**PUBLIC NOTICE**

**FEDERAL COMMUNICATIONS COMMISSION**

**445 12th STREET, S.W.**

**WASHINGTON, D.C. 20554**

#######  {#section .unnumbered}

**DA 00-2171**

**September 25, 2000**

**FM BROADCAST AUCTION**

**SCHEDULED FOR FEBRUARY 21, 2001**

**COMMENT SOUGHT**

**ON RESERVE PRICES OR MINIMUM OPENING BIDS**

**AND OTHER AUCTION PROCEDURAL ISSUES**

**Report No. AUC‑00-37-A (Auction No. 37)**

###### By this Public Notice, the Wireless Telecommunications Bureau (the \"Bureau\") and the Mass Media Bureau (collectively referred to as the \"Bureaus\") announce the auction of certain FM broadcast construction permits to commence February 21, 2001. As discussed in greater detail herein, the Bureaus propose that Auction No. 37 be composed of 351 construction permits in the FM Broadcast service as listed in Attachment A.  {#by-this-public-notice-the-wireless-telecommunications-bureau-the-bureau-and-the-mass-media-bureau-collectively-referred-to-as-the-bureaus-announce-the-auction-of-certain-fm-broadcast-construction-permits-to-commence-february-21-2001.-as-discussed-in-greater-detail-herein-the-bureaus-propose-that-auction-no.-37-be-composed-of-351-construction-permits-in-the-fm-broadcast-service-as-listed-in-attachment-a. .unnumbered}

Specifically, Attachment A lists vacant FM allotments, reflecting FM
channels assigned to the Table of FM Allotments, 47 C.F.R. § 73.202(b),
pursuant to the Commission's established rulemaking procedures,
designated for use in the indicated community. As stated in the
*Broadcast First Report and Order*, applicants may apply for any vacant
FM allotment, as specified in Attachment A; applicants specifying the
same FM allotment will be considered mutually exclusive and, thus, the
construction permit for the FM allotment will be awarded by competitive
bidding procedures.[^1] The reference coordinates for each vacant FM
allotment are also listed in Attachment A.[^2]

The Balanced Budget Act of 1997 requires the Commission to "ensure that,
in the scheduling of any competitive bidding under this subsection, an
adequate period is allowed . . . before issuance of bidding rules, to
permit notice and comment on proposed auction procedures . . . ."[^3]
Consistent with the provisions of the Balanced Budget Act and to ensure
that potential bidders have adequate time to familiarize themselves with
the specific rules that will govern the day-to-day conduct of an
auction, the Commission directed the Bureau, under its existing
delegated authority,[^4] to seek comment on a variety of
auction-specific procedures prior to the start of each auction.[^5] We
therefore seek comment on the following issues relating to Auction No.
37.

# Auction Structure

A.  **Simultaneous Multiple Round Auction Design**

We propose to award these FM construction permits in a single stage,
simultaneous multiple-round auction. As described further below, this
methodology offers every FM construction permit for bid at the same time
in successive rounds of bidding. We seek comment on this proposal.[^6]

######## B. Upfront Payments and Initial Maximum Eligibility for Each Bidder {#b.-upfront-payments-and-initial-maximum-eligibility-for-each-bidder .unnumbered}

The Bureaus have delegated authority and discretion to determine an
appropriate upfront payment for the FM construction permits being
auctioned taking into account such factors as the efficiency of the
auction process and the potential value of spectrum.[^7] As described
further below, the upfront payment is a refundable deposit made by each
bidder to determine and establish eligibility to bid on the FM
construction permits. Upfront payments related to the specific spectrum
subject to auction protects against frivolous or insincere bidding and
provides the Commission with a source of funds from which to collect
payments owed at the close of the auction.[^8] With these guidelines in
mind, we propose the schedule of upfront payments contained in
Attachment A to this Public Notice. We seek comment on this proposal.

We further propose that the amount of the upfront payment submitted by a
bidder will determine the initial maximum eligibility (as measured in
bidding units) for each bidder. Upfront payments will not be attributed
to specific construction permits, but instead will be translated into
bidding units to define a bidder\'s initial maximum eligibility, which
cannot be increased during the auction. Thus, in calculating the upfront
payment amount, an applicant must determine the *maximum* number of
bidding units it may wish to bid on (or hold high bids on) in any single
round, and submit an upfront payment covering that number of bidding
units. We seek comment on this proposal.

