35636 Federal Register / Vol. 65, No. 108 / Monday, June 5, 2000 / Notices

the form of an Installment Payment

Acknowledgement. In general, the

acknowledgement contains a

restatement of the amount of the debt

owed, the payment terms under the

218–219 MHz Order, and references

other Commission rules and regulations

related to the payment of installment

debt. Licensees may also be required to

execute a Uniform Commercial Code

financing statement (UCC–1). The

requisite loan document(s) must be

executed and returned to the

Commission (or its agent) within ten

business days of receipt. An Eligible

Licensee’s failure to fully and timely

execute and deliver the requisite loan

document(s) will result in the automatic

cancellation of the license.

30. Eligible Licensees electing

Reamortization/Resumption are

required to resume payments at the end

of the third month after the Election

Date, subject to applicable late payment

rules, in accordance with the 218–219

MHz Order without regard to whether

the requisite loan document(s) have

been issued, executed, or returned.

XIII. Additional Information

A. Web Site

31. Documents related to this notice

and its implementation may be found

on the Federal Communications

Commission web site located at http://

www.fcc/gov/wtb/auctions/218rest/

218rest.html.

B. FCC Reference Center

32. Documents related to this notice

and its implementation may also be

examined and copied during normal

business hours in the FCC Reference

Center, 445 12th Street, SW, Room CY–

A257, Washington, DC 20554, telephone

(202) 418–0270.

C. ITS

33. In addition, documents may be

purchased from the Commission’s copy

contractor, ITS, Inc., 1231 20th Street,

NW., Washington, DC 20036, telephone

(202) 857–3800.

Federal Communications Commission.

Louis J. Sigalos,

Deputy Chief, Auctions and Industry Analysis

Division.

[FR Doc. 00–13974 Filed 6–2–00; 8:45 am]

BILLING CODE 6712–01–U

FEDERAL COMMUNICATIONS

COMMISSION

[Report No. AUC–00–31–G (Auction No. 31);

DA 00–1075]

Auction of Licenses in the 747–762 and

777–792 MHz Bands Scheduled for

September 6, 2000; Comment Sought

on Modifying the Simultaneous

Multiple Round Auction Design To

Allow Combinatorial (Package) Bidding

AGENCY: Federal Communications

Commission.

ACTION: Notice.

SUMMARY: This document seeks

comment on proposed procedures for

modifying the simultaneous multiple

round auction design to allow

combinatorial (‘‘package’’) bidding for

Auction No. 31 should the Commission

determine that package bidding may be

feasible and appropriate for that

auction.

DATES: Comments are due on or before

June 9, 2000, and reply comments are

due on or before June 16, 2000.

ADDRESSES: An original and four copies

of all pleadings must be filed with the

Commission’s Secretary, Magalie Roman

Salas, Office of the Secretary, Federal

Communications Commission, 445

Twelfth Street, SW, TW–A325,

Washington, DC 20054, in accordance

with § 1.51(c) of the Commission’s rules.

See 47 CFR 1.51(c). In addition, one

copy of each pleading must be delivered

to each of the following locations:

(1) The Commission’s duplicating

contractor, International Transcription

Service, Inc. (ITS), 1231 20th Street,

NW, Washington, DC 20036;

(2) Office of Media Relations, Public

Reference Center, 445 Twelfth Street,

SW, Suite CY–A257, Washington, DC

20554;

(3) Rana Shuler, Auctions and

Industry Analysis Division, Wireless

Telecommunications Bureau, 445

Twelfth Street, SW, Suite 4–A628,

Washington, DC 20554. Comments and

reply comments will be available for

public inspection during regular

business hours in the FCC Public

Reference Room, Room CY–A257, 445

12th Street SW, Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT:

Walter D. Strack, Bureau Chief

Economist, Wireless

Telecommunications Bureau, (202) 418–

0600; Evan Kwerel, Senior Economist,

Office of Plans and Policy, (202) 418–

2030; Craig Bomberger, Auctions

Analyst; Howard Davenport, Auctions

Attorney; or Joel Rabinovitz, Auctions

Attorney, Auctions and Industry

Analysis Division, Wireless

Telecommunications Bureau, (202) 418–

0660.

SUPPLEMENTARY INFORMATION: This is a

summary of a Public Notice released

May 18, 2000. The complete text of the

public notice, including Attachment A,

is available for inspection and copying

during normal business hours in the

FCC Reference Center (Room CY–A257),

445 12th Street, SW, Washington, DC. It

may also be purchased from the

Commission’s copy contractor,

International Transcription Services,

Inc. (ITS, Inc.) 1231 20th Street, NW,

Washington, DC 20036, (202) 857–3800.

It is also available on the Commission’s

web site at http://www.fcc.gov.

