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H Block Auction Announced; Comment Sought
Attachment A: Auction 96 - H BlockPai Statement	Download Options
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DA 13-1540
AUCTION OF H BLOCK LICENSES IN THE 1915-1920 MHz and 1995-2000 MHz BANDS; COMMENT SOUGHT ON COMPETITIVE BIDDING PROCEDURES
FOR AUCTION 96
AU Docket No. 13-178
Comments Due: August 5, 2013
Reply Comments Due: August 16, 2013
I. INTRODUCTION.................................................................................................................................. 1II. LICENSES TO BE OFFERED IN AUCTION 96 ................................................................................. 3
A. Description of Licenses.................................................................................................................... 3B. Cost-Sharing Obligations................................................................................................................. 5
III. DUE DILIGENCE ............................................................................................................................... 11IV. BUREAU SEEKS COMMENT ON AUCTION PROCEDURES ...................................................... 15
A. Auction Design .............................................................................................................................. 16
1. Simultaneous Multiple-Round Auction -- With or Without Package Bidding ...................... 162. Anonymous Bidding................................................................................................................ 24
B. Auction Structure ........................................................................................................................... 30
1. Bidding Rounds....................................................................................................................... 302. Stopping Rule .......................................................................................................................... 333. Information Relating to Auction Delay, Suspension, or Cancellation .................................... 36
C. Auction Procedures........................................................................................................................ 37
1. Upfront Payments and Bidding Eligibility .............................................................................. 372. Activity Rule ........................................................................................................................... 403. Activity Rule Waivers and Reducing Eligibility..................................................................... 444. Reserve Price and Minimum Opening Bids ............................................................................ 49
a. Reserve Price .................................................................................................................... 52b. Minimum Opening Bids ................................................................................................... 54
5. Bid Amounts ........................................................................................................................... 60
a. Minimum Acceptable Bids ............................................................................................... 61b. Additional Bid Amounts ................................................................................................... 65c. Bid Amount Changes........................................................................................................ 67
6. Provisionally Winning Bids .................................................................................................... 697. Bid Removal............................................................................................................................ 728. Bid Withdrawal ....................................................................................................................... 73
D. Post-Auction Payments.................................................................................................................. 76
1. Apportioning Package Bids..................................................................................................... 762. Interim Withdrawal Payment Percentage................................................................................ 783. Additional Default Payment Percentage ................................................................................. 81
V. DEADLINES AND FILING PROCEDURES ..................................................................................... 84VI. CONTACTS......................................................................................................................................... 91ATTACHMENT A: Licenses to Be AuctionedATTACHMENT B: Determining Provisionally Winning Bids and Current Price EstimatesATTACHMENT C: Minimum Acceptable Bid Formula
By this Public Notice, the Wireless Telecommunications Bureau ("Bureau") announces
its intention to hold an auction of licenses in the 1915-1920 MHz ("Lower H Block") and 1995-2000 MHz ("Upper H Block") bands (collectively, the "H Block"),1 and seeks comment on the procedures to be used for this auction. The staff will be prepared to conduct this Auction, which will be designated Auction 96, by or as early as January 14, 2014.
The Commission is offering the licenses in Auction 96 pursuant to the Middle Class Tax Relief and Job Creation Act of 2012 ("Spectrum Act").2 The Spectrum Act requires, among other things, that the Commission allocate for commercial use and license spectrum in the H Block using a system of competitive bidding no later than February 23, 2015.3
LICENSES TO BE OFFERED IN AUCTION 96
Description of Licenses
In the H Block Report and Order, the Commission concluded that licenses for H Block