###  Activity Rules

In order to ensure that the auction closes within a reasonable period of
time, an activity rule requires bidders to either place a valid bid
and/or be the standing high bidder during each round of the auction
rather than waiting until the end to participate. A bidder that does not
satisfy the activity rule will either use an activity rule waiver, if
any remain, or lose bidding eligibility in the auction.

We propose a single stage auction with the following activity
requirement: In each round of the auction, a bidder desiring to maintain
its eligibility to participate in the auction is required to be active
on one hundred (100) percent of its bidding eligibility. 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
bidding eligibility, thus eliminating the bidder from the auction. We
seek comment on this proposal.

######## D. Activity Rule Waivers  {#d.-activity-rule-waivers .unnumbered}

Use of an activity rule waiver preserves the bidder\'s current bidding
eligibility despite the bidder\'s activity in the current round being
below the required minimum level. An activity rule waiver applies to an
entire round of bidding and not to a particular construction permit.
Activity waivers are principally a mechanism for auction participants to
avoid the loss of auction eligibility in the event that exigent
circumstances prevent them from placing a bid in a particular round.

The FCC auction system assumes that bidders with insufficient activity
would prefer to use an activity rule waiver (if available) rather than
lose bidding eligibility. Therefore, the system will automatically apply
a waiver (known as an "automatic waiver") at the end of any bidding
period where a bidder\'s activity level is below the minimum required,
unless (1) there are no more activity rule waivers available; or (2) the
bidder overrides the automatic application of a waiver by reducing
eligibility, thereby meeting the minimum requirements.

We propose that a bidder with insufficient activity that wants to reduce
its bidding eligibility rather than use an activity rule waiver, must
affirmatively override the automatic waiver mechanism during the bidding
period by using the reduce eligibility function in the software. In this
case, the bidder\'s eligibility would be permanently reduced to bring
the bidder into compliance with the activity rules as described above.
Once eligibility has been reduced, a bidder would not be permitted to
regain its lost bidding eligibility.

We propose that a bidder may proactively use an activity rule waiver as
a means to keep the auction open without placing a bid. If a bidder
submits a proactive waiver (using the proactive waiver function in the
bidding software) during a bidding period in which no bids are
submitted, the auction will remain open and the bidder\'s eligibility
will be preserved. An automatic waiver invoked in a round in which there
are no new valid bids will not keep the auction open, under the
simultaneous stopping rule. The submission of a proactive waiver cannot
occur after a bid has been submitted in a round and will preclude a
bidder from placing any bids later in that round.

We propose that each bidder in Auction No. 37 be provided with five
activity rule waivers that may be used in any round during the course of
the auction as set forth above. We seek comment on this proposal.

######## E. Information Relating to Auction Delay, Suspension or Cancellation {#e.-information-relating-to-auction-delay-suspension-or-cancellation .unnumbered}

For Auction No. 37, we propose that, by public notice or by announcement
during the auction, the Bureau may delay, suspend or cancel the auction
in the event of natural disaster, technical obstacle, evidence of an
auction security breach, unlawful bidding activity, administrative or
weather necessity, or for any other reason that affects the fair and
competitive conduct of competitive bidding.[^9] In such cases, the
Bureau, in its sole discretion, may elect to: resume the auction
starting from the beginning of the current round; resume the auction
starting from some previous round; or cancel the auction in its
entirety. Network interruption may cause the Bureau to delay or suspend
the auction. We emphasize that exercise of this authority is solely
within the discretion of the Bureau, and its use is not intended to be a
substitute for situations in which bidders may wish to apply their
activity rule waivers. We seek comment on this proposal.

# Bidding Procedures

## A. Round Structure {#a.-round-structure .unnumbered}

The Commission will use its Automated Auction System to conduct the
electronic simultaneous multiple round auction format for Auction No.
37. The initial bidding schedule will be announced in a public notice to
be released at least one week before the start of the auction, and will
be included in the registration mailings. The simultaneous multiple
round format will consist of sequential bidding rounds, each followed by
the release of round results. Details regarding the location and format
of round results will be included in the same public notice.

The Bureau has discretion to change the bidding schedule in order to
foster an auction pace that reasonably balances speed with the bidders'
need to study round results. The Bureau may increase or decrease the
amount of time for the bidding rounds and review periods, or the number
of rounds per day, depending upon the bidding activity level and other
factors. We seek comment on this proposal.

