[Federal Register Volume 65, Number 195 (Friday, October 6, 2000)]
[Notices]
[Pages 59841-59844]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-25741]


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FEDERAL COMMUNICATIONS COMMISSION

[DA 00-2171 and DA 00-2232]


Comment Sought on Reserve Prices or Minimum Opening Bids and 
Other Auction Procedural Issues; Auction of Additional FM Broadcast 
Construction Permits To Be Included in Auction No. 37 Scheduled for 
February 21, 2001

AGENCY: Federal Communications Commission.

ACTION: Notice.

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SUMMARY: This document announces the auction of certain FM broadcast 
construction permits to commence February 21, 2001.

DATES: Comments regarding the vacant FM allotments listed in Attachment 
A of DA 00-2171 (``Auction No. 37 Comment Public Notice'') are due on 
or before October 9, 2000. Comments regarding the eight additional 
vacant FM allotments listed in DA 00-2232 (``Addendum Public Notice'') 
are due on or before October 13, 2000. All reply comments are due on or 
before October 23, 2000.

ADDRESSES: To file formally, parties must submit an original and four 
copies to the Office of the Secretary, Federal Communications 
Commission, 445 Twelfth Street, SW, TW-A325, Washington, DC 20054. In 
addition, parties must submit one copy to Louis Sigalos, Deputy 
Division Chief, Auctions and Industry Analysis Division, Wireless 
Telecommunications Bureau, 445 Twelfth Street, SW, Suite 4-A668, 
Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT: Kathy Garland, Auctions and Industry 
Analysis Division, Wireless Telecommunications Bureau, at (717) 338-
2888; Kenneth Burnley, Legal Branch, Auctions and Industry Analysis 
Division, Wireless Telecommunications Bureau, at (202) 418-0660; or 
Lisa Scanlan, Audio Services Division, Mass Media Bureau at (202) 418-
2700.

SUPPLEMENTARY INFORMATION: This is a summary of two Public Notices, DA 
00-2171 (``Auction No. 37 Comment Public Notice'') and DA 00-2232 
(``Addendum Public Notice''), released September 25, 2000 and September 
29, 2000 respectively. The complete text of the public notices, 
including attachments, 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,

[[Page 59842]]

Washington, DC 20036, (202) 857-3800. It is also available on the 
Commission's web site at http://www.fcc.gov.
    1. By these Public Notices, the Wireless Telecommunications Bureau 
(the ``Bureau'') and the Mass Media Bureau (collectively referred to as 
the ``Bureaus'') announce the auction of certain FM broadcast 
construction permits to commence February 21, 2001. As discussed in 
greater detail herein, the Bureaus propose that Auction No. 37 be 
composed of 359 construction permits in the FM Broadcast service as 
listed in Attachment A of DA 00-2232 (``Addendum Public Notice'').
    2. Specifically, Attachment A of DA 00-2171 (``Auction No. 37 
Comment Public Notice'') lists 351 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. Attachment A of the 
Addendum Public Notice adds eight additional vacant FM allotments not 
listed in the Auction No. 37 Comment Public Notice, and lists all 
vacant FM allotments that will be included in Auction No. 37. The eight 
additional vacant FM allotments of the Addendum Public Notice have been 
inserted into Attachment A alphabetically by state and the market 
numbers identified in the attachment to the Auction 37 Comment Public 
Notice have been revised to reflect the addition of these eight vacant 
FM allotments. Both Public Notices seek comment on procedural issues 
related to the auctioning of FM broadcast construction permits in 
Auction No. 37.
    3. As stated in the Broadcast First Report and Order, 63 FR 48615 
(September 11, 1998), applicants may apply for any vacant FM allotment, 
as specified in Attachment A of the Addendum Public Notice; applicants 
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. The reference coordinates for each 
vacant FM allotment are also listed in Attachment A of the Addendum 
Public Notice.
    4. The Balanced Budget Act of 1997 requires the Commission to 
``ensure that, in the scheduling of any competitive bidding under this 
subsection, an adequate period is allowed * * * before issuance of 
bidding rules, to permit notice and comment on proposed auction 
procedures * * *.'' Consistent with the provisions of the Balanced 
Budget Act 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 Commission directed the Bureau, 
under its existing delegated authority, to seek comment on a variety of 
auction-specific procedures prior to the start of each auction. We 
therefore seek comment on the following issues relating to Auction No. 
37.

I. Auction Structure

A. Simultaneous Multiple Round Auction Design

    5. We propose to award these FM construction permits in a single 
stage, simultaneous multiple-round auction. As described further, this 
methodology offers every FM construction permit for bid at the same 
time in successive rounds of bidding. We seek comment on this proposal.

