[Federal Register Volume 86, Number 39 (Tuesday, March 2, 2021)]
[Proposed Rules]
[Pages 12146-12161]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-03442]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 1 and 27

[AU Docket No. 20-429; FCC 21-14; FRS 17455]


Auction of Flexible-Use Service Licenses in the 2.5 GHz Band for 
Next-Generation Wireless Services; Comment Sought on Competitive 
Bidding Procedures for Auction 108

AGENCY: Federal Communications Commission.

ACTION: Proposed rule; proposed auction procedures.

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SUMMARY: In this document, the Commission announces an auction of 
approximately 8,300 geographic overlay licenses in the 2.5 GHz band, 
designated as Auction 108. This document proposes and seeks comment on 
auction procedures to be used for Auction 108.

DATES: Comments are due on or before May 3, 2021; and reply comments 
are due on or before May 17, 2021.

ADDRESSES: Interested parties may file comments or reply comments in AU 
Docket No. 20-429. Comments may be filed using the Commission's 
Electronic Comment Filing System (ECFS) or by filing paper copies. The 
Commission strongly encourages interested parties to file comments 
electronically.
    <bullet> Electronic Filers: Comments may be filed electronically 
using the internet by accessing the ECFS at https://www.fcc.gov/ecfs/.
    <bullet> Paper Filers: Parties who choose to file by paper must 
file an original and one copy of each filing.
    <bullet> Filings in response to the Auction 108 Comment Public 
Notice can be sent by commercial courier or by the U.S. Postal Service. 
All filings must be addressed to the Commission's Secretary, Office of 
the Secretary, Federal Communications Commission.
    <bullet> Commercial deliveries (other than U.S. Postal Service 
Express Mail and Priority Mail) must be sent to 9050 Junction Dr., 
Annapolis Junction, MD 20701.
    <bullet> U.S. Postal Service first-class, Express, or Priority mail 
must be addressed to 45 L Street NE, Washington, DC 20554.
    <bullet> Until further notice, the Commission no longer accepts any 
hand or messenger delivered filings. This is a temporary measure taken 
to help protect the health and safety of individuals, and to mitigate 
the transmission of COVID-19.
    <bullet> Email: We also request that a copy of all comments and 
reply comments be submitted electronically to the following address: 
<a href="/cdn-cgi/l/email-protection#14756177607d7b7a25242c547277773a737b62"><span class="__cf_email__" data-cfemail="d5b4a0b6a1bcbabbe4e5ed95b3b6b6fbb2baa3">[email protected]</span></a>.

FOR FURTHER INFORMATION CONTACT: 
    Auction Legal Questions: Erik Beith, (202) 418-0660, 
<a href="/cdn-cgi/l/email-protection#e7a2958e8cc9a5828e938fa7818484c9808891"><span class="__cf_email__" data-cfemail="400532292b6e0225293428002623236e272f36">[email protected]</span></a>, or Daniel Habif, (202) 418-0660, 
<a href="/cdn-cgi/l/email-protection#094d6867606c652741686b606f496f6a6a276e667f"><span class="__cf_email__" data-cfemail="88cce9e6e1ede4a6c0e9eae1eec8eeebeba6efe7fe">[email protected]</span></a>.
    General Auction Questions: (717) 338-2868.
    2.5 GHz Band Licensing Questions: Madelaine Maior, (202) 418-1466, 
<a href="/cdn-cgi/l/email-protection#a4e9c5c0c5c8c5cdcac18ae9c5cdcbd6e4c2c7c78ac3cbd2"><span class="__cf_email__" data-cfemail="1a577b7e7b767b73747f34577b7375685a7c7979347d756c">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's 
document, Public Notice (Auction 108 Comment Public Notice), AU Docket 
No. 20-429, FCC 21-14, adopted on January 13, 2021 and released on 
January 13, 2021. The complete text of this document, including its 
attachments, is available on the Commission's website at www.fcc.gov/auction/108 or by using the search function for AU Docket No. 20-429 on 
the Commission's ECFS web page at www.fcc.gov/ecfs. Alternative formats 
are available to persons with disabilities by sending an email to 
<a href="/cdn-cgi/l/email-protection#3e787d7d0b0e0a7e585d5d10595148"><span class="__cf_email__" data-cfemail="a4e2e7e7919490e4c2c7c78ac3cbd2">[email protected]</span></a> or by calling the Consumer & Governmental Affairs Bureau 
at (202) 418-0530 (voice), (202) 418-0432 (TTY).

I. Introduction

    1. By the Auction 108 Comment Public Notice, the Commission seeks 
comment on the procedures to be used for Auction 108, the auction of 
approximately 8,300 geographic overlay licenses in the 2.5 GHz band. 
The Commission seeks comment on whether to use a single-round auction 
format with user-defined package bidding, or a simultaneous multiple-
round (SMR) auction format.

[[Page 12147]]

II. Licenses To Be Offered in Auction 108

    2. Auction 108 will offer geographic overlay licenses for 
unassigned spectrum in the 2.5 GHz (2496-2690 MHz) band. With overlay 
licenses, licensees obtain the rights to geographic area licenses 
``overlaid'' on top of the existing incumbent licenses, 2.5 GHz Report 
and Order, 84 FR 57343, October 25, 2019. As with an ordinary flexible-
use license, the overlay licensee may operate anywhere within its 
geographic area, subject to protecting the licensed areas (i.e., 
circular Geographic Service Areas with a 35-mile radius) of incumbent 
licensees. If an incumbent licensee in a county cancels or terminates 
its license, then the overlay licensee obtains the rights to operate in 
the geographic area and on the channel of the cancelled license. An 
overlay licensee may clear its geographic area by purchasing the 
incumbent licenses, but it does not have the exclusive right to 
negotiate with the incumbent licensee for its spectrum rights or to 
purchase an incumbent license in the geographic area in which it has 
the overlay rights. The Commission will offer up to three blocks of 
spectrum--49.5 megahertz, 50.5 megahertz, and 16.5 megahertz blocks, 
respectively--licensed on a county basis. Specifically, the first 
license block will include channels A1-A3, B1-B3, C1-C3 (49.5 
megahertz); the second license block will include channels D1-D3, the J 
channels, and channels A4-G4 (50.5 megahertz); and the third license 
block will include channels G1-G3 and the relevant K channels (16.5 
megahertz of contiguous spectrum and 1 megahertz of the K channels 
associated with the G channel group). New overlay licenses in the 
Educational Broadband Service (EBS) portion of the 2.5 GHz band will be 
issued for 10-year, renewable license terms. A licensee in this band 
may provide any services permitted under terrestrial fixed or mobile 
allocations, as set forth in the non-Federal Government column of the 
Table of Frequency Allocations in 47 CFR 2.106.
    3. The specific inventory of overlay licenses available in Auction 
108 will be determined by the results of the Rural Tribal Priority 
Window. During the Rural Tribal Priority Window, federally recognized 
Tribes were given the opportunity to submit applications to acquire new 
2.5 GHz licenses for currently unassigned white space spectrum to 
provide broadband service on rural Tribal lands before the remaining 
unassigned spectrum is made generally available through competitive 
bidding. The Rural Tribal Priority Window opened on February 2, 2020, 
and the original deadline was extended by 30 days to close on September 
2, 2020. The Commission received over 400 applications through the 
Rural Tribal Priority Window and the Wireless Telecommunications Bureau 
(WTB) has already granted over 150 of these applications. Based on 
review of applications received in the Rural Tribal Priority Window, 
the Office of Economics and Analytics (OEA), in conjunction with WTB, 
will release a public notice announcing the final inventory of 2.5 GHz 
band overlay licenses to be offered in Auction 108. This public notice 
will be released in advance of the deadline for the submission of 
short-form applications to bid in Auction 108 so that potential 
applicants can make informed decisions about whether to apply in light 
of information as to existing incumbents and potential Tribal 
licensees. Commission staff aims to process all pending Rural Tribal 
Priority Window applications prior to announcing the final auction 
inventory; however, there may be Tribal applications that remain 
pending at the time the auction inventory is announced. Potential 
bidders in Auction 108 should continue to investigate all factors that 
may affect each license on which they seek to bid throughout the 
auction process, including potential encumbrances that may result from 
pending Tribal applications.
    4. Concurrent with the release of the Auction 108 Comment Public 
Notice, OEA and WTB have made available a file listing all county and 
frequency block combinations potentially available for Auction 108, 
subject to the results of the ongoing review of applications submitted 
during the Rural Tribal Priority Window. This file is listed as an 
``Attachment A'' file on the Auction 108 website at www.fcc.gov/auction/108. The file listing available county and frequency block 
combinations does not include blocks or counties that are fully 
encumbered by existing licenses.
    5. OEA and WTB will also make available resources to assist 
applicants in conducting due diligence research regarding potential 
encumbrances in the band prior to the release of the public notice 
announcing the final auction inventory. In addition to existing 
incumbents in the band, the pending Rural Tribal Priority Window 
applications represent the maximum potential additional encumbrances 
that may affect the licenses available in the auction. These resources 
will include a mapping tool to help identify and view existing licenses 
and Rural Tribal Priority Window applications in the Commission's 
Universal Licensing System (ULS) database. The mapping tool will be 
updated to reflect changes due to the grant or dismissal of any pending 
Tribal applications prior to the auction. Potential applicants are 
reminded, however, that this tool will not represent complete licensing 
information; all information should be confirmed in ULS for any 
specific license or area. More information about Rural Tribal Priority 
Window applications, including a current mapping tool to help identify 
the location of pending, accepted for filing, and granted applications, 
is available at www.fcc.gov/rural-tribal-window-updates. The licensing 
information provided on this web page does not represent complete 
licensing information. All information should be confirmed in ULS for 
any specific license or area.
    6. Notwithstanding Commission resources described in the Auction 
108 Comment Public Notice, each potential bidder is solely responsible 
for investigating and evaluating all technical and marketplace factors 
that may have a bearing on the potential uses of a license that it may 
seek in Auction 108, including the availability of unassigned white 
space in any particular market. In addition to the typical due 
diligence considerations that the Commission encourages of bidders in 
all auctions, the Commission calls particular attention in Auction 108 
to potential encumbrances due to existing licenses and the Rural Tribal 
Priority Window issues described above, which may impact the licenses 
available in Auction 108. Each applicant should closely follow releases 
from the Commission concerning these issues and consider carefully the 
technical and economic implications for commercial use of the 2.5 GHz 
band. The Commission makes no representations or warranties about the 
use of this spectrum for particular services, or about the information 
in Commission databases that is furnished by outside parties. Each 
applicant should be aware that a Commission auction represents an 
opportunity to become a Commission licensee, subject to certain 
conditions and regulations. This includes the established authority of 
the Commission to alter the terms of existing licenses by rulemaking, 
which is equally applicable to licenses awarded by auction. A 
Commission auction does not constitute an endorsement by the Commission 
of any particular service, technology, or product, nor does a 
Commission license constitute a guarantee of business success.