I. Introduction

1. In adopting the service rules for the

747–762 and 777–792 MHz bands, the

Commission determined that

combinatorial bidding procedures could

have significant benefits for the auction

of the licenses in these bands, but

declined to employ this type of auction

because the statutory deadline did not

allow sufficient time to implement such

a design. See Service Rules for the 746–

764 and 776–794 MHz Bands, and

Revisions to Part 27 of the

Commission’s Rules (700 MHz First

Report & Order) 65 FR 3139 (January 20,

2000). However, in light of (a) the

announced delay of the auction until

September 6, 2000; and (b) the

continued progress in the design and

testing of a combinatorial bidding

system, as directed by Congress, the

Wireless Telecommunications Bureau

(‘‘the Bureau’’) now believes that

sufficient time may exist to implement

an auction design that allows for bids on

combinations, or ‘‘packages,’’ of

licenses. See Auction of Licenses for the

747–762 and 777–792 MHz Bands

Postponed Until September 6, 2000

(Auction Public Notice) 65 FR 30598

(May 12, 2000). Therefore, if the

Commission, in conjunction with other

reconsideration issues now before it,

determines that modifying the

simultaneous multiple round auction

design to allow combinatorial

(‘‘package’’) bidding is feasible and

appropriate for Auction No. 31, then the

Bureau wants to be prepared to have a

system and procedures in place to

conduct package bidding. In this public

notice, we seek comment on such

procedures consistent with our

authority under Part 1 of the

Commission’s rules. Depending on the

Commission’s actions and the

comments we receive in response to this

notice, we will, by a later public notice,

either establish procedures as discussed

here and use package bidding for

Federal Register / Vol. 65, No. 108 / Monday, June 5, 2000 / Notices 35637

Auction No. 31, or use the procedures

that we already announced. See Auction

of Licenses in the 747–762 and 777–792

MHz Bands, Auction Notice and Filing

Requirements for 12 Licenses in the 700

MHz Bands (Auction No. 31 Procedures

Public Notice) 65 FR 12251 (March 8,

2000).

2. With package bidding, bidders

would not be restricted to placing bids

on individual licenses, but would also

be allowed to place all-or-nothing bids

on packages of licenses. This approach

would allow bidders to better express

the value of any synergies (benefits from

combining complementary items) that

may exist among licenses, and to avoid

exposure problems—the risks bidders

face in trying to acquire efficient

packages of licenses. For example, with

package bidding a bidder desiring an

aggregation of all six 20 MHz licenses in

order to inaugurate a nationwide service

could bid on the six licenses as a

package and not face the risk of winning

only some of the desired licenses and

paying more than the bidder values

those licenses by themselves (without

the other licenses needed to provide

nationwide coverage).

3. Allowing package bidding does,

however, potentially introduce what is

termed the threshold problem—the

difficulty that multiple bidders desiring

only the single licenses (or smaller

packages) that constitute a package may

have in outbidding a single bidder that

is bidding for the entire package, even

though the multiple bidders may value

the sum of the parts more than the

single bidder values the whole. Bidders

for parts of a larger package each have

an incentive to hold back in the hope

that a bidder for another piece of the

larger package will increase its bid

sufficiently for the bids on the pieces

collectively to beat the bid on the larger

package. The procedures we propose to

implement package bidding are

designed to facilitate the emergence of

bids that will overcome this problem.

4. In general, package bidding should

be an improvement over our usual

auction design when (a) there are strong

complementarities among licenses for

some bidders, and (b) the pattern of

those complementarities is different for

different bidders. Moreover, if some

licenses are complements for some

bidders and substitutes for other

bidders, it might not be possible to

achieve the most efficient assignments

pricing each license individually, as

under our usual simultaneous multiple

round auction design. The comments

we previously received suggest this is

the case for Auction No. 31, where some

potential bidders have expressed the

importance of acquiring a nationwide

footprint, and others the importance of

acquiring all 30 MHz in a region.

Therefore, it is appropriate to consider

package bidding for this auction.

5. We therefore propose to modify the

simultaneous multiple round auction

design that we previously adopted for

Auction No. 31 to allow for package

bidding. Most of our auction rules and

procedures would remain the same or

be changed only slightly. For example,

the Commission rules forbidding

collusion among bidders would remain

in full force. The procedures regarding

upfront payments, initial maximum

eligibility, and bid activity would be

modified to account for the ability of

bidders to bid on both individual

licenses and packages and some of the

other intricacies of package bidding

design. We propose for Auction No. 31

that we would use a two-round stopping

rule with no proactive activity rule

waivers allowed, instead of the oneround stopping rule with proactive

waivers that we previously adopted. We

also seek comment on changes to the

rules regarding default payments so that

the default payment owed after default

on a package would be calculated based

on the difference between the defaulted

bid on the package and the subsequent

bid(s) on the package or the licenses that

make up the package. See Service Rules

for the 746–764 and 776–794 MHz

Bands, and Revisions to Part 27 of the

Commission’s Rules (New Rules NPRM)

64 FR 36686 (July 7, 1999). Finally, we

seek comment on some additional

auction design issues, including a

proposal that we permit bidders to use

certain contingent bids known as ‘‘or’’

bids—for example, a bid of ‘‘$10 for

license A or $20 for license B.’’

II. Auction Design and Procedures

A. Simultaneous Multiple Round With

Package Bidding

6. The simultaneous multiple round

with package bidding auction design

would be a modification of the

simultaneous multiple round auction

design that we previously established

for Auction No. 31, and would be used

instead of the simultaneous multiple

round auction design. Bidders would

still be able to submit bids on individual

licenses, as in our existing simultaneous

multiple round auction design, but

could also submit all-or-nothing bids on

packages of licenses.

Specifically, bidders could place bids

on nine packages:

• One global package, of all licenses

in the auction (i.e., 30 MHz nationwide),

• Two national packages, of either all

six 10 MHz licenses or all six 20 MHz

licenses, and

• Six regional packages, of both the

10 MHz license and the 20 MHz license

in a region.