## B. Reserve Price or Minimum Opening Bid {#b.-reserve-price-or-minimum-opening-bid .unnumbered}

The Balanced Budget Act calls upon the Commission to prescribe methods
by which a reasonable reserve price will be required or a minimum
opening bid established when FCC licenses or construction permits are
subject to auction (*i.e.*, because the Commission has accepted mutually
exclusive applications for those licenses), unless the Commission
determines that a reserve price or minimum bid is not in the public
interest.[^10] Consistent with this mandate, the Commission has directed
the Bureaus to seek comment on the use of minimum opening bids and/or
reserve price prior to the start of each auction of broadcast
construction permits.[^11]

Normally, a reserve price is an absolute minimum price below which an
item will not be sold in a given auction. Reserve prices can be either
published or unpublished. A minimum opening bid, on the other hand, is
the minimum bid price set at the beginning of the auction below which
*no bids* are accepted. It is generally used to accelerate the
competitive bidding process. Also, in a minimum opening bid scenario,
the auctioneer generally has the discretion to lower the amount later in
the auction. It is also possible for the minimum opening bid and the
reserve price to be the same amount.

In light of the Balanced Budget Act, the Bureaus propose to establish
minimum opening bids for Auction No. 37. The Bureaus believe a minimum
opening bid, which has been utilized in other broadcast auctions, is an
effective bidding tool.[^12] A minimum opening bid, rather than a
reserve price, will help to regulate the pace of the auction and
provides flexibility.

For Auction No. 37, the proposed minimum opening bid for each FM
allotment, as listed in Attachment A of this Public Notice, was
determined by taking into account various factors related to the
efficiency of the auction and the potential value of the spectrum,
including the type of service and class of facility offered, market
size, population covered by the proposed FM broadcast facility, industry
cash flow data and recent broadcast transactions. We seek comment on
this proposal.

If commenters believe that these minimum opening bids will result in
unsold construction permits, or are not reasonable amounts, or should
instead operate as reserve prices, they should explain why this is so,
and comment on the desirability of an alternative approach. Commenters
are advised to support their claim with valuation analyses and suggested
reserve prices or minimum opening bid levels or formulas. Alternatively,
comment is sought on whether, consistent with the Balanced Budget Act,
the public interest would be served by having no minimum opening bids or
reserve prices.

## C. Minimum Accepted Bids and Bid Increments  {#c.-minimum-accepted-bids-and-bid-increments .unnumbered}

Once there is a standing high bid on a construction permit, a bid
increment will be applied to that permit to establish a minimum
acceptable bid for the following round. For Auction No. 37, we propose
to set a minimum 10 percent increment. This means that a new bid placed
by a bidder must be at least 10 percent greater than the previous bid
received on the construction permit. The Bureau retains the discretion
to change the methodology for determining the minimum bid increment if
they determine the circumstances so dictate. Advanced notice of the
Bureau's decision to do so will be announced via the Automated Auction
System.

Bidders will enter their bid as multiples of the bid increment (*i.e.,*
with a 10 percent bid increment, a bid of 1 increment will place a bid
10 percent above the previous high bid, a bid of 2 increments will place
a bid 20 percent above the previous high bid). We seek comment on this
proposal.

## D. Information Regarding Bid Withdrawal and Bid Removal {#d.-information-regarding-bid-withdrawal-and-bid-removal .unnumbered}

For Auction No. 37, we propose the following bid removal and bid
withdrawal procedures. Before the close of a bidding period, a bidder
has the option of removing any bid placed in that round. By using the
remove bid function in the software, a bidder may effectively "unsubmit"
any bid placed within that round. A bidder removing a bid placed in the
same round is not subject to a withdrawal payment.

Once a round closes, a bidder may no longer remove a bid. However, in
the next round, a bidder may withdraw standing high bids from previous
rounds using the withdraw bid function. A high bidder that withdraws its
standing high bid from a previous round is subject to the bid withdrawal
payment provisions.[^13] We seek comment on these bid removal and bid
withdrawal procedures.

In the *Part 1 Third Report and Order*, the Commission explained that
allowing bid withdrawals facilitates efficient aggregation of licenses
and the pursuit of efficient backup strategies as information becomes
available during the course of an auction. The Commission noted,
however, that in some instances bidders may seek to withdraw bids for
improper reasons, including to delay the close of the auction for
strategic purposes. The Bureau, therefore, has discretion, in managing
the auction, to limit the number of withdrawals to prevent strategic
delay of the close of the auction or other abuses. The Commission stated
that the Bureau should assertively exercise its discretion, consider
limiting the number of rounds in which bidders may withdraw bids, and
prevent bidders from bidding on a particular market it finds that a
bidder is abusing the Commission\'s bid withdrawal procedures.[^14]

Applying this reasoning, we propose to limit each bidder in Auction No.
37 to withdraw standing high bids in no more than two rounds during the
course of the auction. To permit a bidder to withdraw bids in more than
two rounds would likely encourage insincere bidding or the use of
withdrawals for anti-competitive strategic purposes. The two rounds in
which withdrawals are utilized will be at the bidder\'s discretion;
withdrawals otherwise must be in accordance with the Commission\'s
rules. There is no limit on the number of standing high bids that may be
withdrawn in either of the rounds in which withdrawals are utilized.
Withdrawals will remain subject to the bid withdrawal payment provisions
specified in the Commission\'s rules.

