NEWSReport No. DC-2683 ACTION IN DOCKET CASE November 17, 1994 BROADBAND PCS AUCTION RULES MODIFIED IN THREE RESPECTS (PP DOCKET 93-253) The Commission has modified, on its own motion, some of the Broadband Personal Communications Service (PCS) auction rules adopted in the Fourth Memorandum Opinion and Order. The Commission said that, in light of its experience in the national and regional narrowband PCS license auctions, it would modify its rules pertaining to three aspects of auction design for the broadband PCS auctions: procedures for closing an auction; timing of the auctions in the entrepreneurs' blocks; and the anti-collusion rules. STOPPING RULES In the Fifth Report and Order in this proceeding, the Commission stated that a simultaneous multiple round auction with a simultaneous stopping rule will close when a single round has passed in which there is no new acceptable bid on any license and no activity rule waiver is submitted. In the Fourth Memorandum Opinion and Order it allowed for two types of activity rule waivers, "proactive" waivers, which will keep an auction open in a round in which no new valid bids are submitted, and "automatic" waivers, which will not keep an auction open. It also reaffirmed its decision to use a simultaneous stopping rule, which holds bidding open on all licenses until no new acceptable bid is offered on any license. In today's action, the Commission, based on its experience with the nationwide and regional narrowband PCS auctions, retained the discretion not to close a simultaneous multiple round auction even if no new acceptable bids and no proactive waivers are submitted in a round. This rule modification will facilitate the rapid completion of future auctions because it will permit the Commission to use larger bid increments to speed the pace of the auction without risking a premature auction close. (over) - 2 - TIMING OF AUCTIONS IN THE ENTREPRENEURS' BLOCKS In the Fifth Report and Order, the Commission chose to divide broadband PCS licenses into three groups and to hold a simultaneous multiple round auction for the licenses in each group. The license group to be auctioned first consisted of blocks A and B, each with 30 MHz of spectrum and MTA geographic scope. The next group consisted of blocks C and F (the entrepreneurs' blocks with 30 MHz and 10 MHz of spectrum, respectively, and BTA geographic scope), which have been reserved for bidding by smaller entrepreneurial firms. The group to be auctioned last consisted of blocks D and E, with 10 MHz of spectrum each and BTA geographic scope. In the Fourth Memorandum Opinion and Order it reaffirmed its decision concerning the sequence of auctions. However, the Commission now has concluded that it may be beneficial to hold two separate auctions for the C and F block licenses. In light of its experience with the narrowband auctions, the Commission said it was concerned that auctioning the 986 licenses in the two entrepreneurs' blocks simultaneously could create excessive administrative complexity for the Commission and for bidders, particularly when neither will have had experience with more than 99 licenses in a single auction. In addition, the Commission said it has found that as it has gained experience with license auctions it has identified certain modifications that might improve the efficiency and administration of the auction process. It said it might benefit from such experience in administering the highly complex designated entity provisions that apply to competitive bidding for licenses on the C and F blocks. Further, it appears now that few, if any, potential applicants have any interest in aggregating block C and block F licenses, so that the interdependence between license values in the two blocks may be less than the Commission initially believed. Consequently, the Commission reserved the right to hold two separate simultaneous multiple round auctions for the entrepreneurs' block licenses, one auction for the 493 licenses in block C and one for the 493 licenses in block F. It said it will announce by Public Notice in advance of the application deadline whether one or two entrepreneurs' block auctions will be held. ANTI-COLLUSION RULES The Commission said it has become aware of some confusion regarding the definition of the terms "applicant" and "bidder" as they are used in the anti-collusion rules. Though the Commission intended the terms "bidder" and "applicant" to be used interchangeably, it realized it would be less confusing simply to use the term "applicant," and it has clarified the rules accordingly. The Commission also said that for purposes of the anti-collusion rules the term "applicant" includes all holders of attributable interests in an applicant. - 3 - The Commission amended the anti-collusion rules in one respect to facilitate applicants' access to investment capital and to clarify the obligations of applicants. The Commission said that, as long as collusive conduct can be reliably prevented, the public interest favors allowing holders of non-controlling attributable interests in one applicant for a particular license to invest in or enter into consortium arrangements with a second applicant for licenses in the same geographic area. Accordingly, the anti-collusion rules will permit holders of non-controlling attributable interests in applicants to obtain an ownership interest in or enter into a consortium arrangement with another applicant for a license in the same geographic area, provided that the attributable interest holder certifies to the Commission that it has observed and will observe certain restrictions on communication. That entity must certify that it has not and will not communicate with anyone concerning the bids or bidding strategies of more than one applicant for licenses int he same geographic area in which it holds an interest. The Commission pointed out that applicants must note that conduct that is permissible under the Commission's Rules may be prohibited by the antitrust laws. Thus, the Commission cautioned applicants to proceed carefully in situations involving consortia and joint bidding arrangements. The Commission also made clear that communications concerning bids and bidding strategies include communications regarding capital calls or requests for additional funds in support of bids or bidding strategies. If applicants enter into new or modified consortia or bidding arrangements, or if changes are made in an applicant's ownership, the applicants must modify their short-form applications to reflect these changes. Action by the Commission November 16, 1994, by Memorandum Opinion and Order (FCC 94-295). Chairman Hundt, Commissioner Quello, Barrett, Ness and Chong. - FCC - News Media contact: Audrey Spivack at (202) 418-0500. Office of Plans and Policy contact: Florence Setzer at (202) 418-2030.