[[Page 12148]]

III. Implementation of Part 1 Competitive Bidding Procedures

    7. In the 2.5 GHz Report and Order, the Commission decided to 
conduct any auction of new 2.5 GHz band licenses in conformity with the 
amended part 1 rules. The Commission's part 1 rules require each 
applicant seeking to bid to acquire licenses in a spectrum auction to 
provide certain information in a short-form application (FCC Form 175), 
including ownership details and numerous certifications. Part 1, 
subpart Q's, competitive bidding rules also contain a framework for the 
implementation of a competitive bidding design, application and 
certification procedures, reporting requirements, and the prohibition 
of certain communications. The rules and requirements proposed in this 
section would apply in either a single bidding round auction or an SMR 
auction, unless clearly indicated otherwise.

A. Certification of Notice of Auction 108 Requirements and Procedures

    8. In addition to the certifications already required under 47 CFR 
1.2105, the Commission proposes to require any applicant seeking to 
participate in Auction 108 to certify in its short-form application, 
under penalty of perjury, that it has read the public notice adopting 
procedures for Auction 108 that will be released in advance of the 
short-form deadline, and that it has familiarized itself with those 
procedures and the requirements for obtaining a license and operating 
facilities in the 2.5 GHz band. The Commission believes that this 
requirement would help ensure that the applicant has reviewed the 
procedures for participation in the auction process and has 
investigated and evaluated those technical and marketplace factors that 
may have a bearing on its potential use of any licenses won at auction. 
Consequently, this requirement will promote an applicant's successful 
participation and will minimize its risk of defaulting on its auction 
obligations. As with other required certifications, an auction 
applicant's failure to make the required certification in its short-
form application by the applicable filing deadline would render its 
application unacceptable for filing, and its application would be 
dismissed with prejudice. The Commission seeks comment on this 
proposal. The Commission also seeks comment on whether there are 
additional steps it should take with respect to the filing of short-
form applications to further ensure and promote auction integrity.

B. Bidding Credit Caps

    9. Consistent with the Commission's decisions in the Updating Part 
1 Report and Order, 80 FR 56764, September 18, 2015, the Commission 
seeks comment on establishing reasonable caps on the total bidding 
credit amount that an eligible small business, very small business, or 
rural service provider may be awarded for Auction 108. The Commission 
administers its bidding credit programs to promote small business and 
rural service provider participation in auctions and in the provision 
of spectrum-based services.
    10. Eligibility for the small business bidding credit is determined 
according to a tiered schedule of small business size definitions that 
are based on an applicant's average annual gross revenues for the 
relevant preceding period, and which determine the size of the bidding 
credit discount. In the 2.5 GHz Report and Order, the Commission 
determined that eligibility for the small business bidding credit in 
auctions of new licenses in the 2.5 GHz band would be defined using two 
of the thresholds of the standardized schedule of small business sizes. 
Specifically, the Commission determined that an entity with average 
annual gross revenues for the preceding five years not exceeding $55 
million would be designated as a ``small business'' eligible for a 15% 
bidding credit, and that an entity with average annual gross revenues 
for the preceding five years not exceeding $20 million would be 
designated as a ``very small business'' eligible for a 25% bidding 
credit. The Commission further determined that entities providing 
commercial communication services to a customer base of fewer than 
250,000 combined wireless, wireline, broadband, and cable subscribers 
in primarily rural areas would be eligible for the 15% rural service 
provider bidding credit. The Commission defined ``rural area'' as a 
county with a population density of 100 persons or fewer per square 
mile.
    11. To protect the integrity of the bidding credit program and to 
mitigate the incentives for abuse, the Commission, in the Updating Part 
1 Report and Order, established a process to implement a reasonable cap 
on the total bidding credit amount that an eligible small business or 
rural service provider may be awarded in any auction, based on an 
evaluation of the expected capital requirements presented by the 
particular service and inventory of licenses being auctioned. The 
Commission determined that bidding credit caps would be implemented on 
an auction-by-auction basis, but resolved that, for any particular 
auction, the total amount of the bidding credit cap for small 
businesses would not be less than $25 million, and the bidding credit 
cap for rural service providers would not be less than $10 million. For 
Auctions 101-103, 105, and 107, the Commission adopted a $25 million 
cap on the total bidding credit amount that may be awarded to an 
eligible small business in each auction and a $10 million cap on rural 
service provider bidding credits in each auction.
    12. The Commission proposes to adopt the same bidding credit caps 
for Auction 108. As the Commission did for its recent auctions of 
spectrum for next-generation wireless services, it believes that the 
range of potential use cases suitable for spectrum in the 2.5 GHz band, 
combined with the relatively small geographic areas for new flexible-
use overlay licenses of white space, may permit deployment of smaller-
scale networks with lower total costs. Moreover, past auction data 
suggest that the proposed caps will allow the substantial majority of 
eligible businesses in the auction to take advantage of the bidding 
credit program. The Commission therefore believes that its proposed 
caps will promote the statutory goals of providing meaningful 
opportunities for bona fide small businesses to participate in the 
auction and in the provision of spectrum-based services, without 
compromising its responsibility to prevent unjust enrichment and ensure 
efficient and intensive use of spectrum.
    13. Similarly, the Commission proposes to adopt a $10 million cap 
on the total bidding credit amount that may be awarded to an eligible 
rural service provider in Auction 108. An entity is not eligible for a 
rural service provider bidding credit if it has already claimed a small 
business bidding credit. Based on its experience with other spectrum 
auctions, the Commission anticipates that a $10 million cap on rural 
service provider bidding credits will not constrain the ability of any 
rural service provider to participate fully and fairly in Auction 108. 
In addition, to create parity in Auction 108 among eligible small 
businesses and rural service providers competing against each other in 
smaller markets, the Commission proposes a $10 million cap on the 
overall bidding credit amount that any winning small business bidder 
may apply to licenses won in counties located within any partial 
economic area (PEA) with a population of 500,000 or less.
    14. The Commission seeks comment on these proposed caps. 
Specifically, do the expected capital requirements

[[Page 12149]]

associated with operating in the 2.5 GHz band, the potential number and 
value of new overlay licenses, past auction data, or any other 
considerations justify a higher cap for either type of bidding credit? 
Moreover, are there convincing reasons for not maintaining parity with 
the bidding credit caps adopted in previous auctions of spectrum 
suitable for 5G? Commenters are encouraged to identify unique 
circumstances and characteristics of this mid-band auction that should 
guide us in establishing bidding credit caps, and to provide specific, 
data-driven arguments in support of their proposals.
    15. The Commission reminds applicants applying for designated 
entity bidding credits that they should take due account of the 
requirements of the Commission's rules and implementing orders 
regarding de jure and de facto control of such applicants. These rules 
include a prohibition, which applies to all applicants (whether or not 
they are seeking bidding credits) starting at the short-form 
application filing deadline, against changes in ownership of the 
applicant that would constitute an assignment or transfer of control. 
Under 47 CFR 1.2107(c), the winning bidder must be the entity that 
files the post-auction long-form application. Pursuant to 47 CFR 
1.929(a)(2), any substantial change in ownership or control of an 
applicant is classified as a major amendment. Applicants should not 
expect to receive any opportunities to revise their ownership structure 
after the filing of their short- and long-form applications, including 
making revisions to their agreements or other arrangements with 
interest holders, lenders, or others in order to address potential 
concerns relating to compliance with the designated entity bidding 
credit requirements. This policy will help to ensure compliance with 
the Commission's rules applicable to the award of bidding credits prior 
to the start of bidding in this auction, which will involve competing 
bids from those who do and do not seek bidding credits, and thus 
preserves the integrity of the auction process. In furtherance of this 
policy, applicants will not be permitted to change their bidding credit 
type selection (i.e., from small business to rural service provider, or 
vice versa) after the short-form deadline. The Commission also believes 
that this will meet its objectives in awarding licenses through the 
competitive bidding process.

C. Prohibition of Certain Communications

    16. Section 1.2105(c)(1) of the Commission's rules, 47 CFR 
1.2105(c)(1), provides that, subject to specified exceptions, after the 
short-form application filing deadline, all applicants are prohibited 
from cooperating or collaborating with respect to, communicating with 
or disclosing, to each other or any nationwide provider of 
communications services that is not an applicant, or, if the applicant 
is a nationwide provider, any non-nationwide provider that is not an 
applicant, in any manner the substance of their own, or each other's, 
or any other applicants' bids or bidding strategies (including post-
auction market structure), or discussing or negotiating settlement 
agreements, until after the down payment deadline. Section 
1.2105(c)(5)(i), 47 CFR 1.2105(c)(5)(i), defines ``applicant'' as 
including all officers and directors of the entity submitting a short-
form application to participate in the auction, all controlling 
interests of that entity, as well as all holders of partnership and 
other ownership interests and any stock interest amounting to 10% or 
more of the entity, or outstanding stock, or outstanding voting stock 
of the entity submitting a short-form application.
    17. Nationwide Providers Subject to the Prohibition of Certain 
Communications. The operation of the rule prohibiting certain 
communications requires that the Commission identify each ``nationwide 
provider'' for purposes of Sec.  1.2105(c)(1) in connection with each 
auction. Accordingly, consistent with the procedures adopted for prior 
auctions of flexible-use licenses for advanced wireless services, the 
Commission proposes to identify AT&T, T-Mobile, and Verizon as 
``nationwide providers'' for the purpose of implementing its 
competitive bidding rules in Auction 108, including Sec.  1.2105(c), 
the rule prohibiting certain communications. This is consistent with 
the Commission's identification of nationwide providers in the 2020 
Communications Marketplace Report. The Commission seeks comment on this 
proposal.

D. Information Procedures During the Auction Process

    18. As an additional safeguard to further prevent the sharing of 
information about applicants' bids and bidding strategies and to 
discourage unproductive and anti-competitive strategic behavior, the 
Commission proposes to limit information available in Auction 108 in 
order to prevent the identification of bidders placing particular bids 
until after the bidding has closed. The Commission has instituted 
limited information procedures in most recent spectrum auctions. While 
the Commission generally makes available to the public information 
provided in each applicant's FCC Form 175 following an initial review 
by Commission staff, it proposes to not make public until after bidding 
has closed: (1) The licenses that an applicant selects for bidding in 
its FCC Form 175, (2) the amount of any upfront payment made by or on 
behalf of an applicant for Auction 108, (3) any applicant's bidding 
eligibility, and (4) any other bidding-related information that might 
reveal the identity of the bidder placing a bid.
    19. As in past Commission auctions, the Commission will not make 
public during a bidding round any real-time information on bidding 
activity. Bidders would have access both during and after a round to 
information related to their own bidding activity and eligibility. For 
example, bidders would be able to view their own levels of eligibility 
and submitted activity through the FCC auction bidding system.
    20. After the close of bidding, bidders' license selections, 
upfront payment amounts, bidding eligibility, bids, and other bidding-
related information would be made publicly available.
    21. The Commission seeks comment on the above details of its 
proposal for implementing limited information procedures, or anonymous 
bidding, in Auction 108. Commenters opposing the use of limited 
information procedures in Auction 108 should explain their reasoning 
and propose alternative information rules.