We seek comment on this proposal.

Furthermore, examples of these

packages are illustrated in the following

table. The global package consists of all

twelve cells in the table. The two

national packages are the two rows in

the table. For example, the 10 MHz

national package consists of all six 10

MHz licenses, as shown by the cells

shaded with horizontal lines. The six

regional packages are the six columns of

the table. For example, the regional

package for region two is shown by the

cells shaded with vertical lines.

35638 Federal Register / Vol. 65, No. 108 / Monday, June 5, 2000 / Notices

In addition, we seek comment on

whether the Commission should allow

all possible packages composed of the

twelve individual licenses? Should only

certain additional packages be allowed,

and if so, which ones?

B. Winning and Retained Bids

7. Some additional definitions are

required to discuss package bidding.

Winning bids in a package bidding

auction are the set of bids on individual

licenses and packages that maximizes

revenue when the auction closes,

assigning each license to only one party

(a bidder or, in the case of unsold

licenses, the FCC). Provisional winning

bids are the set of bids that maximize

revenue in a particular round (they

would win if the auction were to close

in that round), assigning each license to

only one party (a bidder or the FCC).

8. Retained bids are bids kept in the

system from one round to the next. They

are used in calculating bidders’ bidding

activity for purposes of the activity rule

(discussed further in ‘‘II.D. Activity

Rules and Eligibility’’). Retained bids

include the provisional winning bids,

plus bids that have the potential to

become provisional winning bids

because of changes in other bids in

subsequent rounds. Assuming that bids

in the auction may only rise, bids that

could never be winning bids are not

retained.

Specifically, we propose to ‘‘retain’’:

• A global package bid, if it is the

provisional winner;

• A national package bid, if it would

be part of the provisional winning set

determined by limiting consideration to

national packages and individual

license bids, but excluding global and

regional packages;

• A regional package bid, if it would

be part of the provisional winning set,

considering regional packages and

individual license bids, but excluding

global and national packages;

• An individual license bid, if it is

the high bid for that license.

In other words, in a given round we

would retain a bid (for the next round)

if it is greater than the best combination

of bids (new bids and bids retained from

the previous round) that exactly cover

the licenses in that bid.

9. For the purposes of determining

retained bids, licenses on which no bids

have been submitted would be treated

as if the minimum opening bid had been

submitted. The Commission will resolve

tie bids on the basis of the order in

which the Commission receives bids.

Bidding credits would be treated the

same as in a simultaneous multiple

round auction, where the gross high

bids on licenses determine the winning

bids. Thus, retained bids and winning

bids would be determined based on

gross bids. We seek comment on this

proposal.

C. Upfront Payments and Initial

Maximum Eligibility

10. As we have stated, the Bureau has

delegated authority and discretion to

determine an appropriate upfront

payment for each license being

auctioned. See Amendment of Part 1 of

the Commission’s Rules (Part 1 Order,

MO&O and NPRM) 62 FR 13540 (March

21, 1997). Upfront payments related to

the specific spectrum subject to auction

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

the auction. See Implementation of

Section 309(j) of the Communications

Act (Competitive Bidding Second R&O)

59 FR 22980 (May 4, 1994).

11. We propose no change in the

upfront payments from those previously

established for the individual licenses.

For a package, we propose that we

would calculate the bidding units and

associated upfront payment by adding

together the bidding units and

associated upfront payments of the

individual licenses that make up the

package. We list the bidding units and

upfront payments for all licenses in

Attachment A. We seek comment on

this proposal.

12. We also propose no change in our

procedure for determining initial

maximum eligibility from the procedure

already established for Auction No. 31.

Thus, the amount of the upfront

payment submitted by a bidder will

determine the initial maximum

eligibility (as measured in bidding

units) for each bidder. Upfront

payments will not be attributed to

specific licenses or packages, but

instead will be translated into bidding

units to define a bidder’s initial

maximum eligibility, which cannot be

increased during the auction. The

maximum eligibility will determine the

licenses and packages on which a

bidder may bid in each round of the

auction. Thus, in calculating its upfront

payment amount, an applicant must

determine its maximum desired activity

(see ‘‘II.E. Activity Rules and

Eligibility’’) in any single round, and

submit an upfront payment covering

that number of bidding units.

13. Bidders might desire sufficient

eligibility in order to afford themselves

the flexibility to be active

simultaneously on various packages and

subsets thereof. If a bidder submitted an

upfront payment for the total number of

bidding units associated with all 12

licenses, the bidder would not, for

example, have enough eligibility to be

active simultaneously on a global

package and other licenses. The bidder

might want to do this, for example, if it

held a retained bid on some individual

licenses and then decided to bid for the

global package. If, however, as proposed

in ‘‘II. E. Activity Rules and Eligibility,’’

we modify the activity rule to account

for mutually exclusive bids, bidders

would never need to purchase more

eligibility than the total bidding units

associated with all licenses.

D. Minimum Accepted Bids and Bid

Increments

14. We propose that for a bid to be

accepted in any round it must be x%

greater than the minimum amount to

have become a retained bid in the

previous round, where the Bureau will

specify the value of x. In the case of an

individual license bid the minimum

accepted bid is analogous to that in a

simultaneous multiple round auction. It

must be x% greater than the highest bid

for that license in previous rounds. We

propose to set the minimum increment

for a license or package initially at five

percent. The Commission retains

discretion to vary the minimum bid

increments in each round of the auction

by announcement prior to each round.

