# Presentation: 667091

## Spectrum Auction Process and Integrated Spectrum Auction SystemAuction No. 63Multichannel Video Distribution & Data Service (MVDDS)

- Debbie Smith,  Auctions Analyst
- debbie.smith@fcc.gov
- September 28, 2005

**Notes:**
Background in auctions but normally on the other end of the phone.  

Answer questions on the Auction Bidder Line and daily inquires to the Auctions Division.

Like to present the same information to you now as I would if I were on the other end of the phone.  

## Disclaimer

- 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 MVDDS, rules relating to application and auction procedures, and the procedures, terms and conditions contained in the Auction No. 63 public notices.

## Questions?

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

- Auction63@fcc.gov

## This symbol indicates a common question slide

**Notes:**
Being on the phone I hear a lot of questions from bidders trying to understand our auction procedures.  This symbol is displayed on slides that have common auction questions. 

## Agenda

- Overview of the FCC’s Simultaneous Multiple Round (SMR) Auction Design and Terminology
- Discuss Auction No. 63 Rules and Procedures
- Presentation and Hands-on Demonstration of the FCC’s Integrated Spectrum Auction System

## 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.

**Notes:**
When you break down the type it is easier to understand how our auctions are run.  We put all licenses up for bid at the same time and conduct multiple rounds that have a definitive starting and stopping time.  During each round of bidding, the bidding that you do is confidential and not displayed until after the round is over.  

## 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.

**Notes:**
Here’s our first common question and probably the most common question.  

When is it over?
Unlike an Ebay auction we do not specify an ending time.  The ending time is determined by the auction and each auction is different.  The auction ends when there is one round in which no new bids, withdrawals or proactive waivers are placed.  Some of those terms may be unfamiliar to you but I’ll discuss them later in the presentation and then go over the closing rule again.  

## 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.

**Notes:**
The ISAS system is a web based bidding system – we’ll go over the security a little later.

There is also an option to bid via our Auction Bidder line.  This can be your primary means of bidding or secondary means if you encounter a problem or are away from accessibility to the internet.  Once you become a qualified bidder you will receive the phone number of the auction bidder line.  This is also the number that you can use to ask questions during the auction.

Instead of having free form fields for you to enter your bids, we have drop down boxes that are filled with nine bid amounts that you select to place your bid.  These predetermined amounts are calculated each round.

5% bid increment % (for my info)

## Auction Design(continued)

- When a round ends, results are processed and made public.
- Including provisionally winning bids (PWBs), all bids, bid withdrawals, and waivers
- In the event of tied bids, PWBs are determined by random number selection
- Activity Requirements
- Bidders must generally bid throughout the auction.

**Notes:**
At the end of each round, remember rounds have a definite start and stop time, round results will be processed and displayed to the public.

This will show the provisionally winning bidder.  Commonly called a PWB.  This represents the winner of the license if the auction had ended that round.  All bids placed by all the bidders during that round, any bid withdrawals that were placed and waivers that were either placed or allocated that round. 

The final item that rounds out our auction design is the activity requirement.  Instead of waiting until the end of the auction and then placing a bid on a license that you are interested in, the FCC implemented an activity requirement that requires you as the bidder to be active during the entire auction.  And when we talk about activity, it brings us to how we measure activity.  And that is by using bidding units.  

## 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’ _activity_ and _eligibility_.

**Notes:**
If we based your activity on $’s it wouldn’t really make sense because the $ figure would keep increasing as the auction continued thus requiring you to bid more money.  So what they have come up with are bidding units.  They are a fixed number assigned to each license and this particular value is listed in Att A. of the procedures public notice.  These bidding units are used to measure eligibility (the ceiling) and the activity (the floor).  

## 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.  

- 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 Eligibility

**Notes:**
Eligibility is looked at as the ceiling.  It is determined by the upfront payment and can never be increased after the upfront payment deadline.  It does not have to be used for specific licenses

## 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.  

- 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.

- Bidding Units and Activity

**Notes:**
Activity on the other hand is the sum of your bidding units.  Add up the bidding units of the licenses you have placed a bid on during that round and the bidding units of any PWBs that you currently hold and this total will be your activity. As you keep that calculation in mind, we’ll move to how and what the FCC requires you to be active on. 

## 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.

**Notes:**
The FCC will require a bidder to carry a certain amount of activity during a round or face having an automatic waiver placed on their behalf during round results processing.  

