[Federal Register Volume 71, Number 188 (Thursday, September 28, 2006)]
[Notices]
[Pages 56977-56982]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-8366]


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FEDERAL COMMUNICATIONS COMMISSION

[Report No. AUC-06-70-A (Auction No. 70); AU Docket No. 06-170; DA 06-
1810]


Auction of FM Broadcast Construction Permits Scheduled for March 
7, 2007; Comments Sought on Competitive Bidding Procedures for Auction 
No. 70

AGENCY: Federal Communications Commission.

ACTION: Notice.

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SUMMARY: This document announces the auction of certain FM broadcast 
construction permits scheduled to commence on March 7, 2007 (Auction 
No. 70). This document also seeks comments on minimum opening bids and 
other procedures for Auction No. 70.

DATES: Comments are due on or before October 5, 2006, and reply 
comments are due on or before October 13, 2006.

ADDRESSES: Comments and reply comments must be identified by AU Docket 
No. 06-170; DA 06-1810. The Bureaus request that a copy of all comments 
and reply comments be submitted electronically to the following 
address: <a href="/cdn-cgi/l/email-protection#89e8fceafde0e6e7beb9c9efeaeaa7eee6ff"><span class="__cf_email__" data-cfemail="afcedaccdbc6c0c1989fefc9cccc81c8c0d9">[email protected]</span></a>. In addition, comment and reply comments may 
be submitted by any of the following methods:
    <bullet> Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    <bullet> Federal Communications Commission's Web site: http://www.fcc.gov/cgb/ecfs/. Follow the instructions for submitting comments.
    <bullet> People with Disabilities: Contact the FCC to request 
reasonable accommodations (accessible format documents, sign language 
interpreters, CART, etc.) by e-mail: <a href="/cdn-cgi/l/email-protection#21676262141115614742420f464e57"><span class="__cf_email__" data-cfemail="0d4b4e4e383d394d6b6e6e236a627b">[email protected]</span></a> or phone: 202-418-
0530 or TTY: 202-418-0432.
    <bullet> Paper Filers: Parties who choose to file by paper must 
file an original and four copies of each filing. Filings can be sent by 
hand or messenger delivery, by commercial overnight courier, or by 
first-class or overnight U.S. Postal Service mail (although the Bureaus 
continues to experience delays in receiving U.S. Postal Service mail). 
All filings must be addressed to the Commission's Secretary, Attn: WTB/
ASAD, Office of the Secretary, Federal Communications Commission.
    <bullet> The Commission's contractor will receive hand-delivered or 
messenger-delivered paper filings for the Commission's Secretary at 236 
Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. The filing 
hours at this location are 8 a.m. to 7 p.m. eastern time (ET). All hand 
deliveries must be held together with rubber bands or fasteners. 
Commercial overnight mail (other than U.S. Postal Service Express Mail 
and Priority Mail) must be sent to 9300 East Hampton Drive, Capitol 
Heights, MD 20743.
    <bullet> U.S. Postal Service first-class, Express, and Priority 
mail should be addressed to 445 12th Street, SW., Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT: Media Bureau, Audio Division, for 
rules service questions: Lisa Scanlan or Tom Nessinger at (202) 418-
2700 Wireless Telecommunications Bureau, Auctions

[[Page 56978]]

and Spectrum Access Division, for auctions legal questions: Lynne Milne 
at (202) 418-0660. For general auction questions: Jeff Crooks at (202) 
418-0660 or Linda Sanderson at (717) 338-2888.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's 
Auction No. 70 Comment Public Notice released on September 21, 2006. 
The complete text of the Auction No. 70 Comment Public Notice, 
including attachments and related Commission documents, is available 
for public inspection and copying from 8 a.m. to 4:30 p.m. ET Monday 
through Thursday or from 8 a.m. to 11:30 a.m. ET on Fridays in the FCC 
Reference Information Center, Portals II, 445 12th Street, SW., Room 
CY-A257, Washington, DC 20554. The Auction No. 70 Comment Public 
Notice, including attachments and related Commission documents also may 
be purchased from the Commission's duplicating contractor, Best Copy 
and Printing, Inc. (BCPI), Portals II, 445 12th Street, SW., Room CY-
B402, Washington, DC 20554, telephone 202-488-5300, facsimile 202-488-
5563, or you may contact BCPI at its Web site: http://www.BCPIWEB.com. 
When ordering documents from BCPI, please provide the appropriate FCC 
document number for example, DA 06-1810. The Auction No. 70 Comment 
Public Notice and related documents also are available on the Internet 
at the Commission's Web site: http://wireless.fcc.gov/auctions/70/ auctions/70/.