15. To simplify our procedures, we

propose to treat minimum opening bids

as retained bids after the first round of

the auction. Thus, for example, after the

first round a bid on an individual

license with no initial bids would be

required to exceed the minimum

opening bid by x percent.

16. We also seek comment on other

methods for calculating the minimum

accepted bid. One possibility is to

determine the bid increment as the

maximum of (a) the increment as

calculated above and (b) an increment

based on the total revenue (the

provisional winning bids) in the

previous round. The total minimum bid

increment would be allocated among

individual licenses in proportion to

their bidding units. That is, the per

bidding unit increment would be

determined as a percentage of the

provisional winning total revenue times

the share of total bidding units

associated with the licenses contained

in the bid.

17. For example, suppose the

provisional winning total revenue in the

previous round is $1,000 and percentage

increment is 5%, so the total increment

to be allocated among individual

licenses is $50. A 20 MHz EAG license

has 28 million bidding units, which is

one-ninth of the total bidding units.

Thus, under this approach the

Federal Register / Vol. 65, No. 108 / Monday, June 5, 2000 / Notices 35639

increment on such a license would be

$5.56, or the amount calculated in the

previous paragraph, whichever is

greater. One potential benefit of this

approach is to help overcome the

threshold problem—the difficulty

smaller bidders face coordinating

increases in bids on individual licenses

or small packages to beat bids for larger

packages of licenses—by moving up the

prices more quickly for apparently

undervalued properties.

18. Another possibility is to

determine the minimum accepted bid

by allocating the total amount needed to

beat the provisional winners. Under this

approach, each license is assigned a

price so that the sum of the prices adds

up to the provisional winning total

revenue. Package prices are equal to the

sum of the prices of the individual

licenses in the package. The minimum

acceptable bid would be a fixed

percentage greater than the assigned

price of the license or package.

19. As has become standard in our

auctions, we also propose that we

would use ‘‘click box’’ bidding.

Specifically, for Auction No. 31 we

would allow package bids to increase by

one increment in each round, while bids

on individual licenses could increase by

one to nine increments. This limitation

is designed to prevent bids on packages

from rising too quickly for bidders on

individual licenses to overcome the

threshold problem. We seek comment

on this proposal. Should we allow

package bids to increase by greater than

one increment in each round?

E. Activity Rules and Eligibility

20. In order to ensure that the auction

closes within a reasonable period of

time, an activity rule requires bidders to

bid actively on a percentage of their

maximum bidding eligibility during

each round of the auction rather than

waiting until the end of the auction to

participate. A bidder that does not

satisfy the activity rule will either lose

bidding eligibility in the next round or

use an activity rule waiver

21. In the context of package bidding,

a bid would be considered ‘‘active’’ if it

is either a retained bid from the

previous round or is an accepted bid in

the current round. Absent overlapping

bids and ‘‘or’’ bids, a bidder’s ‘‘activity’’

is the sum of the bidding units

associated with the licenses on which

the bidder is active. To account for the

possibility of overlapping bids and ‘‘or’’

bids, which can not simultaneously be

part of the winning set, we propose to

measure a bidder’s activity in a round

as the maximum number of bidding

units associated with bids that could

simultaneously be in a provisional

winning set. In other words, a bidder’s

activity in a round is the number of

bidding units associated with the set of

the bidder’s retained bids from the

previous round and the bidder’s

acceptable bids in the current round

that maximizes the number bidding

units without provisionally assigning

the bidder any bids that cannot

simultaneously be part of a provisional

winning set. We seek comment on this

proposal.

22. As we have already established for

Auction No. 31 using the simultaneous

multiple round auction design, we

propose that no bidder’s total activity in

a given round may exceed its current

eligibility. Initial eligibility is

determined by upfront payments, as

discussed in ‘‘II. C. Upfront Payments

and Initial Maximum Eligibility.’’ In the

context of package bidding for Auction

No. 31, we propose that in each round

of the auction a bidder desiring to

maintain its current eligibility would be

required to be active on licenses

encompassing at least 50 percent of its

current eligibility. For a bidder that

failed to meet the activity requirement

in a given round, we would reduce the

bidder’s eligibility for the next round to

two times its activity in the current

round. Thus, a bidder’s eligibility in the

current round is either twice its activity

in the previous round or its eligibility in

the previous round, whichever would

be less:

Eligibility(t)=Min (Eligibility(t¥1),

2*Activity(t¥1))

We seek comment on this proposal

and on variations. For example, should

we instead adopt multiple stages with

increasing activity requirements as we

established for Auction No. 31 using a

simultaneous multiple round auction

design? We also seek comment on

whether, for greater transparency and

computational simplicity, the Bureau

should limit the total number of bids

made by any bidder, and, if so, what

limits should be established.

F. Activity Rule Waivers and Reducing

Eligibility

23. We propose to retain the

procedures regarding activity rule

waivers and reducing eligibility that we

previously established for Auction No.

31 with one exception. As described, we

propose not to allow bidders to submit

proactive waivers.

