**PUBLIC NOTICE**

**Federal Communications Commission**

**445 12^th^ Street, SW**

**Washington, DC 20554**

####### 

**DA 06-376**

**February 21, 2006**

**AUCTION OF 800 MHz AIR-GROUND RADIOTELEPHONE SERVICE LICENSES
SCHEDULED FOR MAY 10, 2006**

**Comment Sought on Additional Payment Component of Default Payments**

**for Auction No. 65**

**Comments Due: March 7, 2006 Reply Comments Due: March 14, 2006**

Report No. AUC-06-65-C (Auction No. 65)

On January 10, 2006, in the *Auction No. 65 Comment Public Notice,* the
Wireless Telecommunications Bureau ("Bureau") announced the auction of
new nationwide commercial Air-Ground Radiotelephone Service licenses in
the 800 MHz band[^1] and sought comment on procedures for the auction of
these licenses (Auction No. 65).[^2] Auction No. 65 is scheduled to
commence on May 10, 2006.

After the release of the *Auction No. 65 Comment Public Notice*, the
Commission released the *CSEA/Part 1 Report and Order,* in which it
modified Section 1.2104(g)(2) of its rules.[^3] This provision, which is
part of the Commission's general competitive bidding rules, governs
default payments that must be paid by winning bidders that default on a
down payment or final payment obligation or are disqualified after the
close of an auction. Under the modified rule, the Commission will, as
part of its determination of competitive bidding procedures in advance
of a particular auction, establish the amount of the additional payment
component of such default payments for that auction.[^4] Because Section
1.2104(g)(2) was modified after the release of the *Auction No. 65
Comment Public Notice*, the Bureau does not seek comment therein on the
appropriate level of this payment for Auction No. 65, nor does it
establish the amount of this payment in the *Auction No. 65 Procedures
Public Notice* released on February 21, 2006.[^5] Therefore, as
explained below, we seek comment in this Public Notice on the
appropriate level of this payment for Auction No. 65.

Section 1.2104(g)(2) provides that if, after the close of an auction, a
winning bidder defaults on a down payment or final payment obligation or
is disqualified (e.g., fails to submit a timely long-form application),
the bidder is liable for a default payment.[^6] 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 3
percent of the defaulter's bid or of the subsequent winning bid,
whichever is less.

Pursuant to the modification of Section 1.2104(g)(2) adopted in the
*CSEA/Part 1 Report and Order,* the 3 percent limit on the additional
default payment for non-combinatorial auctions has been increased to 20
percent.[^7] Thus, the Commission will, for each non-combinatorial
auction, establish an additional default payment from 3 percent up to a
maximum of 20 percent.[^8] As the Commission has indicated, the level of
this payment in each case will be based on the nature of the service and
the inventory of the licenses being offered.[^9]

For Auction No. 65, the Bureau proposes to establish an additional
default payment of 20 percent. In this auction, licenses in three band
plans will be available, but the only licenses that will be awarded will
be those that comprise the band plan that receives the highest aggregate
bid.[^10] Consequently, a bid on a single license may determine not only
the winner of that license but also the winning band plan, and thus
affect the ability of other bidders to win other licenses in the
auction. By contrast, a bid on a license in an auction using the
Commission's standard simultaneous multiple round auction format ("SMR")
may determine only the winner of that license. Because of the particular
interdependence among bids in Auction No. 65 and the potential effects
of one winning bidder's default on bidders for other licenses, we
believe that the detrimental effects of a default may be significantly
greater than in a standard SMR auction. Accordingly, we propose a higher
additional default payment in order to deter such defaults.[^11] We seek
comment on this proposal.

Comments are due on or before March 7, 2006, and reply comments are due
on or before March 14, 2006. All filings must be addressed to the
Commission's Secretary Attn: WTB/ASAD, Office of the Secretary, Federal
Communications Commission. Parties who file comments by paper must file
an original and four copies of each filing. U.S. Postal Service
first-class, Express, and Priority mail should be addressed to 445
12^th^ Street, SW, Washington, DC 20554. Filings can be sent by hand or
messenger delivery, by commercial overnight courier, or by first-class
or overnight U.S. Postal Service mail.[^12] The Bureau also requires
that all comments and reply comments be filed electronically to the
following address: <auction65@fcc.gov>.[^13] The electronic mail
containing the comments or reply comments must include a subject or
caption referring to "Auction No. 65 Comments" and the name of the
commenting party. The Bureau requests that parties format any
attachments to electronic mail as Adobe^®^ Acrobat^®^ (pdf) or
Microsoft^®^ Word documents. Copies of comments and reply comments will
be available for public inspection between 8:00 a.m. and 4:30 p.m.
Eastern Time (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 posted on the
web page for Auction No. 65 at
[http://wireless.fcc.gov/auctions/65/](http://wireless.fcc.gov/auctions/default.htm?job=auction_summary&id=65).