E. Upfront Payments and Bidding Eligibility

    22. In keeping with the Commission's usual practice in spectrum 
license auctions, the Commission proposes that applicants be required 
to submit upfront payments as a prerequisite to becoming qualified to 
bid. As described below, the upfront payment is a refundable deposit 
made by an applicant to establish its eligibility to bid on licenses. 
Upfront payments 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 bidding. The Commission notes that its 
rules require that any auction applicant that, pursuant to 47 CFR 
1.2106(a)(2)(xii), certifies that it is a former defaulter must submit 
an upfront payment equal to 50% more than the amount that otherwise 
would be required. With these considerations in

[[Page 12150]]

mind, the Commission proposes upfront payments based on $0.003 per MHz-
pop, with a minimum of $500 per license. Given the uncertain total 
amount of available white space spectrum in each 2.5 GHz band license 
pending resolution of Rural Tribal Priority Window applications and 
other factors, the Commission proposes to base upfront payments on the 
total potential MHz-pops of each license offered in the auction, rather 
than on available white space in each block. For the 49.5 megahertz and 
50.5 megahertz blocks, the Commission proposes to base the calculation 
on 50 megahertz. Additionally, when calculating upfront payment 
amounts, the Commission proposes to round the results of calculations 
as follows: Results below $1,000 will be rounded down to the nearest 
$100; results between $1,000 and $10,000 will be rounded down to the 
nearest $1,000; results between $10,000 and $100,000 will be rounded 
down to the nearest $10,000; and results above $100,000 will be rounded 
down to the nearest $100,000. The proposed rounding procedures would 
lessen the differences between upfront payment amounts for licenses in 
counties with similar population instead of reflecting relatively small 
differences in total potential MHz-pops that are not necessarily 
representative of the available white space.
    23. The Commission seeks comment on these upfront payment amounts, 
which are specified in the Attachment A file on the Auction 108 website 
at www.fcc.gov/auction/108. If commenters believe that these upfront 
payment amounts are not reasonable amounts, they should explain their 
reasoning and suggest an alternative approach.
    24. The Commission further proposes that the amount of the upfront 
payment submitted by a bidder would determine its bidding eligibility 
in bidding units, which are a measure of bidder eligibility and bidding 
activity. The upfront payment does not limit the dollar amounts of the 
bids that a bidder may submit. The Commission proposes to assign each 
license that is available to be assigned a specific number of bidding 
units, equal to one bidding unit per $100 of the upfront payment listed 
in the Attachment A file. The number of bidding units for a given 
license is fixed and does not change during the auction.
    25. Calculating Upfront Payments in the Single-Round Format. To the 
extent that a bidder wishes to bid on multiple licenses simultaneously, 
it would need to ensure that its upfront payment provides enough 
eligibility to cover the total bidding units associated with the 
licenses that the bidder can win given the bids it intends to submit. 
Under the single-round approach, a bidder's upfront payment would not 
be attributed to specific licenses. A bidder may place bids on multiple 
licenses consistent with its selections in its FCC Form 175, provided 
that the maximum number of bidding units associated with the licenses 
that the bidder can win does not exceed its bidding eligibility. Thus, 
in calculating its upfront payment amount, and hence its bidding 
eligibility, an applicant must determine the maximum number of bidding 
units needed to cover licenses that it may wish to win in the auction 
and submit an upfront payment amount covering that total number of 
bidding units. The Commission seeks comment on these procedures.
    26. Calculating Upfront Payments in the SMR Format. If the 
Commission adopts the SMR auction format discussed below, a bidder that 
wishes to bid on multiple licenses simultaneously similarly would need 
to ensure that its upfront payment provides enough eligibility. A 
bidder would be able to place bids on multiple licenses, provided that 
the total number of bidding units associated with those licenses does 
not exceed its current eligibility. Thus, in calculating its upfront 
payment amount and hence its initial bidding eligibility under this 
approach, an applicant must determine the maximum number of bidding 
units on which it may wish to bid (or hold provisionally winning bids) 
in any single round, and submit an upfront payment amount covering that 
total number of bidding units. The Commission seeks comment on this 
approach to upfront payments under an SMR auction format.

F. Auction Delay, Suspension, or Cancellation

    27. For Auction 108, the Commission proposes that, at any time 
before or during the bidding process, OEA, in conjunction with WTB, may 
delay, suspend, or cancel bidding in Auction 108 in the event of a 
natural disaster, technical obstacle, network interruption, 
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. In such 
a case, OEA would notify participants of any such delay, suspension, or 
cancellation by public notice and/or through the FCC auction bidding 
system's announcement function. If the bidding is delayed or suspended, 
OEA, in its sole discretion, may elect to resume the auction starting 
from the beginning of the round, or it may cancel the auction in its 
entirety (subject to the scheduling in due course of another auction 
for this spectrum). The Commission emphasizes that OEA and WTB would 
exercise the authority to delay, suspend, or cancel bidding in Auction 
108 solely at their discretion. The Commission seeks comment on this 
proposal.

G. Additional Default Payment Percentage

    28. Any winning bidder that defaults or is disqualified after the 
close of an auction (i.e., fails to remit the required down payment by 
the specified deadline, fails to submit a timely long-form application, 
fails to make full and timely final payment, or is otherwise 
disqualified) is liable for a default payment under 47 CFR 
1.2104(g)(2). This payment consists of a deficiency payment, equal to 
the difference between the amount of the bidder's winning 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.
    29. The Commission's rules provide that, in advance of each 
auction, it will establish a percentage between 3% and 20% of the 
applicable winning bid to be assessed as an additional default payment. 
The level of this additional payment in each auction will be based on 
the nature of the service and the licenses being offered.
    30. For Auction 108, the Commission proposes to establish an 
additional default payment of 15%, which is consistent with that 
adopted for prior auctions of spectrum suitable for 5G and other 
advanced wireless services. As noted in the Commercial Spectrum 
Enhancement Act (CSEA)/Part 1 Report and Order, 71 FR 6214, February 7, 
2006, defaults weaken the integrity of the auction process and may 
impede the deployment of service to the public, and an additional 
default payment of up to 20% will be more effective in deterring 
defaults than the 3% used in some earlier auctions. At the same time, 
the Commission does not believe the detrimental effects of any defaults 
in Auction 108 are likely to be unusually great. In light of these 
considerations, the Commission proposes for Auction 108 an additional 
default payment of 15% of the relevant bid. The Commission seeks 
comment on this proposal.

[[Page 12151]]

IV. Proposed Bidding Procedures

    31. The Commission proposes to conduct Auction 108 using either a 
single bidding round, after which the auction system will process the 
bids to determine winning bidders, or a simultaneous multiple-round 
ascending (SMR) auction format. Under the single-round format, winning 
bidders would pay the amounts of their winning bids for the licenses 
they are awarded (less any applicable bidding credit discount). The SMR 
auction format would offer every license for bid at the same time and 
consist of successive bidding rounds in which bidders may place bids on 
individual licenses. Under this format, bidding would remain open on 
all licenses until bidding stops on every license.
    32. The procedures the Commission proposes for the single-round 
format on which it seeks comment differ from FCC spectrum auctions it 
has held in the past because the circumstances for Auction 108 differ 
in many respects from more typical spectrum auction scenarios. However, 
the Commission also outlines and seeks comment on SMR procedures that 
may be more familiar to potential auction participants.
    33. The Commission notes the delegated authority of OEA to develop 
auctions jointly with WTB and expects that OEA and WTB will release a 
technical guide supplementing the information in the Auction 108 
Comment Public Notice and including the mathematical details and 
algorithms of the single-round auction design. The corresponding 
technical information for an SMR auction is contained in the Auction 
108 Comment Public Notice.

A. Single Bidding Round Auction Design

    34. The Commission seeks comment on use of a single bidding round 
that would remain open long enough to give bidders ample time to 
submit, review and potentially resubmit, and confirm their bids. Bids 
submitted during the round would need to meet the activity rule. After 
the round closes, the submitted bids would be processed by the bidding 
system to determine the winning bids.
    35. While this format departs from the multiple-round procedures 
that the Commission typically has used in auctioning spectrum licenses, 
the inventory of licenses available in Auction 108 will be very large 
(approximately 8,300 licenses) and, as a result, a multiple-round 
auction could require a number of months to complete. Although a clock 
auction of generic blocks with an assignment phase to assign frequency-
specific licenses can shorten the duration of a multiple-round auction 
relative to the Commission's SMR auction format, a clock auction format 
would not be appropriate here because each overlay license being 
offered is unique. Within a county, each block has a different amount 
of bandwidth--though not all frequency blocks are available in all 
counties--and even where a given frequency block is available in a 
county, white space may not be available throughout the county due to 
existing incumbent licensee operations. An SMR auction could last for 
months, which would require participating bidders to monitor the 
auction consistently, a resource commitment that is demanding for all 
bidders, but particularly for smaller entities, many of which the 
Commission expects will compete in Auction 108. In addition, a longer 
auction entails a longer prohibited communications quiet period, in 
which all applicants--including but not limited to all officers and 
directors of the entity submitting an application and all controlling 
interests of that entity--are subject to the rule prohibiting certain 
discussions of bids or bidding strategies. Moreover, smaller entities 
that are seeking only a limited number of relatively low value licenses 
may consider such a resource commitment to be too onerous and may 
choose not to participate in this auction. In contrast, the Commission 
anticipates that, based on estimated processing time, a single bidding 
round giving bidders ample time to submit their bids and bid processing 
could be completed within a week.
    36. In addition, a single-round auction format may help overcome 
some of the inherent advantages of incumbent rights holders in the band 
and increase overall competition in the auction. Specifically, the 
Commission seeks comment on using a single-round auction format in the 
context of the existing licensing and leasing landscape of the 2.5 GHz 
band where a single entity holds a large share of the spectrum rights. 
A multiple-round auction will always give a bidder an opportunity to 
outbid its competitors, and given that the majority license-holder in 
this band is a nationwide service provider and is likely to be better 
funded than many other entities that are potentially interested in 
Auction 108, these other, smaller entities may feel as though they have 
little chance of winning when competing against the larger license-
holder. Moreover, given that the larger entity's interests are 
geographically broad while the smaller entities tend to have more 
localized interests, the larger entity would be able to ``cost-
average'' by paying more for some licenses than its stand-alone 
valuation would otherwise indicate because it would be able to leverage 
savings from other licenses that it wins at less than its valuation. 
Other bidders, recognizing these advantages, consequently are likely to 
be deterred from participating in an auction where they expect that 
they would have little opportunity to win. Absent the participation of 
the smaller entities, the advantages to the majority license-holding 
entity would be even stronger. As a result of the diminished 
competition in the auction, prices may likely be lower than they would 
have been had the smaller entities participated. Conversely, in a 
single-round, pay-as-bid auction, the weak bidder has a better 
opportunity to win, it is more likely to participate in the auction, 
and prices can therefore be expected to be closer to the winning 
bidder's valuation. The Commission asks commenters to consider whether 
a single-round format would encourage greater participation in this 
auction than would an SMR auction. Would a smaller entity be more 
likely to participate if other, possibly larger entities did not always 
have an opportunity to place a higher bid, as is the case in a 
multiple-round ascending auction format?
    37. The Commission recognizes that a single-round auction precludes 
the price discovery across licenses that is possible in a multiple-
round auction. Price discovery is intended to help inform a bidder's 
decision to shift its resources across areas as relative prices change 
over the course of the auction, which is particularly helpful for a 
bidder with multiple alternative business plans but without sufficient 
resources to pursue all of them. The single-round auction on which the 
Commission seeks comment considers the potential losses in efficiency 
from the price discovery process and, on balance, finds that any losses 
are likely to be less consequential in this auction than is generally 
true for spectrum auctions. Based on input in the proceeding and the 
characteristics of the licenses offered in Auction 108--county-based, 
with non-uniform and occasionally significant encumbrances across 
areas, making them less suitable for larger-scale operations--it is the 
Commission's understanding that the majority of potential bidders in 
Auction 108 likely will be entities with specific local or regional 
interests, and therefore, they will not be hampered significantly by a 
lack of price discovery over multiple rounds for alternative areas. To 
determine their bid amounts, bidders