We seek comment on these proposals.

##  {#section-1 .unnumbered}

## E. Stopping Rule {#e.-stopping-rule .unnumbered}

For Auction No. 37, the Bureau proposes to employ a simultaneous
stopping rule approach. The Bureau has discretion "to establish stopping
rules before or during multiple round auctions in order to terminate the
auction within a reasonable time."[^15] A simultaneous stopping rule
means that all construction permits remain open until the first round in
which no new acceptable bids, proactive waivers or withdrawals are
received. After the first such round, bidding closes simultaneously on
all construction permits. Thus, unless circumstances dictate otherwise,
bidding would remain open on all construction permits until bidding
stops on every permit.

The Bureau seeks comment on a modified version of the simultaneous
stopping rule. The modified stopping rule would close the auction for
all construction permits after the first round in which no bidder
submits a proactive waiver, a withdrawal, or a new bid on any
construction permit on which it is not the standing high bidder. Thus,
absent any other bidding activity, a bidder placing a new bid on a
construction permit for which it is the standing high bidder would not
keep the auction open under this modified stopping rule. The Bureau
further seeks comment on whether this modified stopping rule should be
utilized.

We propose that the Bureau retains the discretion to keep an auction
open even if no new acceptable bids or proactive waivers are submitted
and no previous high bids are withdrawn. In this event, the effect will
be the same as if a bidder had submitted a proactive waiver. The
activity rule, therefore, will apply as usual and a bidder with
insufficient activity will either lose bidding eligibility or use a
remaining activity rule waiver.

Finally, we propose that the Bureau reserve the right to declare that
the auction will end after a specified number of additional rounds
(\"special stopping rule\"). If the Bureau invokes this special stopping
rule, they will accept bids in the final round(s) only for construction
permits on which the high bid increased in at least one of the preceding
specified number of rounds. The Bureau proposes to exercise this option
only in certain circumstances, such as, for example, where the auction
is proceeding very slowly, there is minimal overall bidding activity, or
it appears likely that the auction will not close within a reasonable
period of time. Before exercising this option, the Bureau is likely to
attempt to increase the pace of the auction by, for example, increasing
the number of bidding rounds per day, and/or increasing the amount of
the minimum bid increments for the limited number of construction
permits where there is still a high level of bidding activity.

We seek comment on these proposals.

# Conclusion

Comments are due on or before October 9, 2000, and reply comments are
due on or before October 23, 2000. To file formally, parties must submit
an original and four copies to the Office of the Secretary, Federal
Communications Commission, 445 Twelfth Street, S.W., TW-A325,
Washington, DC 20054. In addition, parties must submit one copy to Louis
Sigalos, Deputy Division Chief, Auctions and Industry Analysis Division,
Wireless Telecommunications Bureau, 445 Twelfth Street, S.W., Suite
4-A668, Washington, DC 20554.

Comments and reply comments will be available for public inspection
during regular business hours in the FCC Public Reference Room, Room
CY-A257, 445 12th Street, S.W., Washington, D.C. 20554.

For further information concerning this proceeding, contact Kathy
Garland, Auctions and Industry Analysis Division, Wireless
Telecommunications Bureau, at (717) 338-2888; Kenneth Burnley, Legal
Branch, Auctions and Industry Analysis Division, Wireless
Telecommunications Bureau, at (202) 418-0660; or Lisa Scanlan, Audio
Services Division, Mass Media Bureau at (202) 418-2700.

-FCC-

[^1]: *See* Implementation of Section 309(j) of the Communications Act
    -- Competitive Bidding for Commercial Broadcast and Instructional
    Television Fixed Service Licenses, *First Report and Order* in MM
    Docket No. 97-234, GC Docket No. 92-52 and GEN Docket No. 90-264, 13
    FCC Rcd 15920, 15961 and 15974-15975 (1998) ("*Broadcast First
    Report and Order*"), *on recon., Memorandum Opinion and Order*, 14
    FCC Rcd 8724 (1999), *on further recon., Memorandum Opinion and
    Order*, 14 FCC Rcd 14521(1999).