24. Use of an activity rule waiver

preserves the bidder’s current bidding

eligibility despite the bidder’s activity

in the current round being below the

required minimum level. An activity

rule waiver applies to an entire round

of bidding and not to a particular

license or package. Activity rule waivers

are principally a mechanism for auction

participants to avoid the loss of auction

eligibility in the event that exigent

circumstances prevent them from

placing a bid in a particular round.

25. The FCC auction system assumes

that bidders with insufficient activity

would prefer to use an activity rule

waiver (if available) rather than lose

bidding eligibility. Therefore, the

system will automatically apply a

waiver (known as an ‘‘automatic

waiver’’) at the end of any bidding

period where a bidder’s activity level is

below the minimum required unless: (a)

There are no activity rule waivers

available; or (b) the bidder overrides the

automatic application of a waiver by

reducing eligibility, thereby meeting the

minimum requirement. An automatic

waiver invoked in a round in which

there are no new acceptable bids will

not keep the auction open.

26. A bidder with insufficient activity

may wish to reduce its bidding

eligibility rather than use an activity

rule waiver. If so, the bidder must

affirmatively override the automatic

waiver mechanism during the bidding

period by using the reduce eligibility

function in the software. In this case,

the bidder’s eligibility is permanently

reduced to bring the bidder into

compliance with the activity rules. Once

eligibility has been reduced, a bidder

will not be permitted to regain its lost

bidding eligibility.

27. We previously concluded that for

Auction No. 31 using a simultaneous

multiple round design, a bidder may

proactively use an activity rule waiver

as a means to keep the auction open

without placing a bid. As described in

‘‘H. Stopping Rule’’, however, we are

proposing to use a two-round

simultaneous stopping rule for Auction

No. 31 should we use package bidding.

This means that all licenses remain

open until the second consecutive

round in which no new acceptable bids

are received. After the second

consecutive such round, bidding closes

simultaneously on all licenses. With

this stopping rule the auction could not

close by surprise. Thus, we believe that

bidders no longer need proactive

activity rule waivers in order for the

auction to reach an economically

efficient outcome. Moreover, there is

some concern that allowing proactive

waivers when there is a two-round

stopping rule might, in some

circumstances, introduce opportunities

for strategic behavior that may reduce

the efficiency of the auction.

Accordingly, we now propose not to

allow bidders to submit proactive

waivers in the context of package

35640 Federal Register / Vol. 65, No. 108 / Monday, June 5, 2000 / Notices

bidding for Auction No. 31. We seek

comment on this proposal.

28. We further propose that each

bidder in Auction No. 31 be provided

with five activity rule waivers (the same

number we previously adopted) that

may be used at the bidder’s discretion

during the course of the auction as set

forth. We seek comment on this

proposal.

G. Bid Removal and Bid Withdrawal

29. Should we implement package

bidding for Auction No. 31, we propose

to retain the bid removal procedures

that we previously established. Before

the close of a bidding period, a bidder

has the option of removing any bids

placed in that round. By using the

remove bid function in the software, a

bidder may effectively ‘‘unsubmit’’ any

bid placed within that round. This is

not the same as withdrawing a high bid,

which, in our simultaneous multiple

round auction system, can occur in

rounds subsequent to the round in

which the high bid was placed. A

bidder removing a bid placed in the

same round is not subject to withdrawal

payments. Once a round closes, a bidder

may no longer remove a bid.

30. We propose to modify the bid

withdrawal rules to not allow bidders to

withdraw provisional winning bids

from previous rounds if we use package

bidding for Auction No. 31.

Additionally, the previously announced

special 30 MHz nationwide bid

withdrawal procedure would no longer

apply. Thus, bidders will be obligated

for all bids they submit. If a bid is

declared the winner and the bidder does

not pay the amount due, it is liable for

a default payment as set forth in the

Commission’s Rules. With the

implementation of package bidding,

bidders should not face exposure risks

as they might in a simultaneous

multiple round auction design. Bid

withdrawal was designed to allow

bidders to back out of failed

aggregations—to avoid winning some

licenses that are worth little to them

without the others they need to

implement their business plan.

Therefore, to the extent that bids are

allowed on all packages of licenses with

significant complementarities, the use of

withdrawals to mitigate such risk is no

longer necessary. While there is no

offsetting benefit, there is still the

potential harm from allowing

withdrawals. Withdrawals may be used

strategically to provide incorrect price

signals during the auction and lead

other bidders to place inefficient bids.

Also, when withdrawals are permitted,

one can not ensure that the auction will

proceed at an acceptable pace.

Moreover, the harm associated with

withdrawals is likely to be more severe

in auctions with package bidding since

a single withdrawal can affect the entire

provisional winning set. We seek

comment on this proposal.

H. Stopping Rule

31. Under a package bidding design,

we propose to modify the stopping rule

we previously adopted for Auction No.

31. Instead of a one-round simultaneous

stopping rule with the use of proactive

waivers, we now propose to employ a

two-round simultaneous stopping rule

approach. The Bureau has discretion ‘‘to

establish stopping rules before or during

multiple round auctions in order to

terminate the auction within a

reasonable time.’’ A two-round

simultaneous stopping rule means that

all licenses remain open until two

consecutive rounds have occurred in

which no new acceptable bids are

received. After the second consecutive

such round, bidding closes

simultaneously on all licenses. Thus,

unless circumstances dictate otherwise,

bidding would remain open on all

licenses until bidding stops on every

license. We seek comment on this

proposal.