I. Constuction Permits to be Offered in Auction No. 70

    1. The Media and Wireless Telecommunications Bureaus (Bureaus) 
announce that Auction No. 70 will offer 124 construction permits in the 
FM broadcast service as listed in Attachment A of the Auction No. 70 
Comment Public Notice.
    2. Attachment A of the Auction No. 70 Comment Public Notice lists 
vacant FM allotments, reflecting FM channels assigned to the Table of 
FM Allotments, 47 CFR 73.202(b), pursuant to the Commission's 
established rulemaking procedures, designated for use in the indicated 
community. Pursuant to the policies established in the Broadcast First 
Report and Order, 64 FR 24523, May 7, 1999, applicants may apply for 
any vacant FM allotment, as specified in Attachment A. Applications 
specifying the same FM allotment will be considered mutually exclusive 
and, thus, the construction permit for the FM allotment will be awarded 
by competitive bidding procedures.

II. Bureaus Seek Comment on Auction Procedures

    3. Consistent with the provisions of section 309(j)(3) of the 
Communications Act of 1934, as amended, and to ensure that potential 
bidders have adequate time to familiarize themselves with the specific 
rules that will govern the day-to-day conduct of an auction, the 
Bureaus seek comment on the following issues relating to Auction No. 
70.

A. Auction Structure

i. Simultaneous Multiple Round Auction Design
    4. The Bureaus propose to award all construction permits included 
in Auction No. 70 in a simultaneous multiple-round (SMR) auction. This 
type of auction offers every construction permit for bid at the same 
time and consists of successive bidding rounds in which eligible 
bidders may place bids on individual construction permits. A bidder may 
bid on, and potentially win, any number of construction permits. 
Typically, bidding remains open on all construction permits until 
bidding stops on every construction permit, unless a modified stopping 
rule is invoked. The Bureaus seek comment on this proposal.
ii. Round Structure
    5. The Commission will conduct Auction No. 70 over the Internet. 
Alternatively, telephonic bidding also will be available.
    6. The initial bidding schedule will be announced in a public 
notice to be released at least one week before the start of the 
auction. The SMR format will consist of sequential bidding rounds, each 
followed by the release of round results.
    7. The Bureaus have 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. The Bureaus 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. The 
Bureaus seek comment on this proposal.
iii. Stopping Rule
    8. The Bureaus have discretion to establish stopping rules before 
or during multiple round auctions in order to terminate the auction 
within a reasonable time. For Auction No. 70, the Bureaus propose to 
employ a simultaneous stopping rule approach. A simultaneous stopping 
rule means that all construction permits remain available for bidding 
until bidding closes simultaneously on all construction permits. More 
specifically, bidding will close simultaneously on all construction 
permits after the first round in which no bidder submits any new bids, 
applies a proactive waiver, or, if applicable, withdraws any 
provisionally winning bids. Thus, unless circumstances dictate 
otherwise, bidding will remain open on all construction permits until 
bidding stops on every construction permit.
    9. The Bureaus propose to retain the discretion to exercise any of 
the following options during Auction No. 70: (a) Use a modified version 
of the simultaneous stopping rule, based on the failure to submit 
during a prior round of a waiver or a new bid by a bidder who is not a 
provisionally winning bidder for that construction permit, as described 
in the Auction No. 70 Comment Public Notice; (b) keep the auction open 
even if no bidder submits any new bids or applies a waiver; and (c) 
declare that the auction will end after a specified number of 
additional rounds (special stopping rule).
    10. The Bureaus propose to exercise these options only in certain 
circumstances, 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 these options, the Bureaus are likely to attempt to 
increase the pace of the auction by, for example, increasing the number 
of bidding rounds per day, and/or changing the minimum acceptable bids. 
The Bureaus seek comment on these proposals.
iv. Information Relating to Auction Delay, Suspension, or Cancellation
    11. For Auction No. 70, the Bureaus propose that, by public notice 
or by announcement during the auction, the Bureaus 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 efficient conduct of competitive bidding. In 
such cases, the Bureaus, in their 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 Bureaus to delay or 
suspend the auction. The Bureaus emphasize that exercise of this 
authority is solely within the discretion of the Bureaus, and its use 
is not intended to be a substitute for situations in which

[[Page 56979]]

bidders may wish to apply their activity rule waivers. The Bureaus seek 
comment on this proposal.