B. Upfront Payments and Initial Maximum Eligibility for Each Bidder

    6. The Bureaus have delegated authority and discretion to determine 
an appropriate upfront payment for the FM construction permits being 
auctioned taking into account such factors as the efficiency of the 
auction process and the potential value of spectrum. As described 
further, the upfront payment is a refundable deposit made by each 
bidder to determine and establish eligibility to bid on the FM 
construction permits. Upfront payments related to the specific spectrum 
subject to auction protects against frivolous or insincere bidding and 
provides the Commission with a source of funds from which to collect 
payments owed at the close of the auction. With these guidelines in 
mind, we propose the schedule of upfront payments contained in 
Attachment A to the Public Notice. We seek comment on this proposal.
    7. We further propose that 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 construction permits, but instead will be 
translated into bidding units to define a bidder's initial maximum 
eligibility, which cannot be increased during the auction. Thus, in 
calculating the upfront payment amount, an applicant must determine the 
maximum number of bidding units it may wish to bid on (or hold high 
bids on) in any single round, and submit an upfront payment covering 
that number of bidding units. We seek comment on this proposal.

C. Activity Rules

    8. In order to ensure that the auction closes within a reasonable 
period of time, an activity rule requires bidders to either place a 
valid bid and/or be the standing high bidder during each round of the 
auction rather than waiting until the end to participate. A bidder that 
does not satisfy the activity rule will either use an activity rule 
waiver, if any remain, or lose bidding eligibility in the auction.
    9. We propose a single stage auction with the following activity 
requirement: In each round of the auction, a bidder desiring to 
maintain its eligibility to participate in the auction is required to 
be active on one hundred (100) percent of its bidding eligibility. 
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 bidding eligibility, thus eliminating the bidder from the 
auction. We seek comment on this proposal.

D. Activity Rule Waivers

    10. 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 construction 
permit. Activity 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.
    11. 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 (i) there are no more activity rule waivers 
available; or (ii) the bidder overrides the automatic application of a 
waiver by reducing eligibility, thereby meeting the minimum 
requirements.
    12. We propose that a bidder with insufficient activity that wants 
to reduce its bidding eligibility rather than use an activity rule 
waiver, 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 would be 
permanently reduced to bring the bidder into compliance with the 
activity rules. Once eligibility has been reduced, a bidder

[[Page 59843]]

would not be permitted to regain its lost bidding eligibility.
    13. We propose that a bidder may proactively use an activity rule 
waiver as a means to keep the auction open without placing a bid. If a 
bidder submits a proactive waiver (using the proactive waiver function 
in the bidding software) during a bidding period in which no bids are 
submitted, the auction will remain open and the bidder's eligibility 
will be preserved. An automatic waiver invoked in a round in which 
there are no new valid bids will not keep the auction open, under the 
simultaneous stopping rule. The submission of a proactive waiver cannot 
occur after a bid has been submitted in a round and will preclude a 
bidder from placing any bids later in that round.
    14. We propose that each bidder in Auction No. 37 be provided with 
five activity rule waivers that may be used in any round during the 
course of the auction. We seek comment on this proposal.

E. Information Relating to Auction Delay, Suspension or Cancellation

    15. For Auction No. 37, we propose that, 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. We seek comment on this proposal.

II. Bidding Procedures

A. Round Structure

    16. The Commission will use its Automated Auction System to conduct 
the electronic simultaneous multiple round auction format for Auction 
No. 37. 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 
simultaneous multiple round format will consist of sequential bidding 
rounds, each followed by the release of round results. Details 
regarding the location and format of round results will be included in 
the same public notice.
    17. 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. 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. We seek comment on this proposal.

B. Reserve Price or Minimum Opening Bid

    18. 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 or construction 
permits 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 Bureaus to seek comment on the use of minimum opening bids 
and/or reserve price prior to the start of each auction of broadcast 
construction permits.
    19. 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.
    20. In light of the Balanced Budget Act, the Bureaus propose to 
establish minimum opening bids for Auction No. 37. The Bureaus believe 
a minimum opening bid, which has been utilized in other broadcast 
auctions, is an effective bidding tool. A minimum opening bid, rather 
than a reserve price, will help to regulate the pace of the auction and 
provides flexibility.
    21. For Auction No. 37, the proposed minimum opening bid for each 
FM allotment, as listed in Attachment A of the Public Notice, was 
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. We seek 
comment on this proposal.
    22. If commenters believe that these minimum opening bids will 
result in unsold construction permits, or are not reasonable amounts, 
or should instead operate as reserve prices, they should explain why 
this is so, and comment on the desirability of an alternative approach. 
Commenters are advised to support their claim with valuation analyses 
and suggested reserve prices or minimum opening bid levels or formulas. 
Alternatively, comment is sought on whether, consistent with the 
Balanced Budget Act, the public interest would be served by having no 
minimum opening bids or reserve prices.

