Skip Navigation

Federal Communications Commission

English Display Options

Commission Document

H Block Auction Announced; Comment Sought

Attachments & Related Documents

Download Options

Released: July 15, 2013
PUBLIC NOTICE

Federal Communications Commission

News Media Information 202 / 418-0500

445 12th St., S.W.

Internet: http://www.fcc.gov

Washington, D.C. 20554

TTY: 1-888-835-5322

DA 13-1540
July 15, 2013

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

TABLE OF CONTENTS

Heading
Paragraph #
I. INTRODUCTION.................................................................................................................................. 1
II. LICENSES TO BE OFFERED IN AUCTION 96 ................................................................................. 3
A. Description of Licenses.................................................................................................................... 3
B. Cost-Sharing Obligations................................................................................................................. 5
III. DUE DILIGENCE ............................................................................................................................... 11
IV. BUREAU SEEKS COMMENT ON AUCTION PROCEDURES ...................................................... 15
A. Auction Design .............................................................................................................................. 16
1. Simultaneous Multiple-Round Auction -- With or Without Package Bidding ...................... 16
2. Anonymous Bidding................................................................................................................ 24
B. Auction Structure ........................................................................................................................... 30
1. Bidding Rounds....................................................................................................................... 30
2. Stopping Rule .......................................................................................................................... 33
3. Information Relating to Auction Delay, Suspension, or Cancellation .................................... 36
C. Auction Procedures........................................................................................................................ 37
1. Upfront Payments and Bidding Eligibility .............................................................................. 37
2. Activity Rule ........................................................................................................................... 40
3. Activity Rule Waivers and Reducing Eligibility..................................................................... 44
4. Reserve Price and Minimum Opening Bids ............................................................................ 49
a. Reserve Price .................................................................................................................... 52
b. Minimum Opening Bids ................................................................................................... 54
5. Bid Amounts ........................................................................................................................... 60
a. Minimum Acceptable Bids ............................................................................................... 61
b. Additional Bid Amounts ................................................................................................... 65
c. Bid Amount Changes........................................................................................................ 67
6. Provisionally Winning Bids .................................................................................................... 69
7. Bid Removal............................................................................................................................ 72
8. Bid Withdrawal ....................................................................................................................... 73
D. Post-Auction Payments.................................................................................................................. 76

Federal Communications Commission

DA 13-1540

1. Apportioning Package Bids..................................................................................................... 76
2. Interim Withdrawal Payment Percentage................................................................................ 78
3. Additional Default Payment Percentage ................................................................................. 81
V. DEADLINES AND FILING PROCEDURES ..................................................................................... 84
VI. CONTACTS......................................................................................................................................... 91
ATTACHMENT A: Licenses to Be Auctioned
ATTACHMENT B: Determining Provisionally Winning Bids and Current Price Estimates
ATTACHMENT C: Minimum Acceptable Bid Formula

I.

INTRODUCTION

1.
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.
2.
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

II.

LICENSES TO BE OFFERED IN AUCTION 96

A.

Description of Licenses

3.
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.
2

Federal Communications Commission

DA 13-1540

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

Block

Frequencies (MHz)

Bandwidth

Pairing

Area Type Licenses

H
1915-1920/1995-2000
10 MHz
2 x 5 MHz
EA
176
4.
A complete list of the licenses offered in Auction 96 is available in Attachment A to this
Public Notice.

B.

Cost-Sharing Obligations

5.
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 the
Lower 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....)
3

Federal Communications Commission

DA 13-1540

EA GWB
RN = (
) x$12,629,857
Sum of GWBs
7.
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
EA GWB
RN = (
) x$94,875,516
Sum of GWBs
8.
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
9.
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 Block
auctions--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.

III.

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.
4

Federal Communications Commission

DA 13-1540

12.
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 96
license, 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
13.
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

15.
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.

A.

Auction Design

1.

Simultaneous Multiple-Round Auction -- With or Without Package Bidding

16.
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.
17.
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

Federal Communications Commission

DA 13-1540

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 on
various alternatives.
18.
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 bidding
formats 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 (June 2013) (viewable at http://www.esei.ch/people/jacob-goeree/working-papers).
19 See Auction of 700 MHz Band Licenses Scheduled for January 24, 2008; Notice and Filing Requirements,
Minimum Opening Bids, Upfront Payments and Other Procedures for Auction 73 and 76, Public Notice, 22 FCC
Rcd 18141 248-68 (2008).
6

Federal Communications Commission

DA 13-1540

to REAGs, and REAGs nest to the national package). The winning set of bids could consist of bids from
various tiers, as long as each license is included in only one winning bid. That is, in the four-tier construct
described above, the winning set could potentially include individual licenses in one part of the country,
MEA packages in other areas, and potentially REAG packages as well, provided the value of all of these
individual and package bids exceeds a bid on a nationwide package. A bidder may place bids on any
combination of individual licenses or packages.
21.
After each round, the Commission would determine the combination of package and/or
single license bids that yields the highest gross amount, and those bids would become provisionally
winning. When determining provisionally winning bids, the FCC Auction System would consider each
bidder's highest bid on each license or package placed up to that point in the auction, regardless of
whether the bids were provisionally winning after the rounds in which they were placed. Considering
these bids from previous rounds makes it possible for new bids on individual licenses to combine with
other bids in order to compete with bids on packages.20 The provisionally winning bids would be
determined by comparing aggregate gross bid amounts, at each tier, for various combinations of package
and individual license bids.21
22.
We seek comment generally on our proposed simultaneous multiple-round auction format
with hierarchical package bidding. Would HPB, as discussed, balance aggregation needs with
tractability, transparency, and simplicity? We seek comment also on what packages should be available
for various tiers. Should we allow a simple structure of EAs and MEAs, or some other set of tiers of
MEAs, REAGs, and/or a nationwide package? Alternatively, would our standard SMR auction format
without package bidding sufficiently accommodate economies of scale or other complementarities? If we
do not implement package bidding for Auction 96, we propose to conduct the auction using standard
SMR procedures.
23.
Alternative Auction Format. In the alternative, we propose to conduct Auction 96 as a
single round sealed bid auction. While not as common for spectrum auctions as the SMR format, we have
previously used the single round sealed bid format. We propose this alternative because Auction 96
offers licenses in only a single spectrum block and a single round auction may simplify the process for
bidders and reduce the costs of auction participation. In a single round format we could also offer one or
more tiers of non-overlapping packages as discussed above for HPB. We seek comment on any design
features of the sealed bid format (e.g., first-price or second-price). We seek comment on this alternative
proposal and on any other auction formats we should consider for Auction 96.

20 This set of considered bids for licenses and packages would likely include many bids with very little likelihood of
ever becoming provisionally winning. Bidders will be able to assess the chances that a considered bid from a
previous round will become provisionally winning in a later round by comparing it to the considered bids and to
prevailing prices.
21 Packages do not overlap within a tier. That is, a license cannot be included in more than one package in a given
tier. Consequently, comparing aggregate gross bid amounts at each tier does not require combinatorial optimization.
See Attachment B for a more detailed discussion. See also Rothkopf, M. H., A. Pekec, and R. M. Harstad,
"Computationally Manageable Combinatorial Auctions," Management Sciences, 44(8), August 1998, 1131-1147. A
more complex combinatorial optimization process to determine provisionally winning bids is required in some other
package bidding designs, including SMR-PB, the design on which the FCC sought comment for Auction 66. See
Auction of Advanced Wireless Services Licenses Scheduled for June 29, 2006; Comment Sought on Reserve Prices
or Minimum Opening Bids and Other Procedures, Public Notice, DA 06-238, 21 FCC Rcd 794, 797-98 (2006)
(Auction 66 Comment Public Notice).
7

Federal Communications Commission

DA 13-1540

2.

