DA 07-3415

August 17, 2007

**AUCTION OF 700 MHz BAND LICENSES SCHEDULED FOR JANUARY 16, 2008**

**COMMENT SOUGHT ON COMPETITIVE BIDDING PROCEDURES FOR**

**AUCTION 73**

AU Docket No. 07-157

Comments Due: August 31, 2007 Reply Comments Due: September 7, 2007

Report No. AUC-07-73-A (Auction 73)

Table of Contents

Heading Paragraph \#

I. Introduction and summary 1

II\. Background 4

III\. LICENSES TO BE OFFERED IN AUCTION 73 9

IV\. BUREAU SEEKS COMMENT ON AUCTION PROCEDURES 13

A. Auction Design 14

1\. Anonymous Bidding 14

2\. SMR Auction with Package Bidding on C Block Licenses 17

a\. Previous Commission Package Bidding Designs 19

b\. SMR-HPB Auction Format 21

B. Auction Structure 25

1\. Round Structure 25

2\. Stopping Rule 28

3\. Information Relating to Auction Delay, Suspension, or Cancellation
31

C. Bidding Procedures 32

1\. Upfront Payments and Bidding Eligibility 32

2\. Activity Rule 35

3\. Activity Rule Waivers and Reducing Eligibility 42

4\. Reserve Prices or Minimum Opening Bids 47

a\. Reserve Prices 47

b\. Minimum Opening Bids 56

5\. Bid Amounts 60

6\. Provisionally Winning Bids 70

7\. Bid Removal 76

8\. Bid Withdrawal and Dropped Bids 77

D. Considerations Relating to Certain Post-Auction Payment Rules 85

1\. Apportioning Package Bids 85

2\. Interim Withdrawal Payment Percentage 87

3\. Additional Default Payment Percentage 90

V. Contingent subsequent AUCTION 94

VI\. DEADLINES AND FILING PROCEDURES 104

VII\. Contacts 110

[]{.mark}

ATTACHMENT A: Licenses to Be Auctioned

ATTACHMENT B: Activity-Based Formula to Determine Minimum Acceptable
Bids

ATTACHMENT C: Determining Provisionally Winning Bids and Current Price
Estimates

ATTACHMENT D: Subsequent C Block Licenses to Be Auctioned

# Introduction and summary

1.  By this Public Notice, the Wireless Telecommunications Bureau
    ("Bureau") announces an auction of 1,099 licenses in the 698-806 MHz
    band (herein, the "700 MHz Band").[^1] A complete list of licenses
    available is included as Attachment A of this Public Notice. This
    auction, which is designated as Auction 73, is scheduled to commence
    on January 16, 2008.

2.  Pursuant to governing statutes and Commission rules, the Commission
    will announce final procedures for Auction 73 after considering
    comment provided in response to this Public Notice.[^2] In Auction
    73, the Commission will make available 176 licenses over Economic
    Areas (EAs) in the A Block, 734 licenses over Cellular Market Areas
    (CMAs)[^3] in the B Block, 176 licenses over EAs in the E Block, 12
    licenses over Regional Economic Area Groupings (REAGs) in the C
    Block, and one nationwide license, to be used as part of the 700 MHz
    Public/Private Partnership, in the D Block. In this Public Notice,
    we propose and seek comment on detailed procedures for Auction 73,
    including, among other things, procedures for

-   anonymous bidding, to enhance competition by safeguarding against
    potential anti-competitive auction strategies;

-   applicants trying to combine multiple C Block licenses to place bids
    on packages of those licenses;

-   block-specific aggregate reserve prices, to help assure that the
    public recovers a portion of the licenses' value; and

-   offering licenses for the relevant block(s) in a prompt subsequent
    auction in the event auction results do not satisfy applicable
    reserve prices.

3.  The Commission is offering the licenses in Auction 73 consistent
    with the requirements of the Digital Television Transition and
    Public Safety Act of 2005 ("DTV Act").[^4] Pursuant to the DTV Act
    the Commission must conduct the auction of licenses for recovered
    analog spectrum by commencing the bidding not later than January 28,
    2008.[^5]

# Background

4.  The Commission recently released the *700 MHz Second Report and
    Order*, in which it revised rules governing licenses in the 700 MHz
    Band and, as discussed below, made certain determinations regarding
    the auction of 700 MHz Band licenses.[^6] Parties responding to this
    Public Notice should be familiar with the details of the *700 MHz
    Second Report and Order*. We now propose and seek comment on
    detailed procedures to implement the Commission's determinations and
    generally enable the conduct of Auction 73.

5.  *Anonymous Bidding*. In the *700 MHz Second Report and Order*, the
    Commission found that the public interest would be served if the
    auction for new 700 MHz Band licenses is conducted using anonymous
    (or "limited information") bidding procedures, regardless of any
    pre-auction measurement of likely auction competition. Such
    information procedures are intended to reduce the potential for
    anti-competitive bidding behavior, including bidding activity that
    aims to prevent the entry of new competitors. Having made this
    determination, the Commission directed the Bureau to propose and
    seek comment on more detailed procedures for employing anonymous
    bidding for the upcoming auction. Accordingly, in this Public
    Notice, we seek comment on anonymous bidding procedures for Auction
    73.

6.  *Package Bidding for C Block Licenses But Not for A, B, D, and E
    Block Licenses.* The Commission also determined in the *700 MHz
    Second Report and Order* that providing for package bidding for C
    Block licenses in Auction 73 would serve the public interest. The
    Commission found that package bidding for these licenses should
    facilitate the entry of entities seeking to create a nationwide
    footprint and whose business plans require the economies of scale
    that only can be obtained with nationwide operation. The Commission
    directed the Bureau to propose and seek comment on detailed
    procedures for implementing package bidding for the C Block licenses
    and not for licenses in the other blocks to be auctioned.[^7]

7.  *Block-Specific Aggregate Reserve Prices for Auction 73.* The
    Commission also decided to provide for aggregate reserve prices for
    licenses authorizing the use of each block of the 700 MHz Band. The
    Commission concluded that, consistent with its statutory mandate,
    disclosed reserve prices would promote the recovery of a portion of
    the value of the public spectrum resource. The Commission directed
    the Bureau to adopt aggregate reserve prices reflecting the
    potential market value of this spectrum based on a variety of
    factors including, but not limited to, the characteristics of this
    band and the auction prices of other recently auctioned licenses,
    such as licenses for Advanced Wireless Services in the 1710-1755 MHz
    and 2110-2155 MHz bands ("AWS-1").[^8] Accordingly, we propose to
    adopt the following block-specific aggregate reserve prices: Block
    A, \$1.807380 billion; Block B, \$1.374426 billion; Block C,
    \$4.637854 billion; Block D, \$1.330000 billion; Block E, \$0.903690
    billion. Further, we propose that if the sum of the provisionally
    winning gross bids for the licenses in a block does not satisfy the
    relevant aggregate reserve price, none of the relevant licenses for
    the particular block will be assigned based on the auction results.

8.  *Prompt Subsequent Auction, If Necessary, of Alternative Licenses.*
    The Commission, moreover, decided that if licenses initially offered
    for the A, B, C, or E Blocks are not assigned because the auction
    results do not satisfy the applicable aggregate reserve price(s) for
    those licenses, the Commission promptly will offer alternative
    licenses for those blocks. More specifically, the Commission will
    offer licenses for the A, B, and E Blocks subject to alternative
    performance requirements. With respect to the C Block, the
    Commission will offer alternative licenses without the open platform
    conditions and based on different geographic areas and spectrum
    bandwidth. If the D Block license is not assigned because the
    auction results do not satisfy the D Block reserve price, the
    Commission may re-offer that license subject to the same rules or
    reconsider the applicable rules. Consistent with the Commission's
    direction, we will permit only qualified bidders in the initial
    auction to participate in the subsequent auction and propose to use
    the same auction design, including an aggregate reserve price for
    each block that matches the applicable initial reserve price,
    insofar as possible.

# LICENSES TO BE OFFERED IN AUCTION 73 

9.  Auction 73 includes a total of 1,099 licenses: 176 in the A Block,
    734 in the B Block, 176 in the E Block, 12 in the C Block, and 1 in
    the D Block. Figure 1 shows the 700 MHz band plan adopted in the
    recent *700 MHz Second Report and Order*:

    **[Figure 1: 700 MHz Band]{.underline}**

757 775 787 793 805

  ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- --- ----- -------- ----- ----- --- ----- ----- --- ----- --- -------- ----- ----- ---
  A     B     C     D     E     A     B     C     C           A   D     Public               B   C           A         D   Public               B
                                                                        Safety                                             Safety               

  CH.   CH.   CH.   CH.   CH.   CH.   CH.   CH.   CH.   CH.       CH.            CH.   CH.       CH.   CH.       CH.                CH.   CH.   
  52    53    54    55    56    57    58    59    60    61        62             63    64        65    66        67                 68    69    
  ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- --- ----- -------- ----- ----- --- ----- ----- --- ----- --- -------- ----- ----- ---

698 704 710 716 722 728 734 740 746 752 758 764 770 776 782 788 794 800
806

[Lower 700 MHz Band Upper 700 MHz Band]{.smallcaps}

[(TV Channels 52-59) (TV Channels 60-69)]{.smallcaps}

The blocks highlighted above (Lower 700 MHz Band C and D Blocks and
Upper 700 MHz Band A and B Blocks) have previously been auctioned.

[Block]{.underline} [Frequencies (MHz)]{.underline}
[Bandwidth]{.underline} [Pairing]{.underline} [Area Type]{.underline}
[Licenses]{.underline}

A 698-704, 728-734 12 MHz 2 x 6 MHz EA 176

B 704-710, 734-740 12 MHz 2 x 6 MHz CMA 734

E 722-728 6 MHz unpaired EA 176

C 746-757, 776-787 22 MHz 2 x 11 MHz REAG 12

D 758-763, 788-793 10 MHz 2 x 5 MHz Nationwide 1\*

\* Subject to conditions respecting a public/private partnership
license.

10. *Predefined Packages of C Block Licenses*. As directed by the
    Commission's recent decision in the *700 MHz Second Report and
    Order*, the Bureau proposes below detailed procedures that will
    enable bidders to place bids on all individual licenses and on
    certain predefined packages of C Block licenses. More specifically,
    the Bureau proposes to enable bidders to place individual bids on
    the 12 REAG licenses and package bids on the following combinations
    of C Block REAG licenses: REAGs 1-8, comprising the 50 United
    States; REAGs 9 and 11, comprising the United States Pacific
    territories; and REAGs 10 and 12, comprising Puerto Rico, the U.S.
    Virgin Islands and the Gulf of Mexico.

11. *Incumbents.* A number of incumbent broadcasters are licensed and
    operating on these frequencies (TV Channels 52-53, 56-58, 60-62, and
    65-67) and adjacent channels. In accordance with the Commission's
    rules, 700 MHz Band licensees must protect analog TV incumbents from
    harmful interference through February 17, 2009, the end of the DTV
    transition period.[^9] These limitations may restrict the ability of
    such geographic area licensees to use certain portions of the
    electromagnetic spectrum or provide service to some parts of their
    geographic license areas.

12. In the *700 MHz Second Report and Order*, the Commission
    grandfathered an incumbent Guard Band B Block licensee in Major
    Economic Areas (MEAs) 21 and 39 at 761-763 MHz and 791-793 MHz of
    the D Block. The new D Block licensee will be authorized on a
    secondary basis in these markets, and it may not cause interference
    to the primary operations of the grandfathered licensee. If the
    grandfathered licensee, or a successor or assignee, cancels either
    of the grandfathered licenses, or if either license cancels
    automatically, is terminated by the Commission, or expires, then the
    licensed geographic area will revert to the D Block licensee
    automatically.

# BUREAU SEEKS COMMENT ON AUCTION PROCEDURES

13. Section 309(j)(3) of the Communications Act of 1934, as amended,
    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 . . . "[^10] Consistent with
    the provisions of Section 309(j)(3) 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, to seek comment on a variety of
    auction-specific procedures prior to the start of each auction.[^11]
    The Bureau therefore seeks comment on the following issues relating
    to Auction 73.

## Auction Design

### Anonymous Bidding

14. In the *700 MHz Second Report and Order*, the Commission concluded
    that anonymous bidding procedures, which withhold from public
    release until after the auction closes any information that may
    indicate specific applicants' interests in the auction, including
    information such as their license selections and bidding activity,
    should be implemented in the upcoming auction of new 700 MHz Band
    licenses regardless of whether the auction meets a pre-auction
    assessment of likely competition. The Commission concluded that such
    procedures will serve the public interest by reducing the potential
    for anti-competitive bidding behavior, including bidding activity
    that aims to prevent the entry of new competitors.

15. In light of these conclusions, for Auction 73 the Bureau proposes to
    withhold, until after the close of bidding, public release of:
    (1) bidders' license selections on their short-form applications
    (FCC Form 175), (2) the amounts of bidders' upfront payments and
    bidding eligibility, and (3) information that may reveal the
    identities of bidders placing bids and taking other bidding-related
    actions. For example, we propose to withhold the identities of
    bidders placing specific bids or withdrawals and the net bid
    amounts, although we will disclose after the close of each round the
    amount of every bid placed and whether a bid amount was withdrawn.
    We propose to provide individual bidders with additional information
    about their own bids. In contrast to procedures implemented for
    anonymous bidding in past auctions,[^12] and consistent with the
    *700 MHz Second Report and Order*, we will withhold this information
    irrespective of any pre-auction measurement of likely auction
    competition. Accordingly, we propose to withhold the amount of
    bidders' upfront payments and bidding eligibility until after the
    close of bidding. Bidders will be able to view their own level of
    eligibility, before and during the auction, through the Commission's
    Integrated Spectrum Auction System ("ISAS" or "FCC Auction System").
    Moreover, bidders will be made aware of other bidders with whom they
    will not be permitted to discuss bidding strategies for the purpose
    of complying with the Commission's anti-collusion rules.[^13]
    Specifically, the Bureau will notify separately each applicant with
    short-form applications for participation in a pending auction,
    including but not limited to Auction 73, whether applicants in
    Auction 73 have applied for licenses in any of the same geographic
    areas as that applicant.

