# Presentation: 668010

## Spectrum Auction Process and Integrated Spectrum Auction SystemAuction No. 691.4 GHz Bands

- Roy Knowles, Auctions Analyst,
- Auctions and Spectrum Access Division
- November 29, 2006

## 	Nothing herein is intended to supersede any provision of the Commission's rules or public notices.  These slides should not be used as a substitute for a prospective applicant's review of the Commission's relevant orders, rules, and public notices.  Prospective applicants must familiarize themselves thoroughly and remain current with the Commission's rules relating to the 1.4 GHz Bands, rules relating to application and auction procedures, and the procedures, terms and conditions contained in the Auction No. 69 public notices.

**Disclaimer**

## Agenda

- Overview of the FCC’s Simultaneous Multiple Round (SMR) Auction Design and Terminology
- Discuss Auction No. 69 Rules and Procedures
- Presentation and Hands-on Demonstration of the FCC’s Integrated Spectrum Auction System

## 	
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## Questions?

- 	If you are viewing this presentation live over the web, please feel free to e-mail your questions to...

- Auction69@fcc.gov

## Simultaneous Multiple Round (SMR) Auction Design

**Simultaneous** — All licenses are offered at the same time.
**Multiple Round** — There are multiple discrete bidding rounds during which bidding is confidential.

## How many rounds are conducted, and when does bidding stop?

- The number of rounds varies in each auction.  There is no predetermined number.
- Bidding continues until there is one round in which nothing happens.
- No new bids, withdrawals or proactive waivers.

## Auction Design(continued)

- Web-Based Bidding System
- Option to bid via Auction Bidder Line
- Click-Box Bidding
- When placing a bid, a bidder selects from nine bid amounts in the bidding system.
- Activity Requirements
- Bidders must generally bid throughout the auction.

## Auction Design(continued)

- Information Disclosure Procedures for Auction No. 69
- If the eligibility ratio is below three, the auction will commence in limited disclosure mode.*
- If the eligibility ratio is three or above, the auction will commence in full disclosure mode.
- *FCC reserves the discretion to commence in full disclosure mode.

## Bidding system information that will be released at the close of each round during the auction when in limited disclosure mode:
For each license, the provisionally winning bid amount, the minimum acceptable bid amount for the next round, the number of bids in the most recent round, and whether the license is FCC-held.
The amounts of all bids placed on each license in each round will be available in a separate report (bidder identities will be withheld).

- For each license, the provisionally winning bid amount, the minimum acceptable bid amount for the next round, the number of bids in the most recent round, and whether the license is FCC-held.
- The amounts of all bids placed on each license in each round will be available in a separate report (bidder identities will be withheld).

**Auction Design****(continued)**

## What are Bidding Units?

- A fixed number of units that is assigned to each license in the auction.
- The number of bidding units for each license is listed in Attachment A to the Procedures Public Notice.
- Bidding units are used to measure bidders’ _eligibility_ and _activity_.

## Bidding Units and Eligibility

**Eligibility** — The maximum number of bidding units a bidder can bid on.
- A bidder establishes its eligibility with its upfront payment.
- Eligibility cannot be increased.
- Eligibility is *not* specific to certain licenses.  A bidder may use its eligibility on any of a number of licenses it has selected on its 175 application.

## Bidding Units and Activity

**Activity** — The sum of the bidding units for
- the licenses on which a bidder places bids in the current round, and
- licenses on which a bidder has provisionally winning bids from a previous round.

## What is Required Activity?

- The activity requirement is the minimum number of bidding units on which a bidder must be active.  It is determined by a percentage of the bidder’s current eligibility.

## Activity RequirementAuction No. 69

- Two Stage Auction
- Stage 1: 80% activity requirement
- 	If a bidder has 10,000 bidding units of eligibility, its activity requirement is 8,000 bidding units.
- Stage 2: 95% activity requirement
- 	If a bidder has 10,000 bidding units of eligibility, its activity requirement is 9,500 bidding units.