[[Page 12152]]

can incorporate information from significant secondary market activity 
in the 2.5 GHz band, including through auction or auction-like 
processes that have been used by incumbents to find interested parties 
and set prices, as well as data in ULS, and spectrum values from recent 
mid-band spectrum auctions, such as the recently-concluded Commission 
auction of Priority Access Licenses in the 3550-3650 MHz Band. 
Moreover, it has been suggested that smaller operators may have better 
knowledge of the local landscape and may be able to price their bids 
more accurately than larger entities without ties to such local rural 
areas.
    38. The bidding procedures the Commission proposes for the single-
round format include several mechanisms for ensuring that many 
important benefits of a multiple-round auction can be accommodated 
under the single-round format. Importantly, the Commission seeks 
comment on procedures to ensure that certain potentially critical 
aggregations of licenses can be bid on with an either/or indicator so 
that a bidder can indicate that it wishes to be assigned only one of a 
group of substitutable licenses. This procedure offers a useful 
advantage that is not feasible in a multiple-round auction where a 
large number of items precludes flexible package bidding. With these 
mechanisms, the Commission is confident that bidders can simply and 
effectively represent their bidding interests in a single-round format.
    39. The Commission seeks comment on any specific aspects of this 
single-round auction with which commenters agree or disagree. In 
particular, do potential bidders see the time savings of a single-round 
auction as valuable relative to the SMR auction that could last for 
several months? Do commenters believe that the single-round format 
would disproportionately favor one group of bidders or another? Is 
there any reason to conclude that its understanding of the type of 
entities likely to participate in Auction 108 is inaccurate or 
unsupported by the record in the Transforming the 2.5 GHz Band 
proceeding, WT Docket No. 18-120?
    40. Prior to the start of Auction 108, the Commission would make 
available to bidders various educational materials.
1. Pay-As-Bid Pricing Rule
    41. Under the single-round auction format, each winning bidder 
would pay the sum of its winning bid amounts for the licenses it is 
awarded, less any applicable bidding credit discount. Accordingly, a 
bidder with bidding credits should bid an undiscounted (full-price) 
amount for the licenses it wishes to win.
    42. The Commission would use a pay-as-bid payment rule to give 
bidders more certainty about the cost of their winning bids than would 
a ``second price'' payment rule, in which the winning bidder would pay 
a price corresponding to the next best bid or set of bids. In the 
simple case of an individual item and no package bids, the ``second 
price'' would be the second-highest bid. In the context of a 
combinatorial winner determination process such as the Commission 
proposes here, the bidding system would compare the revenue of the 
winning combination of bids with the highest revenue possible absent 
the winning bidder's bid, and subtract the difference from the winning 
bidder's bid to determine the second, or Vickrey, price. A pay-as-bid 
rule may also be useful in discouraging undesirable strategic behavior. 
In a second-price auction where the highest bidder would win but pay 
only the amount of the second-highest bid, a dominant entity may 
overbid on a large group of licenses if it anticipates that competing 
bids for most of those licenses would be considerably lower, so that 
expected gains would outweigh any losses. In contrast, with a pay-as-
bid rule, each bidder would have to pay the amount of its high bid for 
each license it wins, discouraging such aggressive strategies by 
entities with interests in a large number of areas. Moreover, given the 
very large inventory of licenses offered in Auction 108, the 
computation of ``second prices'' (or Vickrey prices) would be 
exceedingly complex and potentially intractable within a reasonable 
amount of processing time. The determination of a single Vickrey price 
involves solving an additional combinatorial optimization problem, 
which could take a significant amount of time to solve. The Commission 
has computed Vickrey prices during the assignment phase of several 
recent spectrum clock auctions where, in each assignment phase market, 
the number of licenses being assigned was less by orders of magnitude 
and only a relatively small number of bidders were being assigned 
licenses.
    43. Might a resource-constrained smaller bidder be more inclined to 
compete at auction because it has more certainty over the amount it 
might pay? Or might a small entity be more likely to participate 
because a dominant entity will have less incentive to strategically 
overbid than in a second-price auction? The Commission seeks comment on 
the use of a pay-as-bid payment rule.
2. Bidding Activity and Eligibility
    44. Consistent with its proposal to determine bidding eligibility 
in bidding units based on the amount of a bidder's upfront payment, the 
Commission proposes to determine bidding activity in terms of bidding 
units, as well. Each license will be assigned a certain number of 
bidding units. For a single round of bidding, the Commission would 
limit a bidder's total bidding activity such that the maximum number of 
bidding units associated with the licenses that the bidder can win does 
not exceed its total eligibility in bidding units.
    45. To implement this procedure, when a bidder uploads a set of 
bids via the internet to the FCC auction bidding system, the system 
would calculate the maximum bid amount and the maximum number of 
bidding units associated with the bids. If the bids do not exceed the 
bidder's eligibility and otherwise are valid bids, the bidding system 
would accept the bid submission. If the submitted bids exceed the 
bidder's eligibility, the bids would be rejected and new bids could be 
submitted before the close of the round. In addition, during the 
bidding round, the bidding system would inform the bidder of a running 
total of its activity in terms of bidding units and the total value of 
all of its submitted bids. The Commission asks for comment on these 
procedures.
3. Minimum Bids and Reserve Prices
    46. As part of the pre-bidding process for each auction, section 
309(j) of the Communications Act of 1934, as amended, mandates that the 
Commission prescribes methods for establishing reasonable minimum bid 
amounts for licenses subject to auction unless such bid amounts are not 
in the public interest. Accordingly, the Commission proposes to 
establish minimum bid amounts for Auction 108.
    47. Given the potential lack of accurate information on available 
white space in the 2.5 GHz band, the Commission proposes to establish 
the minimum bid amounts in Auction 108 using the total potential MHz-
pops of each license offered in the auction, rather than on available 
white space in each block. The Commission proposes to base these 
calculations on $0.006 per MHz-pop, with a minimum of $500 per license. 
For the 49.5-megahertz and 50.5-megahertz blocks, the Commission 
proposes to base the calculation on 50 megahertz. Additionally, when 
calculating minimum bid amounts, the Commission proposes to round the 
results of calculations as follows:

[[Page 12153]]

Results below $1,000 will be rounded down to the nearest $100; results 
between $1,000 and $10,000 will be rounded down to the nearest $1,000; 
results between $10,000 and $100,000 will be rounded down to the 
nearest $10,000; and results above $100,000 will be rounded down to the 
nearest $100,000. The proposed rounding procedures would lessen the 
differences between minimum bid amounts for licenses in counties with 
similar population instead of reflecting relatively small differences 
in total potential MHz-pops that are not necessarily representative of 
the available white space. The Commission seeks comment on these 
minimum bid amounts, which are specified in the Attachment A file on 
the Auction 108 website at www.fcc.gov/auction/108. If commenters 
believe that these minimum bid amounts would result in unsold licenses 
or are not reasonable amounts, they should explain their reasoning and 
propose an alternative approach. Commenters should support their claims 
with valuation analyses and suggested amounts or formulas for minimum 
bids. The Commission does not propose a separate aggregate reserve 
price, below which the auction would not conclude, and it seeks comment 
on that proposal. The Commission is not aware at this time of 
circumstances that require establishment of an aggregate reserve price 
in the public interest for this auction of overlay licenses in the 2.5 
GHz band and propose only the minimum bids that it discusses here.
4. Package Bidding
    48. For the single-round format, the Commission proposes a flexible 
form of package bidding, which would allow bidders to submit bids for 
packages of multiple licenses within the same county or for multiple 
geographic area licenses, i.e., licenses covering multiple metropolitan 
counties within a specified geographic region.
    49. Packages of Multiple Blocks within a County. For the single-
round format, the Commission proposes to allow a bidder to submit 
package bids for two or three licenses in a single county, in order to 
give the bidder more control in this single-round auction over the 
number and combination of licenses that it may win. By contrast, in a 
multiple-round auction, a bidder has greater ability to shape the 
combination of licenses that it is assigned. The Commission proposes 
these limited package bidding procedures for the single-round format to 
address a bidder's need to win at least two or three blocks in a county 
if it wins any blocks. This would enable a bidder to ensure that if it 
won any licenses in a county, it would win sufficient licenses to 
facilitate high-bandwidth services and applications. A package bid 
would consist of a group of licenses and a single price that would 
apply to the entire group. The bidding system would determine the 
winning combination of licenses taking into account that all or none of 
the licenses in a package bid are to be assigned to the bidder.
    50. For example, if a bidder is interested in winning any two 
license blocks in a county, but not a single license or all three 
licenses, it could submit three package bids for each of the two-
license block combinations in the county. The bidder would be ensured 
of winning two licenses if it wins any of them.
    51. Packages of Multiple Metropolitan Counties. The Commission 
proposes procedures to permit certain package bids that include 
licenses in multiple metropolitan counties, as long as the counties in 
a bid are within a given geographic region or area. The Commission 
proposes to define ``metropolitan'' for this purpose as those counties 
that are not subject to the small-market bidding credit cap. Counties 
located within any PEA with a population of 500,000 or less are subject 
to the small-market bidding credit cap. Thus, metropolitan counties are 
those located within any PEA with a population greater than 500,000.
    52. For the single round format, the Commission proposes to limit 
an individual package bid further to include licenses only in 
metropolitan counties that lie within the same Major Economic Area 
(MEA). This limitation would enable packaging across the interdependent 
counties in a metropolitan market, would prevent the submission of 
overly broad packages, and recognizes the need to maintain bidding and 
computational manageability. There are 51 MEAs nationwide; MEAs are 
intermediate in size between Economic Areas (EAs) and Regional Economic 
Area Groupings (REAGs). In addition, the Commission will license Guam 
and the Northern Mariana Islands, Puerto Rico and the U.S. Virgin 
Islands, and American Samoa, which have been assigned Commission-
created MEA numbers 49-51, respectively. Therefore, a single package 
bid could include licenses in two or more metropolitan counties in a 
given MEA; the non-metropolitan counties in the MEA could be bid for 
only as single counties (but potentially as packages of two or three 
licenses in a single county). Finally, for computational reasons, the 
Commission proposes that the total number of package and/or individual 
bids that a bidder may submit involving metropolitan counties in an MEA 
is limited to 250. If the number of individual licenses available in 
the metropolitan counties in a single MEA exceeds 250, an exception to 
the limit would permit a bidder to submit a bid for each individual 
license. The Commission does not propose a limit on individual county-
level bids, package or otherwise, that do not involve metropolitan 
counties.
    53. A package bid would consist of a set of licenses in a set of 
counties and a single price applicable to the entire set of licenses in 
those counties. Within the proposed limits the Commission sets forth 
here, a bidder could include any combination of counties in a package--
i.e., packages would not be pre-defined.
    54. In proposing these procedures for package bidding for the 
single-round format, the Commission aims to balance the needs of 
smaller entities with very localized interests with the requirements of 
entities that wish to create larger networks. Permitting packages of 
the licenses within a county provides a simple mechanism for a bidder 
to guard against winning an undesirable combination or number of 
licenses in a single county, which is likely to be useful to all 
bidders. Allowing multiple-county packages of licenses only for 
metropolitan areas addresses the needs of entities with larger networks 
to ensure that they do not win an undesired patchwork of more heavily 
populated areas. In such areas, counties of smaller and greater 
competitiveness may make winning such patchworks potentially more 
likely. At the same time, limiting the scope of multiple-county 
packages to metropolitan counties within a single MEA reduces the 
potential for a bidder to leverage a highly-valued aggregation in one 
area in order to win licenses in other areas where bidders for 
individual counties may be the more efficient users of those licenses. 
Moreover, limits on package bids help reduce complexity for the bidder 
and enhance computational feasibility.
    55. The Commission seeks comment on these procedures to allow 
bidding for packages of multiple licenses within a single county and 
for packages of bids for multiple metropolitan counties within an MEA. 
The Commission asks commenters to consider how changes they suggest to 
these procedures might impact the different needs of the wide variety 
of potential bidders that may be interested in Auction 108. In 
particular, the Commission seeks comment on the use of MEAs as the 
relevant ``region'' for limiting the metropolitan counties that