Anonymous Bidding

24.
In several prior Commission auctions, the Bureau has adopted procedures to limit the
disclosure of certain bidder-specific information until after the auction.22 Consistent with that practice,
the Bureau proposes to adopt certain procedures for limited information disclosure or "anonymous
bidding" for Auction 96. Specifically, the Bureau proposes to withhold, until after the close of bidding,
public release of (1) bidders' license selections on their short-form applications (FCC Form 175), (2) the
amounts of bidders' upfront payments and bidding eligibility, and (3) information that may reveal the
identities of bidders placing bids and taking other bidding-related actions.
25.
Under these proposed limited information procedures, the amount of every bid placed
and whether a bid was withdrawn (if withdrawals are permitted) would be disclosed after the close of
every round, but the identities of bidders placing specific bids or withdrawals (if permitted) and the net
bid amounts would not be disclosed until after the close of the auction.
26.
Bidders would have access to additional information about their own bids. For example,
bidders would be able to view their own level of eligibility, before and during the auction, through the
FCC Auction System.23
27.
Moreover, for the purpose of complying with section 1.2105(c), the Commission's rule
prohibiting certain communications between applicants (formerly referred to as the "anti-collusion rule"),
applicants would be made aware of other applicants with which they will not be permitted to cooperate,
collaborate, or communicate--including discussing bids, bidding strategies, or post-auction market
structure.24 Specifically, the Bureau would notify separately each applicant with a short-form application
on file for participation in Auction 96 whether applicants with short-form applications to participate in a
pending auction, including but not limited to Auction 96, have applied for licenses in any of the same or
overlapping geographic areas as that applicant.
28.
After the close of bidding, bidders' license selections, upfront payment amounts, bidding
eligibility, bids, and other bidding-related actions would be made publicly available.
29.
The Bureau seeks comment on the details of its proposal for implementing anonymous
bidding in Auction 96. The Bureau also seeks comment on alternatives to the use of anonymous bidding
procedures for Auction 96. When the Commission originally proposed limited information disclosure
procedures, it did so in response to analysis suggesting that under certain circumstances the
competitiveness and economic efficiency of a simultaneous multiple-round auction may be enhanced if
such information is withheld until after the close of the auction.25 The Bureau encourages parties to
provide information about the benefits and costs of complying with limited information procedures as
compared with the benefits and costs of alternative procedures that would provide for the disclosure of
more information on bidder identities and interests in the auction. If commenters believe that the Bureau
should not adopt procedures to limit the disclosure of certain bidder-specific information until after the
auction, they should explain their reasoning.

22 See, e.g., Auction of 700 MHz Band Licenses Scheduled for January 24, 2008; Notice and Filing Requirements,
Minimum Opening Bids, Reserve Prices, Upfront Payments, and Other Procedures for Auctions 73 and 76, Public
Notice,
DA 07-4171, 22 FCC Rcd 18141, 18181-85 145-56 (WTB 2007); Auction of Advanced Wireless
Services Licenses Scheduled for June 29, 2006; Notice and Filing Requirements, Minimum Opening Bids, Upfront
Payments and Other Procedures for Auction No. 66, Public Notice, FCC 06-47, 21 FCC Rcd 4562, 4600-05 140-
57 (2006) (Auction 66 Procedures Public Notice); Auction of 700 MHz Band Licenses Scheduled for July 19, 2011;
Notice and Filing Requirements, Minimum Opening Bids, Upfront Payments, and Other Procedures for Auction 92,
Public Notice, DA 11-420, 26 FCC Rcd 3342, 3372-73 126-29 (WTB 2011).
23 The FCC Auction System is also known as the "Integrated Spectrum Auction System" or "ISAS."
24 See 47 C.F.R. 1.2105(c).
25 Auction 66 Comment Public Notice, 21 FCC Rcd at 799.
8

Federal Communications Commission

DA 13-1540

B.

Auction Structure

1.

Bidding Rounds

30.
Under our proposal to use an SMR format, Auction 96 will consist of sequential bidding
rounds. The initial bidding schedule will be announced in a public notice to be released at least one week
before the start of the auction.
31.
The Commission will conduct Auction 96 over the Internet using the FCC Auction
System. Bidders will also have the option of placing bids by telephone through a dedicated, toll-free
Auction Bidder Line. The toll-free telephone number for the Auction Bidder Line will be provided to
qualified bidders prior to the start of the auction.
32.
The Bureau proposes to retain 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. Under this proposal, the Bureau may change the amount of time for
bidding rounds, the amount of time between rounds, or the number of rounds per day, depending upon
bidding activity and other factors. The Bureau seeks comment on this proposal. Commenters on this
issue should address the role of the bidding schedule in managing the pace of the auction, specifically
discussing the tradeoffs in managing auction pace by bidding schedule changes, by changing the activity
requirements or bid amount parameters, or by using other means.
2.

Stopping Rule

33.
The Bureau has discretion to establish stopping rules before or during multiple round
auctions in order to complete the auction within a reasonable time.26 For Auction 96, under our SMR
proposal, we propose to employ a simultaneous stopping rule approach. Using a simultaneous stopping
rule means all licenses remain available for bidding until bidding stops on every license. More
specifically, bidding will close on all licenses and packages after the first round in which no bidder
submits any new bids, applies a proactive waiver, or withdraws any provisionally winning bids (if
withdrawals are permitted).27 Thus, under our SMR proposal, unless we announce alternative stopping
procedures, the simultaneous stopping rule will be used in this auction, and bidding will remain open on
all licenses until bidding stops on every license, regardless of whether bids are placed on individual
licenses or packages of licenses. Consequently, it is not possible to determine in advance how long
Auction 96 will last.
34.
Further, we propose to retain the discretion to exercise any of the following options
during Auction 96:
a) Use a modified version of the simultaneous stopping rule. The modified stopping rule would
close the auction for all licenses after the first round in which no bidder applies a waiver,
withdraws a provisionally winning bid, or places any new bids on a license or package for
which it is not the provisionally winning bidder. Thus, absent any other bidding activity, a
bidder placing a new bid on a license or package for which it is the provisionally winning
bidder would not keep the auction open under this modified stopping rule.
b) Use a modified version of the simultaneous stopping rule that would close the auction for all
licenses after the first round in which no bidder applies a waiver, withdraws a provisionally
winning bid, or places any new bids on a license or package that is not FCC-held. Thus,

26 47 C.F.R. 1.2104(e).
27 Provisionally winning bids are bids that would become final winning bids if the auction were to close in that given
round. They are discussed in Section IV.C.6. (Provisionally Winning Bids). Proactive waivers are described in
Section IV.C.3. (Activity Rule Waivers and Reducing Eligibility), and bid withdrawals are described in Section
IV.C.8. (Bid Withdrawal) below.
9

Federal Communications Commission

DA 13-1540

absent any other bidding activity, a bidder placing a new bid on a license that does not
already have a provisionally winning bid (an "FCC-held" license) would not keep the auction
open under this modified stopping rule.
c) Use a modified version of the simultaneous stopping rule that combines (a) and (b) above.
d) Declare that the auction will end after a specified number of additional rounds ("special
stopping rule"). If the Bureau invokes this special stopping rule, it will accept bids in the
specified final round(s), after which the auction will close.
e) Keep the auction open even if no bidder places any new bids, applies a waiver, or withdraws
(if withdrawals are permitted) any provisionally winning bids. In this event, the effect will be
the same as if a bidder had applied a waiver. The activity rule will apply as usual, and a
bidder with insufficient activity will either lose bidding eligibility or use a waiver.
35.
We propose to exercise these options only in certain circumstances, for example, where
the auction is proceeding unusually slowly or quickly, there is minimal overall bidding activity, or it
appears likely that the auction will not close within a reasonable period of time or will close prematurely.
Before exercising these options, we are likely to attempt to change the pace of the auction by, for
example, changing the number of bidding rounds per day and/or the minimum acceptable bids. We
propose to retain the discretion to exercise any of these options with or without prior announcement
during the auction. We seek comment on these proposals.
3.

Information Relating to Auction Delay, Suspension, or Cancellation

36.
For Auction 96, we propose that the Bureau may delay, suspend, or cancel the auction in
the event of a natural disaster, technical obstacle, administrative or weather necessity, evidence of an
auction security breach or unlawful bidding activity, or for any other reason that affects the fair and
efficient conduct of competitive bidding.28 We will notify participants of any such delay, suspension or
cancellation by public notice and/or through the FCC Auction System's announcement function. If the
auction is delayed or suspended, we may, in our sole discretion, elect to resume the auction starting from
the beginning of the current round or 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 we will
exercise this authority solely at our discretion, and note that the exercise of our authority in this regard 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.

C.

Auction Procedures

1.