32. The Bureau also seeks comment

on a modified version of the two-round

simultaneous stopping rule for use if we

implement package bidding. The

modified two-round simultaneous

stopping rule would close the auction

for all licenses after the second

consecutive round in which no bidder

submits a new acceptable bid on any

license on which it is not the

provisional winning bidder. Thus,

absent any other bidding activity, a

bidder placing a new bid on a license

for which it is the provisional winning

bidder would not keep the auction open

under this modified rule.

33. As before, we propose that the

Bureau retain the discretion to keep an

auction open even if no new acceptable

bids are submitted. The activity rule

will apply as usual, and a bidder with

insufficient activity will either lose

bidding eligibility or use a remaining

activity rule waiver. We also propose

that the Bureau reserve the right to

declare that the auction will end after a

specified number of additional rounds

(‘‘special stopping rule’’). The Bureau

proposes to exercise this option only in

certain circumstances, such as, for

example, where the auction is

proceeding very slowly, there is

minimal overall bidding activity, or it

appears likely that the auction will not

close within a reasonable period of time.

Before exercising this option, the

Bureau is likely to attempt to increase

the pace of the auction by, for example,

increasing the number of bidding

rounds per day, and/or increasing the

amount of the minimum bid increments

for the limited number of licenses where

there is still a high level of bidding

activity. We seek comment on these

proposals.

I. Reserve Price or Minimum Opening

Bid

34. We propose no change in the

minimum opening bids from those we

previously adopted for the individual

licenses. For a package, we propose to

calculate the minimum opening bid by

adding together the minimum opening

bids of the individual licenses that make

up the package. We list the proposed

minimum opening bids for all licenses

in Attachment A. We seek comment on

this proposal.

35. The Balanced Budget Act calls

upon the Commission to prescribe

methods by which a reasonable reserve

price will be required or a minimum

opening bid established when FCC

licenses are subject to auction (i.e.,

because the Commission has accepted

mutually exclusive applications for

those licenses), unless the Commission

determines that a reserve price or

minimum bid is not in the public

interest. Consistent with this mandate,

the Commission has directed the Bureau

to seek comment on the use of a

minimum opening bid and/or reserve

price prior to the start of each auction.

See Amendment of Part 1 of the

Commission’s Rules—Competitive

Bidding Procedures (Part 1 Third Report

and Order) 63 FR 770 (January 7, 1998).

36. Normally, a reserve price is an

absolute minimum price below which

an item will not be sold in a given

auction. Reserve prices can be either

published or unpublished. A minimum

opening bid, on the other hand, is the

minimum bid price set at the beginning

of the auction below which no bids are

accepted. It is generally used to

accelerate the competitive bidding

process. Also, in a minimum opening

bid scenario, the auctioneer generally

has the discretion to lower the amount

later in the auction. It is also possible

for the minimum opening bid and the

reserve price to be the same amount.

37. In light of the Balanced Budget

Act, the Bureau decided to establish

minimum opening bids for Auction No.

31. The Bureau believes a minimum

opening bid, which has been utilized in

other auctions, is an effective bidding

tool. See Auction of 800 MHz SMR

Upper 10 MHz Band, Minimum

Opening Bids or Reserve Prices (800

MHz Public Notice) 62 FR 55251

(October 23, 1997). A minimum opening

Federal Register / Vol. 65, No. 108 / Monday, June 5, 2000 / Notices 35641

bid, rather than a reserve price, will

help to regulate the pace of the auction

and provides flexibility.

J. Round Structure

38. We propose no changes to the

round structure and procedures from

those we have already adopted for

Auction No. 31. The Commission would

use an automated auction system to

conduct the package bidding auction

format for Auction No. 31. The initial

bidding schedule will be announced in

a public notice to be released at least

one week before the start of the auction,

and will be included in the registration

mailings. The package bidding format

will consist of sequential bidding

rounds, each followed by the release of

round results. Multiple bidding rounds

may be conducted in a single day.

Details regarding the location and

format of round results will be included

in the same public notice.

39. The Bureau has discretion to

change the bidding schedule in order to

foster an auction pace that reasonably

balances speed with the bidders’ need to

study round results and adjust their

bidding strategies. The Bureau may

increase or decrease the amount of time

for the bidding rounds and review

periods, or the number of rounds per

day, depending upon the bidding

activity level and other factors.

K. Information Relating to Auction

Delay, Suspension or Cancellation

40. We propose no change to the

procedures regarding auction delay,

suspension, or cancellation from those

we have already adopted for Auction

No. 31. By public notice or by

announcement during the auction, the

Bureau may delay, suspend or cancel

the auction in the event of natural

disaster, technical obstacle, evidence of

an auction security breach, unlawful

bidding activity, administrative or

weather necessity, or for any other

reason that affects the fair and

competitive conduct of competitive

bidding. In such cases, the Bureau, in its

sole discretion, may elect to: Resume

the auction starting from the beginning

of the current round; resume the auction

starting from some previous round; or

cancel the auction in its entirety.

Network interruption may cause the

Bureau to delay or suspend the auction.

We emphasize that exercise of this

authority is solely within the discretion

of the Bureau, and its use is not

intended to be a substitute for situations

in which bidders may wish to apply

their activity rule waivers.