B. Bidding Procedures

i. Upfront Payments and Bidding Eligibility
    12. The Bureaus have delegated authority and discretion to 
determine an appropriate upfront payment for each FM construction 
permit being auctioned, taking into account such factors as the 
efficiency of the auction process and the potential value of similar 
spectrum. The upfront payment is a refundable deposit made by each 
bidder to establish eligibility to bid on construction permits. 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. With these guidelines in mind, the Bureaus propose the 
schedule of upfront payments for each construction permit as set forth 
in Attachment A of the Auction No. 70 Comment Public Notice. The 
Bureaus seek comment on this proposal.
    13. The Bureaus further propose that the amount of the upfront 
payment submitted by a bidder will determine the maximum number of 
bidding units on which a bidder may place bids. This limit is a 
bidder's initial bidding eligibility. Each FM construction permit is 
assigned a specific number of bidding units equal to the upfront 
payment listed in Attachment A of the Auction No. 70 Comment Public 
Notice, on a bidding unit per dollar basis. Bidding units for a given 
construction permit do not change as prices rise during the auction. A 
bidder's upfront payment is not attributed to specific construction 
permits. Rather, a bidder may place bids on any combination of 
construction permits that it selected in its short form application 
(FCC Form 175), as long as the total number of bidding units associated 
with those construction permits does not exceed the bidder's current 
eligibility. In order to bid on a construction permit, qualified 
bidders must have an eligibility level that meets or exceeds the number 
of bidding units assigned to that construction permit. Eligibility 
cannot be increased during the auction; it can only remain the same or 
decrease. Thus, in calculating its upfront payment amount, an applicant 
must determine the maximum number of bidding units it may wish to bid 
on (or hold provisionally winning bids on) in any single round, and 
submit an upfront payment amount covering that total number of bidding 
units. The Bureaus seek comment on this proposal.
ii. Activity Rule
    14. In order to ensure that an auction closes within a reasonable 
period of time, an activity rule requires bidders to bid actively 
throughout the auction, rather than wait until late in the auction 
before participating. A bidder's activity in a round will be the sum of 
the bidding units associated with any construction permits upon which 
it places bids during the current round and the bidding units 
associated with any construction permits 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 bids in the auction.
    15. The Bureaus propose to divide the auction into two stages, each 
characterized by a different activity requirement. The auction will 
start in Stage One. It proposes that the auction generally will advance 
from Stage One to Stage Two when the auction activity level, as 
measured by the percentage of bidding units receiving new provisionally 
winning bids, is approximately twenty percent or below for three 
consecutive rounds of bidding. However, the Bureaus further propose 
that it retain the discretion to change stages unilaterally by 
announcement during the auction. In exercising this discretion, the 
Bureaus will consider a variety of measures of bidder activity, 
including, but not limited to, the auction activity level, the 
percentage of construction permits (as measured in bidding units) on 
which there are new bids, and the number of new bids.
    16. For Auction No. 70, the Bureaus propose the following activity 
requirements: Stage One: In each round of the first stage of the 
auction, a bidder desiring to maintain its current bidding eligibility 
is required to be active on construction permits representing at least 
75 percent of its current bidding eligibility. Failure to maintain the 
requisite activity level will result in a reduction in the bidder's 
bidding eligibility in the next round of bidding (unless an activity 
rule waiver is used). During Stage One, a bidder's reduced eligibility 
for the next round will be calculated by multiplying the bidder's 
current round activity by four-thirds (\4/3\). Stage Two: In each round 
of the second stage, a bidder desiring to maintain its current bidding 
eligibility is required to be active on 95 percent of its current 
bidding eligibility. Failure to maintain the requisite activity level 
will result in a reduction in the bidder's bidding eligibility in the 
next round of bidding (unless an activity rule waiver is used). During 
Stage Two, a bidder's reduced eligibility for the next round will be 
calculated by multiplying the bidder's current round activity by 
twenty-nineteenths (\20/19\).
    17. The Bureaus seek comment on this proposal. Commenters that 
believe this activity rule should be modified should explain their 
reasoning and comment on the desirability of an alternative approach. 
The Bureaus also invite comment on, in the alternative, conducting the 
auction with a single stage that would use an activity requirement of 
100 percent. Commenters are advised to support their claims with 
analyses and suggested alternative activity rules.
iii. Activity Rule Waivers and Reducing Eligibility
    18. Use of an activity rule waiver preserves the bidder's 
eligibility despite the bidder's activity in the current round being 
below the required minimum level. An activity rule waiver applies to an 
entire round of bidding and not to a particular construction permit. 
Activity rule waivers can be either proactive or automatic and are 
principally a mechanism for auction participants to avoid the loss of 
bidding eligibility in the event that exigent circumstances prevent 
them from placing a bid in a particular round.
    19. The Commission's Integrated Spectrum Auction System (``ISAS'' 
or ``FCC Auction System'') assumes that a bidder that does not meet the 
activity requirement would prefer to apply an activity rule waiver (if 
available) rather than lose bidding eligibility. Therefore, the system 
will automatically apply a waiver at the end of any bidding round where 
a bidder's activity level is below the minimum required unless: (1) The 
bidder has no activity rule waivers available; or (2) the bidder 
overrides the automatic application of a waiver by reducing 
eligibility, thereby meeting the minimum requirement. If a bidder has 
no waivers remaining and does not satisfy the required activity level, 
its eligibility will be permanently reduced, possibly curtailing or 
eliminating the bidder's ability to place additional bids in the 
auction.
    20. 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