Upfront Payments and Bidding Eligibility

37.
The Bureau has delegated authority and discretion to determine an appropriate upfront
payment for each license being auctioned, taking into account such factors as the efficiency of the auction
process and the potential value of similar licenses.29 An upfront payment is a refundable deposit made by
each bidder to establish its eligibility to bid on licenses. Upfront payments that are related to the specific
licenses being auctioned 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.30 For Auction 96, we
propose to make the upfront payments equal to the proposed minimum opening bids, which are

28 47 C.F.R. 1.2104(i).
29 See Part 1 Order, 12 FCC Rcd at 5697-98 16. See also Part 1 Third Report and Order, 13 FCC Rcd at 425
86; Second Report and Order, 9 FCC Rcd 2377-79 169-75.
30 See Second Report and Order, 9 FCC Rcd at 2377-79 169-76.
10

Federal Communications Commission

DA 13-1540

established as described in Section IV.C.4., below. The upfront payments for each license are set forth in
Attachment A to this Public Notice. We seek comment on this proposal.
38.
The Bureau further proposes that the amount of the upfront payment submitted by a
bidder will determine its initial bidding eligibility in bidding units. We propose to assign each license a
specific number of bidding units, equal to one bidding unit per dollar of the upfront payment proposed for
the license. The specific bidding units for each license are set forth in Attachment A to this Public
Notice. The number of bidding units for a given license is fixed and does not change during the auction
as prices change. A bidder's upfront payment is not attributed to specific licenses or packages of licenses.
Rather, a bidder may place bids on any combination of the licenses it selected on its short-form
application (FCC Form 175), provided that the total number of bidding units associated with those
licenses does not exceed its current eligibility. Table 2 below provides an example of how this process
operates. A bidder cannot increase its eligibility during the auction; it can only maintain its eligibility or
decrease its eligibility. Thus, in calculating its upfront payment amount and hence its initial bidding
eligibility, an applicant must determine the maximum number of bidding units on which it may wish to
bid (or hold provisionally winning bids) in any single round and submit an upfront payment amount
covering that total number of bidding units. We request comment on these proposals.

Table 2: Upfront Payments, Bidding Eligibility, and Bidding Flexibility Example

License

Market Name

Bidding Units

Upfront Payment

AH-BEA009-H
State College PA
212,000
$212,000
AH-BEA068-H
Champaign-Urbana IL
109,000
$109,000
If a bidder wishes to bid on both licenses in a round, it must have selected both on its FCC Form 175 and
purchased at least 321,000 bidding units (212,000 + 109,000) of bidding eligibility. If a bidder only
wishes to bid on one, but not both, purchasing 212,000 bidding units would meet the eligibility
requirement for either license. The bidder would be able to bid on either license, but not both at the same
time. If the bidder purchased only 109,000 bidding units, it would have enough eligibility for the
Champaign-Urbana license but not the State College license.
39.
Under HPB procedures, the number of bidding units for a package equals the sum of the
bidding units for the licenses in that package. The bidding units for a license and a package including that
license will be counted only once in determining bidding eligibility. Thus, when an applicant calculates
its upfront payment amount by determining the maximum number of bidding units on which it may wish
to bid in any single round (in addition to its current provisionally winning bids), it should count the
bidding units associated with each license only once even if it may wish to bid on an individual license
and a package containing that license. We seek comment on these proposals.
2.

Activity Rule

40.
In order to ensure that an SMR 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 licenses upon which it places bids during the current round and the bidding units associated with
any licenses for which it holds provisionally winning bids placed in previous rounds. The bidding units
associated with a given license will be counted only once in a bidder's activity calculation for the round,
even if the bidder places multiple bids including the license--for example, places a bid on a license and a
bid on a package including that license. 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
11

Federal Communications Commission

DA 13-1540

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 additional bids in the auction.31
41.
The Bureau proposes to divide the auction into at least two stages, each characterized by
a different activity requirement.32 The auction will start in Stage One. The Bureau proposes to advance
the auction to the next stage by announcement during the auction. In exercising this discretion, the
Bureau will consider a variety of measures of auction activity, including but not limited to the percentage
of bidding units associated with licenses on which there are new bids,33 the number of new bids, and the
increase in revenue. The Bureau seeks comment on these proposals.
42.
The Bureau proposes the following activity requirements, while noting again that the
Bureau retains the discretion to change stages unilaterally by announcement during the auction:

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 bidding units associated with licenses
representing at least 80 percent of its current bidding eligibility, counting the bidding units
associated with a bid on an individual license and a package including that license only once.
Failure to maintain the required activity level will result in the use of an activity rule waiver or a
reduction in the bidder's bidding eligibility for the next round of bidding. During Stage One, a
bidder's reduced eligibility for the next round will be calculated by multiplying the bidder's
current round activity by five-fourths (5/4).

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 required activity level will result in the use of an activity rule waiver or a reduction
in the bidder's bidding eligibility for the next round of bidding. 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).
43.
The Bureau requests comment on these activity requirements. Under this proposal, the
Bureau will retain the discretion to change the activity requirements during the auction. For example, the
Bureau could decide to add an additional stage with a higher activity requirement, not to transition to
Stage Two if it believes the auction is progressing satisfactorily under the Stage One activity requirement,
or to transition to Stage Two with an activity requirement that is higher or lower than the 95 percent
proposed herein.34 If the Bureau exercises this discretion, it will alert bidders by announcement in the
FCC Auction System.
3.

Activity Rule Waivers and Reducing Eligibility

44.
When a bidder's eligibility in the current round is below the required minimum level, it
may preserve its current level of eligibility through an activity rule waiver. An activity rule waiver
applies to an entire round of bidding, not to a particular bid. Activity rule waivers, which can be either

31 See Section IV.C.3. (Activity Rule Waivers and Reducing Eligibility) below.
32 See 47 C.F.R. 1.2104(f).
33 For example, when monitoring activity for determining when to change stages, the Bureau may consider the
percentage of bidding units of the licenses receiving new provisionally winning bids, excluding any FCC-held
licenses. In past auctions, the Bureau has generally--but not always--changed stages when this measure was
approximately twenty percent or below for three consecutive rounds of bidding.
34 If the Bureau implements stages with activity requirements other than the ones listed above, a bidder's reduced
eligibility for the next round will be calculated by multiplying the bidder's current round activity by the reciprocal of
the activity requirement. For example, with a 98 percent activity requirement, the bidder's current round activity
would be multiplied by 50/49; with a 100 percent activity requirement, the bidder's current round activity would
become its bidding eligibility (current round activity would be multiplied by 1/1).
12

Federal Communications Commission

DA 13-1540

proactive or automatic, are principally a mechanism for a bidder to avoid the loss of bidding eligibility in
the event that exigent circumstances prevent it from bidding in a particular round.
45.
The FCC Auction System assumes that a bidder that does not meet the activity
requirement would prefer to use 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 in which a
bidder's activity level is below the minimum required unless (1) the bidder has no activity rule waivers
remaining, or (2) the bidder overrides the automatic application of a waiver by reducing eligibility,
thereby meeting the activity requirement. If a bidder has no waivers remaining and does not satisfy the
required activity level, the bidder's current eligibility will be permanently reduced, possibly curtailing or
eliminating the ability to place additional bids in the auction.
46.
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 round by using the "reduce eligibility" function in the FCC Auction System. In this
case, the bidder's eligibility is permanently reduced to bring it into compliance with the activity rule
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.
47.
Under the proposed simultaneous stopping rule, 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 are placed or withdrawn, 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, withdrawals (if permitted), or proactive waivers will not keep the auction
open. A bidder cannot apply a proactive waiver after bidding in a round, and applying a proactive waiver
will preclude it from placing any bids in that round.35 Applying a waiver is irreversible; once a proactive
waiver is submitted, it cannot be unsubmitted, even if the round has not yet closed.
48.
Consistent with recent Commission auctions, the Bureau proposes that each bidder in
Auction 96 be provided with a total of three activity rule waivers that may be used as set forth above at
the bidder's discretion during the course of the auction. The Bureau seeks comment on this proposal.
4.