16. In the event that licenses initially offered for any of the 700 MHz
    Band spectrum blocks are not assigned because the auction results do
    not satisfy the applicable reserve price and the Commission conducts
    a prompt subsequent auction of licenses for the relevant block(s),
    the Commission proposes generally to withhold the information
    described above on bidder license selection and eligibility and
    information that may reveal the identities of bidders placing bids
    for both auctions until after the close of bidding in the second
    auction. Thus, if the initial auction results satisfy aggregate
    reserve prices with respect to licenses in some but not all blocks,
    the Commission proposes, except for the D Block, to withhold
    information on the winning bidders for licenses in the relevant
    block(s) as well as information on bidder license selections and
    eligibility and information that may reveal the identities of
    bidders placing bids and taking other bidding-related actions on
    licenses in all blocks until after the close of bidding in both
    auctions. Because bidding on the 700 MHz Band licenses is
    interrelated, the purpose for which we impose anonymous bidding
    procedures in the first place -- to make signaling and other
    anti-competitive bidding behavior less likely to be successful --
    will continue to be served by not making such information public
    until after the close of bidding on all of the licenses.[^14] For
    the D Block, however, we propose, instead of withholding all
    information, to make public before the close of bidding in a second
    auction only such information as may be necessary to proceed with
    promptly facilitating the D Block winner's obligations to negotiate
    a Network Sharing Agreement with the national Public Safety
    Broadband Licensee in the adjacent spectrum block,[^15] in the event
    there is a winning bidder for the D Block license in the initial
    auction. We seek comment on these details regarding our proposal for
    implementation of anonymous bidding in Auction 73, and on
    alternative proposals for the specific procedures to implement
    anonymous bidding.

### SMR Auction with Package Bidding on C Block Licenses

17. In the *700 MHz Second Report and Order*, the Commission directed
    the Bureau to propose detailed auction procedures that would permit
    the license-by-license bidding of the FCC's standard simultaneous
    multiple round (SMR) auction format for the A, B, D, and E Block
    licenses, while enabling package bidding for C Block licenses.[^16]
    Accordingly, the Bureau proposes to conduct Auction 73 using an SMR
    auction design with hierarchical package bidding ("HPB") for the C
    Block licenses.[^17] The Bureau has developed software for an
    auction format ("SMR-HPB") that permits license-by-license bidding
    as well as limited package bidding using HPB on predetermined
    packages of specified licenses. Under this proposal, HPB will be
    available for 12 licenses in the C Block, and license-by-license
    bidding without package bids will be available for the 1,087
    licenses in the other available blocks. In this SMR-HPB auction
    format, as detailed below, we propose for the C Block licenses
    certain procedures that differ from standard SMR procedures, while
    retaining the standard SMR procedures for all of the other licenses
    to be offered. We seek comment on the details of the proposed
    SMR-HPB format described below, keeping in mind the Commission's
    goal of facilitating the entry of a new nationwide competitor with
    sufficient bandwidth to offer a range of advanced wireless services,
    without causing undue difficulty for bidders that are not interested
    in a nationwide license.[^18]

18. In the *700 MHz Second Report and Order*, the Commission also
    provided that the Bureau may conduct an auction without package
    bidding for the C Block licenses "in the event that currently
    unforeseen difficulties make it impracticable to implement package
    bidding."[^19] In the event that package bidding cannot be
    implemented for Auction 73, the Bureau proposes to conduct the
    auction using standard SMR procedures for all of the licenses,
    including the C Block licenses as well as the A, B, D, and E Block
    licenses.

#### Previous Commission Package Bidding Designs

19. The Bureau's proposed SMR-HPB auction design further develops and
    modifies prior package bidding designs for the Commission's spectrum
    license auctions. Unlike previous designs that allowed bidders to
    create their own packages of any or all of the licenses in the
    auction, SMR-HPB allows a form of package bidding only on
    predetermined packages of specified licenses, while using SMR
    procedures for licenses not subject to package bidding. The
    Commission first proposed a simple form of package bidding in 2000,
    in connection with procedures for a planned auction of licenses in
    the Upper 700 MHz Band (Auction 31). These package bidding
    procedures were modified in 2002 when Auction 31 was scheduled to
    begin on June 19, 2002. After Auction 31 was postponed consistent
    with the Auction Reform Act of 2002,[^20] the Commission further
    modified its package bidding design. This package bidding design was
    used for an auction of narrowband Personal Communication Services
    licenses (Auction 51) in September 2003.[^21] Following Auction 51,
    the Commission continued to consider alternative package bidding
    auction formats and developed a particular SMR auction format with
    package bidding ("SMR-PB"). In 2006, the Commission sought comment
    on whether to use SMR-PB and/or SMR for Auction 66, and decided to
    use its SMR auction format without package bidding for all of the
    licenses in that auction.[^22] In 2005 and 2006 the Commission
    conducted experimental economic testing of the SMR-PB format.

20. The Commission has received considerable feedback on auction design
    from potential bidders and other members of the public, including
    comments submitted in the 700 MHz proceeding.[^23] Also, in 2007 the
    Commission did further experimental economic testing on alternative
    package bidding designs.[^24] Furthermore, there has been a
    significant amount of recent academic research and economic
    experiments on auction designs that incorporate package bidding in
    various ways.[^25] Taking into consideration Commission experience
    and input from the public, the Commission now seeks comment on using
    the following SMR-HPB format for Auction 73.

#### SMR-HPB Auction Format

21. As in the Commission's non-package bidding SMR auctions, the
    proposed SMR-HPB auction format offers all licenses for sale
    simultaneously, with bid amounts generally ascending over a series
    of bidding rounds. SMR-HPB allows bids on all individual licenses
    and on certain predefined packages of specified licenses. In Auction
    73, not all licenses will be included in packages: the Commission
    will offer package bidding only on the C Block licenses. Bidding on
    licenses in other blocks will be on a license-by-license basis only,
    as in SMR. A bidder may bid on, and potentially win, any number of
    licenses and/or packages. Typically, bidding remains open on all
    licenses until bidding stops on every license, based on the
    applicable stopping rule.

22. With respect to licenses offered subject to HPB, bidders may not
    create their own packages. The predefined packages are determined by
    the Commission according to a hierarchical structure. The initial
    level consists of individual licenses, and the next level consists
    of non-overlapping packages of those licenses, such that a given
    license is included only once in each level. The winning set of bids
    may consist of bids from various levels, as long as each license is
    included in only one winning bid.

23. For Auction 73, the Bureau proposes to accept individual bids on C
    Block licenses for REAGs 1-12 (Level 1) and package bids on certain
    combinations of C Block REAG licenses (Level 2). Thus, the initial
    level will be the twelve individual REAG licenses, and the second
    level will consist of packages of REAGs 1-8 (the 50 United States),
    REAGs 10 and 12 (Puerto Rico, the U.S. Virgin Islands and the Gulf
    of Mexico, or "Atlantic"), and REAGs 9 and 11 (the U.S. Pacific
    territories, or "Pacific"). We propose a package of REAGs covering
    the 50 states consistent with the Commission's determination that we
    should implement a package bidding auction design to facilitate the
    entry of a new nationwide competitor in the C Block.[^26] We seek
    comment on this proposal, including comments suggesting alternative
    levels or alternative ways of packaging licenses within levels.

    **[Figure 2: Proposed Package]{.underline}** Structure of C Block
    Licenses

  ------------------------ -------- --- --- --- --- --- --- --- ---------- ---- --------- -----
  Level 2: Packages        50                                   Atlantic        Pacific   
                           States                                                         

  Level 1: REAG licenses   1        2   3   4   5   6   7   8   10         12   9         11
  ------------------------ -------- --- --- --- --- --- --- --- ---------- ---- --------- -----

24. After each round, the FCC determines the combination of package
    and/or single license bids that yields the highest gross amount, and
    those bids become provisionally winning.[^27] For licenses that are
    not subject to package bidding, the FCC Auction System will consider
    the bids placed in the round and the provisionally winning bids from
    the previous round; the highest bid on each license will become that
    round's provisionally winning bid.[^28] For licenses subject to
    package bidding, when determining provisionally winning bids, the
    FCC Auction System will consider each bidder's highest bid on each
    license or package placed up to that point in the auction,
    regardless of whether the bids were provisionally winning after the
    rounds in which they were placed. Considering these bids from
    previous rounds makes it possible for new bids on individual
    licenses to combine with other bids in order to compete with bids on
    packages.[^29] The provisionally winning bids are determined by
    comparing aggregate gross bid amounts, at each level, for various
    combinations of package and individual license bids.[^30]

## Auction Structure

### Round Structure 

25. Auction 73 will consist of sequential bidding rounds. The initial
    bidding schedule will be announced in a public notice to be released
    at least one week before the start of the auction.

26. The Commission will conduct Auction 73 over the Internet, and
    telephonic bidding will be available as well. The toll-free
    telephone number for the Auction Bidder Line will be provided to
    qualified bidders.

27. The Bureau proposes to 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. Under this proposal, the Bureau may 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 Bureau seeks comment on this
    proposal. Commenters may wish to address the role of the bidding
    schedule in managing the pace of the auction and the tradeoffs in
    managing auction pace by bidding schedule changes, by changing the
    activity requirements or bid amount parameters, or by using other
    means.

### Stopping Rule 

28. The Bureau has discretion "to establish stopping rules before or
    during multiple round auctions in order to terminate the auction
    within a reasonable time."[^31] For Auction 73, the Bureau proposes
    to employ a simultaneous stopping rule approach. A simultaneous
    stopping rule means that all licenses remain available for bidding
    until bidding closes simultaneously on all licenses. More
    specifically, bidding will close simultaneously on all licenses and
    packages after the first round in which no bidder submits any new
    bids, applies a proactive waiver, or withdraws any provisionally
    winning bids.[^32] Thus, unless the Bureau announces alternative
    stopping procedures, bidding will remain open on all licenses until
    bidding stops on every license, regardless of whether bids are
    placed on individual licenses or packages of licenses. Consequently,
    it is not possible to determine in advance how long the auction will
    last.

29. Further, the Bureau proposes to retain the discretion to exercise
    any of the following options during Auction 73:

> a\) Use 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 applies a waiver, withdraws a
> provisionally winning bid, or places any new bids on any license or
> package for which it is not the provisionally winning bidder. Thus,
> absent any other bidding activity, a bidder placing a new bid on a
> license or a package of licenses for which it is the provisionally
> winning bidder would not keep the auction open under this modified
> stopping rule. When commenting on this proposal, commenters should
> address whether this modified stopping rule should apply across
> licenses and packages of those licenses. For example, should the
> auction close if the only bid placed is a new bid on a license that is
> part of a package upon which that same bidder holds the provisionally
> winning bid? Commenters should also address whether this modified
> stopping rule should apply only after applicable reserve prices have
> been met.

b)  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) after which the auction will close.

c)  Keep the auction open even if no bidder places any new bids, applies
    a waiver, or withdraws any provisionally winning bids. In this
    event, the effect will be the same as if a bidder had applied a
    waiver. The activity rule, therefore, will apply as usual, and a
    bidder with insufficient activity will either lose bidding
    eligibility or use a waiver.

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30. The Bureau proposes to 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, e.g.,
    before bidders have had an adequate opportunity to satisfy any
    applicable reserve prices. Before exercising certain of these
    options, the Bureau is likely to attempt to change the pace of the
    auction by, for example, changing the number of bidding rounds per
    day and/or changing minimum acceptable bids. The Bureau proposes to
    retain the discretion to exercise any of these options with or
    without prior announcement during the auction. The Bureau seeks
    comment on these proposals.

### Information Relating to Auction Delay, Suspension, or Cancellation

31. For Auction 73, the Bureau proposes that, by public notice or by
    announcement during the auction, the Bureau may delay, suspend, or
    cancel the auction in the event of natural disaster, technical
    obstacle, 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.[^33] In such cases, the Bureau, in its sole
    discretion, may elect to resume the auction starting from the
    beginning of the current round, resume the auction starting from
    some previous round, or cancel the auction in its entirety. Network
    interruption may cause the Bureau to delay or suspend the auction.
    The Bureau emphasizes 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. The Bureau seeks comment on this
    proposal.

## Bidding Procedures

### Upfront Payments and Bidding Eligibility 

32. The Bureau has delegated authority and discretion to determine an
    appropriate upfront payment for each license being auctioned.[^34] A
    bidder's upfront payment is a refundable deposit to establish
    eligibility to bid on licenses. Upfront payments related to the
    licenses for 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.[^35] With these guidelines in mind, the Bureau proposes
    to calculate upfront payments on a license-by-license basis using a
    method that considers the likely relative demand for the licenses,
    taking into account, among other factors, the population within the
    license area, the bandwidth covered by the license, whether the
    license includes rural areas, and whether a license for the exact
    same area was unsold in Auction 66.[^36] Specifically, the Bureau
    proposes to calculate upfront payments as follows:[^37]

-   For licenses covering CMAs in the 50 states in which the licenses
    offered in Auction 66 were sold, \$0.05 per MHz per population
    (MHz-pop) for Metropolitan Statistical Area (MSA) licenses and
    \$0.03/MHz-pop for Rural Service Area (RSA) licenses

-   For licenses covering EAs in the 50 states in which the
    corresponding licenses in both EA blocks offered in Auction 66 were
    sold, the sum of \$0.05/MHz-pop for counties contained within an MSA
    and \$0.03/MHz-pop for counties contained within an RSA

-   For licenses covering REAGs in the 50 states in which the
    corresponding licenses in all three REAG blocks offered in Auction
    66 were sold, the sum of \$0.05/MHz-pop for counties contained
    within an MSA and \$0.03/MHz-pop for counties contained within an
    RSA

-   For licenses covering geographic areas for which an Auction 66
    license was unsold, \$0.01/MHz-pop

-   For licenses covering the Gulf of Mexico, \$1,000 per MHz

-   For all remaining licenses, \$0.01/MHz-pop

For all licenses, the results of the above calculations are subject to a
minimum of \$500 per license and are rounded using our standard rounding
procedure.[^38] The proposed number of bidding units for each license
and associated upfront payment amounts are listed in Attachment A.[^39]
The Bureau seeks comment on this proposal.