spectrum should be awarded on an Economic Areas (EA) basis in all areas, including the Gulf of Mexico.4 Auction 96 will offer one license for each of the 176 EAs. The Lower H Block and Upper H Block frequencies will be licensed as paired 5 megahertz blocks, with each license having a total bandwidth of 10 megahertz; 1915-1920 MHz for mobile and low power fixed (i.e., uplink) operations and 1 Service Rules for the Advanced Wireless Services H Block--Implementing Section 6401 of the Middle Class Tax Relief and Job Creation Act of 2012 Related to the 1915-1920 MHz and 1995-2000 MHz Bands, WT Docket No. 12-357, Report and Order, FCC 13-88 (rel. Jun. 27, 2013) (H Block Report and Order). All references to the Part 27 rules adopted by the Commission in the H Block Report and Order and cited herein will become effective on the dates announced in the Federal Register Notice regarding the H Block Report and Order.2 See Middle Class Tax Relief and Job Creation Act of 2012, Pub. L. No. 112-96, 126 Stat. 156 (2012) (Spectrum Act).3 Spectrum Act, 6401(b), codified at 47 U.S.C. 1451(b). The Commission concluded in the H Block Report and Order that both blocks of the H Block spectrum are already allocated for non-Federal Fixed and Mobile use on a primary basis, with their present spectrum pairing, and that no further action to allocate the frequencies in the H Block bands for commercial use is necessary to meet the Spectrum Act's allocation requirements. See H Block Report and Order at 14. See also Amendment of Part 2 of the Commission's Rules to Allocate Spectrum Below 3 GHz for Mobile and Fixed Services to Support the Introduction of New Advanced Wireless Services, including Third Generation Wireless Systems, ET Docket No. 00-258, RM-9498, RM-10024, Third Report and Order, Third Notice of Proposed Rulemaking and Second Memorandum Opinion and Order, 18 FCC Rcd 2223, 2238 28(2003); Amendment of Part 2 of the Commission's Rules to Allocate Spectrum Below 3 GHz for Mobile and Fixed Services to Support the Introduction of New Advanced Wireless Services, Including Third Generation Wireless Systems, ET Docket No. 00-258, IB Docket No. 99-81, Sixth Report and Order, Third Memorandum Opinion and Order and Fifth Memorandum Opinion and Order, 19 FCC Rcd 20720, 20722 1 (2004). 4 See H Block Report and Order at 37, 45.
1995-2000 MHz for base station and fixed (i.e., downlink) operations.5 Figure 1 shows the H Block band plan, and Table 1 contains summary information regarding H Block frequencies, total bandwidth, and geographic area type. Figure 1: H Block Band Plan
Table 1: H Block License Summary
Area Type Licenses
1915-1920/1995-2000
A complete list of the licenses offered in Auction 96 is available in Attachment A to this Public Notice. B.
Cost-Sharing Obligations
As noted in the H Block Report and Order, the spectrum in the Lower H Block and the Upper H Block is subject to cost-sharing requirements related to the past clearing and relocation of incumbent users from these bands.6 Consistent with its long-standing policy that cost-sharing obligations for both the Lower H Block and the Upper H Block be apportioned on a pro rata basis against the relocation costs attributable to the particular band,7 the Commission adopted cost-sharing rules in the H Block Report and Order that require H Block licensees to pay a pro rata share of expenses previously incurred by UTAM, Inc. ("UTAM") and by Sprint Nextel, Inc. ("Sprint") in clearing incumbents from theLower H Block and the Upper H Block, respectively.8 6.
Under the cost sharing formula adopted in the H Block Report and Order, the reimbursement amount owed ("RN") to UTAM with respect to the 1915-1920 MHz band will be determined by dividing the gross winning bid ("GWB") for an H Block license by the sum of the gross winning bids for all H Block licenses won in Auction 96 and then multiplying that result by $12,629,857--the total amount owed to UTAM for clearing the Lower H Block.9 The cost-sharing formula for the Lower H Block is as follows: 5 See id. at 28-29.6 See H Block Report and Order at Section II.B (Cost Sharing Obligations). For background information related to past clearing of Lower H Block incumbents, see id. at 157-58. For background information related to past clearing of the Upper H Block incumbents, see id. at 159.7 See, e.g., H Block Report and Order at 157 n.483, citing Emerging Technologies proceeding.8 See id. at 167-73. The Commission made clear in the H Block Report and Order that winning bidders in the first auction offering H Block licenses may not seek reimbursement from other H Block licensees, including for licenses awarded in subsequent auctions. Id. at 168. 9 See 47 C.F.R. 27.102(a). See also H Block Report and Order at 167-73. The Commission noted that $12,629,857 is the amount UTAM has identified as the amount collectively owed to UTAM by future Lower H Block licensees for UTAM's clearing of the 1910-1930 MHz band; that is, this amount represents one-fourth of (continued....)
EA GWB
RN = (
) x$12,629,857
Sum of GWBs
The H Block Report and Order adopted the same cost-sharing formula for the Upper H Block (1995-2000 MHz band) related to Sprint's clearing costs of $94,875,516:10
) x$94,875,516
Winning bidders are required to pay UTAM and Sprint, as applicable, the reimbursement amounts owed within thirty days after the grant of the winning bidders' long-form license applications.11
The Commission also adopted a contingency plan in the H Block Report and Order that will be triggered in the unlikely event that licenses won in this auction cover less than forty percent of the U.S. population.12 If such an event occurs, winning bidders--in this auction and in subsequent H Blockauctions--will be required to timely pay UTAM and Sprint, respectively, their pro rata share calculated by dividing the population of the individual EA by the total U.S. population and then multiplying this quotient by $12,629,857 for UTAM and by $94,875,516 for Sprint.13 10.