Reserve Price and Minimum Opening Bids

49.
Section 309(j) calls upon the Commission to prescribe methods for establishing a
reasonable reserve price or a minimum opening bid amount when Commission licenses are subject to
auction, unless the Commission determines that a reserve price or minimum opening bid amount is not in
the public interest.36 Consistent with this mandate, the Commission has directed the Bureau to seek
comment on the use of a minimum opening bid amount and/or reserve price prior to the start of each
auction.37
50.
Normally, a reserve price is an absolute minimum price below which an item or items
will not be sold in a given auction. If a reserve price is utilized, the specific amount of the reserve price
may be disclosed or undisclosed.38 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. It is possible for the minimum opening bid and the reserve price to be the
same amount.

35 In general, once a bidder places a proactive waiver during a round, the FCC Auction System does not allow the
bidder to take any other bidding-related action in that round, including placing bids or withdrawing bids.
36 47 U.S.C. 309(j)(4)(F). See also 47 C.F.R. 1.2104(c) and (d).
37 Part 1 Third Report and Order, 13 FCC Rcd at 454-56 141. See also 47 C.F.R. 1.2104(c).
38 See 47 C.F.R. 1.2104(c). See also Part 1 Third Report and Order, 13 FCC Rcd at 455 140.
13

Federal Communications Commission

DA 13-1540

51.
Among other factors the Bureau must consider in deciding whether to employ either or
both of these mechanisms is the amount of spectrum being auctioned, levels of incumbency, the
availability of technology to provide service, the size of the geographic service areas, the extent of
interference with other spectrum bands, and any other relevant factors that could have an impact on the
spectrum being auctioned.39
a. Reserve Price
52.
The Commission is statutorily obliged to consider and balance a variety of public
interests and objectives when establishing service rules and licensing procedures with respect to the
public spectrum resource. These objectives include promoting recovery for the public a portion of the
value of that resource.40 With respect to the H Block licenses being offered in Auction 96, the Spectrum
Act specifically directs that proceeds from an auction of H Block spectrum be deposited into the Public
Safety Trust Fund and be used for, among other things, funding (or reimbursement to the U.S. Treasury
for the funding) of the nationwide, interoperable public safety broadband network by the First Responder
Network Authority.41 In view of the various public interest objectives we must consider, we propose to
establish a reserve price for the H Block licenses offered in Auction 96. We further propose to utilize an
aggregate reserve price based on the aggregate of the gross bids for the H Block licenses, rather than
license-by-license reserve prices. We seek comment on these proposals.
53.
We seek comment on the implementation of a reserve price. What factors should we
consider in determining the amount of the reserve? Should we disclose the amount of the reserve price
publicly prior to the auction, or should the reserve price amount remain undisclosed? We also seek
comment on how to evaluate unsold licenses in determining whether an aggregate reserve price has been
met. We encourage commenters to address any additional specific issues related to the use of reserve
prices. We ask that commenters describe in detail the specific factors that lead them to their conclusions.
b. Minimum Opening Bids
54.
In light of section 309(j)'s requirements, the Bureau proposes to establish minimum
opening bid amounts for Auction 96. The Bureau believes a minimum opening bid amount, which has
been used in other auctions, is an effective bidding tool for accelerating the competitive bidding process.42
55.
For Auction 96 the Bureau proposes to calculate minimum opening bid amounts on a
license-by-license basis using a formula based on bandwidth and license area population,43 similar to our
approach in many previous spectrum auctions. We propose to use a calculation based on $0.07 per
megahertz of bandwidth per population (per "MHz-pop"). Additionally, we propose to incorporate
pricing information from previous auctions to tailor the results of our calculation to the relative prices for
each EA. For this we propose to create an index of the relative price of each EA using the winning bid
amounts for the EA licenses of paired spectrum from Auctions 66 and 73. This modification to the use of

39 Part 1 Third Report and Order, 13 FCC Rcd at 454-56 141.
40 47 U.S.C. 309(j)(3)(C).
41 Spectrum Act, 6401(c)(4), 6413, codified at 47 U.S.C. 309(j)(8)(F), 1457; see also Spectrum Act,
6202(a), codified at 47 U.S.C. 1422(a).
42 See, e.g., Auction of 800 MHz SMR Upper 10 MHz Band, Minimum Opening Bids or Reserve Prices, Order, DA
97-2147, 12 FCC Rcd 16354 (1997); Auction of the Phase II 220 MHz Service Licenses, Auction Notice and Filing
Requirements for 908 Licenses Consisting of Economic Area (EA), Economic Area Grouping (EAG), and
Nationwide Licenses, Scheduled for September 15, 1998, Minimum Opening Bids and Other Procedural Issues,
Public Notice, DA 98-1010, 13 FCC Rcd 16445 (1998).
43 All population figures are from the 2010 U.S. Census, U.S. Department of Commerce, Bureau of the Census. See
Census 2010 Summary File 1 (SF1) and Island Areas: 2010 Census Summary File (covering the U.S. Virgin Islands,
Guam, the Northern Mariana Islands, and American Samoa).
14

Federal Communications Commission

DA 13-1540

$0.07 per MHz-pop results in amounts ranging from less than $0.01 per MHz-pop to $0.16 per MHz-pop.
We further propose a minimum of $1000 per license. For the license covering the Gulf of Mexico we
propose to set the minimum opening bid at $20,000. The minimum opening bid amount for a package
will equal the sum of the minimum opening bid amounts for all of the licenses in that package.
56.
The proposed minimum opening bid amount for each H Block license available in
Auction 96, calculated pursuant to the procedures described above, is set forth in Attachment A. For
packages we propose that the minimum opening bid amount of a package will equal the sum of the
minimum opening bid amounts for all of the licenses in that package.
57.
The Bureau seeks comment on all of the above proposals concerning minimum opening
bids. If commenters believe that these minimum opening bid amounts will result in unsold licenses, or
are not reasonable amounts, they should explain why this is so and comment on the desirability of an
alternative approach. If a commenter requests a lower minimum opening bid amount for a specific
license, it should justify the requested change in detail. If commenters disagree with our proposed use of
$0.07 per MHz-pop, our approach to tailoring minimum opening bid amounts to account for relative
prices among the EAs in past auctions, or our selection of which past results to consider, we ask
commenters to support their claims with valuation analyses and suggested minimum opening bid amount
levels or formulas.
58.
In establishing minimum opening bid amounts, we particularly seek comment on factors
that could reasonably have an impact on valuation of the licenses being auctioned, including the amount
of spectrum being auctioned, levels of incumbency, the availability of technology to provide service, the
size of the service areas, the size of the geographic service areas, issues of interference with other
spectrum bands and any other relevant factors. The Bureau also seeks comment on whether, consistent
with section 309(j), the public interest would be served by having no minimum opening bid amount.
59.
Commenters may also wish to address the general role of minimum opening bids in
managing the pace of the auction. For example, commenters could compare using minimum opening
bids--e.g., by setting higher minimum opening bids to reduce the number of rounds it takes licenses to
reach their final prices--to other means of controlling auction pace, such as changes to bidding schedules
or activity requirements.
5.

Bid Amounts

60.
The Bureau proposes that, in each round, an eligible bidder will be able to place a bid on
a given license or package using one or more pre-defined bid amounts.44 Under this proposal, the FCC
Auction System interface will list the acceptable bid amounts for each license and package. The Bureau
proposes to calculate bid amounts as described below.
a.