L. Default

41. Under the Commission’s Rules, if

a bidder defaults, we may auction a new

license for the spectrum. The defaulting

bidder is also liable for a payment.

Applying these rules to this auction, if

a bidder defaults on a package bid, we

would auction all of the licenses making

up the package on which the party has

defaulted. We would do this even if,

under the combinatorial auction rules, a

different set of packages would have

won had the defaulting bidder not bid.

For example, if the winning set of bids

contains a 20 MHz nationwide package

and a 10 MHz nationwide package, and

the 20 MHz winner then defaults, we

would auction only the six licenses

making up the nationwide 20 MHz

package. The 10 MHz package would be

unaffected. We would take this

approach even if, had the 20 MHz

winner not submitted its winning bid,

the winning set of licenses would not

have been a nationwide 20 MHz

package and a nationwide 10 MHz

package but rather the six 30 MHz

regional packages. We seek comment on

this proposal.

42. To calculate the payment due

upon default under package bidding, we

seek comment on modifications to the

default rules as follows. For defaulted

package bids, payments will be

calculated on a bid-by-bid basis, rather

than on a license-by-license basis. The

base payment due will be equal to the

difference between the amount bid for

the package and the amount of the

subsequent winning bid for the same

package or the aggregate of the

subsequent winning bids for the

licenses that make up the package. As

is true for individual licenses, if a

bidder defaults on two or more

packages, the default payment due for

each defaulted package will be

calculated separately and will not be

offset against one another. In other

words, if one package is subsequently

auctioned for more than the original

package bid amount and the other

package subsequently is auctioned for

less, the excess bid price from the first

package can not be used to reduce the

amount owed on the second package.

The additional payment will remain

equal to three percent of the subsequent

winning bid(s) or the defaulting bidder’s

bid, whichever is less. We seek

comment on this proposed change to the

Commission’s rules.

Two examples will illustrate how this

rule would work.

Example 1: A bidder wins the 10 MHz

nationwide package with a bid of $500

million and defaults. The Commission offers

the six licenses that make up the 10 MHz

package at a new auction, where they are

won with bids of $70 million, $70 million,

$80 million, $80 million, $90 million and

$90 million. The total amount received in the

second auction is $480 million. The

defaulting bidder is responsible for a total of

$34.4 million consisting of $20 million (the

difference between its original bid and the

total of the subsequent winning bids) plus

$14.4 million (3% of the subsequent winning

bids).

Example 2: A bidder wins two regional

packages with bids of $250 million each and

defaults. The Commission offers the four

licenses that make up the two regional

packages at a new auction, where they are

again won as packages at bids of $200 million

and $300 million, respectively. The

defaulting bidder is responsible for separate

default payments for each package. For the

first package, the payment equals a total of

$56 million consisting of $50 million (the

original $250 million bid less the subsequent

winning bid of $200 million) plus $6 million

(3% of the subsequent winning bid). For the

second package, the subsequent winning bid

is higher than the defaulting bidder’s original

bid and therefore there is no shortfall; the

default payment equals only $7.5 million

(3% of the original bid). In total, the

defaulting bidder owes a payment equal to

$63.5 million ($56 million for the first

package plus $7.5 million for the second

package).

III. Additional Auction Design

Considerations

A. ‘‘Or’’ Bids

43. We propose the use of ‘‘or’’ bids

that would allow bidders to specify that

they wish to win one bid or the other,

but not both, if we implement package

bidding. Such bids could provide a

bidder greater flexibility to aggressively

bid on licenses that it considers

substitutes. For example, suppose a

bidder wants a license for one region

and only one region. Without ‘‘or’’ bids

a bidder with a retained but nonprovisional winning bid on a license

might be reluctant to start bidding on

another license that it considers a good

substitute because it could end up

winning both. Allowing ‘‘or’’ bids

would overcome this problem.

44. For computational simplicity and

transparency, we propose (a) to allow

only pairs of bids to be linked by the

‘‘or’’ function or operator and (b) not to

allow links between national and

regional packages. For example, we

would allow bidders to use the ‘‘or’’

function between the 10 MHz

nationwide package and the 20 MHz

nationwide package, but not between

the 10 MHz nationwide package and a

30 MHz region. We would also allow

bidders to use the ‘‘or’’ function to link

to their retained bids as long as the

retained bids are not part of the

provisional winning set.

35642 Federal Register / Vol. 65, No. 108 / Monday, June 5, 2000 / Notices

45. In order to implement ‘‘or’’ bids,

we would need to modify the method by

which we determine retained bids.

Rather than using the method described

in ‘‘II.B. Definitions: Winning and

Retained Bids,’’ we would determine

retained bids as follows:

• Retain a global package bid if it is

the provisional winner. Do not retain

attached ‘‘or’’ bids.

• Retain a national package bid if it

would be part of the provisional

winning set including national packages

and individual license bids, but

excluding global and regional packages.

Do not retain attached ‘‘or’’ bids.

• Retain a regional package bid if it

would be part of the provisional

winning set including regional packages

and individual license bids, but

excluding global and national packages.

Do not retain attached ‘‘or’’ bids.

• Retain individual license bids if it

would be part of the provisional

winning set including individual

license bids, but excluding global,

national and regional package bids. Do

not retain attached ‘‘or’’ bids.