[[Page 56980]]

waiver mechanism during the bidding round by using the reduce 
eligibility function in the FCC Auction System. In this case, the 
bidder's eligibility is permanently reduced to bring the bidder into 
compliance with the activity rules as described above. Reducing 
eligibility is an irreversible action. Once eligibility has been 
reduced, a bidder will not be permitted to regain its lost bidding 
eligibility, even if the round has not yet closed.
    21. A bidder may apply an activity rule waiver proactively as a 
means to keep the auction open without placing a bid. If a bidder 
proactively applies an activity rule waiver (using the apply waiver 
function in the FCC Auction System) during a bidding round in which no 
bids or withdrawals (if permitted) are submitted, the auction will 
remain open and the bidder's eligibility will be preserved. An 
automatic waiver applied by the FCC Auction System in a round in which 
there are no new bids or withdrawals (if permitted) will not keep the 
auction open. A bidder cannot submit a proactive waiver after 
submitting a bid in a round, and submitting a proactive waiver will 
preclude a bidder from placing any bids in that round. Applying a 
waiver is irreversible; once a proactive waiver is submitted, that 
waiver cannot be unsubmitted, even if the round has not yet closed.
    22. The Bureaus propose that each bidder in Auction No. 70 be 
provided with three activity rule waivers that may be used at the 
bidder's discretion during the course of the auction. The Bureaus seek 
comment on this proposal.
iv. Reserve Price or Minimum Opening Bid
    23. The Bureaus seek comment on the use of a minimum opening bid 
amount and/or a reserve price in Auction No. 70. 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 amount, 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. The auctioneer has the discretion to lower minimum 
opening bid amounts during the course of the auction. It is also 
possible for the minimum opening bid amount and the reserve price to be 
the same amount.
    24. The Bureaus propose to establish minimum opening bid amounts 
for Auction No. 70. The Bureaus believe a minimum opening bid amount, 
which has been used in other auctions, is an effective bidding tool for 
accelerating the competitive bidding process. The Bureaus do not 
propose a separate reserve price for the construction permits to be 
made available in Auction No. 70.
    25. For Auction No. 70, the proposed minimum opening bids were 
determined by taking into account various factors related to the 
efficiency of the auction and the potential value of the spectrum, 
including the type of service and class of facility offered, market 
size, population covered by the proposed FM broadcast facility, 
industry cash flow data and recent broadcast transactions. The specific 
minimum opening bid for each construction permit available in Auction 
No. 70 is set forth in Attachment A of the Auction No. 70 Comment 
Public Notice. The Bureaus seek comment on this proposal.
    26. If commenters believe that these minimum opening bid amounts 
will result in unsold construction permits, or are not reasonable 
amounts, they should explain why this is so, and comment on the 
desirability of an alternative approach. Commenters are advised to 
support their claims with valuation analyses and suggested reserve 
prices or minimum opening bid amount levels or formulas. In 
establishing the minimum opening bid amounts, the Bureaus particularly 
seek comment on such factors as the potential value of the spectrum 