[[Page 12154]]

can be included in a single package bid. Would a smaller aggregation, 
such as EAs, be more appropriate? Alternatively, would larger areas, 
such as REAGs be preferable? The Commission also asks commenters to 
address the proposed definition of ``metropolitan.'' Would an 
alternative definition of more heavily populated counties be simple to 
implement and consistent with other definitions used in this and other 
recent Commission spectrum auctions?
5. Either/Or Indicator
    56. Because a single-round auction does not give a bidder an 
opportunity to move its bids from one area to another as prices change, 
or from one block to another within an area, as does a multiple-round 
auction, the Commission proposes to allow a bidder to indicate that two 
or more of its bids are to be treated as mutually exclusive by the 
bidding system when assigning winning bids. In other words, a bidder 
can indicate that it wants to win only one of the bids in a group of 
bids it specifies. For example, if a bidder is interested in winning 
one of the three licenses available in a county, it could submit 
separate bids for each of the three licenses and indicate that it 
wishes to win only one of them. A bidder's upfront payment amount and 
its activity and eligibility calculations would be based on the largest 
set of bids that the bidder can win taking into account that some bids 
may be mutually exclusive.
    57. The Commission proposes that a bidder may indicate that it 
wants the bidding system to consider the bids in a specified group as 
mutually exclusive as long as either all the bids in the group involve 
the same non-metropolitan county or all the bids in the group involve 
only metropolitan counties in the same MEA. The Commission further 
seeks comment on allowing each bid to be included in at most one 
mutually exclusive group of bids. The Commission proposes these limits 
on either/or bids to ensure that the combinatorial optimization winner 
determination problem is feasible, given the extremely large number of 
potential combinations of bids that must be considered. A group of 
mutually exclusive bids can include individual and/or package bids.
    58. The Commission asks commenters to consider whether these 
procedures to allow a bidder to use an either/or indicator to instruct 
the bidding system to assign only one of a specified group of bids 
would be helpful in managing the bidder's potential winnings if this 
single-round auction format is adopted.
6. Bid Processing and Winning Bids
    59. To determine winning bids in the single-round format, the 
Commission proposes that after the single bidding round, the bidding 
system would use optimization software to determine the value-
maximizing combination of (package and individual) bids, taking into 
account each bidder's mutually exclusive either/or bids. A bid of a 
bidder with a bidding credit would be considered in the optimization at 
its undiscounted bid price. In contrast, for payment purposes, the 
bidding credit discount for a bidder with a bidding credit will be 
subtracted from the bidder's total winning bids, applying any bidding 
credit caps, to determine its net winning bids.
    60. The Commission also seeks comment on assigning each individual 
or package bid a pseudo-random number upon submission, such that, if 
there are ties among the value-maximizing combinations of bids, the 
bidding system would determine the winning bids by finding the set that 
maximizes the sum of pseudo-random numbers.
    61. Because there is a very small but positive probability that the 
optimization software would be unable to provide an exact solution to 
the problem of determining the value-maximizing combination of bids 
within a reasonable amount of time, the Commission seeks comment on use 
of an ``escape clause.'' Under the proposed escape clause, if the 
optimization software does not yield an exact solution within 48 hours, 
then the winning set of bids would be determined by the best solution 
identified to that point. Winning bidders would pay the amounts of 
their winning bids, consistent with the pay-as-bid pricing rule.
    62. The Commission seeks comment on these proposed bid processing 
procedures for this novel single-round auction with package bidding, 
including the tie-breaking mechanism, the escape clause generally, and 
the proposed 48-hour computational period.

B. Simultaneous Multiple-Round Auction Design

    63. The Commission also seeks comment on using its SMR auction 
format for this auction. This type of auction offers every license for 
bid at the same time and consists of successive bidding rounds in which 
bidders may place bids on individual licenses. The SMR procedures on 
which the Commission seeks comment below are consistent with those 
adopted in prior Commission SMR auctions. Typically, bidding remains 
open on all licenses until bidding stops on every license. This format 
would not provide for package bidding because of the significant 
complexity that this would present, for both bidders and the bidding 
system, given that the 2.5 GHz band plan has a potential inventory of 
approximately 8,300 licenses.
    64. The Commission has predominantly used an SMR format for 
spectrum auctions, and therefore this format is familiar to potential 
bidders that have participated in past Commission spectrum auctions. An 
SMR format allows price discovery, so that a bidder may observe how 
prices differ across areas or frequency blocks, and to modify its 
bidding strategies accordingly. In addition, multiple rounds of bidding 
may give a bidder more confidence in its bid amounts in cases where 
there is a significant ``common'' value element to the licenses being 
auctioned beyond the particular value to the bidder in its business 
plan.
    65. The Commission seeks comment on whether using an auction design 
that is familiar to bidders is important in helping potential 
participants feel more comfortable with participating in Auction 108. 
The Commission also asks whether allowing price discovery through a 
multiple round auction format is particularly important in this 
auction, and whether such benefits would warrant the additional time 
required to conduct an SMR auction relative to a single-round. Would 
such benefits outweigh the potential advantages of a single-round 
format to smaller entities discussed above?
1. Bidding Rounds
    66. Under the SMR format, Auction 108 would consist of sequential 
bidding rounds, each of which would be followed by the release of round 
results. The initial bidding schedule would be announced in a public 
notice to be released at least one week before the start of bidding. 
Details on viewing round results, including the location and format of 
downloadable results files for each round would be included in the same 
public notice.
    67. Under this auction format, the Commission would conduct Auction 
108 over the internet using the FCC auction bidding system. Bidders 
would have the option of placing bids online or by telephone through a 
dedicated auction bidder line.
    68. OEA would 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. This would allow

[[Page 12155]]

OEA to 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 large number of licenses available in 
the 2.5 GHz band implies that the SMR format could involve a large 
number of bidding rounds, potentially lasting several months. The 
Commission seeks comment on this approach. Commenters on this issue 
should address the role of the bidding schedule in managing the pace of 
the auction, specifically discussing the tradeoffs in managing auction 
pace by bidding schedule changes, by changing the activity requirements 
or bid amount parameters, or by using other means.
2. Stopping Rule
    69. The Commission has discretion to establish stopping rules 
before or during multiple-round auctions in order to complete the 
auction within a reasonable time. Under this SMR auction format, the 
Commission would employ a simultaneous stopping rule approach, which 
means all licenses remain available for bidding until bidding stops on 
every license. Specifically, bidding would close on all licenses after 
the first round in which no bidder submits any new bids, applies a 
proactive waiver, or withdraws any provisionally winning bids (if bid 
withdrawals are permitted). Provisionally winning bids are bids that 
would become final winning bids if the auction were to close in that 
given round. Under this simultaneous stopping rule, bidding would 
remain open on all licenses until bidding stops on every license. 
Consequently, under this approach, it is not possible to determine in 
advance precisely how long the bidding in Auction 108 would last.
    70. Further, OEA would retain the discretion to exercise any of the 
following stopping options during Auction 108:
    Option 1. The auction would close for all licenses after the first 
round in which no bidder applies a waiver, no bidder withdraws a 
provisionally winning bid (if withdrawals are permitted in Auction 
108), or no bidder places any new bid on a license for which it is not 
the provisionally winning bidder. Thus, absent any other bidding 
activity, a bidder placing a new bid on a license for which it is the 
provisionally winning bidder would not keep the auction open under this 
modified stopping rule.
    Option 2. The auction would close for all licenses after the first 
round in which no bidder applies a waiver, no bidder withdraws a 
provisionally winning bid (if withdrawals are permitted in Auction 
108), or no bidder places any new bid on a license that already has a 
provisionally winning bid. Thus, absent any other bidding activity, a 
bidder placing a new bid on an FCC-held license (a license that does 
not have a provisionally winning bid) would not keep the auction open 
under this modified stopping rule.
    Option 3. The auction would close using a modified version of the 
simultaneous stopping rule that combines Option 1 and Option 2 above.
    Option 4. The auction would close after a specified number of 
additional rounds (special stopping rule) to be announced by OEA. If 
OEA invokes this special stopping rule, it would accept bids in the 
specified final round(s), after which the auction would close.
    Option 5. The auction would remain open even if no bidder places 
any new bid, applies a waiver, or withdraws any provisionally winning 
bids (if withdrawals are permitted in Auction 108). In this event, the 
effect would be the same as if a bidder had applied a waiver. The 
activity rule would apply as usual, and a bidder with insufficient 
activity would lose bidding eligibility or use a waiver.
    71. Under the SMR format, OEA would 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. Before exercising 
these options, OEA would likely attempt to change the pace of Auction 
108. For example, OEA could adjust the pace of bidding by changing the 
number of bidding rounds per day and/or the minimum acceptable bids. 
Under this approach, OEA would retain continuing discretion to exercise 
any of these options with or without prior announcement by OEA during 
the auction. The Commission seeks comment on these procedures.
3. Activity Rule
    72. In order to avoid unduly prolonging the length of the auction, 
an activity rule requires bidders to bid actively throughout the 
auction, rather than wait until late in the auction before 
participating. The bidding system calculates a bidder's activity in a 
round as the sum of the bidding units associated with any licenses upon 
which it places bids during the current round and the bidding units 
associated with any licenses for which it holds provisionally winning 
bids. 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.
    73. Under an SMR auction format, the Commission would consider 
dividing the auction into at least two stages, each characterized by a 
different activity requirement. For example, in a first stage, bidders 
could be required to be active on 80% of their bidding units, while in 
a later stage, they could be required to be active on 95% of their 
bidding units. The Commission would also consider conducting the 
auction in a single stage, potentially with a 100% activity 
requirement. If the Commission does not conduct a single stage, the 
auction would start in Stage One. OEA would then have the discretion to 
advance the auction to another stage by announcement during the 
auction. In exercising this discretion, the Commission anticipates that 
OEA would consider a variety of measures of auction activity, including 
but not limited to, the length of the auction, the percentage of 
bidding units associated with licenses on which there are new bids, the 
number of new bids, and the increase in revenue. For example, when 
monitoring activity for determining when to change stages, OEA could 
consider the percentage of bidding units of the licenses receiving new 
provisionally winning bids, excluding any FCC-held licenses. In past 
auctions, OEA has generally--but not always--changed stages when this 
measure was approximately 20% or below for three consecutive rounds of 
bidding. The Commission seeks comment on these procedures for activity 
requirements.
4. Activity Rule Waivers and Reducing Eligibility
    74. For the SMR auction format, when a bidder's activity in the 
current round is below the required minimum level, it could preserve 
its current level of eligibility through an activity rule waiver, if 
available. An activity rule waiver applies to an entire round of 
bidding, not to a particular license. Activity rule waivers can be 
either proactive or automatic. Activity rule waivers are primarily a 
mechanism for a bidder to avoid the loss of bidding eligibility in the 
event that exigent circumstances prevent it from bidding in a 
particular round.
    75. Under an SMR auction format, each bidder in Auction 108 would 
be

