Bid Withdrawal and Bid Removal,” supra. 17 See Section I. C. “Activity Rules,” supra. 12 13 previous round is subject to the bid withdrawal payment provisions of the Commission rules. 18 We seek comment on these bid removal and bid withdrawal procedures. In the Part 1 Third Report and Order, the Commission explained that allowing bid withdrawals facilitates efficient aggregation of licenses and the pursuit of efficient backup strategies as information becomes available during the course of an auction. The Commission noted, however, that, in some instances, bidders may seek to withdraw bids for improper reasons. The Bureau, therefore, has discretion, in managing the auction, to limit the number of withdrawals to prevent any bidding abuses. The Commission stated that the Bureau should assertively exercise its discretion, consider limiting the number of rounds in which bidders may withdraw bids, and prevent bidders from bidding on a particular market if the Bureau finds that a bidder is abusing the Commission’s bid withdrawal procedures. 19 Applying this reasoning, we propose to limit each bidder in Auction No. 48 to withdrawing standing high 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 would likely encourage insincere bidding or the use of withdrawals for anti- competitive purposes. The two rounds in which withdrawals are utilized will be at the bidder’s discretion; withdrawals otherwise must be in accordance with the Commission’s rules. There is no limit on the number of standing high bids that may be withdrawn in either of the rounds in which withdrawals are utilized. Withdrawals will remain subject to the bid withdrawal payment provisions specified in the Commission’s rules. We seek comment on this proposal. F. Stopping Rule The Bureau has discretion “to establish stopping rules before or during multiple round auctions in order to terminate the auction within a reasonable time.” 20 For Auction No. 48, the Bureau proposes to employ a simultaneous stopping rule approach. A simultaneous stopping rule means that all licenses remain open until bidding closes simultaneously on all licenses. Bidding will close simultaneously on all licenses after the first round in which no new acceptable bids, proactive waivers, or withdrawals are received. Thus, unless circumstances dictate otherwise, bidding will remain open on all licenses until bidding stops on every license. However, the Bureau proposes to retain the discretion to exercise any of the following options during Auction No. 48: 1. Utilize a modified version of the simultaneous stopping rule. The modified stopping rule would close the auction for all licenses after the first round in which no bidder submits a proactive waiver, withdrawal, or a new bid on any license on which it is not the standing high bidder. Thus, absent any other bidding activity, a bidder placing a new bid on a license for which it is the standing high bidder would not keep the auction open under this modified stopping rule. The 18 See 47 C. F. R. §§ 1.2104( g), 1. 2109. 19 Part 1 Third Report and Order, 13 FCC Rcd at 460, ¶ 150. 20 See 47 C. F. R. § 1.2104( e). 13 14 Bureau further seeks comment on whether this modified stopping rule should be used at any time or only in stage three of the auction. 2. Keep the auction open even if no new acceptable bids or proactive waivers are submitted and no previous high bids are withdrawn. In this event, the effect will be the same as if a bidder had submitted a proactive waiver. The activity rule, therefore, will apply as usual, and a bidder with insufficient activity will either lose bidding eligibility or use a remaining activity rule waiver. 3. Declare that the auction will end after a specified number of additional rounds (“ special stopping rule”). If the Bureau invokes this special stopping rule, it will accept bids in the specified final round( s) only for licenses on which the high bid increased in at least one of a specified preceding number of rounds. The Bureau proposes to exercise these options only in certain circumstances, such as, for example, where the auction is proceeding very slowly, there is minimal overall bidding activity, or it appears likely that the auction will not close within a reasonable period of time. Before exercising these options, the Bureau is likely to attempt to increase the pace of the auction by, for example, increasing the number of bidding rounds per day, and/ or increasing the amount of the minimum bid increments for the limited number of licenses where there is still a high level of bidding activity. We seek comment on these proposals. III. Conclusion Comments are due on or before November 20, 2002, and reply comments are due on or before November 27, 2002. Because of the disruption of regular mail and other deliveries in Washington, DC, the Bureau requires that all comments and reply comments be filed electronically. Comments and reply comments must be sent by electronic mail to the following address: auction48@ fcc. gov. 21 The electronic mail containing the comments or reply comments must include a subject or caption referring to Auction No. 48 Comments. The Bureau requests that parties format any attachments to electronic mail as Adobe ® Acrobat ® (pdf) or Microsoft ® Word documents. Copies of comments and reply comments will be available for public inspection during regular business hours in the FCC Public Reference Room, Room CY- A257, 445 12th Street, SW, Washington, DC 20554. In addition, the Bureau requests that commenters fax a courtesy copy of their comments and reply comments to the attention of Kathryn Garland at (717) 338- 2850. This proceeding has been designated as a “permit- but- disclose” proceeding in accordance with the Commission’s ex parte rules. 22 Persons making oral ex parte presentations are reminded that memoranda summarizing the presentations must contain summaries of the substance of the presentations and not merely a listing of the subjects discussed. More than a one or two sentence description of the views and arguments presented is generally required. 23 21 Comments and reply comments in response to this Public Notice may not be filed using the Commission’s Electronic Comment Filing System, which is used for the Commission’s docketed rule making proceedings. 22 47 C. F. R. §§ 1.1200( a), 1. 1206. 23 See 47 C. F. R. § 1.1206( b). 14 15 Other rules pertaining to oral and written ex parte presentations in permit- but- disclose proceedings are set forth in Section 1.1206( b) of the Commission’s rules. 24 For further information concerning this proceeding, contact the Auctions and Industry Analysis Division, Wireless Telecommunications Bureau, as listed below: For legal questions: Rosemary Cabral at (202) 418- 0660 For general auction questions: Roy Knowles at (717) 338- 2888 Barbara Sibert at (717) 338- 2888 For service rule questions: Bettye Woodward at (202) 418- 1345 – FCC – 24 Id. 15