33. The Bureau further proposes that the amount of the upfront payment
    submitted by a bidder will determine the bidder's initial bidding
    eligibility in bidding units. The Bureau proposes that each license
    be assigned a specific number of bidding units equal to the upfront
    payment listed in Attachment A, on a bidding unit per dollar
    basis.[^40] For a package, we propose to calculate the bidding units
    by adding together the bidding units of the individual licenses that
    make up the package. The number of bidding units for a given license
    is fixed and does not change during the auction as prices change. A
    bidder's upfront payment is not attributed to specific licenses or
    packages. Rather, a bidder may place bids on any of the licenses it
    selected on its application to participate in the auction as long as
    the total number of bidding units associated with those licenses
    does not exceed its current eligibility. Eligibility cannot be
    increased during the auction; it can only remain the same or
    decrease.

34. In the proposed SMR-HPB auction format, a bidder may place bids on
    any combination of licenses and packages of licenses as long as the
    total number of bidding units associated with the licenses does not
    exceed the bidder's current eligibility. Therefore, applicants
    interested in bidding only on individual licenses should determine
    the total number of bidding units associated with licenses they wish
    to bid on or have included in provisionally winning bids[^41] in any
    single round, and submit an upfront payment amount covering that
    total number of bidding units. Applicants interested in bidding on
    packages should determine their upfront payment by calculating the
    sum of bidding units associated with each discrete license they wish
    to include in new bids (package or individual bids) or have included
    in provisionally winning bids in any single round. The bidding units
    associated with a given license, even if the license is included in
    more than one bid, will be counted only once per bidder per round.
    Hence, if a bidder has enough eligibility to bid on certain
    licenses, it can place bids on the licenses individually *and* on
    packages containing the licenses without needing additional
    eligibility. For example, if licenses A, B, and C each have 10,000
    bidding units, and a bidder wishes in a single round to be able to
    bid on licenses A, B, and C individually and on packages AB and ABC,
    the bidder needs 30,000 bidding units of eligibility.

### Activity Rule 

35. In order to ensure that the auction closes within a reasonable
    period of time, an activity rule requires bidders to bid actively
    throughout the auction, rather than wait until late in the auction
    before participating.

36. In the proposed SMR-HPB format, as well as in an SMR format, 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.[^42]

37. The Bureau proposes to divide the auction into at least two stages,
    each characterized by a different activity requirement. The auction
    will start in Stage One. The Bureau proposes to advance the auction
    to the next stage by announcement during the auction. In exercising
    this discretion, the Bureau will consider a variety of measures of
    auction activity, including but not limited to the percentage of
    licenses (as measured in bidding units) on which there are new
    bids,[^43] the number of new bids, and the increase in revenue. The
    Bureau seeks comment on these proposals.

38. 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.
    Additionally, commenters may wish to address the role of activity
    rules in managing the pace of the auction and the tradeoffs in
    managing auction pace by bidding schedule changes, by changing the
    activity requirements or bid amount parameters, or by using other
    means.

39. In SMR and SMR-HPB, a bidder's activity in a round will be the sum
    of the bidding units associated with any licenses covered by new and
    provisionally winning bids.[^44] In SMR-HPB, the bidding units
    associated with a given license will be counted only once in a
    bidder's activity calculation for the round, even if the bidder
    places multiple bids including the license. For example, consider
    two licenses, A and B, each having 10,000 bidding units. Assuming a
    bidder bids on license A as well as the package AB in a given round,
    the bidder's activity would be 20,000 bidding units, calculated as
    the sum of the bidding units of licenses A and B. Note that the
    bidding units for license A are not counted twice.

40. The Bureau proposes the following activity requirements, while
    noting again that the Bureau retains the discretion to change stages
    unilaterally by announcement during the auction:

    **Stage One:** In each round of the first stage of the auction, a
    bidder desiring to maintain its current bidding eligibility is
    required to be active on licenses representing at least 80 percent
    of its current bidding eligibility. Failure to maintain the required
    activity level will result in the use of an activity rule waiver or
    a reduction in the bidder's bidding eligibility for the next round
    of bidding. During Stage One, a bidder's reduced eligibility for the
    next round will be calculated by multiplying the bidder's current
    round activity by five-fourths (5/4).

    **Stage Two:** In each round of the second stage, a bidder desiring
    to maintain its current bidding eligibility is required to be active
    on 95 percent of its current bidding eligibility. Failure to
    maintain the required activity level will result in the use of an
    activity rule waiver or a reduction in the bidder's bidding
    eligibility for the next round of bidding. During Stage Two, a
    bidder's reduced eligibility for the next round will be calculated
    by multiplying the bidder's current round activity by
    twenty-nineteenths (20/19).

41. The Bureau retains the discretion to change the activity
    requirements during the auction. For example, the Bureau could
    decide to add an additional stage with a higher activity
    requirement, not to transition to Stage Two if it believes the
    auction is progressing satisfactorily under the Stage One activity
    requirement, or to transition to Stage Two with an activity
    requirement that is higher or lower than the 95 percent proposed
    herein.[^45] If the Bureau exercises this discretion, it will alert
    bidders by announcement in the FCC Auction System.

### Activity Rule Waivers and Reducing Eligibility 

42. Use of an activity rule waiver preserves the bidder's 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, not to particular licenses. Activity rule waivers
    can be either proactive or automatic and are principally a mechanism
    for bidders to avoid the loss of bidding eligibility in the event
    that exigent circumstances prevent them from bidding in a particular
    round.

43. The FCC Auction System assumes that a bidder not meeting the
    activity requirement would prefer to apply an activity rule waiver
    (if available) rather than lose bidding eligibility. Therefore, the
    system will 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, its eligibility will be
    permanently reduced, possibly curtailing or eliminating the bidder's
    ability to place additional bids in the auction.

44. 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 round by using the "reduce eligibility" function
    in the FCC Auction System. In this case, the bidder's eligibility is
    permanently reduced to bring the bidder into compliance with the
    activity rule as described above. Reducing eligibility is an
    irreversible action. Once eligibility has been reduced, a bidder
    will not be permitted to regain its lost bidding eligibility, even
    if the round has not yet closed.

45. Under the proposed simultaneous stopping rule, a bidder may apply an
    activity rule waiver proactively as a means to keep the auction open
    without placing a bid. If a bidder proactively applies an activity
    rule waiver (using the "apply waiver" function in the FCC Auction
    System) during a bidding round in which no bids are placed or
    withdrawn, the auction will remain open and the bidder's eligibility
    will be preserved. An automatic waiver applied by the FCC Auction
    System in a round in which there are no new bids, withdrawals, or
    proactive waivers will not keep the auction open. A bidder cannot
    apply a proactive waiver after bidding in a round, and applying a
    proactive waiver will preclude a bidder from placing any bids in
    that round.[^46] Applying a waiver is irreversible; once a proactive
    waiver is submitted, that waiver cannot be unsubmitted, even if the
    round has not yet closed.

46. Consistent with recent auctions of commercial wireless spectrum, the
    Bureau proposes that each bidder in Auction 73 be provided with
    three activity rule waivers that may be used as set forth above at
    the bidder's discretion during the course of the auction. The Bureau
    seeks comment on this proposal.

### Reserve Prices or Minimum Opening Bids 

#### Reserve Prices

47. In the *700 MHz Second Report and Order*, the Commission concluded
    that establishing separate aggregate reserve prices for all the
    licenses in each block of the 700 MHz Band spectrum to be offered in
    Auction 73 will serve the public interest. More specifically, the
    Commission directed the Bureau to adopt and publicly disclose
    block-specific aggregate reserve prices, pursuant to its existing
    delegated authority and the regular pre-auction process and
    consistent with the Commission's conclusions in the *700 MHz Second
    Report and Order*. We propose that the sum of the provisionally
    winning gross bids for all licenses in each block must equal or
    exceed the disclosed aggregate reserve price for the block before
    the Commission will assign licenses in that block.[^47] For reasons
    discussed below, we propose to adopt the following block-specific
    aggregate reserve prices to be used pursuant to this proposal: Block
    A, \$1.807380 billion; Block B, \$1.374426 billion; Block C,
    \$4.637854 billion; Block D, \$1.330000 billion; Block E, \$0.903690
    billion. We seek comment on all aspects of this proposal, as well as
    comment on other proposals for implementing the Commission's
    direction in the *700 MHz Second Report and Order*.

48. *Background.* Section 309(j) calls upon the Commission to prescribe
    methods for establishing a reasonable reserve price or a minimum
    opening bid amount when FCC licenses are subject to auction, unless
    the Commission determines that a reserve price or minimum opening
    bid amount is not in the public interest.[^48] Consistent with this
    mandate, the Commission has directed the Bureau to seek comment on
    the use of a minimum opening bid amount and/or reserve price prior
    to the start of each auction.[^49] If a reserve price is adopted, it
    may be disclosed or undisclosed.[^50]

49. The Commission is statutorily obliged to consider and balance a
    variety of public interests and objectives when establishing service
    rules and licensing procedures with respect to the public spectrum
    resource. These objectives include promoting recovery for the public
    a portion of the value of that resource.[^51] In the *700 MHz Second
    Report and Order*, the Commission adopted innovative provisions with
    respect to licenses in each separate block of the 700 MHz Band,
    including provisions establishing a public/private partnership with
    respect to the D Block license, open platform requirements for
    licenses in the C Block, and geographic performance requirements
    with respect to licenses in the A, B, and E Blocks. To address the
    possibility that various factors, including but not limited to the
    innovative service rules adopted for 700 MHz Band licenses, might
    impact the recovery of a portion of the value of the public spectrum
    resource, the Commission concluded that the public interest requires
    that the auction of the licenses be subject to certain reserve
    prices.

50. The Commission further recognized that, given the array of different
    conditions imposed on the licenses for different blocks, bidders may
    place sufficient value on licenses in a particular block to satisfy
    a reserve applicable to that block even though interest in licenses
    in another block may be too low to satisfy the latter block's
    aggregate reserve. The Commission therefore concluded that
    block-specific aggregate reserve prices should be used and directed
    the Bureau to adopt auction procedures that will enable licensing of
    specific blocks provided that the auction results satisfy the
    block-specific reserve prices. In this regard, the Commission
    expressly noted that under procedures typical of Commission
    auctions, a bidder would be able to raise its own provisionally
    winning bid(s) to attempt to satisfy the reserve price for licenses
    in any spectrum block.[^52]

51. The Commission concluded that, in order to recover an appropriate
    portion of the value of the public spectrum resource, the
    block-specific aggregate prices should reflect current assessments
    of the potential market value of licenses for the 700 MHz Band. The
    Commission directed that this assessment be based on various factors
    including, but not limited to, the characteristics of this band and
    the value of other recently auctioned licenses, such as licenses for
    Advanced Wireless Services. The Commission reasoned that using AWS-1
    auction results might be an appropriate guide for setting
    block-specific reserve prices reflecting a conservative estimate of
    final market value. For instance, spectrum in the 700 MHz Band
    possesses superior propagation characteristics to AWS-1 spectrum. In
    addition, as of February 18, 2009, the 700 MHz Band spectrum will be
    unencumbered, while full access to AWS-1 spectrum requires the
    relocation of both Government and commercial incumbent users. Thus,
    other factors aside, 700 MHz Band licenses with comparable
    geographic service areas and bandwidth should have a higher market
    value than AWS-1 licenses.

52. The Commission expressly noted that the detailed rules regarding the
    D Block license, the D Block licensee's required construction of a
    network to be shared by public safety service users, and the
    resulting limitations on the flexibility of the D Block licensee,
    should be given weight in assessing the D Block's potential market
    value. Based solely on geographic area and spectrum block size,
    AWS-1 auction results might suggest a D Block reserve price of \$1.7
    billion. However, in light of the D Block license conditions
    essential to the public safety purpose of the public/private
    partnership, it might be appropriate to expect bidders to bid only
    about 75 percent to 80 percent of such an amount, or about \$1.33
    billion. In addition, when determining relative valuation of other
    blocks, the Bureau should consider the relative valuation of
    differing blocks in the recent auction of AWS-1 licenses.

53. *Discussion.* The Commission directed the Bureau to establish
    block-specific reserve prices by taking into account a conservative
    estimate of market value based on auction results for AWS-1 spectrum
    licenses, as noted above and in the *700 MHz Second Report and
    Order*, as well as various factors including, but not limited to,
    the characteristics of this band. Using AWS-1 auction results as a
    guide, the sum of block-specific reserves would amount to about
    \$10.4 billion. The Commission also provided specific guidance in
    setting the reserve applicable to the D Block license, suggesting
    that an amount of approximately \$1.33 billion would be appropriate.
    Consistent with the guidance of the Commission, we propose the
    following block-specific aggregate reserve prices for Auction 73:
    Block A, \$1.807380 billion; Block B, \$1.374426 billion; Block C,
    \$4.637854 billion; Block D, \$1.330000 billion; Block E, \$0.903690
    billion. Together, these block-specific aggregate reserves sum to
    \$10.053350 billion.[^53]

54. As the Commission has already noted and as discussed above, the D
    Block reserve price of \$1.33 billion is discounted from an amount
    based more closely on AWS-1 bids because of the unique service rules
    and related obligations imposed upon the D Block licensee. For the
    A, B, C, and E Blocks, we base the reserve prices on the respective
    market value estimates using AWS-1 bids, adding one percent, and
    rounding to the nearest thousand dollars. Because of the
    value-enhancing propagation characteristics and relatively
    unencumbered nature of the 700 MHz Band spectrum, we believe these
    are conservative estimates.[^54] We seek comment on these proposed
    reserve prices and specifically on whether any or all of them should
    be higher or lower than proposed here.