The cost-sharing rules and contingency plan adopted in the H Block Report and Order are designed to ensure that UTAM and Sprint receive full reimbursement after this auction by effectively apportioning the reimbursement costs associated with any unsold H Block licenses among the winning bidders, except in cases where the above-described contingency plan is triggered or a successful bidder's long-form application is not filed or granted. If any of the licenses won in this auction are not awarded, the license at issue will be deemed to have triggered a reimbursement obligation that will be paid by the licensee acquiring the license in a subsequent auction.
DUE DILIGENCE 11.
Each potential bidder is solely responsible for investigating and evaluating all technical and marketplace factors that may have a bearing on the value of the licenses that it is seeking in this auction. Each bidder is responsible for assuring that, if it wins a license, it will be able to build and operate facilities in accordance with the Commission's rules. The Commission makes no representations or warranties about the use of this spectrum for particular services. Each applicant should be aware that a Commission auction represents an opportunity to become a Commission licensee, subject to certain conditions and regulations. A Commission auction does not constitute an endorsement by the Commission of any particular service, technology, or product, nor does a Commission license constitute a guarantee of business success.
(Continued from previous page) UTAM's total reimbursable clearing costs for the entire 1910-1930 MHz band. See H Block Report and Order at 158 n. 491. 10 See 47 C.F.R. 27.1031(a). See also H Block Report and Order at 158-59. The Commission noted that Sprint has stated that the pro rata share of the overall Broadcast Auxiliary Service (BAS) relocation costs attributable to each five megahertz of relocated BAS spectrum amounts to $94,875,516. See H Block Report and Order at 159 n.496.11 See 47 C.F.R. 27.2021(e), 27.1031(e), 27.1041(b). See also H Block Report and Order at 170-73.12 See H Block Report and Order at 163, 168. In such a scenario the population would be measured using 2010 Census data, which is the most recent decennial census data. Id. at 168 n. 528.13 See 47 C.F.R. 27.1021(b)-(c), 27.1031(b)-(c). See also H Block Report and Order at 163, 168.
An applicant should perform its due diligence research and analysis before proceeding, as it would with any new business venture. Each potential bidder should perform technical analyses and/or refresh any previous analyses to assure itself that, should it become a winning bidder for any Auction 96license, it will be able to build and operate facilities that will fully comply with all applicable technical and regulatory requirements. We strongly encourage each applicant to inspect any prospective transmitter sites located in, or near, the geographic area for which it plans to bid; confirm the availability of such sites; and familiarize itself with the Commission's rules regarding the National Environmental Policy Act.14
We strongly encourage each applicant to conduct its own research prior to Auction 96 in order to determine the existence of pending administrative, rulemaking, or judicial proceedings that might affect its decisions regarding participation in the auction. 14.
We strongly encourage participants in Auction 96 to continue such research throughout the auction. The due diligence considerations mentioned in this Public Notice do not constitute an exhaustive list of steps that should be undertaken prior to participating in this auction. As always, the burden is on the potential bidder to determine how much research to undertake, depending upon the specific facts and circumstances related to its interests. IV.
BUREAU SEEKS COMMENT ON AUCTION PROCEDURES
Consistent with the provisions of section 309(j)(3)(E)(i) 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 a given 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.15 We therefore seek comment on the following issues relating to the conduct of Auction 96.
Simultaneous Multiple-Round Auction -- With or Without Package Bidding
The Bureau proposes to conduct Auction 96 using a simultaneous multiple-round (SMR)
auction format.16 As described further below, an SMR auction offers every license for bid at the same time and consists of successive bidding rounds in which eligible bidders may place bids. Typically, bidding remains open on all licenses until bidding stops on every license.