We seek comment on this proposal,

including whether the number of ‘‘or’’

bids per bidder be limited.

B. Bid Cancellation

46. Another method that could

overcome the reluctance of bidders that

have retained but non-provisional

winning bids from bidding on other

licenses that they consider substitutes is

to allow bidders to cancel their bids. If

we adopted such a procedure, bidders

would be permitted to cancel only nonprovisional winning retained bids;

provisional winning bids could not be

cancelled. Allowing non-provisional

winning retained bid cancellation could

avoid the possible complexity of ‘‘or’’

bids and provide bidders more

flexibility to pursue backup strategies—

and to explore ways to beat package

bids. However, it also could facilitate

adverse strategic bidding, similar to that

associated with allowing withdrawal of

provisional winning bids. Allowing

cancellation of retained but nonprovisional winning bids could also

make it more difficult for bidders for

single licenses or smaller packages to

beat package bids. Moreover, if bidders

were permitted to freely cancel nonprovisional winning retained bids, the

total of retained bids would not

necessarily always increase during the

auction and we might be unable to

ensure an acceptable pace of the

auction. We therefore tentatively

conclude not to permit bidders to cancel

bids. We seek comment, however, on

this.

47. If we permitted cancellation of

non-provisional winning bids, we

would also likely adopt the option of

retaining all bids. The possibility that

bids may be cancelled means that many,

or all, bids are potentially part of a

winning set of bids, and thus it may be

appropriate to retain all bids. Rather

than the auction system canceling nonprovisional winning bids automatically,

bidders would be required to cancel

those bids. If we were to adopt this

approach, it would also be necessary to

modify the activity rules and the

procedures for calculating minimum

acceptable bids. The currently proposed

activity rule could provide inadequate

incentives to move the auction along if

the same activity credit were given to all

bids regardless of their likelihood of

winning. We seek comment on this

proposal.

C. Bid Composition Restriction

48. We seek comment on bid

composition restrictions. For example,

the Milgrom-McAfee bid composition

restriction would not allow a bidder that

is active in a round on a package, but

not on a subset of that package, to bid

subsequently for the subset. Such a

restriction could help mitigate the

threshold problem. It would tend to

deter bidders that are interested in

multiple license but do not have strong

synergies from strategically making

package bids to create a threshold

problem for bidders interested in

subsets of the package. Such a rule

would, however, somewhat limit

bidders’ flexibility. We seek comment

on this device and similar restrictions.

IV. Conclusion

49. This proceeding has been

designated as a ‘‘permit-but-disclose’’

proceeding in accordance with the

Commission’s ex parte rules. 47 CFR

1.1200(a), 1.1206. Persons making oral

ex parte presentations are reminded that

memoranda summarizing the

presentations must contain summaries

of the substance of the presentations

and not merely a listing of the subjects

discussed. More than a one or two

sentence description of the views and

arguments presented is generally

required. See 47 CFR 1.1206(b). Other

rules pertaining to oral and written ex

parte presentations in permit-butdisclose proceedings are set forth in

§ 1.1206(b) of the Commission’s rules,

47 CFR 1.1206(b).

Federal Communications Commission.

Louis J. Sigalos,

Deputy Chief, Auctions and Industry Analysis

Division.

[FR Doc. 00–13993 Filed 6–2–00; 8:45 am]

BILLING CODE 6712–01–P

FEDERAL RESERVE SYSTEM

Change in Bank Control Notices;

Acquisitions of Shares of Banks or

Bank Holding Companies

The notificants listed below have

applied under the Change in Bank

Control Act (12 U.S.C. 1817(j)) and

§ 225.41 of the Board’s Regulation Y (12

CFR 225.41) to acquire a bank or bank

holding company. The factors that are

considered in acting on the notices are

set forth in paragraph 7 of the Act (12

U.S.C. 1817(j)(7)).

The notices are available for

immediate inspection at the Federal

Reserve Bank indicated. The notices

also will be available for inspection at

the offices of the Board of Governors.

Interested persons may express their

views in writing to the Reserve Bank

indicated for that notice or to the offices

of the Board of Governors. Comments

must be received not later than June 19,

2000.

A. Federal Reserve Bank of

Minneapolis (JoAnne F. Lewellen,

Assistant Vice President), 90 Hennepin

Avenue, Minneapolis, Minnesota

55480–0291:

1. John L. Franklin, Sidney, Montana;

to acquire voting shares of 1st United

Bancorporation, Inc., Sidney, Montana,

and thereby indirectly acquire voting

shares of 1st Bank, Sidney, Montana.

Board of Governors of the Federal Reserve

System, May 30, 2000.

Robert deV. Frierson,

Associate Secretary of the Board.

[FR Doc. 00–13899 Filed 6–2–00; 8:45 am]

BILLING CODE 6210–01–P

FEDERAL RESERVE SYSTEM

Formations of, Acquisitions by, and

Mergers of Bank Holding Companies

The companies listed in this notice

have applied to the Board for approval,

pursuant to the Bank Holding Company

Act of 1956 (12 U.S.C. 1841 et seq.)

(BHC Act), Regulation Y (12 CFR Part

225), and all other applicable statutes

and regulations to become a bank

holding company and/or to acquire the

assets or the ownership of, control of, or

the power to vote shares of a bank or

bank holding company and all of the

banks and nonbanking companies