[[Page 12156]]

provided with three activity rule waivers that could be used as set 
forth at the bidder's discretion during the course of the auction. The 
FCC auction bidding system would assume that a bidder that does not 
meet the activity requirement would prefer to use an activity rule 
waiver (if available) rather than lose bidding eligibility. Therefore, 
the system would 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, 
the bidder's current eligibility would be permanently reduced, possibly 
curtailing or eliminating the ability to place additional bids in the 
auction.
    76. A bidder with insufficient activity might wish to reduce its 
bidding eligibility rather than use an activity rule waiver. If so, 
then the bidder affirmatively would have to override the automatic 
waiver mechanism during the bidding round by using the reduce 
eligibility function in the FCC auction bidding system. In this case, 
the bidder's eligibility would be permanently reduced to bring it into 
compliance with the activity rule described above. Reducing eligibility 
is an irreversible action; once eligibility has been reduced, a bidder 
could not regain its lost bidding eligibility.
    77. Under the simultaneous stopping rule for this auction format, a 
bidder would be permitted to apply an activity rule waiver proactively 
as a means to keep the auction open without placing a bid. If a bidder 
proactively were to apply an activity rule waiver (using the proactive 
waiver function in the FCC auction bidding system) during a bidding 
round in which no bids are placed or withdrawn (if bid withdrawals are 
permitted in Auction 108), the auction would remain open and the 
bidder's eligibility would be preserved. An automatic waiver applied by 
the FCC auction bidding system in a round in which there is no new bid, 
no bid withdrawal (if bid withdrawals are permitted in Auction 108), or 
no proactive waiver would not keep the auction open. The Commission 
seeks comment on this approach.
5. Reserve Price or Minimum Opening Bids
    78. If the Commission adopts an SMR auction format, then it would 
also establish minimum opening bid amounts. The bidding system would 
not accept bids lower than these amounts.
    79. The Commission would calculate minimum opening bid amounts on a 
license-by-license basis using the same calculations outlined for the 
single bidding round auction design based on $0.006 per MHz-pop. The 
Commission seeks comment on these minimum opening bid amounts, which 
are specified in Attachment A to the Auction 108 Comment Public Notice. 
If commenters believe that these minimum opening bid amounts would 
result in unsold licenses or are not reasonable amounts under an SMR 
format, they should explain why this is so. Commenters should support 
their claims with valuation analyses and suggested amounts or formulas 
for minimum opening bids for this auction design.
    80. In establishing minimum opening bid amounts under the SMR 
format, the Commission particularly seeks comment on factors that 
reasonably could have an impact on bidders' valuation of the spectrum, 
including the type of service offered, market size, population covered 
by the proposed facility, and any other relevant factors.
    81. Commenters may also wish to address the general role of minimum 
opening bids in managing the pace of the auction. For example, 
commenters could compare using minimum opening bids--e.g., by setting 
higher minimum opening bids to reduce the number of rounds it takes 
licenses to reach their final prices--to other means of controlling 
auction pace, such as changes to bidding schedules or activity 
requirements.
    82. The Commission would not establish any aggregate reserve price 
for licenses offered through an SMR auction format. The Commission is 
not aware at this time of circumstances that require establishment of 
an aggregate reserve price in the public interest for this auction of 
overlay licenses in the 2.5 GHz band and seek comment only on the per 
license minimum opening bids that it discusses here. The Commission 
seeks comment on this issue. If commenters believe the Commission 
should establish an aggregate reserve price, they should explain why 
and support their claims with valuation analyses and suggested amounts 
or formulas for reserve prices.
6. Bid Amounts
    83. Under an SMR auction format, an eligible bidder with sufficient 
eligibility, in each round, would be able to place a bid on a given 
license in any of up to nine different amounts--the minimum acceptable 
bid amounts and additional bid amounts discussed below. Under this 
approach, the FCC auction bidding system would list the acceptable bid 
amounts for each license.
    84. Minimum Acceptable Bid Amounts. The first of the acceptable bid 
amounts is called the minimum acceptable bid amount. The minimum 
acceptable bid amount for a license would be equal to its minimum 
opening bid amount until there is a provisionally winning bid on the 
license. Once there is a provisionally winning bid for a license, the 
minimum acceptable bid amount for that license would be equal to the 
amount of the provisionally winning bid plus a percentage of that bid 
amount calculated using the activity-based formula described below. In 
general, the percentage would be higher for a license receiving many 
bids than for a license receiving few bids. In the case of a license 
for which the provisionally winning bid has been withdrawn (if 
withdrawals are allowed in Auction 108), the minimum acceptable bid 
amount would equal the second highest bid received for the license.
    85. The percentage of the provisionally winning bid used to 
establish the minimum acceptable bid amount (the additional percentage) 
would be 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 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. For Round 1 calculations, because there is no prior round 
(i.e., no round 0), the activity index from the prior round would be 
set at 0. 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 provisionally winning bid amount to obtain the minimum 
acceptable bid for the next round. The result will be rounded using the 
Commission's standard rounding procedures for auctions: 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. Under the SMR auction format, the 
weighting factor would be set initially at 0.5, the minimum percentage 
at 0.1 (10%), and the

[[Page 12157]]

maximum percentage at 0.2 (20%). Hence, at these initial settings, the 
minimum acceptable bid for a license would be between 10% and 20% 
higher than the provisionally winning bid, depending upon the bidding 
activity for the license. Equations and examples are shown in 
Attachment B to the Auction 108 Comment Public Notice. The Commission 
seeks comment on whether to use this activity-based formula or a 
different approach for the SMR auction format. In particular, the 
Commission asks whether it should set the maximum percentage at a 
higher amount, for example 30% or more, in light of concerns over the 
large number of rounds that may be required for this auction.
    86. Additional Bid Amounts. The FCC auction bidding system would 
calculate any additional bid amounts using the minimum acceptable bid 
amount and an additional bid increment percentage. The minimum 
acceptable bid amount would be multiplied by the additional bid 
increment percentage, and that result (rounded) would be the additional 
increment amount. The first additional acceptable bid amount would 
equal the minimum acceptable bid amount plus the additional increment 
amount. The second additional acceptable bid amount would equal the 
minimum acceptable bid amount plus two times the additional increment 
amount; the third additional acceptable bid amount would be the minimum 
acceptable bid amount plus three times the additional increment amount; 
etc. The Commission would set the additional bid increment percentage 
at 5% initially. Hence, the calculation of the additional increment 
amount would be (minimum acceptable bid amount) * (0.05), rounded. The 
Commission seeks comment on this approach.
    87. Bid Amount Changes. Under this auction format, OEA would retain 
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 OEA determines that circumstances 
so dictate. Further, OEA would retain the discretion to do so on a 
license-by-license basis. Commenters should address the size of changes 
in the bid amounts, in particular, the additional percentage. Should 
the Commission increase the size of the minimum acceptable bid amounts 
in order to manage expeditiously the pace of an SMR auction with 
approximately 8,300 licenses? At what size do changes in bid amounts 
make it too difficult for bidders to align their bid amounts with their 
budgets and willingness to pay? OEA would also retain 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, OEA could set a limit on increases in minimum acceptable bid 
amounts over provisionally winning bids. Thus, if calculating a minimum 
acceptable bid using the activity-based formula results in a minimum 
acceptable bid amount that exceeds the provisionally winning bid on a 
license by more than the limit, the minimum acceptable bid amount would 
instead be capped at the provisionally winning bid plus the amount of 
the limit. The Commission seeks comment on the circumstances under 
which OEA should employ such a limit, factors OEA should consider when 
determining the dollar amount of the limit, and the tradeoffs in 
setting such a limit or changing other parameters--such as the minimum 
and maximum percentages of the activity-based formula. If OEA were to 
exercise this discretion, it would alert bidders by announcement in the 
FCC auction bidding system. The Commission seeks comment on these 
procedures.
    88. The Commission seeks comment on the above procedures for the 
SMR auction format, including whether to use the activity-based formula 
to establish the additional percentage or a different approach. If 
commenters disagree with beginning the auction with nine acceptable bid 
amounts per license as described above, they should suggest an 
alternative number of acceptable bid amounts to use at the beginning of 
the auction and an alternative number to use later in the auction. 
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 changing the 
bidding schedule, activity requirements, or bid amounts, or by using 
other means.
7. Provisionally Winning Bids
    89. Under an SMR auction format, the FCC auction bidding system 
would determine provisionally winning bids consistent with practices in 
past auctions. At the end of each bidding round, the bidding system 
would determine a provisionally winning bid for each license based on 
the highest bid amount received for the license. A provisionally 
winning bid would remain the provisionally winning bid until there is a 
higher bid on the same license at the close of a subsequent round. 
Provisionally winning bids at the end of the auction would become the 
winning bids.
    90. If identical high bid amounts were submitted on a license in 
any given round (i.e., tied bids), the FCC auction bidding system would 
use a pseudo-random number generator to select a single provisionally 
winning bid from among the tied bids. The auction bidding system would 
assign a pseudo-random number to each bid when the bid is entered. The 
tied bid with the highest pseudo-random number would become the 
provisionally winning bid. The remaining bidders, as well as the 
provisionally winning bidder, would be permitted to submit higher bids 
in subsequent rounds. However, if the auction were to end with no other 
bids being placed, the winning bidder would be the one that placed the 
provisionally winning bid. If the license received any bids in a 
subsequent round, the provisionally winning bid again would be 
determined by the highest bid amount received for the license
    91. A provisionally winning bid would be retained until there is a 
higher bid on the license at the close of a subsequent round, unless 
the provisionally winning bid is withdrawn (if bid withdrawals are 
permitted in Auction 108). Under the SMR auction design, provisionally 
winning bids would count toward activity for purposes of the activity 
rule.
8. Bid Removal and Bid Withdrawal
    92. The FCC auction bidding system would allow each bidder to 
remove any of the bids it placed in a round before the close of that 
round. By removing a bid placed within a round, a bidder would 
effectively ``unsubmit'' the bid. In contrast to the bid withdrawal 
provisions described below, a bidder removing a bid placed in the same 
round would not be subject to a withdrawal payment. Once a round 
closes, a bidder would no longer be permitted to remove a bid.
    93. The Commission seeks comment on whether bid withdrawals should 
be permitted should it adopt an SMR auction format for Auction 108. 
When permitted in an auction, bid withdrawals provide a bidder with the 
option of withdrawing bids placed in prior rounds that have become 
provisionally winning bids. A bidder would be able to withdraw its 
provisionally winning bids using the withdraw function in the FCC 
auction bidding system.