C. Minimum Accepted Bids and Bid Increments

    23. Once there is a standing high bid on a construction permit, a 
bid increment will be applied to that permit to establish a minimum 
acceptable bid for the following round. For Auction No. 37, we propose 
to set a minimum 10 percent increment. This means that a new bid placed 
by a bidder must be at least 10 percent greater than the previous bid 
received on the construction permit. The Bureau retains the discretion 
to change the methodology for determining the minimum bid increment if 
they determine the circumstances so dictate. Advanced notice of the 
Bureau's decision to do so will be announced via the Automated Auction 
System.
    24. Bidders will enter their bid as multiples of the bid increment 
(i.e., with a 10 percent bid increment, a bid of 1 increment will place 
a bid 10 percent above the previous high bid, a bid of 2 increments 
will place a bid 20 percent above the previous high bid). We seek 
comment on this proposal.

D. Information Regarding Bid Withdrawal and Bid Removal

    25. For Auction No. 37, we propose the following bid removal and 
bid withdrawal procedures. Before the close of a bidding period, a 
bidder has the option of removing any bid placed in that round. By 
using the remove bid function in the software, a bidder may effectively 
``unsubmit'' any bid placed within that round. A bidder removing a bid 
placed in the same round is not subject to a withdrawal payment.
    26. Once a round closes, a bidder may no longer remove a bid. 
However, in the next round, a bidder may withdraw

[[Page 59844]]

standing high bids from previous rounds using the withdraw bid 
function. A high bidder that withdraws its standing high bid from a 
previous round is subject to the bid withdrawal payment provisions. We 
seek comment on these bid removal and bid withdrawal procedures.
    27. In the Part 1 Third Report and Order, 63 FR 770 (January 7, 
1998), the Commission explained that allowing bid withdrawals 
facilitates efficient aggregation of licenses and the pursuit of 
efficient backup strategies as information becomes available during the 
course of an auction. The Commission noted, however, that in some 
instances bidders may seek to withdraw bids for improper reasons, 
including to delay the close of the auction for strategic purposes. The 
Bureau, therefore, has discretion, in managing the auction, to limit 
the number of withdrawals to prevent strategic delay of the close of 
the auction or other abuses. The Commission stated that the Bureau 
should assertively exercise its discretion, consider limiting the 
number of rounds in which bidders may withdraw bids, and prevent 
bidders from bidding on a particular market it finds that a bidder is 
abusing the Commission's bid withdrawal procedures.
    28. Applying this reasoning, we propose to limit each bidder in 
Auction No. 37 to withdraw standing high 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 would likely encourage insincere bidding 
or the use of withdrawals for anti-competitive strategic purposes. The 
two rounds in which withdrawals are utilized will be at the bidder's 
discretion; withdrawals otherwise must be in accordance with the 
Commission's rules. There is no limit on the number of standing high 
bids that may be withdrawn in either of the rounds in which withdrawals 
are utilized. Withdrawals will remain subject to the bid withdrawal 
payment provisions specified in the Commission's rules. We seek comment 
on these proposals.

E. Stopping Rule

    29. For Auction No. 37, the Bureau proposes to employ a 
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 
simultaneous stopping rule means that all construction permits remain 
open until the first round in which no new acceptable bids, proactive 
waivers or withdrawals are received. After the first such round, 
bidding closes simultaneously on all construction permits. Thus, unless 
circumstances dictate otherwise, bidding would remain open on all 
construction permits until bidding stops on every permit.
    30. The Bureau seeks comment on a modified version of the 
simultaneous stopping rule. The modified stopping rule would close the 
auction for all construction permits after the first round in which no 
bidder submits a proactive waiver, a withdrawal, or a new bid on any 
construction permit on which it is not the standing high bidder. Thus, 
absent any other bidding activity, a bidder placing a new bid on a 
construction permit for which it is the standing high bidder would not 
keep the auction open under this modified stopping rule. The Bureau 
further seeks comment on whether this modified stopping rule should be 
utilized.
    31. We propose that the Bureau retains the discretion to keep an 
auction open even if no new acceptable bids or proactive waivers are 
submitted and no previous high bids are withdrawn. In this event, the 
effect will be the same as if a bidder had submitted a proactive 
waiver. The activity rule, therefore, will apply as usual and a bidder 
with insufficient activity will either lose bidding eligibility or use 
a remaining activity rule waiver.
    32. Finally, we propose that the Bureau reserve the right to 
declare that the auction will end after a specified number of 
additional rounds (``special stopping rule''). If the Bureau invokes 
this special stopping rule, they will accept bids in the final round(s) 
only for construction permits on which the high bid increased in at 
least one of the preceding specified number of rounds. 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 construction permits where there is still a high 
level of bidding activity. We seek comment on these proposals.

Federal Communications Commission.
Margaret Wiener,
Deputy Chief, Auctions and Industry Analysis Division.
[FR Doc. 00-25741 Filed 10-5-00; 8:45 am]
BILLING CODE 6712-01-P