55. We propose to consider gross bid amounts rather than net bid amounts
    in determining whether the block-specific reserve prices have been
    met. Anonymous bidding procedures, which we propose to apply in
    Auction 73 at Commission direction, preclude disclosing net bid
    amounts until after the close of bidding. Therefore, were the
    block-specific reserve prices to be set in net rather than gross
    terms, during the auction bidders and the public would be less able
    to monitor whether provisionally winning bids had met the applicable
    reserve prices.

####  Minimum Opening Bids

56. In contrast to a reserve price, a minimum opening bid is the minimum
    bid price set at the beginning of the auction below which no bids
    will be 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.

57. In light of Section 309(j)'s requirement to prescribe methods for
    establishing reasonable minimum opening bid amounts for licenses
    subject to auction unless such bid amounts are not in the public
    interest, the Bureau proposes to establish minimum opening bid
    amounts for Auction 73. The Bureau believes a minimum opening bid
    amount, which has been used in other auctions, is an effective
    bidding tool for accelerating the competitive bidding process.[^55]

58. Specifically, for Auction 73, the Bureau proposes to calculate
    minimum opening bid amounts on a license-by-license basis using a
    method that takes into consideration, among other factors, the
    winning bids for AWS-1 licenses in Auction 66. This approach for
    Auction 73 minimum opening bid amounts draws on the Auction 66
    prices that were bid on licenses for the exact same geographic
    areas.[^56] This approach makes it possible to establish somewhat
    higher minimum opening bids for licenses that may likely sell for
    relatively higher prices, thereby potentially reducing the number of
    bidding rounds necessary for licenses to reach their final auction
    prices. Specifically, the Bureau proposes to calculate minimum
    opening bid amounts as follows:[^57]

-   For licenses covering geographic areas in the 50 states for which
    all of the corresponding licenses offered in Auction 66 for the
    exact same geographic area were sold, 25 percent of the dollars per
    MHz per population (MHz-pop) of the net amounts of the Auction 66
    winning bids for licenses covering the same geographic license area,
    subject to a minimum of \$0.03/MHz-pop

-   For licenses covering geographic areas for which a corresponding
    Auction 66 license was unsold, \$0.01/MHz-pop

-   For licenses covering the Gulf of Mexico, \$1,000 per MHz

-   For all remaining licenses, \$0.01/MHz-pop

    For all licenses, the results of the above calculations are subject
    to a minimum of \$500 per license and are rounded using our standard
    rounding procedure.[^58] The Bureau proposes to calculate the
    minimum opening bid for any package as the sum of the minimum
    opening bids for the licenses in the package. The proposed minimum
    opening bid amount for each license available in Auction 73 is set
    forth in Attachment A of this Public Notice. The Bureau seeks
    comment on this proposal.

59. If commenters believe that these minimum opening bid amounts will
    result in unsold licenses or are not reasonable amounts, 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 amounts or formulas. In
    establishing minimum opening bid amounts, the Bureau particularly
    seeks comment on such factors as the amount of spectrum being
    auctioned, the availability of technology to provide service, the
    size of the service areas, issues of interference with other
    spectrum bands and any other relevant factors that could reasonably
    have an impact on valuation of the licenses being auctioned. The
    Bureau also seeks comment on whether, consistent with Section
    309(j), the public interest would be served by having no minimum
    opening bid amounts or higher minimum opening bid amounts.
    Furthermore, commenters may wish to comment on whether, given the
    proposed block-specific aggregate reserve prices, it would be
    desirable to have different minimum opening bid formulas for
    different blocks. For example, higher minimum opening bids could
    reduce the number of rounds it takes for block-specific aggregate
    reserve prices to be met. Commenters may also wish to address the
    general role of minimum opening bids in managing the pace of the
    auction. Would it be preferable for auction pace to be controlled by
    minimum opening bids -- for example, by setting higher minimum
    opening bids to reduce the number of rounds it takes licenses to
    reach their final prices -- or through other means such as changes
    to bidding schedules or activity requirements?

### Bid Amounts 

60. The Bureau proposes that, in each round, eligible bidders be able to
    place a bid on a given license or package using one or more
    pre-defined bid amounts.[^59] Under this proposal, the FCC Auction
    System interface will list the acceptable bid amounts for each
    license or package.

61. *Minimum Acceptable Bids*. The first of the acceptable bid amounts
    is called the minimum acceptable bid amount. The minimum acceptable
    bid amount for a license will be equal to its minimum opening bid
    amount until there is a provisionally winning bid on the license or
    on a package that includes the license. The minimum acceptable bid
    amount for a package will be the sum of the minimum acceptable bid
    amounts for the licenses in the package. Minimum acceptable bids are
    calculated based on current price estimates and an activity-based
    formula.

62. *Current Price Estimates*. After there is a provisionally winning
    bid covering a license, the FCC Auction System will determine a
    "current price estimate" ("CPE") for each license in each round as a
    basis for calculating minimum acceptable bids.[^60] For non-C Block
    licenses the CPE is the provisionally winning bid amount, so that
    minimum acceptable bids are based on provisionally winning bid
    amounts, as in a standard SMR auction without package bidding. For
    licenses in the C Block subject to HPB, if a bid on an individual
    license is provisionally winning, the CPE for that license is the
    provisionally winning bid amount. If a package bid is provisionally
    winning, CPEs for individual licenses in the package are constructed
    by scaling up the bids on individual licenses so that the sum of the
    license CPEs equals the provisionally winning package bid.[^61] Bids
    are scaled up by adding "shares" to the highest bid received so far
    in the auction for each license in the package.[^62] These shares
    are proportional to the bidding units associated with each license
    relative to the total number of bidding units in the package. If,
    contrary to our proposal here, there are multiple levels of
    packages, license bids may need to have additional shares added in
    order to scale up to the package bids at higher levels of
    aggregation. The mechanism for determining CPEs in an SMR-HPB
    auction format is described in more detail in Attachment C.

63. *Activity-Based Formula*. Once CPEs are calculated, minimum
    acceptable bids are then determined for each license as the amount
    of the CPE plus a percentage of the CPE. The percentage is
    calculated using the activity-based formula described below. In
    general, the percentage will be higher when many bidders are bidding
    on a license, or on a package containing a license, than when few
    bidders are bidding on a license.

64. The percentage of the provisionally winning bid used to establish
    the minimum acceptable bid amount is 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, including package bids, 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.[^63] 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 CPE amount to obtain the minimum acceptable bid
    for the next round.[^64] The Bureau proposes initially to set the
    weighting factor at 0.5, the minimum percentage at 0.1 (10%), and
    the maximum percentage at 0.2 (20%). Hence, at these initial
    settings, the minimum acceptable bid for a license will be between
    ten percent and twenty percent higher than the CPE (which, for non-C
    Block licenses not subject to HPB, will equal the provisionally
    winning bid), depending upon the bidding activity covering the
    license. Equations and examples are shown in Attachment B.

65. *Additional Bid Amounts*. Any additional bid amounts are calculated
    using the minimum acceptable bid amount and a bid increment
    percentage -- more specifically, by multiplying the minimum
    acceptable bid by one plus successively higher multiples of the bid
    increment percentage. If, for example, the bid increment percentage
    is ten percent, the calculation of the first additional acceptable
    bid amount is (minimum acceptable bid amount) \* (1 + 0.1), or
    (minimum acceptable bid amount) \* 1.1; the second additional
    acceptable bid amount equals the minimum acceptable bid amount times
    one plus two times the bid increment percentage, or (minimum
    acceptable bid amount) \* 1.2, etc. The Bureau will round the
    results of these calculations and the minimum acceptable bid
    calculations using the Bureau's standard rounding procedures.[^65]
    The Bureau proposes initially to set the bid increment percentage at
    0.1.

66. In the case of a license for which the provisionally winning bid has
    been withdrawn, the minimum acceptable bid amount will equal the
    second highest bid received for the license.[^66]

67. For Auction 73, for non-C Block licenses, the Bureau proposes to
    begin the auction with one acceptable bid amount per license (the
    minimum acceptable bid amount). For C Block licenses subject to HPB,
    the Bureau proposes to begin the auction with three acceptable bid
    amounts per license (the minimum acceptable bid amount and two
    additional bid amounts) and one acceptable bid amount per package
    (the minimum acceptable bid amount and no additional bid
    amounts).[^67] While the Commission typically has provided for up to
    a total of nine acceptable bid amounts, we depart from past
    procedure because our experience indicates that other methods for
    controlling the pace of the auction (for example, changing the
    minimum and maximum percentages in the activity-based minimum
    acceptable bid formula described above, or increasing the number of
    bidding rounds per day) are more effective in that regard.

68. The Bureau retains 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 it
    determines that circumstances so dictate. Further, the Bureau
    retains the discretion to do so on a license-by-license and
    package-by-package basis. The Bureau also retains 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, the Bureau could set a \$10 million limit on
    increases in minimum acceptable bid amounts over provisionally
    winning bids. Thus, if the activity-based formula calculates a
    minimum acceptable bid amount that is \$20 million higher than the
    provisionally winning bid on a license, the minimum acceptable bid
    amount would instead be capped at \$10 million above the
    provisionally winning bid. We seek comment on the circumstances
    under which the Bureau should employ such a limit, factors we should
    consider when determining the dollar amount of the limit, and the
    tradeoffs in setting such a limit or changing parameters of the
    activity-based formula, such as changing the minimum percentage. If
    the Bureau exercises this discretion, it will alert bidders by
    announcement in the FCC Auction System.

69. The Bureau seeks comment on the above proposals. If commenters
    disagree with the Bureau's proposal to begin the auction with one
    acceptable bid amount per most licenses and per package, they should
    suggest an alternative number of acceptable bid amounts to use at
    the beginning of the auction, an alternative number to use later in
    the auction, and whether the same number of bid amounts should be
    used for both licenses and packages. 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 bidding schedule changes, by changing the
    activity requirements or bid amount parameters, or by using other
    means. Given the proposed block-specific aggregate reserve prices,
    commenters may wish to address the desirability of setting bid
    amount parameters such that the reserve prices may be met more
    quickly, or whether it would be preferable to constrain bid amounts
    such that prices rise more slowly.

### Provisionally Winning Bids 

70. After each round of bidding, the FCC Auction System determines which
    combination of bids together provides the greatest aggregate gross
    amount and is therefore provisionally winning. If the auction were
    to close at the end of that round, the provisionally winning bids
    would become final winning bids, provided that applicable reserve
    prices had been met. For the 1,087 licenses not subject to package
    bidding, the FCC Auction System determines a provisionally winning
    bid for each license based on the highest bid amount received for
    the license, taking into account the bids placed in the round and
    the provisionally winning bids from the previous round.[^68] For
    licenses in the C Block subject to HPB, the FCC Auction System will
    determine which combination of individual and package bids yields
    the highest aggregate gross bid amount, taking into consideration
    each bidder's highest bid on each license or package submitted up to
    that point in the auction.[^69] These bids become the provisionally
    winning bids for the round.

71. In order to determine which combination of bids on licenses and/or
    packages yields the highest aggregate bid amount in a HPB auction,
    the FCC Auction System compares aggregate bid amounts across the
    various levels in a recursive process. It first compares, for each
    package in the second level, the sum of the highest individual
    license bids from the first level with the highest bids on packages
    in the second level containing those licenses. If we decide to
    include more than two levels, for each package in any subsequent
    level, the FCC Auction System would compare the highest bid on the
    package with the highest combination of bids from previous levels
    corresponding to licenses in that package. Those bids that generate
    the maximum total bid amounts become provisionally winning.
    Attachment C provides additional detail on this procedure.

72. For licenses subject to package bidding in SMR-HPB, the FCC Auction
    System considers each bidder's highest bid on each license or
    package when determining the provisionally winning bids.[^70]
    Consequently, for licenses in the C Block, an individual license or
    package bid that does not become a provisionally winning bid at the
    conclusion of the round in which it was placed may become a
    provisionally winning bid at the conclusion of a subsequent round.
    This may occur even if the bidder does not have the bidding
    eligibility to cover the newly-provisionally winning bid.[^71] This
    contrasts with the SMR procedure used for licenses not subject to
    package bidding, in which only provisionally winning bids from the
    previous round and bids placed during the round are considered when
    determining provisionally winning bids.

73. Below we propose procedures to permit bidders on C Block licenses or
    packages to drop from consideration a limited number of
    non-provisionally winning bids on such licenses and/or
    packages.[^72] However, provisionally winning bids for licenses
    subject to package bidding cannot be withdrawn, as discussed
    below.[^73]

74. If more than one set of bids generates the same highest aggregate
    gross bid amount (i.e., the sets of bids are tied), the FCC Auction
    System will break ties randomly. Specifically, the FCC Auction
    System will assign a random number to each license in each bid upon
    submission. In the event of ties among bids that generate the
    highest aggregate gross bid amount, the set of bids with the highest
    sum of random numbers becomes provisionally winning. Bidders,
    regardless of whether they hold a provisionally winning bid, can
    submit higher bids in subsequent rounds. However, if the auction
    were to end with no other bids being placed, the winning bidders
    would be those that placed the provisionally winning bids.

75. The set of provisionally winning bids is determined after every
    round in which new bids are submitted or provisionally winning bids
    are withdrawn, if applicable. As stated above, the provisionally
    winning bids at the end of the auction become winning bids provided
    that applicable reserve prices have been met.

### Bid Removal

76. Before the close of a bidding round, a bidder has the option of
    removing any bid placed in that round. By removing bids a bidder may
    effectively "unsubmit" any bid placed within that round. Once a
    round closes, a bidder may no longer remove a bid. In contrast to
    the bid withdrawal provisions described below, a bidder removing a
    bid placed in the same round is not subject to a withdrawal payment.
    The Bureau seeks comment on these bid removal procedures.