[[Page 12158]]

    94. The Commission has recognized that bid withdrawals may be a 
helpful tool for bidders seeking to efficiently aggregate licenses or 
implement backup strategies in certain auctions. The Commission has 
also acknowledged that allowing bid withdrawals may encourage insincere 
bidding or increase opportunities for undesirable strategic bidding in 
certain circumstances.
    95. Applying this reasoning to Auction 108, each bidder would be 
allowed to withdraw provisionally winning 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 may encourage insincere bidding or the use 
of withdrawals for undesirable strategic bidding purposes. The two 
rounds in which a bidder may withdraw provisionally winning bids would 
be at the bidder's discretion, and there would be no limit on the 
number of provisionally winning bids that a bidder may withdraw in 
either of the rounds in which it withdraws bids. Withdrawals must be in 
accordance with the Commission's rules, including the bid withdrawal 
payment provisions specified in 47 CFR 1.2104(g).
    96. A bidder that withdraws its provisionally winning bid(s), if 
permitted, is subject to the bid withdrawal payment provisions of the 
Commission's rules. The Commission proposes the interim bid withdrawal 
payment be set at 15% of the withdrawn bid for the purposes of an SMR 
auction. 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. 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. However, if a license for which a bid had been withdrawn does not 
receive a subsequent higher bid or winning bid in the same auction, the 
FCC cannot calculate the final withdrawal payment until that license 
receives a higher bid or winning bid in a subsequent auction. In such 
cases, when that final withdrawal payment cannot yet be calculated, the 
FCC imposes on the bidder responsible for the withdrawn bid an interim 
bid withdrawal payment, which will be applied toward any final bid 
withdrawal payment that is ultimately assessed.
    97. The amount of the interim bid withdrawal payment is established 
in advance of bidding in each auction and may range from 3% to 20% of 
the withdrawn bid amount. The Commission has determined that the level 
of the interim withdrawal payment in a particular auction will be based 
on the nature of the service and the inventory of the licenses being 
offered. The Commission noted specifically that a higher interim 
withdrawal payment percentage is warranted to deter the anti-
competitive use of withdrawals when, for example, bidders will not need 
to aggregate the licenses being offered in the auction or when there 
are few synergies to be captured by combining licenses. With respect to 
the flexible-use 2.5 GHz band licenses being offered in Auction 108, 
the service rules permit a variety of advanced spectrum-based services, 
some of which may best be offered by combining licenses on adjacent 
frequencies or in adjacent areas. Balancing the potential need for 
bidders to use withdrawals to avoid winning incomplete combinations of 
licenses with the Commission's interest in deterring undesirable 
strategic use of withdrawals, the Commission proposes to establish an 
interim bid withdrawal payment of 15% of the withdrawn bid for Auction 
108, should it adopt an SMR auction format.
    98. The Commission seeks comment on allowing bid withdrawals and an 
interim bid withdrawal payment of 15% of the withdrawn bid under a 
potential SMR auction design. If commenters disagree, then the 
Commission asks them to support their arguments by taking into account 
the licenses available, the impact on auction dynamics and the pricing 
mechanism, and the effects on the bidding strategies of other bidders.

V. Tutorials and Additional Information for Applicants

    99. The Commission intends to provide additional information on the 
bidding system and to offer demonstrations and other educational 
opportunities for applicants in Auction 108 to familiarize themselves 
with the FCC auction application system and the auction bidding system.
    100. In addition, OEA and WTB will make available an interactive 
mapping tool to identify and assess potential encumbrances in the band, 
including as a result of pending Rural Tribal Priority Window 
applications. Potential applicants are again reminded, however, that 
this tool will not represent complete licensing information; all 
information should be confirmed in ULS for any specific license or 
area.

VI. Procedural Matters

A. Supplemental Initial Regulatory Flexibility Analysis

    101. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), the Commission has prepared this Supplemental Initial 
Regulatory Flexibility Analysis (Supplemental IRFA) of the possible 
significant economic impact on small entities of the policies and rules 
addressed in the Auction 108 Comment Public Notice to supplement the 
Commission's Initial and Final Regulatory Flexibility Analyses 
completed in the 2.5 GHz Notice of Proposed Rulemaking (NPRM), 83 FR 
26396, June 7, 2018, and 2.5 GHz Report and Order, and other Commission 
orders pursuant to which Auction 108 will be conducted. Written public 
comments are requested on this Supplemental IRFA. Comments must be 
identified as responses to the Supplemental IRFA and must be filed by 
the same deadline for comments specified on the first page of the 
Auction 108 Comment Public Notice. The Commission will send a copy of 
the Auction 108 Comment Public Notice, including this Supplemental 
IRFA, to the Chief Counsel for Advocacy of the Small Business 
Administration (SBA). In addition, the Auction 108 Comment Public 
Notice and Supplemental IRFA (or summaries thereof) will be published 
in the Federal Register.
    102. Need for, and Objectives of, the Proposed Rules. The Auction 
108 Comment Public Notice sets forth the proposed auction procedures 
for those entities that seek to bid to acquire licenses in Auction 108. 
The Auction 108 Comment Public Notice seeks comment on proposed 
procedural rules to govern Auction 108, which will auction geographic 
overlay licenses of unlicensed spectrum in the 2.5 GHz band (2496-2690 
MHz). The specific overlay licenses available in Auction 108 will be 
determined by the results of the Rural Tribal Priority Window, which 
gave federally recognized Tribes the opportunity to submit applications 
to acquire new 2.5 GHz band overlay licenses to provide broadband 
service on rural Tribal lands before the remaining unassigned spectrum 
is made generally available to all entities through competitive 
bidding. The Rural Tribal Priority Window closed on September 2, 2020. 
Based on review of applications received in the Rural Tribal Priority 
Window, OEA, in conjunction with WTB, will release a public notice 
announcing the final inventory of 2.5 GHz band overlay licenses to be 
offered in Auction 108. This public notice will be released in advance 
of the deadline

[[Page 12159]]

for the submission of short-form applications to bid in Auction 108 so 
that potential applicants can make informed decisions about whether to 
apply. OEA and WTB will also make available resources to assist 
applicants in conducting due diligence research regarding potential 
encumbrances in the band prior to the release of the public notice 
announcing the final auction inventory.
    103. The Auction 108 Comment Public Notice and process is intended 
to provide notice of and adequate time for potential applicants to 
comment on proposed auction procedures. To promote the efficient and 
fair administration of the competitive bidding process for all Auction 
108 participants, the Commission seeks comment on the following 
procedures that would apply to Auction 108 under either the single-
round auction format or the SMR auction format:
    <bullet> Requirement of an additional certification by each 
applicant in its short-form application, under penalty of perjury, that 
it has read the public notice adopting procedures for Auction 108 and 
that it has familiarized itself with those procedures and the 
requirements for obtaining a license and operating facilities in the 
2.5 GHz band;
    <bullet> use of limited information procedures under which the 
Commission will not make public until after the bidding has closed: (1) 
The licenses that an applicant selects for bidding in its auction 
application (FCC Form 175); (2) the amount of any upfront payment made 
by or on behalf of an applicant for Auction 108; (3) an applicant's 
bidding eligibility; and (4) any other bidding-related information that 
might reveal the identity of the bidder placing a bid;
    <bullet> establishment of bidding credit caps for eligible small 
businesses and rural service providers in Auction 108;
    <bullet> provision of discretionary authority to OEA, in 
conjunction with WTB, to delay, suspend, or cancel bidding in Auction 
108 for any reason that affects the ability of the competitive bidding 
process to be conducted fairly and efficiently;
    <bullet> a specific upfront payment amount for each license 
available in Auction 108;
    <bullet> establishment of an additional default payment of 15% 
under Sec.  1.2104(g)(2) of the rules in the event that a winning 
bidder defaults or is disqualified after the auction.
    104. The Auction 108 Comment Public Notice also seeks comment on 
the following procedures under the single-round auction format:
    <bullet> Use of a single-round auction format for Auction 108 with 
limited package bidding;
    <bullet> use of a pay-as-bid pricing rule whereby each winning 
bidder will pay the sum of its winning bid amounts for the licenses it 
is awarded, less any applicable bidding credit discount;
    <bullet> establishment of a bidder's bidding eligibility in bidding 
units based on that bidder's upfront payment through assignment of a 
specific number of bidding units for each license;
    <bullet> establishment of a minimum bid amount for each license 
available in Auction 108 based on each license's potential MHz-pops;
    <bullet> use of an either/or indicator to allow a bidder to 
indicate that two or more of its bids are to be treated as mutually 
exclusive by the bidding system when assigning winning bids; and
    <bullet> a methodology for processing bids.
    105. In addition, the Auction 108 Comment Public Notice seeks 
comment on the following procedures under the SMR auction format:
    <bullet> Use of a simultaneous multiple-round auction format for 
Auction 108, consisting of sequential bidding rounds with a 
simultaneous stopping rule (with discretion by OEA to exercise 
alternative stopping rules under certain circumstances);
    <bullet> use of an activity rule that would require bidders to bid 
actively during the auction rather than waiting until late in the 
auction before participating;
    <bullet> an auction with one or more stages, in which, for example, 
a bidder is required to be active on 80% of its bidding eligibility in 
each round of the first stage, and on 95% of its bidding eligibility in 
each round of the second stage;
    <bullet> provision of three activity rule waivers for each bidder 
to allow it to preserve eligibility during the course of the auction;
    <bullet> use of minimum acceptable bid amounts and additional bid 
increments, along with a methodology for calculating such amounts, with 
OEA retaining discretion to change its methodology if circumstances 
dictate;
    <bullet> a procedure for breaking ties if identical high bid 
amounts are submitted on a license in a given round;
    <bullet> bid removal procedures;
    <bullet> whether to permit bid withdrawals; and
    <bullet> establishment of an interim bid withdrawal percentage of 
15% of the withdrawn bid if the Commission were to allow bid 
withdrawals in Auction 108.
    106. The proposed procedures for the conduct of Auction 108 
constitute the more specific implementation of the competitive bidding 
rules contemplated by parts 1 and 27 of the Commission's rules, the 2.5 
GHz Report and Order, and relevant competitive bidding orders, and are 
fully consistent therewith.
    107. Legal Basis. The Commission's statutory obligations to small 
businesses under the Communications Act of 1934, as amended, are found 
in 47 U.S.C. 309(j)(3)(B) and 47 U.S.C. 309(j)(4)(D). The statutory 
basis for the Commission's competitive bidding rules is found in 
various provisions of the Communications Act of 1934, as amended, 
including 47 U.S.C. 154(i), 301, 302, 303(e), 303(f), 303(r), 304, 307, 
and 309(j). The Commission has established a framework of competitive 
bidding rules, updated most recently in 2015, pursuant to which it has 
conducted auctions since the inception of the auctions program in 1994 
and would conduct Auction 108. In promulgating those rules, the 
Commission conducted numerous RFA analyses to consider the possible 
impact of those rules on small businesses that might seek to 
participate in Commission auctions. In addition, a Final Regulatory 
Flexibility Analysis (FRFA) was included in the 2.5 GHz Report and 
Order that adopted rule provisions relevant to this notification.
    108. Description and Estimate of the Number of Small Entities to 
Which the Proposed Rules Will Apply. The RFA directs agencies to 
provide a description of, and, where feasible, an estimate of the 
number of small entities that may be affected by the proposed rules and 
policies, if adopted. The RFA generally defines the term ``small 
entity'' as having the same meaning as the terms ``small business,'' 
``small organization,'' and ``small governmental jurisdiction.'' In 
addition, the term ``small business'' has the same meaning as the term 
``small business concern'' under the Small Business Act. A ``small 
business concern'' is one which: (1) Is independently owned and 
operated; (2) is not dominant in its field of operation; and (3) 
satisfies any additional criteria established by the SBA.
    109. As noted above, Regulatory Flexibility Analyses were 
incorporated into the 2.5 GHz NPRM and the 2.5 GHz Report and Order. In 
those analyses, the Commission described in detail the small entities 
that might be significantly affected. In the Auction 108 Comment Public 
Notice, the Commission adopts by reference the descriptions and 
estimates of the number of small entities from the previous Regulatory 
Flexibility Analyses in the 2.5 GHz NPRM and the 2.5 GHz Report and 
Order.