## Bidding Units in Action

**Example:****	****You have 235,000 BU of eligibility and an 80% activity requirement (188,000 BU)**

**What can you bid on? **
- Los Angeles _***or***_  Washington, Milwaukee and Denver
- Not Washington or Milwaukee or Denver by themselves
- (below activity requirement)
- Not Los Angeles and* *Washington; not Los Angeles and Milwaukee; not Los Angeles and Denver (exceeds eligibility)

| Market | Description | Bidding Units | Upfront Payment |
| --- | --- | --- | --- |
| MEA044 | Los Angeles | 225,000 | $225,000 |
| MEA005 | Washington | 88,000 | $88,000 |
| MEA017 | Milwaukee | 50,000 | $50,000 |
| MEA033 | Denver | 50,000 | $50,000 |

## What if you change your mind?

- You can _remove_ a bid you placed during the current round.  If you place a bid during a round and then remove that bid before the end of the round, it’s as if it never happened.
- You can _withdraw_ provisionally winning bids from a previous round. Once a withdrawal is submitted during a round, that withdrawal cannot be unsubmitted even if the round has not yet ended.
- Each bidder will have only two rounds in which withdrawals can be made.
- Be aware that there may be financial consequences to withdrawals.

## What if you do not meet the activity requirement? 

- One of two things will happen:
- You will use an activity rule waiver.
- 				or
- Your eligibility will be reduced.

## Activity Rule Waivers

- Use of an activity rule waiver preserves a bidder’s current eligibility despite the bidder’s activity in the current round being below the required level.
- When a bidder uses an activity rule waiver, the waiver applies to that round of bidding, not to a particular license.

## Activity Rule Waivers

- Bidders are provided with a limited number of activity rule waivers.
- In Auction No. 69, each bidder is provided three activity rule waivers.

## Automatic Waivers

- 	The system will automatically apply a waiver for a bidder at the end of any round in which the bidder’s activity is below the required level unless:
- The bidder has no more activity rule waivers.
- 				or
- The bidder reduces eligibility.

## Proactive Waivers

- Bidders can apply activity rule waivers proactively.
- The important difference between an automatic waiver and a proactive waiver is that a proactive waiver keeps the auction open.
- Bidding continues until there is one round in which nothing happens.
- No new bids, withdrawals or _proactive waivers_.

## What if a bidder does not meet the activity requirement and does not have any waivers left?

- 	The bidder’s current eligibility will be permanently reduced, possibly eliminating the bidder from further bidding in the auction.

## Eligibility Reduction

- 	Bidders may use the reduce eligibility function of the auction system.
- Reducing eligibility will bring a bidder into compliance with the activity requirement.
- Useful when a bidder is not meeting the activity requirement, does not want to bid on additional licenses, and does not want to use an activity rule waiver.

## Reduce Eligibility in Action

**Example:****	****You have 235,000 BU of eligibility and a 95% activity requirement (223,250 BU)**

**You no longer want Los Angeles. What can you do?**
- 	Place your bids on Washington, Milwaukee and Denver, and allow ISAS to automatically use one of your waivers when you  do not meet the activity requirement.
- 				 – or –
- 	Place your bids on Washington, Milwaukee and Denver, and then reduce your eligibility.  ISAS will multiply your current activity (188,000 BU) by 20/19 and _***permanently***_*** ***reduce your  eligibility to 197,895 bidding units.

| Market | Description | Bidding Units | Upfront Payment |
| --- | --- | --- | --- |
| MEA044 | Los Angeles | 225,000 | $225,000 |
| MEA005 | Washington | 88,000 | $88,000 |
| MEA017 | Milwaukee | 50,000 | $50,000 |
| MEA033 | Denver | 50,000 | $50,000 |

## Bid Amounts

- Minimum opening bids are established prior to the auction.
- Minimum acceptable bids are calculated using an activity-based formula.
- The activity-based formula tailors the percentage increment to the activity that a license receives.

## Bid Amounts

- For activity and eligibility, the dollar amount of a bid does not matter.
- How much can you bid?  Any one ofnine pre-defined dollar amounts.
- The upfront payment does not limit the amount you may bid for a license.

## The SecurID® Key Fob

- Multiple key fobs sent to all bidders
- Random number refreshes every 60 seconds
- Countdown indicator
- Please return to the FCC for recycling

## To Ensure a Positive Auction Experience

- Do your homework.
- Read all public notices related to this auction.
- Participate in the mock auction.
- Test backup strategies and activate _all_ SecurID® key fobs.
- Use Auction Bidder Line to ask “what if” questions.
- Check for and read all announcements to stay informed.
- Bidding schedule
- Auction parameter changes
- Bid Early!
- Print round summaries.