### Bid Withdrawal and Dropped Bids 

77. *Bid Withdrawals*. The Commission has previously found that, in
    certain circumstances, allowing bid withdrawals facilitates
    efficient aggregation of licenses and the pursuit of backup
    strategies as information becomes available during the course of an
    auction.[^74] The Commission noted, however, that in some instances
    bidders may seek to withdraw bids for improper reasons and should,
    therefore, be subject to bid withdrawal payment provisions.[^75]
    Moreover, the Commission gave the Bureau discretion in managing the
    auction to limit the number of withdrawals to prevent any bidding
    abuses. The Commission stated that the Bureau should 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.[^76]

78. Applying this reasoning to Auction 73, the Bureau proposes to allow
    a limited number of bid withdrawals under certain circumstances.
    Specifically, bidders will be allowed to withdraw their
    provisionally winning bids on licenses not subject to package
    bidding (i.e., all licenses except C Block), but in no more than two
    rounds of the auction. The two rounds in which a bidder may withdraw
    provisionally winning bids will be at the bidder's discretion.
    Otherwise, withdrawals must be in accordance with the Commission's
    rules.[^77] Under this proposal, there is no limit on the number of
    provisionally winning bids that a bidder may withdraw in either of
    the rounds in which it withdraws bids. After a provisionally winning
    bid for a license is withdrawn, the minimum acceptable bid for the
    license will be set to the next highest bid on the license, and the
    license will revert to the FCC (i.e., there will not be a
    provisionally winning bidder on the license).

79. With respect to licenses subject to package bidding (i.e., the C
    Block) bidders have the option of placing bids on certain
    predetermined packages of licenses, thereby reducing their risk of
    winning some, but not all, of the licenses in those packages. While
    the predetermined packages may not coincide with the "all or
    nothing" aggregation needs of all bidders, the hierarchical packages
    should significantly reduce the overall "exposure risk" in the
    auction that bidders will win only some of the licenses in a desired
    set. Therefore, to the extent that package bids allow bidders to
    avoid such risk, withdrawals are less useful to bidders.

80. At the same time, withdrawals by one bidder on licenses subject to
    package bidding can be more disruptive to the bidding strategies of
    others than withdrawals on licenses not subject to package bidding.
    Whether a bid on a license not subject to package bidding becomes
    provisionally winning depends only upon whether it is the highest
    bid submitted for the license and, in the case of ties, on its
    random number assignment. In contrast, whether a bid becomes
    provisionally winning on a license subject to package bidding
    depends in part upon the particular configuration of bids submitted
    by other bidders that cover the same license. Consequently, a
    withdrawn bid on a license subject to package bidding has the
    potential to alter the composition of the provisionally winning
    bids, and may adversely affect other bidders.

81. Therefore, because the potential benefits to bidders from being able
    to withdraw bids are likely to be lower, and because the potential
    harms to other bidders from withdrawn bids are potentially much
    greater, we propose to permit withdrawals only on licenses not
    subject to package bidding.

82. *Dropped Bids*. With respect to the C Block licenses, since HPB
    considers bids made in previous rounds when determining
    provisionally winning bids, it is possible that a bid for a package
    or a license subject to package bidding can become provisionally
    winning many rounds after it was placed. These non-provisionally
    winning bids are useful to the auction since they enhance the
    ability of bidders interested in single licenses or smaller packages
    to combine their bids with the bids of others to compete with a
    large package bid, and they provide stability to the process for
    determining current price estimates.[^78] It may be the case,
    however, that a bidder wishes to focus on alternative licenses
    instead, and no longer wishes to win one of its previous bids. In
    order to allow bidders to opt out of non-provisionally winning
    considered bids that they no longer wish to win, we propose that
    under HPB, for licenses subject to package bidding, bidders be
    allowed a limited number of opportunities to "drop"
    non-provisionally winning bids from further consideration in the
    auction.

83. Eliminating non-provisionally winning bids from consideration may
    affect the current price estimates of other licenses, thereby
    affecting other bidders. This ability to affect the bids of other
    bidders may lead to undesirable strategic use of dropped bids.
    Therefore, we propose to permit bidders to drop non-provisionally
    winning bids on packages and on licenses subject to package bidding
    in no more than one round of the auction. To discourage bidders from
    dropping bids in order to disadvantage their competitors we also
    propose the following restrictions on the circumstances under which
    bids may be dropped and on the bidder's subsequent bidding activity:

    \(1\) A bidder that is a provisionally winning bidder on a package
    will not be permitted to drop bids on licenses or sub-packages that
    are included in the package.

    \(2\) A bidder that drops its bids on a license or package will not
    be permitted to submit further bids on that particular license or
    package during the auction.

    \(3\) A bidder that drops its bids on a license or package will not
    be permitted to submit any bids on packages containing that license
    or package for the duration of the auction.

84. No payments are associated with dropped bids. The round in which a
    bidder may drop non-provisionally winning bids from consideration
    will be at the bidder's discretion. We seek comment on these
    proposals. We also seek comment on the possibilities of not allowing
    dropped bids, of allowing dropped bids not subject to all the
    restrictions proposed above, and of imposing other restrictions than
    proposed above.

## Considerations Relating to Certain Post-Auction Payment Rules

### Apportioning Package Bids 

85. Given that the Commission has determined that package bidding will
    be used for the C Block licenses in Auction 73, we seek comment on
    the appropriate mechanism for apportioning package bids among the
    individual licenses comprising the package. In package bidding, when
    a bidder places an all-or-nothing bid on a package of licenses,
    there will be no identifiable bid amounts on the individual licenses
    that comprise the package. However, the Commission's competitive
    bidding rules and procedures assume that the amount of each bid on
    an individual license always is known. For example, rules for
    calculating the amount of small business, new entrant, or tribal
    land bidding credits presume that the winning bid on the license is
    known.[^79] Similarly, in determining the amount of a default or
    withdrawal payment, which involves a comparison between the
    withdrawing or defaulting bidder's bid and a subsequent bid, the
    rules assume that there are bid amounts for individual
    licenses.[^80] Accordingly, the Commission recently adopted a new
    rule providing that, in advance of each auction with package
    bidding, the Commission shall establish a methodology for
    determining how to estimate the price or bid on an individual
    license included in a package of licenses.[^81]

86. The Bureau proposes to apportion package bids when regulatory
    calculations require individual license bid amounts by dividing the
    package bid amount among the licenses comprising the package in
    proportion to the number of bidding units for each license.
    Alternatively, the Bureau proposes to use the final round CPEs for
    each license to apportion package bids.[^82] We seek comment on
    these proposals.

### Interim Withdrawal Payment Percentage

87. The Bureau seeks comment on the appropriate percentage of a
    withdrawn bid that should be assessed as an interim withdrawal
    payment, in the event that a final withdrawal payment cannot be
    determined at the close of the auction.[^83] In general, the
    Commission's rules provide that 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.[^84] However,
    if a license for which a bid has been withdrawn does not receive a
    subsequent higher bid or winning bid in the same auction, the final
    withdrawal payment cannot be calculated until a corresponding
    license receives a higher bid or winning bid in a subsequent
    auction. When that final payment cannot yet be calculated, the
    bidder responsible for the withdrawn bid is assessed an interim bid
    withdrawal payment, which will be applied toward any final bid
    withdrawal payment that is ultimately assessed.[^85]

88. The Commission recently amended its rules to provide that in advance
    of the auction, the Commission shall establish a percentage between
    three percent and twenty percent of the withdrawn bid to be assessed
    as an interim bid withdrawal payment.[^86] When it adopted the new
    rule, the Commission indicated that it would consider the nature of
    the service and the inventory of the licenses being offered when
    determining the level of the interim withdrawal payment in a
    particular auction.[^87]

89. Auction 73 will offer licenses under several different geographic
    licensing schemes and bandwidth sizes, and bidders may have a
    legitimate interest in using withdrawals to facilitate their efforts
    to aggregate licenses across potentially substitutable blocks of
    licenses not subject to package bidding. We also believe that the
    likely significant bid amounts for licenses in this auction (and
    resulting absolute value of withdrawal payments) will in themselves
    serve as a deterrent to unnecessary withdrawals. Therefore, we do
    not propose to set the interim bid withdrawal payment at the maximum
    rate of twenty percent. At the same time, we believe that a rate
    above the minimum three percent will help deter undesirable
    strategic use of withdrawals. Specifically, the Bureau proposes to
    establish an interim bid withdrawal payment of ten percent of the
    withdrawn bid in Auction 73. This proposal, moreover, is consistent
    with bid withdrawal payment percentages adopted in recent auctions
    for wireless licenses.[^88] The Bureau seeks comment on this
    proposal.

### Additional Default Payment Percentage

90. Any winning bidder that defaults or is disqualified after the close
    of an auction (i.e., fails to remit the required down payment within
    the prescribed period of time, fails to submit a timely long-form
    application, fails to make full payment, or is otherwise
    disqualified) is liable for a default payment under Section
    1.2104(g)(2) of the Commission's rules.[^89] This payment consists
    of a deficiency payment, equal to the difference between the amount
    of the bidder's bid and the amount of the winning bid the next time
    a license covering the same spectrum is won in an auction, plus an
    additional payment equal to a percentage of the defaulter's bid or
    of the subsequent winning bid, whichever is less. Until recently
    this additional payment for non-combinatorial auctions has been set
    at three percent of the defaulter's bid or of the subsequent winning
    bid, whichever is less.

91. The percentage of the bid that a defaulting bidder must pay in
    addition to the deficiency will depend on the auction format
    ultimately chosen for a particular auction. In non-package auctions,
    the amount can range from three percent up to a maximum of twenty
    percent, established in advance of the auction and based on the
    nature of the service and the inventory of the licenses being
    offered.[^90] In auctions with package bidding, the additional
    payment is set, pursuant to Section 1.2104(g)(2)(ii), at 25 percent
    of the applicable bid. This higher level reflects the fact that a
    defaulted winning bid in an auction with package bidding may have
    affected which other bids were winning.[^91]

92. The Bureau proposes to establish an additional default payment of
    fifteen percent with respect to bids on licenses in Blocks A, B, D,
    and E, which are not subject to package bidding. As previously noted
    by the Commission*,* defaults weaken the integrity of the auction
    process and impede the deployment of service to the public, and an
    additional default payment of more than three percent will be more
    effective in deterring defaults. Moreover, we believe an additional
    default payment greater than ten percent, which the Commission has
    established in several recent auctions, is appropriate for Auction
    73.[^92] Because no licenses in Blocks A, B, or E will be sold
    unless the aggregate reserve price for that block is met, bidders
    may have an additional incentive to bid on a license and later
    default (after determination that the reserve price has been met),
    in order to help ensure that the reserve price is met and other
    initial licenses in the block are assigned. We believe a higher
    additional default payment will help deter such behavior. With
    respect to the D Block, for which there is a single nationwide
    license which will not be assigned unless the D Block reserve price
    is met, a default by the winning bidder will delay the especially
    time-sensitive process of establishing a public-private partnership
    for the provision of public safety services. Given the unusually
    large public interest benefits of timely licensing the D Block, we
    propose to deter defaults by imposing a higher additional default
    payment in that block as well. Accordingly, we propose an additional
    default payment of fifteen percent on licenses in the A, B, D, and E
    Blocks. The Bureau seeks comment on this proposal.

93. For licenses in the C Block, because they are subject to package
    bidding, the additional default payment will be the twenty-five
    percent as set forth in Section 1.2104(g)(2)(ii). This additional
    default payment will apply to all bids for packages and for licenses
    that are subject to package bidding.

#  Contingent subsequent AUCTION 

94. In the *700 MHz Second Report and Order*, the Commission concluded
    that if licenses for the A, B, C or E Blocks are not assigned
    because the auction results for the licenses as initially offered do
    not satisfy the applicable aggregate reserve price(s), the public
    interest will be served by offering alternative licenses for the
    relevant blocks as soon as possible after the initial auction.
    Similarly, if the license for the D Block is not assigned because
    the auction results do not satisfy the reserve price applicable to
    that license, the license for the D Block may be offered again in a
    prompt subsequent auction. As detailed in the *700 MHz Second Report
    and Order*, any alternative A, B and E Block licenses will be
    subject to alternative performance requirements. With respect to the
    C Block, any alternative licenses will be based on different
    geographic areas and spectrum bandwidth, as detailed below. In
    addition, the alternative C Block licenses will not be subject to
    the open platform conditions applicable to the licenses initially
    offered for the C Block.

95. The Commission directed the Bureau to permit only qualified bidders
    in the initial auction to participate in any contingent subsequent
    auction and to use the same auction design, including the applicable
    aggregate reserve price(s), insofar as possible. Pursuant to these
    directions, we propose and seek comment on the following procedures
    for a contingent subsequent auction. Except as detailed below, we
    propose to apply all of the procedures discussed above for Auction
    73 to such a subsequent auction.

96. *Licenses To Be Offered*. Licenses in the A, B, D and E Block
    offered in any contingent subsequent auction will cover the same
    geographic areas and frequencies as such licenses offered in the
    initial auction. However, as indicated in Figure 3, the alternative
    C Block will include C1 Block licenses offered in each of the 176
    EAs and C2 Block licenses offered in each of the 12 REAGs. A
    complete list of alternative C Block licenses that would be offered
    in such an auction is included as Attachment D of this Public
    Notice.

**[Figure 3: Alternative C Block Plan]{.underline}**

757 763 775 787 793 805

  ------ ----- --- ----- -------- ------- ----- --- ------ ------ --- ----- -------- ------- ----- ---
  C1     C2    A   D     Public                 B   C1     C2     A   D     Public                 B
                         Safety                                             Safety                 

  CH. 60 CH.       CH.            CH. 63  CH.       CH. 65 CH. 66     CH.            CH. 68  CH.   
         61        62                     64                          67                     69    
  ------ ----- --- ----- -------- ------- ----- --- ------ ------ --- ----- -------- ------- ----- ---

746 752 758 764 770 776 782 788 794 800 806

[Block]{.underline} [Frequencies (MHz)]{.underline}
[Bandwidth]{.underline} [Pairing]{.underline} [Area Type]{.underline}
[Licenses]{.underline}

C1 746-752, 776-782 12 MHz 2 x 6 MHz EA 176

C2 752-757, 782-787 10 MHz 2 x 5 MHz REAG 12

97. *Auction Design*. If the subsequent auction offers only licenses not
    subject to package bidding in Auction 73, *i.e.*, licenses for
    Blocks A, B, D, and/or E, we propose to conduct the subsequent
    auction using the Commission's standard SMR auction design without
    package bidding. The procedures applicable to the auction will be
    the same as those discussed above with respect to licenses for
    Blocks A, B, D and E in Auction 73, subject to the differences
    discussed below.