Minimum Acceptable Bids

61.
The first of the acceptable bid amounts is called the minimum acceptable bid amount.
The minimum acceptable bid amount for a license will be equal to its minimum opening bid amount until
there is a provisionally winning bid on the license itself or on a package that includes the license. The
minimum acceptable bid amount for a package will be the sum of the minimum acceptable bid amounts
for the licenses in the package. The Bureau proposes to calculate minimum acceptable bids based on
"current price estimates" and an activity-based formula.
62.
Current Price Estimates. After there is a provisionally winning bid covering a license,
the FCC Auction System will determine a current price estimate ("CPE") for each license in each round
as a basis for calculating minimum acceptable bids. The CPE is the provisionally winning bid for the
license, or--if the provisionally winning bid covering the license is a package bid--a proxy for an

44 Bidders must have sufficient eligibility to place a bid on the particular license. See Section IV.C.1. (Upfront
Payments and Bidding Eligibility) above.
15

Federal Communications Commission

DA 13-1540

individual license bid calculated as a share of the provisionally winning package bid.45 The proposed
mechanism for determining CPEs in an HPB auction format is described in more detail in Attachment B.
63.
Activity-Based Formula. Once CPEs are calculated, minimum acceptable bids are then
determined for each license as the amount of the CPE plus a percentage of the CPE. The percentage is
calculated using the activity-based formula described below. In general, the percentage will be higher
when many bidders are bidding on a license, or on a package containing a license, than when few bidders
are bidding on a license.
64.
The percentage of the CPE used to establish the minimum acceptable bid amount is
calculated based on an activity index at the end of each round. The activity index is a weighted average
of (a) the number of distinct bidders placing a bid on the license, including package bids, in that round,
and (b) the activity index from the prior round. Specifically, the activity index is equal to a weighting
factor times the number of bidders placing a bid covering the license in the most recent bidding round
plus one minus the weighting factor times the activity index from the prior round.46 The additional
percentage is determined as one plus the activity index times a minimum percentage amount, with the
result not to exceed a given maximum. The additional percentage is then multiplied by the CPE amount
to obtain the minimum acceptable bid for the next round.47 The Bureau proposes initially to set the
weighting factor at 0.5, the minimum percentage at 0.1 (10%), and the maximum percentage at 0.25
(25%). Hence, at these initial settings, the minimum acceptable bid for a license will be between ten
percent and twenty-five percent higher than the CPE, depending upon the bidding activity covering the
license. Equations and examples are shown in Attachment C. We seek comment on whether to use this
activity-based formula or a different approach. For example, should we use a fixed percentage above the
CPE?
b.

Additional Bid Amounts

65.
The Bureau proposes to calculate any additional bid amounts using the minimum
acceptable bid amount and a bid increment percentage-- more specifically, by multiplying the minimum
acceptable bid by one plus successively higher multiples of the bid increment percentage. If, for example,
the bid increment percentage is 5 percent, the calculation of the first additional acceptable bid amount is
(minimum acceptable bid amount) * (1 + 0.05), rounded, or (minimum acceptable bid amount) * 1.05,
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) * 1.10,
rounded; etc. The Bureau will round the results using the Commission's standard rounding procedures
for auctions.48 The Bureau proposes initially to set the bid increment percentage at 5 percent.

45 If a bid on an individual license is provisionally winning, the CPE for that license will be the provisionally
winning bid amount. If a package bid is provisionally winning, the CPEs for individual licenses in the package will
be constructed by scaling up the bids on individual licenses so that the sum of the license CPEs equals the
provisionally winning package bid. Bids are scaled up by adding "shares" to the highest bid received so far in the
auction for each license in the package. These shares are proportional to the bidding units associated with each
license relative to the total number of bidding units in the package. See 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.
46 For Round 1 calculations, because there is no prior round (i.e., no round 0), the activity index from the prior round
is set at 0.
47 The Bureau will round the result using our standard rounding procedures: results above $10,000 are rounded to
the nearest $1,000; results below $10,000 but above $1,000 are rounded to the nearest $100; and results below
$1,000 are rounded to the nearest $10.
48 See note 47 (concerning rounding), above.
16

Federal Communications Commission

DA 13-1540

66.
For Auction 96 the Bureau proposes to begin the auction with three acceptable bid
amounts per license (the minimum acceptable bid amount and two additional bid amounts) and one
acceptable bid amount per package (the minimum acceptable bid amount and no additional bid amounts).
More acceptable bidding amounts are proposed for licenses than for packages to help ensure that bids on
individual licenses or on smaller packages can compete with bids on larger packages, even when there
may not be active competition on all the separate components of the large package.
c.

Bid Amount Changes

67.
The Bureau retains the discretion to change the minimum acceptable bid amounts, the
additional bid amounts, the number of acceptable bid amounts, and the parameters of the formulas used to
calculate minimum acceptable bid amounts and additional bid amounts if the Bureau determines that
circumstances so dictate. Further, the Bureau retains the discretion to do so on a license-by-license and
package-by-package basis. The Bureau also retains the discretion to limit (a) the amount by which a
minimum acceptable bid for a license may increase compared with the corresponding CPE, and (b) the
amount by which an additional bid amount may increase compared with the immediately preceding
acceptable bid amount. For example, the Bureau could set a $10 million limit on increases in minimum
acceptable bid amounts over CPEs. Thus, if the activity-based formula calculates a minimum acceptable
bid amount that is $20 million higher than the CPE on a license, the minimum acceptable bid amount
would instead be capped at $10 million above the CPE. The Bureau seeks comment on the circumstances
under which we should employ such a limit, factors we should consider when determining the dollar
amount of the limit, and the tradeoffs in setting such a limit or changing other parameters--such as
changing the minimum acceptable bid percentage, the bid increment percentage, or the number of
acceptable bid amounts. If the Bureau exercises this discretion, it will alert bidders by announcement in
the FCC Auction System.
68.
The Bureau seeks comment on the above proposals. If commenters disagree with the
proposal to begin the auction with three acceptable bid amounts per license and one per package, they
should suggest an alternative number of acceptable bid amounts to use at the beginning of the auction, an
alternative number to use later in the auction, and whether the same number of bid amounts should be
used for both licenses and packages. Commenters may wish to address the role of the minimum
acceptable bids and the number of acceptable bid amounts in managing the pace of the auction and the
tradeoffs in managing auction pace by changing the bidding schedule, activity requirements, or bid
amounts, or by using other means.
6.

Provisionally Winning Bids

69.
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, the FCC Auction System determines
which combination of individual and package bids together yields the highest aggregate gross bid amount,
taking into consideration each bidder's highest bid on each license or package submitted up to that point
in the auction. 49 These bids become the provisionally winning bids for the round.
70.
If identical high bid amounts are submitted on a license or package in any given round
(i.e., tied bids), the FCC Auction System will use a random number generator to select a single
provisionally winning bid from among the tied bids. (The Auction System assigns a random number to
each bid when the bid is entered. The tied bid with the highest random number wins the tiebreaker.50)

49 Consequently, an individual license or package bid that does not become a provisionally winning bid at the
conclusion of the round in which it was placed may become a provisionally winning bid at the conclusion of a
subsequent round. This may occur even if the bidder does not have the bidding eligibility to cover the newly-
provisionally winning bid, a situation that would not occur under the FCC's usual SMR auction procedures. In such
cases, bidding eligibility will not be increased.
50 With package bidding, in the event of ties among bids that generate the highest aggregate gross bid amount, the
set of bids with the highest sum of random numbers becomes provisionally winning.
17

Federal Communications Commission

DA 13-1540

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 provisionally winning bid.
71.
The set of provisionally winning bids is determined after every round in which new bids
are submitted. As stated above, the provisionally winning bids at the end of the auction become winning
bids provided that any applicable reserve prices have been met. We remind bidders that provisionally
winning bids count toward activity for purposes of the activity rule.51
7.

Bid Removal

72.
For Auction 96, the Bureau proposes 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
a selected bid in the FCC Auction System, a bidder may effectively "undo" any bid placed within that
round. Once a round closes, a bidder may no longer remove a bid. We seek comment on this bid removal
proposal.
8.