being auctioned, including the type of service and class of facility 
offered, market size, population covered by the proposed FM broadcast 
facility and other relevant factors that could reasonably have an 
impact on valuation of the broadcast spectrum. The Bureaus also seek 
comment on whether, consistent with section 309(j), the public interest 
would be served by having no minimum opening bid amount or reserve 
price.
v. Bid Amounts
    27. The Bureaus propose that, in each round, eligible bidders be 
able to place bids on a given construction permit in any of nine 
different amounts, if a bidder has sufficient eligibility to place a 
bid on that construction permit. Under this proposal, the FCC Auction 
System interface will list the nine acceptable bid amounts for each 
construction permit.
    28. The first of the nine acceptable bid amounts is called the 
minimum acceptable bid amount. The minimum acceptable bid amount for a 
construction permit will be equal to its minimum opening bid amount 
until there is a provisionally winning bid for the construction permit. 
After there is a provisionally winning bid for a construction permit, 
the minimum acceptable bid amount will be calculated by multiplying the 
provisionally winning bid amount times one plus the minimum acceptable 
bid percentage. If, for example, the minimum acceptable bid percentage 
is 10 percent, the minimum acceptable bid amount will equal 
(provisionally winning bid amount) * (1.10), rounded.
    29. The eight additional bid amounts are calculated using the 
minimum acceptable bid amount and a bid increment percentage, which 
need not be the same as the percentage used to calculate the minimum 
acceptable bid amount. The first additional acceptable bid amount 
equals the minimum acceptable bid amount times one plus the bid 
increment percentage, rounded. If, for example, the bid increment 
percentage is 10 percent, the calculation is (minimum acceptable bid 
amount) * (1 + 0.10), rounded, or (minimum acceptable bid amount) * 
1.10, rounded; the second additional acceptable bid amount equals the 
minimum acceptable bid amount times one plus two times the bid 
increment percentage, rounded, or (minimum acceptable bid amount) * 
1.20, rounded; the third additional acceptable bid amount equals the 
minimum acceptable bid amount times one plus three times the bid 
increment percentage, rounded, or (minimum acceptable bid amount) * 
1.30, rounded; etc. The Bureaus will round the result using our 
standard rounding procedures.
    30. For Auction No. 70, the Bureaus propose to use a minimum 
acceptable bid percentage of 10 percent. This means that the minimum 
acceptable bid amount for a construction permit will be approximately 
10 percent greater than the provisionally winning bid amount for the 
construction permit. The Bureaus also propose to use a bid increment 
percentage of 10 percent to calculate the eight additional acceptable 
bid amounts.
    31. The Bureaus retain the discretion to change the minimum 
acceptable bid amounts, the minimum acceptable bid percentage, and the 
bid increment percentage if they determine that circumstances so 
dictate. The Bureaus will do so by announcement in the FCC Auction 
System during the auction. The Bureaus seek comment on these proposals.
vi. Provisionally Winning Bids
    32. Provisionally winning bids are bids that would become final 
winning bids if the auction were to close in that given round. At the 
end of a bidding round, a provisionally winning bid

[[Page 56981]]