98. We are not certain that package bidding will be appropriate with
    respect to C1 and C2 Block licenses that may be available in a
    subsequent auction. We seek comment on whether we should implement
    HPB for such alternative C Block licenses in a subsequent auction.
    If so, we seek comments suggesting levels and ways of packaging
    licenses within levels using HPB or SMR-HPB auction formats,
    depending on whether the subsequent auction also includes licenses
    for Blocks A, B, D, and/or E.

99. *Aggregate Reserve Prices*. As required by the Commission, the
    licenses in a subsequent auction will be subject to the same
    aggregate reserve price(s) applicable in the initial auction. In the
    *700 MHz Second Report and Order*, the Commission noted that the
    Bureau has delegated authority to determine how to allocate the C
    Block reserve price upon auction of alternative licenses.
    Accordingly, the Bureau proposes to apply the C Block aggregate
    reserve price of \$4.637854 billion to all of the alternative C
    Block licenses. That is, the sum of the gross bid amounts on the C1
    and C2 Block licenses must equal or exceed \$4.637854 billion in
    order to meet the reserve price. We seek comment on this proposal
    and on alternatives to this proposal. Commenters may wish to address
    whether, in the alternative, the C Block reserve price should be
    split between the C1 and C2 Blocks based on their respective
    bandwidths (e.g., \$2.529739 billion and \$2.108115 billion for the
    C1 and C2 Blocks, respectively) or by other measures.

100. *Pre-Auction Application Process.* As noted above, the Commission
     has directed that only applicants found qualified to bid in Auction
     73 may be eligible to bid in any contingent subsequent auction. We
     propose that the subsequent public notice announcing the close of
     Auction 73 also will announce the auction number of the contingent
     subsequent auction and the deadline for pre-auction submissions in
     connection with any contingent subsequent auction. That public
     notice will specify the licenses that will be offered in the
     subsequent auction, the deadline by which qualified bidders must
     select licenses to be offered in order to be eligible to bid on
     those licenses, and the deadline by which such bidders must submit
     upfront payments to purchase bidding eligibility in the subsequent
     auction. We propose that the public notice will provide that the
     deadline for selecting alternative licenses will be 10 business
     days from the date of the public notice and the deadline for
     submitting upfront payments will be 10 business days from the date
     of the selection deadline. This will enable bidding on the
     alternative licenses to begin less than two months after the public
     notice announcing the close of Auction 73. We seek comment on this
     proposal.

101. *Effective Period for Anti-Collusion Rule*. In the *700 MHz Second
     Report and Order*, the Commission directed the Bureau to adopt any
     procedures that may enhance the effectiveness of an auction of
     licenses in Auction 73 or any subsequent contingent auction. In
     part, the Commission found that the Commission's anti-collusion
     rule should treat Auction 73 and any such subsequent auction as a
     single auction, given the related nature of the auctions.
     Accordingly, the applicable "down payment deadline" marking the end
     of the anti-collusion period for Auction 73 and any subsequent
     auction shall be the down payment deadline established following
     the close of the subsequent auction.[^93]

102. *Minimum Opening Bids.* For a contingent subsequent auction, the
     Bureau proposes to calculate minimum opening bid amounts on a
     license-by-license basis using the same approach described above
     that draws on the Auction 66 prices that were bid on licenses for
     the exact same geographic areas.[^94] The proposed minimum opening
     bid amounts for the C1 and C2 Block licenses that would be
     available in a contingent subsequent auction are set forth in
     Attachment D of this Public Notice. For any licenses in other
     blocks offered in the same subsequent auction, we propose the same
     minimum opening bid amounts set forth in Attachment A of this
     Public Notice. We seek comment on these proposals and other
     possible amounts for minimum opening bids. If commenters believe
     that these minimum opening bid amounts will result in unsold
     licenses or are not reasonable amounts, 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 amounts or formulas. The change of
     conditions with respect to any licenses for the A, B, C and E
     Blocks to be offered in a subsequent auction should increase the
     value of the licenses and may support higher minimum opening bids.
     In addition, the bidding in the initial auction may provide further
     information regarding the appropriate level of minimum opening
     bids. If we modify the minimum opening bids, we will announce the
     new minimum opening bids in the same public notice announcing
     pre-auction procedures.

103. *Additional Procedures.* The Commission also directed the Bureau to
     consider what procedures may be appropriate to deter bidders from
     actions that might thwart the assignment of licenses in either
     auction. We propose that otherwise eligible bidders will be denied
     bidding eligibility in a subsequent auction in the event that they
     default on any winning bids in the initial auction. We seek comment
     on this proposal, as well as comment on any other proposals that
     may enhance the effectiveness of the auction of licenses in Auction
     73 or any contingent subsequent auction.

# DEADLINES AND FILING PROCEDURES 

104. Comments are due on or before August 31, 2007, and reply comments
     are due on or before September 7, 2007. All filings related to the
     auction of 700 MHz spectrum licenses should refer to AU Docket No.
     07-157. Comments may be submitted using the Commission's Electronic
     Comment Filing System ("ECFS") or by filing paper copies.[^95] The
     Bureau strongly encourages interested parties to file comments
     electronically, and requests submission of a copy via the Auction
     73 e-mail box (<auction73@fcc.gov>).

105. *Electronic Filers*: Comments may be filed electronically using the
     Internet by accessing the ECFS at <http://www.fcc.gov/cgb/ecfs/>.
     Filers should follow the instructions provided on the website for
     submitting comments. In completing the transmittal screen, filers
     should include their full name, U.S. Postal Service mailing
     address, and the applicable docket or rulemaking number. Parties
     may also submit an electronic comment by Internet e-mail. To get
     filing instructions, filers should send an e-mail to
     [[ecfs@fcc.gov]{.underline}](mailto:ecfs@fcc.gov), and include the
     following words in the body of the message, "get form." A sample
     form and directions will be sent in response.

106. *Paper Filers*: Parties who choose to file by paper must file an
     original and four copies of each filing. Filings can be sent by
     hand or messenger delivery, by commercial overnight courier, or by
     first-class or overnight U.S. Postal Service mail (although the
     Bureau continues to experience delays in receiving U.S. Postal
     Service mail). All filings must be addressed to the Commission's
     Secretary Attn: WTB/ASAD, Office of the Secretary, Federal
     Communications Commission.

> • The Commission's contractor will receive hand-delivered or
> messenger-delivered paper filings for the Commission's Secretary at
> 236 Massachusetts Avenue, NE, Suite 110, Washington, DC 20002. The
> filing hours at this location are 8:00 a.m. to 7:00 p.m. Eastern Time
> (ET). All hand deliveries must be held together with rubber bands or
> fasteners. Any envelopes must be disposed of before entering the
> building.
>
> • Commercial overnight mail (other than U.S. Postal Service Express
> Mail and Priority Mail) must be sent to 9300 East Hampton Drive,
> Capitol Heights, MD 20743.
>
> • U.S. Postal Service first-class, Express, and Priority mail should
> be addressed to 445 12th Street, SW, Washington DC 20554.

107. *Auction 73 E-mail Box*: The Bureau also requests that a copy of
     all comments and reply comments be submitted electronically to the
     following address: <auction73@fcc.gov>.

108. Copies of comments and reply comments will be available for public
     inspection between 8:00 a.m. and 4:30 p.m. ET Monday through
     Thursday or 8:00 a.m. to 11:30 a.m. ET on Fridays in the FCC
     Reference Information Center, Room CY-A257, 445 12th Street, SW,
     Washington, DC 20554, and will also be accessible through the
     search function on the ECFS web page at
     <http://www.fcc.gov/cgb/ecfs/>.

109. This proceeding has been designated as a "permit-but-disclose"
     proceeding in accordance with the Commission's *ex parte*
     rules.[^96] 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. 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.

# Contacts

110. For further information concerning this proceeding, contact the
     Wireless Telecommunications Bureau, as listed below:

**Mobility Division, Wireless Telecommunications Bureau**

For service rules questions: Erin McGrath (legal) or Keith Harper
(technical) at (202) 418-0620

**Auctions and Spectrum Access Division, Wireless Telecommunications
Bureau**

For general auction questions: Jeff Crooks at (202) 418-0660 or Lisa
Stover at (717) 338-2868

For auctions legal questions: Erik Salovaara or Scott Mackoul at (202)
418-0660

\- FCC -

[^1]: This spectrum is part of the 698-806 MHz band, which currently is
    occupied by television broadcasters and is being made available for
    new commercial and public safety services as a result of the digital
    television (DTV) transition. In prior proceedings, the Commission
    considered the 700 MHz Band in two parts, 698-746 MHz (the "Lower
    700 MHz Band") and 746-806 MHz (the "Upper 700 MHz Band"). The Lower
    700 MHz Band was divided into blocks A through E, and the Upper 700
    MHz Band was divided into blocks A through D. The Commission
    previously assigned licenses for blocks C and D in the Lower 700 MHz
    Band and for blocks A and B in the Upper 700 MHz Band. Consequently,
    the remaining blocks to be licensed are the Lower 700 MHz Band A, B,
    and E Blocks, and the Upper 700 MHz Band C and D Blocks. As the
    letters identifying the blocks remaining to be licensed in the Lower
    and Upper 700 MHz Bands do not overlap, we will refer to these
    blocks to be licensed as the A, B, E, C and D Blocks, without
    repeating the Lower 700 MHz Band and Upper 700 MHz Band designation.

[^2]: Based on statutory mandates that subsequently were repealed, the
    Commission previously announced several auctions for licenses
    associated with spectrum covered by licenses now offered in Auction
    73. *See* Auction Reform Act of 2002, *Report to Congress*, FCC
    03-138, 18 FCC Rcd 12556, 12561 (2003). The Commission cancelled or
    postponed those previously announced auctions. *Id.* at 12561-62.
    The Commission's prior public notices regarding those cancelled or
    postponed auctions have no continuing effect with respect to Auction
    73. *See, e*.*g*., "Auction of Licenses in the 747-762 and 777-792
    MHz Bands Scheduled for June 19, 2002, Further Modification of
    Package Bidding Procedures and Other Procedures for Auction No. 31,"
    *Public Notice*, DA 02-659, 17 FCC Rcd 5140 (2002) (procedures for
    an auction of Upper 700 MHz licenses); *see also* "Auction of
    Licenses for 747-762 and 777-792 MHz Bands (Auction No. 31) is
    Rescheduled," *Public Notice*, DA 02-1829, 17 FCC Rcd 14546 (2002)
    (postponing Auction 31, which already had been rescheduled for
    January 14, 2003, pending further notice).

[^3]: The CMA licenses consist of both Metropolitan Statistical Area
    (MSA) and Rural Service Area (RSA) licenses. For the Lower 700 MHz
    Band, the Commission adopted MSAs and RSAs as defined by Public
    Notice Report No. CL-92-40 "Common Carrier Public Mobile Services
    Information, Cellular MSA/RSA Markets and Counties," dated January
    24, 1992, DA 92-109, 7 FCC Rcd 742 (1992), with the following
    modifications: (i) the service areas of cellular markets that border
    the U.S. coastline of the Gulf of Mexico extend 12 nautical miles
    from the U.S. Gulf coastline; and (ii) the service area of cellular
    market 306 that comprises the water area of the Gulf of Mexico
    extends from 12 nautical miles off the U.S. Gulf coast outward into
    the Gulf. 47 C.F.R. § 27.6(c)(2).

[^4]: *See* Deficit Reduction Act of 2005, Pub. L. No. 109-171, 120
    Stat. 4 (2006) ("DRA"). Title III of the DRA is the DTV Act. The DTV
    Act is codified in various portions of Title 47 of the United States
    Code.

[^5]: 47 U.S.C. § 309(j)(15)(v).

[^6]: Service Rules for the 698-746, 747-762 and 777-792 MHz Bands, WT
    Docket No. 06-150, Revision of the Commission's Rules to Ensure
    Compatibility with Enhanced 911 Emergency Calling Systems, CC Docket
    No. 94-102, Section 68.4(a) of the Commission's Rules Governing
    Hearing Aid-Compatible Telephones, WT Docket No. 01-309, Biennial
    Regulatory Review -- Amendment of Parts 1, 22, 24, 27, and 90 to
    Streamline and Harmonize Various Rules Affecting Wireless Radio
    Services, WT Docket 03-264, Former Nextel Communications, Inc. Upper
    700 MHz Guard Band Licenses and Revisions to Part 27 of the
    Commission's Rules, WT Docket No. 06-169, Implementing a Nationwide,
    Broadband, Interoperable Public Safety Network in the 700 MHz Band,
    PS Docket No. 06-229, Development of Operational, Technical and
    Spectrum Requirements for Meeting Federal, State and Local Public
    Safety Communications Requirements Through the Year 2010, WT Docket
    No. 96-86, Second Report and Order, FCC 07-132, (2007) ("*700 MHz
    Second Report and Order*"). The *700 MHz Second Report and Order* is
    part of the 700 MHz band proceeding. *See also, e.g.*, Service Rules
    for the 698-749, 747-762 and 777-792 MHz Bands, WT Docket No.
    06-150, Revision of the Commission's Rules to Ensure Compatibility
    with Enhanced 911 Emergency Calling Systems and Section 68.4(a) of
    the Commission's Rules Governing Hearing Aid-Compatible Telephones,
    CC Docket No. 94-102, WT Docket No. 01-309, *Notice of Proposed Rule
    Making, Fourth Further Notice of Proposed Rule Making, and Second
    Further Notice of Proposed Rule Making*, 21 FCC Rcd 9345 (2006)
    ("*700 MHz Commercial Services Notice*"*)*; Service Rules for the
    698-746, 747-762 and 777-792 MHz Bands, WT Docket No. 06-150,
    Revision of the Commission's Rules to Ensure Compatibility with
    Enhanced 911 Emergency Calling Systems, CC Docket No. 94-102,
    Section 68.4(a) of the Commission's Rules Governing Hearing
    Aid-Compatible Telephones, WT Docket No. 01-309, Biennial Regulatory
    Review -- Amendment of Parts 1, 22, 24, 27, and 90 to Streamline and
    Harmonize Various Rules Affecting Wireless Radio Services, WT Docket
    03-264, Former Nextel Communications, Inc. Upper 700 MHz Guard Band
    Licenses and Revisions to Part 27 of the Commission's Rules, WT
    Docket No. 06-169, Implementing a Nationwide, Broadband,
    Interoperable Public Safety Network in the 700 MHz Band, PS Docket
    No. 06-229, Development of Operational, Technical and Spectrum
    Requirements for Meeting Federal, State and Local Public Safety
    Communications Requirements Through the Year 2010, WT Docket No.
    96-86, *Report and Order and Further Notice of Proposed Rulemaking*,
    22 FCC Rcd 8064 (2007) ("*700 MHz Report and Order*" and "*700 MHz
    Further Notice*," respectively).