Bid Withdrawal

73.
Under our proposal to use SMR with HPB procedures, the Bureau proposes not to permit
any bids, provisionally winning or otherwise, to be dropped or withdrawn from consideration in
Auction 96. The benefits that bidders may realize from withdrawing bids in a typical SMR auction are
minimized under the proposed package bidding format. In addition, in an SMR auction with package
bidding there are significant risks associated with bid withdrawals that are not present in an SMR auction
without package bidding. In the Part 1 Third Report and Order, the Commission explained that under its
typical SMR auction format without package bidding, allowing bid withdrawals facilitates efficient
aggregation of licenses and the pursuit of backup strategies as information becomes available during the
course of an auction.52 The Commission noted, however, that in some instances bidders may seek to
withdraw bids for improper reasons. The Bureau, therefore, has discretion in managing the auction to
limit the number of withdrawals to prevent any bidding abuses.
74.
Under the HPB auction format that we propose for Auction 96, the potential benefits of
withdrawn or dropped bids in facilitating aggregations are far lower than they would be in a typical SMR
auction. While the predetermined packages may not coincide with the "all or nothing" aggregation needs
of all bidders, the hierarchical packages should significantly reduce the overall risk that bidders will win
only some of the licenses in a desired set. Therefore, to the extent that package bids allow bidders to
avoid such risk, withdrawals are less useful to bidders. Further, because the licenses available in
Auction 96 consist of a single frequency block, bidders will not need to use withdrawals to pursue backup
strategies in other blocks, as they sometimes have in other Commission spectrum auctions conducted with
SMR procedures. At the same time, in an auction with package bidding, dropping bids from
consideration can have negative effects that would not arise in a typical SMR auction. Withdrawals by
one bidder on licenses subject to package bidding can be more disruptive to the bidding strategies of
others than withdrawals on licenses not subject to package bidding. In a non-package bidding auction,
whether a bid on a license becomes provisionally winning depends only upon the bids submitted for that
license. In contrast, whether a bid becomes provisionally winning on a license subject to package bidding
depends upon the bids submitted for that license, the bids submitted for the packages containing that
license, and the bids submitted for other licenses in those packages. Consequently, a withdrawn bid on a
license subject to package bidding has the potential to alter the composition of the provisionally winning
set of bids, and may adversely affect other bidders. Moreover, because bidders interested in single
licenses or smaller packages need their bids to combine with the bids by other bidders in order to be
competitive with bids on larger packages, having even non-provisionally winning bids withdrawn from

51 See Section IV.C.2. (Activity Rule) above.
52 Part 1 Third Report and Order, 13 FCC Rcd at 459-60 150.
18

Federal Communications Commission

DA 13-1540

consideration can adversely affect their ability to compete. In addition, because CPEs for a license
depend in part on package bids including the license, the process for determining current price estimates
is more stable--and less subject to undesirable manipulation--if bids cannot be withdrawn from
consideration. Hence, because of the potential under the proposed package bidding auction format for
withdrawn bids, provisionally winning or not, to affect auction dynamics and the bidding strategies of
other bidders, we propose not to allow any bids to be withdrawn after the round in which they were
placed has closed.
75.
We seek comment on this proposal not to allow bids to be withdrawn or removed from
consideration under our proposed HPB auction procedures. If bidders disagree with this proposal, we ask
them to support their arguments by taking into account the structure of the H Block inventory, the impact
on auction dynamics and the pricing mechanism, and the effects on the bidding strategies of other bidders.
In the event we do not utilize HPB procedures with an SMR format, should we allow bid withdrawals? In
the past, when we have allowed bid withdrawals in SMR auctions, we have typically limited withdrawn
bids to a maximum of three rounds, and sometimes set a lower limit on the number of withdrawal rounds.
What would be the appropriate number of rounds in Auction 96 if we permit bid withdrawals?

D.

Post-Auction Payments

1.

Apportioning Package Bids

76.
In package bidding, when a bidder places an all-or-nothing bid on a package of licenses,
there will be no identifiable bid amounts on the individual licenses that compose the package. However,
the Commission's competitive bidding rules and procedures assume that the amount of each bid on an
individual license always is known. For example, rules for calculating the amount of small business, new
entrant, or tribal land bidding credits presume that the winning bid on the license is known.53 Similarly,
in determining the amount of a default or withdrawal payment, which involves a comparison between the
withdrawing or defaulting bidder's bid and a subsequent bid, the rules assume that there are bid amounts
for individual licenses.54 Accordingly, the Commission adopted a rule providing that, in advance of each
auction with package bidding, the Commission shall establish a methodology for determining how to
estimate the price or bid on an individual license included in a package of licenses.55
77.
We propose that under our HPB procedures, we will use final CPEs as an estimate of the
price or bid on an individual license for the purpose of later apportioning package bids. Therefore, when
regulatory calculations require individual license bid amounts, we will divide the package bid amount
among the licenses composing the package in proportion to the final round CPEs for the licenses. We
seek comment on this proposal.
2.

Interim Withdrawal Payment Percentage

78.
In conjunction with our proposal to use HPB procedures, we seek comment on not
permitting any bids, provisionally winning or otherwise, to be withdrawn or dropped from consideration
in Auction 96. Hence, under our proposal, we would have no need to determine an appropriate interim
withdrawal payment percentage.
79.
The Bureau seeks comment, however, on the appropriate interim withdrawal payment
percentage to apply if we allow withdrawals under procedures for an SMR auction without package
bidding for Auction 96. Specifically, we seek comment on the percentage of a withdrawn bid that should

53 47 C.F.R. 1.2110(f). Knowing the size of a small business bidding credit on an individual license may be
necessary in order to calculate a small business bidding credit unjust enrichment obligation on a license won as part
of a package.
54 47 C.F.R. 1.2104(g).
55 See 47 C.F.R. 1.2103(b), as amended by the CSEA/Part 1 Report and Order. CSEA/Part 1 Report and Order,
21 FCC Rcd at 906 39.
19

Federal Communications Commission

DA 13-1540

be assessed as an interim withdrawal payment 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).56 If
a bid is withdrawn and no subsequent higher bid is placed and/or the license is not won in the same
auction, the final withdrawal payment cannot be calculated until after the close of a subsequent auction in
which a higher bid for the license (or the equivalent to the license) is placed or the license is won.57
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 any final bid withdrawal
payment that is ultimately assessed.58 Section 1.2104(g)(1) of the Commission's rules requires that the
percentage of the withdrawn bid to be assessed as an interim bid withdrawal payment be between three
percent and twenty percent and that it be set in advance of the auction.59
80.
The Commission has determined 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 licenses being
offered.60 The Commission has 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 the licenses being offered in the auction, such as when few licenses are offered that are on
adjacent frequencies or in adjacent areas, or when there are few synergies to be captured by combining
licenses.61 However, as we have discussed in connection with our proposal to use package bidding for
Auction 96, we believe that there may be significant benefits for some bidders from aggregating EA
licenses. Hence, if we do not use package bidding, withdrawals may be useful to protect bidders against
incomplete aggregations in Auction 96. Balancing the potential need for bidders to use withdrawals to
avoid winning incomplete combinations of licenses with the Bureau's interest in deterring undesirable
strategic use of withdrawals, the Bureau proposes a percentage below the maximum twenty percent
permitted under the current rules but above the three percent previously provided by the Commission's
rules. Specifically, the Bureau proposes to establish an interim bid withdrawal payment of fifteen percent
of the withdrawn bid for this auction. The Bureau seeks comment on this proposal.
3.

Additional Default Payment Percentage

81.
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 and timely final payment, or is otherwise disqualified) is liable for a
default payment under 47 C.F.R. 1.2104(g)(2). This payment consists of a deficiency payment, equal to
the difference between the amount of the Auction 96 bidder's winning bid and the amount of the winning
bid the next time a license 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.
82.
The percentage of the bid that a defaulting bidder must pay in addition to the deficiency
will depend on the auction format ultimately chosen for a particular auction. In auctions with package

56 See 47 C.F.R. 1.2104(g)(1). The withdrawal payment amount is deducted from any upfront payments or down
payments that the withdrawing bidder has deposited with the Commission. No withdrawal payment is assessed for a
withdrawn bid if either the subsequent winning bid or any of the intervening subsequent withdrawn bids equals or
exceeds that withdrawn bid. Id.
57 Id.
58 Id.
59 See id., as amended by CSEA/Part 1 Report and Order, 21 FCC Rcd at 901-04 27-32.
60 See CSEA/Part 1 Report and Order, 21 FCC Rcd at 903-04 31.
61 See id. at 904 n.57.
20

Federal Communications Commission

DA 13-1540

bidding, as we propose to use in Auction 96, the additional payment is set, pursuant to section
1.2104(g)(2)(ii), at 25 percent of the applicable bid. This higher level reflects the fact that a defaulted
winning bid in an auction with package bidding may affect multiple licenses and perhaps all of the other
licenses being offered.62
83.
In non-package auctions, the amount can range from three percent up to a maximum of
twenty percent, established in advance of the auction and based on the nature of the service and the
inventory of the licenses being offered,63 and so, we seek comment on an appropriate additional default
payment percentage in the event we do not conduct Auction 96 with package bidding procedures. As
noted in the CSEA/Part 1 Report and Order, defaults weaken the integrity of the auction process and may
impede the deployment of service to the public, and an additional default payment of up to 20 percent will
be more effective in deterring defaults than the three percent used in some earlier auctions.64 At the same
time, we do not believe the detrimental effects of any defaults in Auction 96 are likely to be unusually
great. Balancing these considerations, we propose to establish an additional default payment for
Auction 96 of fifteen percent of the applicable bid. The Bureau seeks comment on this proposal.