## 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.

- 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.

- Activity RequirementAuction No. 63

**Notes:**
So here is the activity requirement that the FCC has set forth for this auction.  

## Bidding Units in Action

**Example:****	****You have 7,000 BU of eligibility and a 80% activity requirement (5,600 BU)**

| Market | Description | Bidding Units | Upfront Payment |
| --- | --- | --- | --- |
| MVD167 | Utica | 7,000 | $7,000  |
| MVD177 | Marquette | 6,000 | $6,000  |
| MVD210 | Glendive | 1,000 | $1,000  |

**What can you bid on? **
- Utica _***or***_  Marquette _***or***_  Marquette and Glendive
- Not Glendive by itself (doesn’t meet activity requirement)
- Not Utica and* *Marquette; not Utica and Glendive (exceeds eligibility)

**Notes:**
We’ll put these bidding units into action.  

## 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_ PWBs from prior rounds.  Bid withdrawals have limits and consequences:
- Each bidder is limited to withdrawals in no more than one round in Auction No. 63.
- Withdrawals are subject to the bid withdrawal payments specified in 47 C.F.R. § 1.2104(g).

**Notes:**
There are 2 options if you change your mind after bidding, but it depends on what has happened since you placed your bid.  

If the round in which you placed your bid is still open you can remove that bid and the removal acts as an “undo”.  So essentially it is like you never placed that bid.

If the round in which you placed the bid is over, round results have processed and you are deemed the PWB the “undo” then becomes a withdrawal.  A withdrawal carries limits and consequences.  A bidder can not withdraw in more than one round (as many licenses as they hold PWB’s on) and there could be a monetary consequence as specified in the rule section.

## 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.

**Notes:**
When you perform either of the previously mentioned tasks or do not bid enough to meet your activity requirement 2 things can happen.  You could use a waiver or have your eligibility permanently 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.

**Notes:**
Two types of waivers – automatic and proactive.  Both of these types of waivers preserves a bidders eligibility even if the bidder is below the activity requirement.  

## Activity Rule Waivers

- Bidders are provided with a limited number of activity rule waivers.
- In Auction No. 63, 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_.

**Notes:**
Proactive waivers are a function of the bidding system.  So just as you can bid, remove bids and withdraw bids another option is that you can submit a proactive waiver.  

One major difference between the 2 waiver types is that a proactive waiver will keep the auction open.

Back to that common question of when will the auction end?  When no new bids, withdrawals or proactive waivers are placed. 

## 

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

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

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

## 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.

**Notes:**
This is a proactive function in the bidding system when you are not meeting your required activity and you don’t want to bid on any more licenses but do not want to use a waiver.  

In order for reduce eligibility to work, you need to hold PWB’s or place bids on all the markets that you are interested in bidding on for the rest of the auction and then select RE.  This way the system will calculate your reduction depending on the stage and your current activity will become your required activity.

## Reduce Eligibility in Action

**Example:****	****You have 7,000 BU of eligibility and a 95% activity requirement (6,650 BU)**

| Market | Description | Bidding Units | Upfront Payment |
| --- | --- | --- | --- |
| MVD167 | Utica | 7,000 | $7,000  |
| MVD177 | Marquette | 6,000 | $6,000  |
| MVD210 | Glendive | 1,000 | $1,000  |

**Utica & Marquette have exceeded your budget, what can you do?**
- Place your bid on Glendive and allow ISAS to automatically take a waiver when you do not meet your activity requirement
- Place your bid on Glendive and then reduce eligibility.  ISAS will multiply the BUs for Glendive by 20/19 and _***permanently ***_lower your eligibility to 1,053 bidding units.

## Minimum opening bids are established prior to the auction.
Minimum acceptable bid percentage and bid increment percentage are set at 5% (subject to change).
Minimum acceptable bids will be approximately 5 percent greater than the provisionally winning bids. The auction system allows for a total of nine bid amounts for each license. 

- Minimum acceptable bid percentage and bid increment percentage are set at 5% (subject to change).
- Minimum acceptable bids will be approximately 5 percent greater than the provisionally winning bids. The auction system allows for a total of nine bid amounts for each license.

- Bid Amounts

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

- 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.

- Bid Amounts

## The SecurID Card

- Multiple cards 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 cards.
- 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.

## Auction ConceptualDesign

- Auction ConceptualDesign