[^7]: In the event that unforeseen difficulties make it impracticable to
    implement package bidding for the C Block consistent with the goals
    the Commission articulated in the *700 MHz Second Report and Order*,
    the Commission provided that the Bureau could conduct the auction
    without package bidding for the C Block.

[^8]: The Commission's website provides extensive information regarding
    the recent auction of AWS-1 licenses ("AWS-1 auction" or "Auction
    66"). *See*
    [http://wireless.fcc.gov/auctions/66/](http://wireless.fcc.gov/auctions/default.htm?job=auction_summary&id=66).

[^9]: *See* 47 C.F.R. § 27.60 (co-channel and adjacent channel
    interference protection requirements for analog TV and DTV
    facilities).

[^10]: 47 U.S.C. § 309(j)(3)(E)(i).

[^11]: *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, *Third
    Report and Order and Second Further Notice of Proposed Rule Making*,
    FCC 97-413, 13 FCC Rcd 374, 448 ¶¶ 124-25 (1997) ("*Part 1 Third
    Report and Order*") (directing 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
    acceptable 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). *See also* 47 C.F.R. § 0.131; Amendment of Part 1 of
    the Commission's Rules --- Competitive Bidding Proceeding, *Order,
    Memorandum Opinion and Order, and Notice of Proposed Rule Making*,
    FCC 97-60, 12 FCC Rcd 5686, 5697-98 ¶ 16 (1997) ("*Part 1 Order*").

[^12]: *See, e.g.,* "Auction of Advanced Wireless Services Licenses
    Scheduled for June 29, 2006; Notice and Filing Requirements, Minimum
    Opening Bids, Upfront Payments and Other Procedures for Auction No.
    66," *Public Notice,* 21 FCC Rcd 4562, 4600-05 ¶¶ 140-157 (2006)
    ("*Auction 66 Procedures Public Notice*"); "Auction of Broadband PCS
    Spectrum Scheduled for May 16, 2007; Notice and Filing Requirements,
    Minimum Opening Bids, Upfront Payments and Other Procedures for
    Auction No. 71," *Public Notice*, DA 07-30, 22 FCC Rcd 433, 463-464
    ¶¶ 109-113 (WTB 2007) ("*Auction 71 Procedures Public Notice*");
    "Auction of Phase II 220 MHz Service Spectrum Scheduled for June 20,
    2007; Notice and Filing Requirements, Minimum Opening Bids, Upfront
    Payments and Other Procedures for Auction No. 72," *Public Notice,*
    DA 07-514, 22 FCC Rcd 3404, 3433-34 ¶¶ 112-116 (WTB 2007) ("*Auction
    72 Procedures Public Notice*").

[^13]: *See* 47 C.F.R. § 1.2105(c).

[^14]: Consistent with this determination, if there is a subsequent
    auction of alternative licenses, the anti-collusion rule, which goes
    into effect prior to the first auction, will remain in effect until
    the down-payment deadline following the second auction. *See*
    Section V. "Contingent Subsequent Auction," below.

[^15]: *See* *700 MHz Second Report & Order* at ¶¶ 444-454.

[^16]: *Id.* at ¶¶ 290-292.

[^17]: In the economic experiments previously conducted by the Bureau,
    this type of package bidding was referred to as "tiered" package
    bidding. *See Report on Results of Economic Experiments comparing
    Performance Properties of Certain Simultaneous Multiple round
    Spectrum License Auctions With Package* Bidding, May 25, 2007, and
    *Report on Results of Economic Experiments Examining Performance
    Properties of Simultaneous Multiple Round Spectrum License Auctions
    With and Without Combinatorial Bidding*, July 15, 2006, both at
    [http://wireless.fcc.gov/auctions/data/papersAndStudies.html](http://wireless.fcc.gov/auctions/default.htm?job=papers_studies).

[^18]: *Id.* at ¶ 292.

[^19]: *Id.*

[^20]: Auction Reform Act of 2002, Pub. L. No. 107-195, 116 Stat. 715
    (codified as 47 U.S.C. § 309(j)(15)(C)(iii)).

[^21]: "Auction of Regional Narrowband PCS Licenses Scheduled for
    September 24, 2003, Notice and Filing Requirements, Minimum Opening
    Bids, Upfront Payments, Package Bidding and Other Auction
    Procedures," *Public Notice*, DA 03-1994, 18 FCC Rcd 11974, 12008-10
    (2003).

[^22]: *Auction 66 Procedures* *Public Notice,* 21 FCC Rcd at 4612-15 ¶¶
    188-200.

[^23]: See, for example, United States Cellular Corporation *700 MHz
    Commercial Services* Comments; Paul Milgrom and Karen Wrege *700 MHz
    Commercial Services* Comments and *700 MHz Commercial Services*
    Reply Comments; Letter from Ruth Milkman, Counsel to Access
    Spectrum, LLC, and Kathleen Wallman, Advisor to Pegasus
    Communication Corporation, to Marlene H. Dortch, Secretary, Federal
    Communications Commission, *Ex Parte* in WT Docket No. 06-150 (filed
    February 5, 2007); Letter from George Y. Wheeler, Counsel to United
    States Cellular Corporation, to Marlene H. Dortch, Secretary,
    Federal Communications Commission, *Ex Parte* in WT Docket No.
    06-150 (filed March 7, 2007); AT&T Inc. *700 MHz Further Notice*
    Comments; Coalition for 4G in America *700 MHz Further Notice*
    Comments; Frontline Wireless, LLC *700 MHz Further Notice* Comments;
    United States Cellular Corporation *700 MHz Further Notice* Reply
    Comments; Verizon Wireless *700 MHz Further Notice* Comments; Letter
    from Glenn S. Rabin, Vice President and Federal Regulatory Counsel,
    Alltel Corporation, to Marlene H. Dortch, Federal Communications
    Commission, *Ex Parte* in WT Docket No. 06-150 (filed July 9, 2007).
    On May 2, 2005, the Bureau sought comment on a proposed design for
    economic experiments to examine the performance properties of
    designs for conducting simultaneous multiple round auctions of
    spectrum licenses both with and without combinatorial bidding.
    "Comment Sought on Experimental Design for Examining Performance
    Properties of Simultaneous Multiple Round Spectrum License Auctions
    With and Without Combinatorial Bidding," *Public Notice*, DA
    05-1267, 20 FCC Rcd 8685 ("*Combinatorial Bidding Comment Public
    Notice*"). In response to the *Combinatorial Bidding Comment Public
    Notice*, the Bureau received the following filings: Comments of
    Lawrence M. Ausebel, Peter Cramton, and Paul Milgrom (dated June 1,
    2005); Comments of Leap Wireless International, Inc. (dated June 1,
    2005); Comments of PA Consulting Group (dated June 1, 2005);
    Comments of Telephone and Data Systems, Inc. and United States
    Cellular Corporation (dated June 1, 2005); Comments of Verizon
    Wireless (dated June 1, 2005); *Ex Parte* Letter from Robert J.
    Weber, on behalf of Telephone and Data Systems, Inc., to Marlene H.
    Dortch, Secretary, Federal Communications Commission (filed May 12,
    2005). Filings made in response to the *Combinatorial Bidding Public
    Notice* are available at
    [http://wireless.fcc.gov/auctions/data/papersAndStudies.html](http://wireless.fcc.gov/auctions/default.htm?job=papers_studies).

[^24]: *See Report on Results of Economic Experiments comparing
    Performance Properties of Certain Simultaneous Multiple round
    Spectrum License Auctions With Package* Bidding, May 25, 2007, and
    *Report on Results of Economic Experiments Examining Performance
    Properties of Simultaneous Multiple Round Spectrum License Auctions
    With and Without Combinatorial Bidding*, July 15, 2006, both at
    [http://wireless.fcc.gov/auctions/data/papersAndStudies.html](http://wireless.fcc.gov/auctions/default.htm?job=papers_studies).

[^25]: Such work includes, but is not limited to, the following: Goeree,
    J. K. and C. A. Holt, "A Simple Combinatorial Auction," Working
    Paper, May 2007 (addressing pricing in a hierarchically-tiered
    package bidding format); Rothkopf, M. H., A. Pekeč, and R. M.
    Harstad, "Computationally Manageable Combinatorial Auctions,"
    *Management Sciences*, 44(8), August 1998, 1131-1147 (addressing a
    hierarchically-tiered package bidding format); Ausubel, L. M., P.
    Cramton, and P. Milgrom, "The Clock-Proxy Auction: A Practical
    Combinatorial Auction Design," in *Combinatorial Auctions*, eds. P.
    Cramton, Y. Shoham, and R. Steinberg, MIT Press, 2006, p. 115-138;
    Ausubel, L. M. and P. Milgrom, "Ascending Auctions with Package
    Bidding," *Frontiers of Theoretical Economics*, 1(1), 2002; Brunner,
    C., J. K. Goeree, C. A. Holt, and J. O. Ledyard, "Combinatorial
    Auctioneering," Working Paper, July 26, 2006; Cantillon, E. and M.
    Pesendorfer, "[Combination Bidding in Multi-Unit
    Auctions](http://www.ecare.ulb.ac.be/ecare/people/members/cantillon/ecantillon/web/combination-bidding.pdf),"
    Working Paper, November, 2006; Klemperer, P., *Auctions: Theory and
    Practice*, Princeton University Press, 2004; Kwasnica, A. M., J. O.
    Ledyard, D. Porter, and C. DeMartini, "A New and Improved Design for
    Multi-Object Iterative Auctions," *Management Science*, 51(3), March
    2005, 419-434; Milgrom, P., *Putting Auction Theory to Work*,
    Cambridge University Press, 2004; Porter, D., S. Rassenti, A.
    Roopnarine, and V. Smith, "Combinatorial Auction Design,"
    *Proceedings of the National Academy of Sciences*, 100(19),
    September 2003, 11153-11157.

[^26]: *See 700 MHz Second Report and Order* at ¶292.

[^27]: Tied bids, or ties among sets of bids, will be broken randomly.
    *See* below, Section IV.C.6.

[^28]: The Bureau proposes to provide bidders with limited ability to
    withdraw provisionally winning bids for licenses not subject to
    package bidding (non-C Block licenses). *See* below, Section IV.C.8.

[^29]: This set of considered bids for licenses and packages in the C
    Block will likely include many bids with very little likelihood of
    ever becoming provisionally winning. Bidders will be able to assess
    the chances that a considered bid from a previous round will become
    provisionally winning in a later round by comparing it to the
    considered bids and to prevailing price levels. As discussed in more
    detail below, for licenses subject to package bidding, we propose to
    give bidders some limited ability to "drop" non-provisionally
    winning bids in order to prevent a bid they no longer want from
    becoming provisionally winning in a later round. *See* Section
    IV.C.8.

[^30]: Packages do not overlap within a level. That is, a license cannot
    be included in more than one package in a given level. Consequently,
    comparing aggregate gross bid amounts at each level does not require
    combinatorial optimization. *See* Attachment C for a more detailed
    discussion. *See* also Rothkopf, M. H., A. Pekeč, and R. M. Harstad,
    "Computationally Manageable Combinatorial Auctions," *Management
    Sciences*, 44(8), August 1998, 1131-1147. A more complex
    combinatorial optimization process to determine provisionally
    winning bids is required in some other package bidding designs,
    including SMR-PB, the design of which the FCC sought comment on for
    Auction 66.

[^31]: 47 C.F.R. § 1.2104(e).

[^32]: Proactive waivers are described in Section IV.C.3. "Activity Rule
    Waivers and Reducing Eligibility," provisionally winning bids are
    defined in Section IV.C.6. "Provisionally Winning Bids," and bid
    withdrawals are described in Section IV.C.8. "Bid Withdrawal and
    Dropped Bids," below. Dropped bids, described in Section IV.C.8., do
    not keep the auction open.

[^33]: 47 C.F.R. § 1.2104(i).

[^34]: *See Part 1 Order*, 12 FCC Rcd at 5697-98 ¶ 16. *See also Part 1
    Third Report and Order*, 13 FCC Rcd at 425 ¶ 86; Implementation of
    Section 309(j) of the Communications Act--Competitive Bidding,
    *Second Report and Order*, FCC 94-61, 9 FCC Rcd 2348, 2378-79 ¶¶
    171-75 (1994) ("*Competitive Bidding Second Report and Order*").

[^35]: *See Competitive Bidding Second Report and Order*, 9 FCC Rcd at
    2378-79 ¶¶ 171-76.

[^36]: For a CMA license in Auction 73, the proposed upfront payment
    considers whether the Auction 66 A Block license for the same CMA
    was sold; for an EA license, whether either of the two Auction 66
    licenses (B and C Blocks) for the same EA were unsold; and for an
    REAG license, whether any of the three Auction 66 licenses (D, E and
    F Blocks) for the same REAG were unsold. This approach does not
    consider Auction 66 results for other licenses that overlap or
    encompass a particular geographic area. That is, the Auction 66
    results for EA and REAG licenses are not considered for Auction 73
    CMA licenses, the Auction 66 results for CMA and REAG licenses are
    not considered for Auction 73 EA licenses, and the Auction 66
    results for CMA and EA licenses are not considered for Auction 73
    REAG licenses.