V.

DEADLINES AND FILING PROCEDURES

84.
Comments are due on or before August 5, 2013, and reply comments are due on or before
August 16, 2013. All filings related to procedures for Auction 96 must refer to AU Docket No. 13-178.
Comments may be submitted using the Commission's Electronic Comment Filing System ("ECFS") or by
filing paper copies.65 We strongly encourage interested parties to file comments electronically.
85.
Electronic Filers: Comments may be filed electronically using the Internet by accessing
the ECFS at http://www.fcc.gov/cgb/ecfs. Filers should follow the instructions provided on the website
for submitting comments. In completing the transmittal screen, filers should include their full name, U.S.
Postal Service mailing address, and the applicable docket number, AU Docket No. 13-178. To get filing
instructions, filers should send an e-mail to ecfs@fcc.gov, and include the following words in the body of
the message: "get form." A sample form and directions will be sent in response.
86.
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. All filings must be addressed to the Commission's
Secretary Attn: WTB/ASAD, Office of the Secretary, Federal Communications Commission.
The Commission's contractor will receive hand-delivered or messenger-delivered paper filings
for the Commission's Secretary at the FCC Headquarters building located at 445 12th Street, SW,
Room TW-A325, Washington, DC 20554. The filing hours at this location are 8:00 a.m. to 7:00
p.m. Eastern Time (ET). All hand deliveries must be held together with rubber bands or
fasteners. Any envelopes must be disposed of before entering the building.
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.
U.S. Postal Service first-class, Express, and Priority mail must be addressed to 445 12th Street,
SW, Washington DC 20554.

62 47 C.F.R. 1.2104(g)(2)(ii); see also Service Rules for the 746-764 and 776-794 MHz Bands, and Revisions to
Part 27 of the Commission's Rules, Second Memorandum Opinion and Order, 15 FCC Rcd 21070, 21079-80 17-
18 (2000) (adopting 25% additional default amount for package bidding auctions).
63 See CSEA/Part 1 Report and Order, 21 FCC Rcd at 903-04 30-31.
64 Id. at 902-04 29-31.
65 See Electronic Filing of Documents in Rulemaking Proceedings, GC Docket No. 97-113, Report and Order, FCC
98-56, 13 FCC Rcd 11322 (1998).
21

Federal Communications Commission

DA 13-1540

87.
Auction 96 E-mail Box: We also request that a copy of all comments and reply comments
be submitted electronically to the following address: auction96@fcc.gov.
88.
Copies of comments and reply comments will be available for public inspection between
8:00 a.m. and 4:30 p.m. ET Monday through Thursday, or 8:00 a.m. to 11:30 a.m. ET on Fridays, in the
FCC Reference Information Center, Room CY-A257, 445 12th Street, SW, Washington, DC 20554, and
will also be accessible through the search function on the ECFS web page at http://www.fcc.gov/cgb/ecfs.
89.
This proceeding has been designated as a "permit-but-disclose" proceeding in accordance
with the Commission's ex parte rules.66 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 provisions pertaining to oral and written ex
parte
presentations in permit-but-disclose proceedings are set forth in section 1.1206(b) of the
Commission's rules. 67
90.
To request materials in accessible formats (Braille, large print, electronic files, audio
format) for people with disabilities, send an e-mail to fcc504@fcc.gov or call the Consumer and
Government Affairs Bureau at (202) 418-0530 or (202) 418-0432 (TTY).

VI.

CONTACTS

91.
For further information concerning this proceeding, contact the offices listed below:

Broadband Division, Wireless Telecommunications Bureau

For H Block service rule questions:
Matthew Pearl (legal) or Janet Young (technical), at
(202) 418-2487

Auctions and Spectrum Access Division, Wireless Telecommunications Bureau

For general auction questions:
Jeff Crooks at (202) 418-0660 or Linda Sanderson at
(717) 338-2868
For auctions legal questions:
Valerie Barrish at (202) 418-0660

Office of Communications Business Opportunities


For questions concerning small business inquiries:
(202) 418-0990
- FCC -

66 47 C.F.R. 1.1200(a), 1.1206.
67 The Commission substantially revised its ex parte rules in 2011. These revised rules require for example, that an
ex parte notice must be filed for each oral ex parte presentation, not just for those presentations that involve new
information or arguments not already in the record. Further, a filer typically must submit an ex parte notice
electronically in machine-readable format. A filer may not submit a PDF image created by scanning a paper
document, except in a situation in which a word processing version of the document is not available. See
Amendment of the Commission's Ex Parte Rules and Other Procedural Rules, GC Docket No. 10-43, Report and
Order and Further Notice of Proposed Rulemaking
, FCC 11-11, 26 FCC Rcd 4517 (2011).
22

Federal Communications Commission

DA 13-1540

ATTACHMENT A

Licenses to Be Auctioned

This page was intentionally inserted as a placeholder for Attachment A, which is available as a separate
file.
A-1

Federal Communications Commission

DA 13-1540

ATTACHMENT B

Determining Provisionally Winning Bids and Current Price Estimates

The licenses subject to package bidding in a Hierarchical Package Bidding auction are grouped into non-
overlapping, successively larger packages at each level. This attachment discusses a two-tier HPB
structure, which is one of the options for Auction 96. In this example, the hierarchical structure has two
levels, consisting of 176 individual Economic Area (EA) licenses in the first tier and 52 packages in the
second tier. These packages consist of EAs aggregated into Major Economic Areas (MEAs). After each
round, all considered bids and minimum opening bids are used to determine the largest bid on each
license and on each package.68 A simple procedure is used to calculate the provisionally winning set of
bids and a current price estimate ("CPE") for each individual license.69 This appendix describes the
winner determination and pricing rules, first in terms of an example and then in more general terms.

Determining Provisionally Winning Bids

After each round of bidding, the FCC Auction System determines which combination of bids provides the
greatest aggregate gross amount and are therefore provisionally winning. In order to determine the best
combination of bids, the system takes the highest bid on each individual license. It then compares the
sum of the high bids on individual licenses in a package with the highest package bid at each tier to
determine provisionally winning bid(s).
Example: Suppose that the highest bids on each license and package are as shown in Table 1 below for a
sample configuration of EAs and MEAs. The sum of the highest bids on EA licenses EA1-EA3, 30,
exceeds the highest bid on the MEA1 package, 20. The highest bid on the MEA2 package, 32, exceeds
the sum of the highest bids on EA licenses EA4 and EA5, 20. Thus, the provisionally winning bids
would be the bids on the individual EA licenses EA1-EA3, and the package bid on MEA2.

Example with High Bids in Parentheses

Tier 2:

MEA1

MEA2

Packages

(20)
(32)

Tier 1:

EA1

EA2

EA3

EA4

EA5

EAs

(10)
(10)
(10)
(10)
(10)

68 The set of considered bids in a round includes new bids for that given round and each bidder's highest bid on each
license or package, regardless of the round in which it was placed. For a description of how tied bids are broken, see
Section IV.C.6. (Provisionally Winning Bids). In addition to these bids, the FCC Auction System considers a set of
"FCC bids." There is an FCC bid on each license, and the amount of each FCC bid is slightly below the minimum
opening bid amount.
69 The hierarchical structure of HPB was suggested by Rothkopf, Pekec, and Harstad, "Computationally Manageable
Combinatorial Auctions," Management Science, 44(8), August 1998, 1131-1147. The pricing mechanism for HPB
was proposed by 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.
B-1

Federal Communications Commission

DA 13-1540

Determining Current Price Estimates for Licenses

CPEs for licenses are determined in such a way as to indicate to bidders how high they must bid to
compete with the provisionally winning bid on the package containing those licenses in the event the
package bid is the provisionally winning bid. If the bids on the individual EA licenses are all
provisionally winning, then the CPEs are simply equal to those bids, as is the case in an FCC
simultaneous multiple round (SMR) auction without package bidding. But if the bid amount for a
package is greater than the sum of the bid amounts for the individual licenses it contains, then the highest
bids received so far for the licenses are scaled up to the package bid amount by adding "shares."70 These
shares are proportional to the bidding units associated with each license relative to the total number of
bidding units in the package.
Suppose that all EA licenses have equal bidding units, and that the bid amounts are as shown as in the
example above. The high bid on the MEA2 package is 32, which exceeds the sum of the bids for the EA
licenses in the package. Therefore, to calculate the CPE the individual bids for licenses EA4 and EA5 are
raised from 10, to 10 + (1/2)(32-20) = 16. In other words, the "shortfall" of 12 is divided among the 2
licenses in the package in proportion to their bidding units (which are equal in this case). In this example,
a "package share" of 6 is added to the high bids on the EA licenses in the MEA2 package, but there is no
package share for the licenses in the MEA1 package.
Minimum acceptable bids for licenses in the next round of the auction are calculated by adding a
percentage to the license CPE.71 For packages, minimum acceptable bids are the sums of the minimum
acceptable bids for the licenses in the package. As a result of constructing CPEs in this way, the
minimum acceptable bids for the next round will indicate to bidders what they must bid to be able to
unseat the provisionally winning bids from the last round.