The Bureau additionally proposes to incorporate provisions for a simple form of package bidding into the simultaneous multiple-round auction. In particular, we propose to use a form of package bidding called hierarchical package bidding (HPB) in which, in addition to being able to bid on individual 14 47 C.F.R. Chapter 1, Part 1, Subpart I.15 47 U.S.C. 309(j)(3)(E)(i). See Amendment of Part 1 of the Commission's Rules--Competitive Bidding Procedures, WT Docket No. 97-82, Third Report and Order and Second Further Notice of Proposed Rule Making, FCC 97-413, 13 FCC Rcd 374, 447-49 124-25 (1997) (Part 1 Third Report and Order) (directing WTB to seek comment on specific mechanisms related to day-to-day auction conduct including, for example, the structure of bidding rounds and stages, establishment of minimum opening bids or reserve prices, minimum acceptable bids, initial maximum eligibility for each bidder, activity requirements for each stage of the auction, activity rule waivers, criteria for determining reductions in eligibility, information regarding bid withdrawal and bid removal, stopping rules, and information relating to auction delay, suspension or cancellation). See also 47 C.F.R. 0.131; Amendment of Part 1 of the Commission's Rules--Competitive Bidding Proceeding, WT Docket No. 97-82, Order, Memorandum Opinion and Order and Notice of Proposed Rule Making, FCC 97-60, 12 FCC Rcd 5686, 5697-98 16 (1997) (Part 1 Order). 16 See Implementation of Section 309(j) of the Communications Act--Competitive Bidding, PP Docket No. 93-253, Second Report and Order, FCC 94-61, 9 FCC Rcd 2348, 2360-75 68-159 (1994) (Second Report and Order) for a general discussion of competitive bidding design. 5
licenses, bidders would also be able to bid on certain tiered, non-overlapping packages of licenses. The Commission concluded in the H Block Report and Order that the H Block spectrum should be licensed on an EA basis. Consistent with that conclusion, we propose that the basic bidding tier under HPB be individual EA licenses. The H Block Report and Order also noted that the decision to license at the EA level would facilitate aggregations at the larger Major Economic Area (MEA) and Regional Economic Area Grouping (REAG) levels.17 We therefore seek comment on the use of predefined packages of EAs in MEAs and potentially larger packages such as REAGs, as well as a package comprising all markets in the contiguous 48 states. Below we describe and seek more detailed comment on our proposals and onvarious alternatives.
By permitting only non-overlapping packages at each tier (for example, a given EA could
be included in only one MEA, which in turn could be included in only one REAG), HPB considerably simplifies bidder strategy and computational complexity compared to some other forms of package bidding. The pricing rules used with HPB are transparent and make it clear to bidders how package bids are evaluated relative to individual bids, hence making it easier than in more complex package biddingformats for bidders interested in individual licenses to compete with bidders interested in packages. As a result of these and other advantages, HPB and similar packaging formats have performed well in tests of overall auction efficiency.18 Auction 96 is the first H Block auction and a single complete set of nationwide EA licenses is available. Consequently, offering predefined packages might allow for significant economies of scale that may well correspond to a variety of business plans. Bidders that wish smaller or more tailored aggregations than the allowable predefined packages would be able to bid on individual EAs instead of or in addition to the predefined packages. 19.
The Bureau used a variant of HPB in Auction 73 under considerably different circumstances. Most notably, in Auction 73 we implemented SMR bidding across the five available blocks of licenses and determined that package bidding would be permitted in only one of the blocks. Further, if the aggregate reserve price that was applicable to the package bidding block in Auction 73 was not met, the performance and public interest requirements pertaining to the licenses in the block would change significantly. As a result, special procedures were needed to allow bidders to shift their bidding across the multiple available blocks, the rest of which were subject to a different bidding format.19 Those complicating factors--and their implications for bidder strategies--are not present in Auction 96, which includes only a single block of licenses. Hence, the bidding rules implementing HPB would be considerably simpler than those for Auction 73. 20.
Briefly, HPB as proposed for Auction 96 could be implemented as follows. We would determine the predefined packages according to a non-overlapping hierarchical structure, with an initial tier consisting of individual EA licenses. We could adopt a two-tier structure composed simply of the initial tier of EAs and MEA packages. Any subsequent tiers could consist of non-overlapping packages of the licenses in the initial tier and all subsidiary tiers. For example, if we were to adopt MEA, REAG, and nationwide packages, these packages would all nest accordingly (e.g., EAs nest to MEAs, MEAs nest 17 See H Block Report and Order at 37- 39, 42, 45.18 See, e.g., Goeree, J. K. and C. A. Holt, "Hierarchical Package Bidding: A Paper & Pencil Combinatorial Auction," Games and Economic Behavior 70(1), September 2010, 146-169; Rothkopf, M. H., A. Pekec, and R. M. Harstad, "Computationally Manageable Combinatorial Auctions," Management Sciences, 44(8), August 1998, 1131-1147; T. Scheffel, G. Ziegler, and M. Bichler, "On the impact of package selection in combinatorial auctions: an experimental study in the context of spectrum auction design," Experimental Economics, 15(4), December 2012, 667-692. Bichler, M., Goeree, J.K., Mayer, S., and Shabalin, P., "Spectrum Auction Design: Simple Auctions For Complex Sales," working paper (Jun