[^37]: All population figures are from the 2000 U.S. Census, U.S.
    Department of Commerce, Bureau of the Census. *See* Census 2000
    Summary File 1 (SF1) and July 3, 2001, news releases covering the
    U.S. Virgin Islands, Guam, the Northern Mariana Islands, and
    American Samoa.

[^38]: 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.

[^39]: The upfront payment for any of the pre-defined packages of C
    Block licenses will be the sum of the upfront payments of the
    licenses included in the specific package.

[^40]: "Former defaulters" --- *i.e.*, applicants, including any of
    their affiliates, any of their controlling interests, or any of the
    affiliates of their controlling interests, that in the past have
    defaulted on any Commission licenses or been delinquent on any
    non-tax debt owed to any Federal agency, but that have since
    remedied all such defaults and cured all of their outstanding
    non-tax delinquencies --- are required to pay upfront payments that
    are fifty percent more than the normal upfront payment amounts. 47
    C.F.R. § 1.2106(a).

[^41]: *See* Section IV.C.6. "Provisionally Winning Bids," below.

[^42]: *See* Section IV.C.3. "Activity Rule Waivers and Reducing
    Eligibility," below.

[^43]: For example, when monitoring activity for determining when to
    change stages, the Bureau may consider the percentage of bidding
    units of the licenses receiving new provisionally winning bids,
    excluding any FCC-held licenses. In past auctions, the Bureau has
    generally changed stages when this measure was approximately twenty
    percent or below for three consecutive rounds of bidding.

[^44]: In a standard SMR auction without package bidding, the activity
    calculation is described as the sum of the bidding units for
    licenses on which the bidder places new bids or holds provisionally
    winning bids. For bidders placing bids only on individual licenses,
    the calculation as stated above is equivalent to the standard SMR
    calculation.

[^45]: If the Bureau implements stages with activity requirements other
    than the ones listed above, a bidder's reduced eligibility for the
    next round will be calculated by multiplying the bidder's current
    round activity by the reciprocal of the activity requirement. For
    example, with a 98 percent activity requirement, the bidder's
    current round activity would be multiplied by 50/49; with a 100
    percent activity requirement, the bidder's current round activity
    would become its bidding eligibility (current round activity would
    be multiplied by 1/1).

[^46]: In general, once a bidder places a proactive waiver during a
    round, the FCC Auction System does not allow the bidder to take any
    other bidding-related action, including placing, withdrawing, or
    dropping bids later in that round.

[^47]: If the auction results satisfy a block-specific aggregate
    reserve, licenses in that block will be assigned based on the
    auction results, subject to completion of the licensing process,
    including review of applicants' qualifications. If not, the
    Commission has provided for a prompt auction of alternative, less
    restrictive licenses for the A, B, C, and E Blocks, and the
    possibility of a prompt re-auction of the license for the D Block,
    subject to the same applicable block-specific reserves. We propose
    and seek comment on procedures for any such subsequent auction in
    Section V, below.

[^48]: 47 U.S.C. § 309(j)(4)(F). *See also* 47 C.F.R. § 1.2104(c) and
    (d).

[^49]: *Part 1 Third Report and Order*, 13 FCC Rcd at 455-56 ¶ 141.

[^50]: *See* 47 C.F.R. § 1.2104(c). *See also* *Part 1 Third Report and
    Order*, 13 FCC Rcd at 455 ¶ 140.

[^51]: 47 U.S.C. § 309(j)(3)(C).

[^52]: *See* Section IV.B.2. "Stopping Rule," above.

[^53]: The Commission's suggested \$10.4 billion aggregate market value
    estimate for the 700 MHz licenses was derived as the sum of
    block-specific estimates of the market value of 700 MHz licenses,
    based on AWS-1 winning bids. Each block-specific estimate was based
    on bid amounts for comparable AWS-1 spectrum blocks, taking
    geographic area type and bandwidth into account, and further
    adjusting for the specific bandwidth in the 700 MHz blocks. *See 700
    MHz Second Report and Order*, at n.700. The block-specific reserves
    we propose here accept the amounts suggested by the Commission in
    the *700 MHz Second Report and Order* as a base, with the \$10.4
    billion aggregate market value estimate adjusted for the specific
    amount of \$1.33 billion for the D Block.

[^54]: The estimated market values based on Auction 66 (AWS-1) bids and
    the calculation of the reserve prices we propose are described in
    the tables below.

    **Estimated 700 MHz Band Market Value Based on AWS-1 Bids**

    700 MHz Block700 MHz Bandwidth (MHz)Geographic Area TypeComparable
    AWS-1 BlockAWS-1 Bandwidth (MHz)Bandwidth Ratio 700/AWS-1AWS-1
    BidsEstimated Market Value Based on AWS-1
    BidsA12EAC101.2\$1,491,238,000\$1,789,485,600B12CMAA200.6\$2,268,029,200\$1,360,817,520E6EAC100.6\$1,491,238,000\$894,742,800C22REAGF201.1\$4,174,486,000\$4,591,934,600D10Nationwide\*D
    and E101.0\$1,749,031,000\$1,749,031,000Total62 \$10,386,011,520\*
    Since AWS-1 did not have any nationwide licenses, "Estimated Market
    Value Based on AWS-1 Bids" is based on Auction 66 bids for 10 MHz
    REAG licenses.

    The "Estimated Market Value Based on AWS-1 Bids" is calculated as
    the "Bandwidth Ratio 700/AWS-1" multiplied by "AWS-1 Bids."

    **Proposed 700 MHz Band Reserve Prices**

    700 MHz BlockEstimated Market Value Based on\
    AWS-1 Bids Commission Guidance on

    D Block Reserve Price**Proposed 700 MHz Band Reserve
    Prices**A\$1,789,485,600 **\$1,807,380,000**
    B\$1,360,817,520 **\$1,374,426,000**
    E\$894,742,800 **\$903,690,000** C\$4,591,934,600
    **\$4,637,854,000** D\$1,749,031,000\$1,330,000,000
    **\$1,330,000,000** Total\$10,386,011,520**\$10,053,350,000**The
    "Estimated Market Value Based on AWS-1 Bids" entries were calculated
    in the previous table.

    "Commission Guidance on D Block Reserve Price" reflects explicit
    Commission advice on the D Block reserve price.

    Auction 66 results are available at
    [http://wireless.fcc.gov/auctions/66/](http://wireless.fcc.gov/auctions/default.htm?job=auction_summary&id=66).

[^55]: *See, e.g*., Auction of 800 MHz SMR Upper 10 MHz Band, Minimum
    Opening Bids or Reserve Prices, *Order*, DA 97-2147, 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*, DA 98-1010, 13 FCC Rcd
    16445 (1998).

[^56]: For a CMA license in Auction 73, the proposed minimum opening bid
    considers the net amount of the winning bid for the Auction 66 A
    Block license for the same CMA; for an EA license, the net amounts
    of the winning bids for the two Auction 66 licenses (B and C Blocks)
    for the same EA; and for an REAG license, the net amounts of the
    winning bids for the three Auction 66 licenses (D, E and F Blocks)
    for the same REAG. This approach does not consider Auction 66
    results for other licenses that overlap or encompass a particular
    geographic area. That is, the Auction 66 results for EA and REAG
    licenses are not considered for the minimum opening bid amounts for
    Auction 73 CMA licenses the Auction 66 results for CMA and REAG
    licenses are not considered for Auction 73 EA licenses and the
    Auction 66 results for CMA and EA licenses are not considered for
    Auction 73 REAG licenses.

[^57]: All population figures are from the 2000 U.S. Census, U.S.
    Department of Commerce, Bureau of the Census. *See* Census 2000
    Summary File 1 (SF1) and July 3, 2001, news releases covering the
    U.S. Virgin Islands, Guam, the Northern Mariana Islands, and
    American Samoa.

[^58]: 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.

[^59]: Bidders must have sufficient eligibility to place a bid on the
    particular license and/or package. *See* Section IV.C.1. "Upfront
    Payments and Bidding Eligibility," above.

[^60]: For the licenses subject to package bidding in SMR-HPB, there may
    not be individual provisionally winning bids for some licenses, if
    the provisionally winning bid covering the licenses is a package
    bid. Therefore, CPEs serve as a proxy for individual license
    provisionally winning bid amounts. The procedure for computing CPEs
    is described briefly above in Section IV.A.2.b. and in greater
    detail in Attachment C.

[^61]: Goeree, J. K. and C. A. Holt, "A Simple Combinatorial Auction,"
    Working Paper, May, 2007.

[^62]: If no bids have been placed on an individual license, the share
    will be added to the minimum opening bid amount.

[^63]: For Round 1 calculations, because there is no prior round (i.e.,
    no round 0), the activity index from the prior round is set at 0.

[^64]: The Bureau will round the result using our standard rounding
    procedures: 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.

[^65]: *Id*.

[^66]: *See* Section IV.C.8. "Bid Withdrawal and Dropped Bids," below.

[^67]: Additional acceptable bidding amounts are proposed for licenses
    subject to package bidding to ensure that bidders on individual
    licenses or on smaller packages can compete with larger package
    bids, even when there may not be active competition on all the
    separate components of the large package.

[^68]: Bidders may have limited ability to withdraw provisionally
    winning bids on non-C Block licenses. *See* Section IV.C.8. Bid
    Withdrawal and Dropped Bids, below.

[^69]: For C Block licenses and packages, bidders may be able to drop
    non-provisionally winning bids from consideration, in some
    circumstances and with certain restrictions on subsequent bidding.
    *See* Section IV.C.8. Bid Withdrawal and Dropped Bids, below.

[^70]: The solver considers the highest bid placed by each bidder on a
    given license or package, regardless of the rounds in which the bids
    were placed.

[^71]: In such cases, the bidder's bidding eligibility will not be
    restored or increased.

[^72]: If dropped bids are permitted, their use will be limited and
    bidders will face constraints on subsequent bidding activity. *See*
    Section IV.C.8.

[^73]: *See* Section IV.C.8. Bid Withdrawal and Dropped Bids, below.

[^74]: *Part 1 Third Report and Order*, 13 FCC Rcd at 459-60 ¶ 150.
    Additionally, the "exposure risk" that is addressed by withdrawals
    and package bidding involves not only the risk that a bidder will
    win some, but not all, of a desired set of licenses, but also the
    risk that the bidder will have to pay more for the subset than those
    licenses alone are worth to the bidder.

[^75]: 47 C.F.R. §§ 1.2104(g) and 1.2109.

[^76]: *Part 1 Third Report and Order*, 13 FCC Rcd at 459-60 ¶ 150.

[^77]: *See* 47 C.F.R. §§ 1.2104(g) and 1.2109.

[^78]: *See* Section IV.C.5. "Bid Amounts" and Attachment C.

[^79]: 47 C.F.R. § 1.2110(f). Knowing the size of a small business
    bidding credit on an individual license may be necessary in order to
    calculate a small business bidding credit unjust enrichment
    obligation on a license won as part of a package.

[^80]: 47 C.F.R. § 1.2104(g).

[^81]: *See* 47 C.F.R. § 1.2104(g)(2), as amended by the *CSEA/Part 1
    Report and Order*. *CSEA/Part 1 Report and Order*, 21 FCC Rcd at 906
    ¶ 39.

[^82]: Current price estimates are discussed in Section IV.C.5., above.

[^83]: In Auction 73, withdrawals are permitted only on non-C Block
    licenses, which are not subject to package bidding.

[^84]: 47 C.F.R. § 1.2104(g)(1). 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. *Id*.

[^85]: *Id*.

[^86]: *See CSEA/Part 1 Report and Order*, 21 FCC Rcd at 903 ¶ 30.

[^87]: *Id*. at 903-04 ¶ 31.

[^88]: *See* *Auction 66 Procedures Public Notice*, 21 FCC Rcd at 4623 ¶
    239; *see also* "Auction of 1.4 GHz Band Licenses Scheduled for
    February 7, 2007; Notice and Filing Requirements, Minimum Opening
    Bids, Upfront Payments and Other Procedures for Auction No. 69,"
    *Public Notice*, DA 06-2014, 21 FCC Rcd 12393, 12437 ¶ 179 (WTB
    2006) ("*Auction 69 Procedures Public Notice*"); *Auction 72*
    *Procedures Public Notice*, 22 FCC Rcd at 344 ¶ 172. Note that in
    the recent broadband PCS auction (Auction 71), which offered only 38
    licenses, most that were not adjacent frequencies or geographic
    areas, the Bureau adopted a 15 percent interim withdrawal payment.
    *Auction 71 Procedures Public Notice* 22 FCC Rcd at 475 ¶ 169.

[^89]: 47 C.F.R. § 1.2104(g)(2).

[^90]: *See CSEA/Part 1 Report and Order*, 21 FCC Rcd at 903 ¶ 30.

[^91]: 47 C.F.R. § 1.2104(g)(2)(ii).

[^92]: *See* *Auction 66 Procedures Public Notice*, 21 FCC Rcd at
    4627-28 ¶ 258; *see also Auction 69 Procedures Public Notice*, 21
    FCC Rcd at 12440 ¶ 193; *Auction 71 Procedures Public Notice*, 22
    FCC Rcd at 477 ¶ 183; *Auction 72 Procedures Public Notice*, 22 FCC
    Rcd at 3447 ¶ 186.

[^93]: *See* 47 C.F.R. § 1.2105(c)(1).

[^94]: See Section IV.C.4.b. "Minimum Opening Bids," above.

[^95]: *See* Electronic Filing of Documents in Rulemaking Proceedings,
    *Report and Order*, FCC 98-56, 13 FCC Rcd 11322 (1998).

[^96]: 47 C.F.R. §§ 1.1200(a), 1.1206.