amount for each construction permit will be determined based on the 
highest bid amount received for the construction permit. In the event 
of identical high bid amounts being submitted on a construction permit 
in a given round (i.e., tied bids), the Bureaus will use a random 
number generator to select a single provisionally winning bid from 
among the tied bids. (Each bid is assigned a random number, and the 
tied bid with the highest random number wins the tiebreaker.) The 
remaining bidders, as well as the provisionally winning bidder, can 
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 selected provisionally winning bid. If any bids are 
received on the construction permit in a subsequent round, the 
provisionally winning bid again will be determined by the highest bid 
amount received for the construction permit.
    33. A provisionally winning bid will remain the provisionally 
winning bid until there is a higher bid on the same construction permit 
at the close of a subsequent round. Bidders are reminded that 
provisionally winning bids count toward activity for purposes of the 
activity rule.
vii. Bid Removal and Bid Withdrawal
    34. For Auction No. 70, the Bureaus propose the following bid 
removal procedures. Before the close of a bidding round, a bidder has 
the option of removing any bid placed in that round. By removing 
selected bids in the FCC Auction System, a bidder may effectively 
unsubmit any bid placed within that round. In contrast to the bid 
withdrawal provisions described below, a bidder removing a bid placed 
in the same round is not subject to any penalties. Once a round closes, 
a bidder may no longer remove a bid.
    35. The Bureaus also seek comment on bid withdrawal procedures to 
be used for Auction No. 70. Where permitted, bid withdrawals provide a 
bidder with the option of withdrawing bids placed in prior rounds that 
have become provisionally winning bids. A bidder that withdraws any of 
its provisionally winning bids is subject to the bid withdrawal payment 
provisions of the Commission rules.
    36. For Auction No. 70, the Bureaus propose to prohibit bidders 
from withdrawing any bids after the round in which bids were placed has 
closed. The Bureaus proposal is made in recognition of the site-
specific nature and wide geographic dispersion of the permits available 
in this auction, which suggests that FM broadcast interests may have 
fewer incentives to aggregate permits through the auction process (as 
compared with bidders in many auctions of wireless licenses). The 
Bureaus also remain mindful that withdrawals, particularly those made 
in late stages of an auction, could result in delays in licensing new 
FM stations and attendant delays in the offering of new broadcast 
service to the public.
    37. As an alternative, the Bureaus seek comment on whether to 
permit each bidder to withdraw provisionally winning bids in no more 
than one round during the course of the auction. To permit a bidder to 
withdraw bids in more than one round may encourage insincere bidding or 
the use of withdrawals for anti-competitive purposes. The round in 
which a withdrawal may be used would be at the bidder's discretion; bid 
withdrawal otherwise must be in accordance with the Commission's rules. 
Should this approach be adopted, there would no limit on the number of 
provisionally winning bids that may be withdrawn in the round in which 
a withdrawal is used. Any withdrawal would remain subject to the bid 
withdrawal payment provisions specified in the Commission's rules.
    38. If permitted, a bidder would have the option to withdraw its 
provisionally winning bids using the ``withdraw bids'' function in the 
FCC Auction System. A bidder that withdraws its provisionally winning 
bid(s) would be subject to the bid withdrawal payment provisions of the 
Commission rules.

C. Due Diligence

    39. Potential bidders are solely responsible for investigating and 
evaluating all technical and market place factors that may have a 
bearing on the value of the broadcast facilities in this auction. The 
FCC makes no representations or warranties about the use of this 
spectrum for particular services. Applicants should be aware that an 
FCC auction represents an opportunity to become an FCC permittee in the 
broadcast service, subject to certain conditions and regulations. An 
FCC auction does not constitute an endorsement by the FCC of any 
particular service, technology, or product, nor does an FCC 
construction permit or license constitute a guarantee of business 
success. Applicants should perform their individual due diligence 
before proceeding as they would with any new business venture. In 
particular, potential bidders are strongly encouraged to review all 
underlying Commission orders, such as the specific Report and Order 
amending the FM Table of Allotments and allotting the FM channel(s) on 
which they plan to bid. Reports and Orders adopted in FM allotment 
rulemaking proceedings often include anomalies such as site 
restrictions or expense reimbursement requirements. Additionally, 
potential bidders should perform technical analyses sufficient to 
assure them that, should they prevail in competitive bidding for a 
given FM construction permit, they will be able to build and operate 
facilities that will fully comply with the Commission's technical and 
legal requirements. Applicants are strongly encouraged to inspect any 
prospective transmitter sites located in, or near, the service area for 
which they plan to bid, and also to familiarize themselves with the 
Commission's rules regarding the National Environmental Policy Act.
    40. Potential bidders are strongly encouraged to conduct their own 
research prior to Auction No. 70 in order to determine the existence of 
pending proceedings, including pending rulemaking proceedings that 
might affect their decisions regarding participation in the auction. 
Participants in Auction No. 70 are strongly encouraged to continue such 
research during the auction.