This proceeding has been designated as a "permit‑but‑disclose"
proceeding in accordance with the Commission's *ex parte* rules.[^14]
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.[^15] Other rules pertaining to oral and
written *ex parte* presentations in permit-but-disclose proceedings are
set forth in Section 1.1206(b) of the Commission's rules.[^16]

For further information regarding this proceeding, contact:

**Auctions and Spectrum Access Division:**

For legal questions: Brian Carter at (202) 418-0660

For general auction questions: Jeff Crooks at (202) 418-0660 or Barbara
Sibert at (717) 338-2888

**\-- FCC \--**

[^1]: The spectrum consists of an uplink band at 849-851 MHz and a
    downlink band at 894-896 MHz. 47 C.F.R. § 22.857.

[^2]: "Auction of 800 MHz Air-Ground Radiotelephone Service Licenses
    Scheduled for May 10, 2006; Comment Sought on Reserve Prices or
    Minimum Opening Bids and Other Procedures for Auction No. 65,"
    *Public Notice*, DA 06-3 (rel. January 10, 2006) (70 Fed. Reg. 3513)
    (January 23, 2006) ("*Auction No. 65 Comment Public Notice*").

[^3]: Implementation of the Commercial Spectrum Enhancement Act and
    Modernization of the Commission's Competitive Bidding Rules and
    Procedures, WT Docket No. 05-211, *Report and Order,* FCC 06-4 (rel.
    January 24, 2006), ¶¶ 30-32 (71 Fed. Reg. 6214) (February 7, 2006)
    ("*CSEA/Part 1 Report and Order*"); 47 C.F.R. § 1.2104(g)(2).

[^4]: Other changes to the Commission's general competitive bidding
    rules adopted in the *CSEA/Part 1 Report and Order* do not affect
    procedures in Auction No. 65, *e.g.*, changes regarding interim
    withdrawal payments, or do not require additional public comment
    prior to application, *e.g.*, changes regarding license applications
    filed by winning consortia. *See generally* *CSEA/Part 1 Report and
    Order* at ¶ 2 (summarizing changes).

[^5]: "Auction of 800 MHz Air-Ground Radiotelephone Service Licenses
    Scheduled for May 10, 2006; Notice and Filing Requirements, Minimum
    Opening Bids, Upfront Payments and Other Procedures for Auction No.
    65," *Public Notice*, DA 06-299 (rel. February 21, 2006) ("*Auction
    No. 65 Procedures Public Notice*").

[^6]: 47 C.F.R. § 1.2104(g)(2). *See also* 47 C.F.R. § 1.2109.

[^7]: *CSEA/Part 1 Report and Order* at ¶ 30. The default payment rule
    for combinatorial auctions, which is now also included in 47 C.F.R.
    § 1.2104(g)(2), is not relevant to Auction No. 65.

[^8]: *CSEA/Part 1 Report and Order* at ¶ 31.

[^9]: *Id*.

[^10]: *See* Amendment of Part 22 of the Commission's Rules to Benefit
    the Consumers of Air-Ground Telecommunications Services, Biennial
    Regulatory Review --- Amendment of Parts 1, 22, and 90 of the
    Commission's Rules, Amendment of Parts 1 and 22 of the Commission's
    Rules to Adopt Competitive Bidding Rules for Commercial and General
    Aviation Air-Ground Radiotelephone Service, WT Docket Nos. 03-103
    and 05-42, *Report and Order and Notice of Proposed Rulemaking*, 20
    FCC Rcd 4403, 4405-06 ¶ 1, 4418-22 ¶¶ 24-32 (2005).

[^11]: We note that the Commission used similar reasoning when
    establishing an additional default payment percentage of 25 percent
    for bid defaults following a combinatorial auction: ". . . in an
    auction with combinatorial bidding, a default may reasonably be
    expected to affect multiple licenses (and perhaps every license in
    the auction) . . . the 25% payment component . . . \[is\] necessary
    to adequately discourage insincere bidding and strategic defaults."
    Amendment of the Part 1 of the Commission\'s Rules \-- Competitive
    Bidding Procedures, WT Docket No. 97-82, *Second Order on
    Reconsideration of the Third Report and Order and Order on
    Reconsideration of the Fifth Report and Order*, 18 FCC Rcd 10180,
    10200-201 ¶ 28 (2003)*.*

[^12]: 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. All hand
    deliveries must be held together with rubber bands or fasteners.
    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.

[^13]: The Commission recently began using the Commission's Electronic
    Comment Filing System ("ECFS") in conjunction with comments on
    auction procedures. However, it began doing so only after the
    release of the *Auction No. 65 Comment Public Notice.* Consequently,
    comments and reply comments in response to this Public Notice may
    not be filed using ECFS.

[^14]: 47 C.F.R. §§ 1.1200(a), 1.1206.

[^15]: 47 C.F.R. § 1.1206(b).

[^16]: *Id*.