[^2]: With regard to the FM service, in the *Broadcast First Report and
    Order*, the Commission gave applicants the opportunity to submit a
    set of preferred site coordinates as an alternative to the reference
    coordinates for the vacant FM allotment upon which they intend to
    bid. Detailed instructions for specifying preferred site coordinates
    will be given in a subsequent Auction 37 Public Notice which will
    provide guidelines for completing FCC Form 175 and exhibits. *See
    Broadcast First Report and Order*, 13 FCC Rcd at 15974 and note 153.

[^3]: Section 3002(a)(E)(i), Balanced Budget Act of 1997, Pub. L.
    105-33, 111 Stat. 251 (1997) ("Balanced Budget Act"), amending
    Section 309(j) of the Communications Act, 47 U.S.C. § 309(j).

[^4]: *See* Amendment of Part 1 of the Commission\'s Rules---Competitive
    Bidding Procedures, WT Docket No. 97-82, *Order, Memorandum Opinion
    and Order, and Notice of Proposed Rule Making*, 12 FCC Rcd 5686,
    5697, ¶ 16 (1997) ("*Part 1 Order*") ("We also clarify that pursuant
    to Section 0.131 of our rules, the Chief, Wireless
    Telecommunications Bureau, has delegated authority to implement all
    of the Commission\'s rules pertaining to auctions procedures").

[^5]: *See* Amendment of Part 1 of the Commission\'s Rules \--
    Competitive Bidding Procedures, Allocation of Spectrum Below 5 GHz
    Transferred from Federal Government Use, 4660-4685 MHz, WT Docket
    No. 97-82, ET Docket No. 94-32, *Third Report and Order and Second
    Further Notice of Proposed Rule Making*, 13 FCC Rcd 374, 448, ¶ 124
    (1998) ("*Part 1 Third Report and Order*"). The Commission directed
    the Bureau to seek comment on specific mechanisms related to
    day-to-day auction conduct including, for example, the structure of
    bidding rounds and stages, establishment of minimum opening bids or
    reserve prices, minimum accepted bids, initial maximum eligibility
    for each bidder, activity requirements for each stage of the
    auction, activity rule waivers, criteria for determining reductions
    in eligibility, information regarding bid withdrawal and bid
    removal, stopping rules, and information relating to auction delay,
    suspension or cancellation. *Id.* at ¶ 125. *See also Broadcast
    First Report and Order*, 13 FCC Rcd at 15967-15968. (Consistent with
    the Part 1 rules, the Commission delegated authority to the Mass
    Media Bureau to seek comment on and establish an appropriate auction
    design methodology prior to the start of each broadcast auction).

[^6]: *See* Implementation of Section 309(j) of the Communications Act
    -- Competitive Bidding , PP Docket No. 93-253, *Second Report and
    Order*, 9 FCC Rcd 2348, 2378-79, ¶¶ 171-176 (1994) *("Second Report
    and* *Order")* for a general discussion of competitive bidding
    design.

[^7]: *S*ee *Broadcast First Report and Order*, 13 FCC Rcd at 15971, ¶
    134.

[^8]: *See* *Second Report and Order*, 9 FCC Rcd 2348, 2378-79, ¶¶
    171-176 (1994).

[^9]: *See* 47 C.F.R. § 1.2104(i).

[^10]: *See* Balanced Budget Act, Section 3002(a). The Commission\'s
    authority to establish a reserve price or minimum opening bid is set
    forth in 47 C.F.R. § 1.2104(c) and (d).

[^11]: *See Broadcast First Report and* Order, 13 FCC Rcd at 15971, ¶
    134.

[^12]: *S*e*e*, *e.g.*, Closed Broadcast Auction --- Notice and Filing
    Requirements for Auction of AM, FM, TV, LPTV and FM and TV
    Translator Construction Permits --- Minimum Opening Bids and Other
    Procedural Issues, Auction No. 25, DA 99-1346, *Public Notice*, 14
    FCC Rcd 10632 (1999); Supplemental Closed Broadcast Auction ---
    Notice and Filing Requirements for Auction of Certain AM, FM, LPTV
    and TV Broadcast Construction Permits --- Minimum Opening Bids and
    Other Procedural Issues, Auction No. 28, DA 99-2958, *Public Notice*
    (rel. December 23, 1999).

[^13]: *See* 47 C.F.R. § 1.2104(g); 1.2109.

[^14]: *Part 1 Third Report and Order*, 13 FCC Rcd at 460, ¶ 150.

[^15]: 47 C.F.R. § 1.2104(e).