Technical Description

The discussion below is specific to a two-tier package structure. For a more general description, which
can be applied to variations on HPB, see Goeree and Holt, "Hierarchical Package Bidding: A Paper &
Pencil Combinatorial Auction," Games and Economic Behavior 70(1), September 2010, 146-169.
To Determine Provisionally Winning Bids: Suppose a package r is divided into individual licenses, i =
1,...,Ir where Ir is the number of individual licenses in package r, each with ir bidding units. Bidders can
submit bids on individual licenses and package bids for the entire package. Let b max
ir
denote the highest
bid for license i in package r and b max
r
the highest package bid for package r. In this case, the revenue-
maximizing allocation can be found recursively (Rothkopf, Pekec, and Harstad, 1998):
1. Pick the larger of b max
max
r
and Iri=1 bir , which determines Revr, the revenue for package r.
2. If Rev
max
r = br
, the highest package bid for package r is provisionally winning and the bids on
individual licenses in that package are losing, otherwise the highest bids on individual licenses in
package r are provisionally winning and the package bid for package r is losing.

70 If no bids have been placed on an individual license, the share will be added to the minimum opening bid amount.
71 In a standard FCC SMR auction (without package bidding), the FCC Auction System adds a percentage to the
current provisionally winning bid amount for each license to determine minimum acceptable bids for the next round.
This percentage may be determined by an activity-based formula, described in Attachment C and in Section IV.C.5.
(Bid Amounts).
B-2

Federal Communications Commission

DA 13-1540

To Determine CPEs for Licenses: A second procedure is used to calculate CPEs for licenses (Goeree and
Holt, 2010).72 The CPE pir of license i in package r is the maximum bid for the license plus a "package
share" (if the sum of the high bids for individual licenses in the package falls short of Revr). The shares
are determined by the relative sizes of the licenses in terms of bidding units. Let r = Iri=1ir denote the
total number of bidding units in package r. With this notation, the pricing formula is:

max

Ir
max
p b
ir Re v
b
ir
ir



r
ir
r
i1

where the difference in parentheses is non-negative by construction. Thus,
p
max
ir = bir
if an individual license bid wins.
p
max
ir = bir
+ package share if a package bid wins.
Current price estimates based on this procedure address the "threshold problem" in the sense that they
provide benchmarks for bids on individual licenses that will, when scaled up, or incremented, allow the
individual license bids to displace a provisionally winning bid on the package containing those licenses.
The procedures for determining provisionally winning bids and CPEs for licenses, set forth here for two
tiers, can be generalized for any number of levels. With a single level these procedures reduce to the
SMR pricing and allocation rules in which the provisionally winning bid for a license is the highest bid
received for that license. With multiple levels, the algorithm for determining provisionally winning bids
follows a "bottom-up" approach and checks at every level, h, whether it is better to provisionally assign a
level-h package to the high bidder for that package or to provisionally assign the smaller sub-packages
that it contains. The rule for determining CPEs follows from this recursive comparison of level-h and
level-(h+1) packages: if the larger packages provide higher revenue, then the prices of the individual
licenses contained in the larger packages are incremented in proportion to bidding units to reflect this
shortfall. Once the algorithm finishes, the CPEs of the individual licenses add up to the sum of the
associated provisionally winning bids.

72 The computed prices determine minimum acceptable bids for licenses by adding a percentage. The minimum
acceptable bid for a package is equal to the sum of the minimum acceptable bids for the licenses it contains.
B-3

Federal Communications Commission

DA 13-1540

ATTACHMENT C

Minimum Acceptable Bid Formula

The following formula used to calculate minimum acceptable bids is based on activity. After current
price estimate (CPE) for a license is calculated, the minimum acceptable bid amount for that license will
be equal to the amount of the CPE plus a percentage of that CPE, calculated using the formula below. In
general, the percentage will be higher for a license receiving many bids than for a license receiving few
bids.
Ai = (C * Bi) + ((1-C) * Ai-1)
Ii+1 = smaller of ((1 + Ai) * N) and M
Xi+1 = Ii+1 * Yi
where
Ai = activity index for the current round (round i)
C
= activity weight factor
Bi = number of bidders submitting bids on the license in the current round (round i)
Ai-1 = activity index from previous round (round i-1), A0 is 0
Ii+1 = additional percentage for the next round (round i+1)
N
= minimum additional percentage or floor
M
= maximum additional percentage or ceiling
Xi+1 = dollar amount corresponding to the additional percentage
Yi = current price estimate (CPE) for the license from the current round
(The CPE for a license is the provisionally winning bid, unless there is a provisionally
winning package bid covering the license. See Attachment B for more information on
CPEs.)
Examples
C = 0.5, N = 0.1, M = 0.2
Please note that these values are for illustrative purposes only and might not be the same as those
used in the auction.
Round 1 (2 bidders submitting bids, CPE = $1,000,000)
1. Calculation of additional percentage for round 2:
A1 = (0.5 * 2) + (0.5 * 0) = 1
I2 = The smaller of [((1 + 1) * 0.1) = 0.2] and 0.2 (the maximum additional percentage)
= 0.2
2. Calculation of dollar amount associated with the additional percentage for round 2 (using I2 from
above):
X2 = 0.2 * $1,000,000 = $200,000
C-1

Federal Communications Commission

DA 13-1540

3. Minimum acceptable bid amount for round 2 = $1,200,000
Round 2 (3 bidders submitting bids, CPE = $2,000,000)
1. Calculation of additional percentage for round 3:
A2 = (0.5 * 3) + (0.5 * 1) = 2
I3 = The smaller of [((1 + 2) * 0.1) = 0.3] and 0.2 (the maximum additional percentage)
= 0.2
2. Calculation of dollar amount associated with the additional percentage for round 3 (using I3 from
above):
X3 = 0.2 * $2,000,000 = $400,000
3. Minimum acceptable bid amount for round 3 = $2,400,000
Round 3 (1 bidder submitting bids, CPE = $2,400,000)
1. Calculation of additional percentage for round 4:
A3 = (0.5 * 1) + (0.5 * 2) = 1.5
I4 = The smaller of [((1 + 1.5) * 0.1) = 0.25] and 0.2 (the maximum additional percentage)
= 0.2
2. Calculation of dollar amount associated with the additional percentage for round 4 (using I4 from
above):
X4 = 0.2 * $2,400,000 = $480,000
3. Minimum acceptable bid amount for round 4 = $2,880,000
For packages, the minimum acceptable bid amount is the sum of the minimum acceptable bid amounts for
the licenses in the package.
C-2

Note: We are currently transitioning our documents into web compatible formats for easier reading. We have done our best to supply this content to you in a presentable form, but there may be some formatting issues while we improve the technology. The original version of the document is available as a PDF, Word Document, or as plain text.

close
FCC

You are leaving the FCC website

You are about to leave the FCC website and visit a third-party, non-governmental website that the FCC does not maintain or control. The FCC does not endorse any product or service, and is not responsible for, nor can it guarantee the validity or timeliness of the content on the page you are about to visit. Additionally, the privacy policies of this third-party page may differ from those of the FCC.