D. Post-Auction Procedures

i. Establishing the Interim Withdrawal Payment Percentage
    41. As noted above, the Bureaus propose not to permit bids to be 
withdrawn in Auction No. 70. However, in the event that Bureaus choose 
to permit bidders to withdraw bids in Auction No. 70, we seek comment 
on the appropriate percentage of a withdrawn bid that should be 
assessed as an interim withdrawal payment, which is an amount that is 
assessed in the event that a final withdrawal payment cannot be 
determined at the close of the auction. In general, the Commission's 
rules provide that 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 subsequent auction(s). However, if a permit for which there has 
been a withdrawn bid is neither subject to a subsequent higher bid nor 
won in the same auction, the final withdrawal payment cannot be 
calculated until a corresponding permit is subject to a higher bid or 
won in a subsequent auction. When that final payment cannot yet be 
calculated, the bidder responsible for the withdrawn bid is assessed an 
interim bid withdrawal payment, which will be applied toward

[[Page 56982]]

any final bid withdrawal payment that is ultimately assessed. The 
Commission's recently adopted rules provide that in advance of the 
auction, the Commission shall establish the percentage of the withdrawn 
bid to be assessed as an interim bid withdrawal payment between three 
percent and twenty percent.
    42. When it adopted the new rule, the Commission indicated 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 
authorizations being offered. The Commission noted that it may impose a 
higher interim withdrawal payment percentage to deter the anti-
competitive use of withdrawals when, for example, bidders likely will 
not need to aggregate permits offered, such as when few permits are 
offered that are not on adjacent frequencies or in adjacent areas, or 
there are few synergies to be captured by combining permits.
    43. The Commission has observed that it may be appropriate to 
impose a higher interim withdrawal payment percentage to deter the 
anti-competitive use of withdrawals in auctions where it is much less 
likely that bidders will need to assemble complete sets of licenses. 
With respect to the permits being offered in Auction No. 70, the 
Bureaus have little evidence that bidders have a significant need to 
use withdrawals to avoid incomplete combinations of licenses. Citing 
experience with FM Auction No. 37, among others, the Commission has 
``observed a disproportionate number of withdrawals late in our 
auctions, indicating that some bidders have been placing and then 
withdrawing bids primarily to discourage potential or existing market 
competitors from seeking to acquire licenses.'' Consistent with its 
interest in deterring strategic withdrawals, the Bureaus propose to 
establish the percentage of the withdrawn bid to be assessed as an 
interim bid withdrawal payment at the maximum twenty percent permitted 
under the Commission's rules. The Bureaus seek comment on this 
proposal.
ii. Establishing the Additional Default Payment Percentage
    44. Any winning bidder that defaults or is disqualified after the 
close of an auction (i.e., fails to remit the required down payment 
within the prescribed period of time, fails to submit a timely long-
form application, fails to make full 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 bid and the amount of 
the winning bid the next time a construction permit 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. Until recently, this additional payment for most 
auctions has been set at three percent of the defaulter's bid or of the 
subsequent winning bid, whichever is less.
    45. On January 24, 2006, the Commission released the Commercial 
Spectrum Enhancement Act Report and Order (CSEA/Part 1 Report and 
Order), 71 FR 6214, February 7, 2006, in which it modified Sec.  
1.2104(g)(2) by increasing the three percent limit on the additional 
default payment for non-combinatorial auctions to twenty percent. Under 
the modified rule, the Commission will, in advance of each auction, 
establish an additional default payment for that auction of three 
percent up to a maximum of twenty percent. The level of this payment in 
each case will be based on the nature of the service and the inventory 
of the construction permits being offered.
    46. For Auction No. 70, the Bureaus propose to establish additional 
default payment of twenty percent. As noted in the CSEA/Part 1 Report 
and Order, defaults weaken the integrity of the auctions process and 
may impede the deployment of service to the public, and an additional 
default payment of more than the previous three percent will be more 
effective in deterring defaults. In light of its proposal for the 
interim bid withdrawal payment amount as discussed above, the Bureaus 
are concerned that setting an additional default payment of less than 
the twenty percent maximum amount may encourage post-auction defaults, 
which further undermine the integrity of the auction process. In light 
of these considerations for Auction No. 70, the Bureaus propose an 
additional default payment of twenty percent of the relevant bid. The 
Bureaus seek comment on this proposal.

III. Conclusion

    47. 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 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. Other rules pertaining to 
oral and written ex parte presentations in permit-but-disclose 
proceedings are set forth in 47 CFR 1.1206(b).

Federal Communications Commission.
Gary D. Michaels,
Deputy Chief, Auctions and Spectrum Access Division, WTB.
[FR Doc. 06-8366 Filed 9-27-06; 8:45 am]
BILLING CODE 6712-01-P


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