[[Page 12160]]

    110. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements for Small Entities. The Commission designed the 
auction application process itself to minimize reporting and compliance 
requirements for applicants, including small entity applicants. In the 
first part of the Commission's two-phased auction application process, 
parties desiring to participate in an auction file streamlined, short-
form applications in which they certify under penalty of perjury as to 
their qualifications. Eligibility to participate in bidding is based on 
an applicant's short-form application and certifications, as well as 
its upfront payment. In the second phase of the process, winning 
bidders file a more comprehensive long-form application. Thus, an 
applicant which fails to become a winning bidder does not need to file 
a long-form application and provide the additional showings and more 
detailed demonstrations required of a winning bidder.
    111. The Commission does not expect the processes and procedures 
proposed in the Auction 108 Comment Public Notice will require small 
entities to hire attorneys, engineers, consultants, or other 
professionals to participate in Auction 108 and comply with the 
procedures it ultimately adopts because of the information, resources, 
and guidance the Commission makes available to potential and actual 
participants. For example, the Commission intends to release an online 
tutorial that will help applicants understand the procedures for filing 
of the auction short-form application (FCC Form 175). The Commission 
also intends to make information on the bidding system available and 
offer demonstrations and other educational opportunities for applicants 
in Auction 108 to familiarize themselves with the FCC auction 
application system and the auction bidding system. By providing these 
resources as well as the resources discussed below, the Commission 
expects small entities that use the available resources to experience 
lower participation and compliance costs. Nevertheless, while the 
Commission cannot quantify the cost of compliance with the proposed 
procedures, it does not believe that the costs of compliance will 
unduly burden small entities that choose to participate in the auction 
because the proposals for Auction 108 are similar in many respects to 
the procedures in recent auctions conducted by the Commission.
    112. Steps Taken to Minimize the Significant Economic Impact on 
Small Entities, and Significant Alternatives Considered. The RFA 
requires an agency to describe any significant, specifically small 
business, alternatives that it has considered in reaching its proposed 
approach, which may include the following four alternatives (among 
others): (1) The establishment of differing compliance or reporting 
requirements or timetables that take into account the resources 
available to small entities; (2) the clarification, consolidation, or 
simplification of compliance and reporting requirements under the rule 
for such small entities; (3) the use of performance rather than design 
standards; and (4) an exemption from coverage of the rule, or any part 
thereof, for such small entities.
    113. The Commission has taken steps to minimize any economic impact 
of its auction procedures on small entities through, among other 
things, the Commission's potential use of a single bidding round and a 
pay-as-bid pricing rule. The Commission expects that many small 
entities will bid in Auction 108 and the use of a single-round auction 
would significantly reduce the time and resource commitment required 
for participation, if adopted. Due to the large inventory of licenses 
that will be available in Auction 108, the multiple-round auction 
format that the Commission has typically used in auctioning spectrum 
licenses could require several months to complete and require 
participating bidders to expend resources to consistently monitor the 
auction during that time. In contrast, the Commission anticipates that 
with a single bidding round, bid processing for Auction 108 could be 
completed within a week. In addition, the use of a pay-as-bid pricing 
rule, which requires each winning bidder to pay the sum of its winning 
bid amounts for the licenses it is awarded, less any applicable bidding 
credit discount, should also benefit small entities by giving them more 
certainty about the costs of their winning bids.
    114. In the event the Commission adopts the SMR auction format, it 
has also taken steps to minimize any economic impact of its auction 
procedures on small entities through, among other things, the many 
resources the Commission provides potential auction participants. OEA 
and WTB propose to make resources available to assist applicants in 
conducting due diligence research regarding potential encumbrances in 
the band prior to the release of the public notice announcing the final 
auction inventory. Small entities and other auction participants may 
seek clarification of or guidance on complying with competitive bidding 
rules and procedures, reporting requirements, and the FCC's auction 
bidding system. An FCC Auctions Hotline provides access to Commission 
staff for information about the auction process and procedures. The FCC 
Auctions Technical Support Hotline is another resource which provides 
technical assistance to applicants, including small entities, on issues 
such as access to or navigation within the electronic FCC Form 175 and 
use of the FCC's auction bidding system. Small entities may also use 
the web-based, interactive online tutorial produced by Commission staff 
to familiarize themselves with auction procedures, filing requirements, 
bidding procedures, and other matters related to an auction.
    115. The Commission also makes various databases and other sources 
of information, including the Auctions program websites and copies of 
Commission decisions, available to the public without charge, providing 
a low-cost mechanism for small entities to conduct research prior to 
and throughout the auction. Prior to and at the close of Auction 108, 
the Commission will post public notices on the Auctions website, which 
articulate the procedures and deadlines for the auction. The Commission 
makes this information easily accessible and without charge to benefit 
all Auction 108 applicants, including small entities, thereby lowering 
their administrative costs to comply with the Commission's competitive 
bidding rules.
    116. Prior to the start of bidding, the Commission also proposes to 
make available to bidders various educational materials. Eligible 
bidders will be given an opportunity to become familiar with auction 
procedures and the bidding system by participating in a mock auction. 
Further, the Commission intends to conduct Auction 108 electronically 
over the internet using a web-based auction system that eliminates the 
need for bidders to be physically present in a specific location. 
Qualified bidders also have the option to place bids by telephone. 
These mechanisms are made available to facilitate participation in 
Auction 108 by all eligible bidders and may result in significant cost 
savings for small entities that use these alternatives. Moreover, the 
adoption of bidding procedures in advance of the auction, consistent 
with statutory directive, is designed to ensure that the auction will 
be administered predictably and fairly for all participants, including 
small entities.
    117. For Auction 108, the Commission proposes a $25 million cap on 
the total bidding credit amount that may be awarded to an eligible 
small business and a $10 million cap on the total bidding credit amount 
that may be

[[Page 12161]]

awarded to a rural service provider. In addition, the Commission 
proposes a $10 million cap on the overall amount of bidding credits 
that any winning small business bidder may apply to licenses won in 
counties located within any PEA with a population of 500,000 or less. 
Based on the technical characteristics of the 2.5 GHz band and its 
analysis of past auction data, the Commission anticipates that its 
proposed caps will allow the majority of small businesses to take full 
advantage of the bidding credit program, thereby lowering the relative 
costs of participation for small businesses.
    118. These proposed procedures for the conduct of Auction 108 
constitute the more specific implementation of the competitive bidding 
rules contemplated by parts 1 and 30 of the Commission's rules, 47 CFR 
parts 1 and 30, the 2.5 GHz Report and Order, and relevant competitive 
bidding orders, and are fully consistent therewith.
    119. Federal Rules that May Duplicate, Overlap, or Conflict with 
the Proposed Rules. None.

B. Paperwork Reduction Act Analysis

    120. The Auction 108 Comment Public Notice contains proposed new 
information collection requirements. The Commission, as part of its 
continuing effort to reduce paperwork burdens, invites the general 
public and the Office of Management and Budget (OMB) to comment on the 
information collection requirements contained in this document, as 
required by the Paperwork Reduction Act of 1995, Public Law 104-13. In 
addition, pursuant to the Small Business Paperwork Relief Act of 2002, 
Public Law 107-198, 44 U.S.C. 3506(c)(4), the Commission seeks specific 
comment on how it might further reduce the information collection 
burden for small business concerns with fewer than 25 employees.

C. Deadlines and Filing Procedures

    121. Pursuant to 47 CFR 1.415, 1.419, interested parties may file 
comments or reply comments on or before the dates indicated on the 
first page of the Auction 108 Comment Public Notice in AU Docket No. 
20-429. Comments may be filed using the Commission's Electronic Comment 
Filing System (ECFS) or by filing paper copies.
    122. Ex Parte Requirements. This proceeding has been designated as 
a ``permit-but-disclose'' proceeding in accordance with the 
Commission's ex parte rules. Persons making oral ex parte presentations 
must file a copy of any written presentations or memoranda summarizing 
any oral presentation within two business days after the presentation 
(unless a different deadline applicable to the Sunshine Period 
applies). Persons making oral ex parte presentations are reminded that 
memoranda summarizing the presentations must (1) list all persons 
attending or otherwise participating in the meeting at which the ex 
parte presentation was made, and (2) summarize all data presented and 
arguments made during the presentation. If the presentation consisted 
in whole or in part of the presentation of data or arguments already 
reflected in the presenter's written comments, memoranda, or other 
filings in the proceeding, the presenter may provide citations to such 
data or arguments in his or her prior comments, memoranda, or other 
filings (specifying the relevant page and/or paragraph numbers where 
such data or arguments can be found) in lieu of summarizing them in the 
memorandum. Documents shown or given to the Commission staff during ex 
parte meetings are deemed to be written ex parte presentations and must 
be filed consistent with 47 CFR 1.1206(b). In proceedings governed by 
47 CFR 1.49(f) or for which the Commission has made available a method 
of electronic filing, written ex parte presentations and memoranda 
summarizing oral ex parte presentations, and all attachments thereto, 
must be filed through the electronic comment filing system available 
for that proceeding, and must be filed in their native format (e.g., 
.doc, .xml, .ppt, searchable .pdf). Participants in this proceeding 
should familiarize themselves with the Commission's ex parte rules.

Federal Communications Commission.
Marlene Dortch,
Secretary.
[FR Doc. 2021-03442 Filed 3-1-21; 8:45 am]
BILLING CODE 6712-01-P


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