# Comment Sought on Competitive Bidding Procedures for Broadcast Incentive Auction 1000, Including 1001 and 1002 > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2015-01607 ## Record - **Collection:** Federal Register - **Document type:** Proposed Rule - **Published:** January 29, 2015 - **Citation:** 80 FR 4816 ## Text FEDERAL COMMUNICATIONS COMMISSION 47 CFR Parts 1, 27 and 73 [AU Docket No. 14-252; GN Docket No. 12-268; FCC 14-191; DA 15-24; DA 15-60] Comment Sought on Competitive Bidding Procedures for Broadcast Incentive Auction 1000, Including 1001 and 1002 AGENCY: Federal Communications Commission. ACTION: Proposed rule; proposed auction procedures. SUMMARY: The Auction 1000 Request for Comment initiates the pre-auction process by which the Federal Communications Commission will develop detailed procedures for the broadcast television spectrum incentive auction, taking into account public comment received in response to its proposals. The Auction 1000 Request for Comment includes specific proposals, including on determination of the initial broadcast television spectrum clearing target, opening bid prices, benchmarks for the final stage rule, and the final television channel assignment process, and seeks comment on those proposed procedures. DATES: Comments are due on or before February 13, 2015, and reply comments are due on or before March 13, 2015. Written comments on the Paperwork Reduction Act proposed information collection requirements must be submitted by the public, Office of Management and Budget (OMB), and other interested parties on or before March 30, 2015. ADDRESSES: All filings in response to this notice must refer to AU Docket No. 14-252 and GN Docket No. 12-268. The Federal Communications Commission strongly encourages interested parties to file comments electronically, and requests that an additional copy of all comments and reply comments be submitted electronically to the following address: auction1000@fcc.gov. Comments may be submitted by any of the following methods: Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments. Federal Communications Commission's Web site: http://fjallfoss.fcc.gov/ecfs2/. Follow the instructions for submitting comments. Paper Filers: Parties who choose to file by paper must file an original and one copy 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. All hand-delivered or messenger-delivered paper filings for the Commission's Secretary must be delivered to FCC Headquarters at 445 12th Street SW., Room TW-A325, Washington, DC 20554. 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. People with Disabilities: Contact the FCC to request reasonable accommodations (accessible format documents, sign language interpreters, CART, etc.) by email: FCC504@fcc.gov or phone: 202-418-0530 or TTY: 202-418-0432. PRA Comments: In addition to filing comments with the Secretary, a copy of any comments on the Paperwork Reduction Act information collection requirements contained herein should be submitted to the Federal Communications Commission via email to PRA@fcc.gov and to Nicholas A. Fraser, Office of Management and Budget, via email to Nicholas_A._Fraser@omb.eop.gov or via fax at 202-395-5167. FOR FURTHER INFORMATION CONTACT: Wireless Telecommunications Bureau, Auctions and Spectrum Access Division: For auction legal questions: Erin Griffith at (202) 418-0660 and for general auction questions: Linda Sanderson at (717) 338-2868; Spectrum and Competition Policy Division: For mobile spectrum holding questions: Amy Brett at (202) 418-1310; and Broadband Division: For 600 MHz Band service rule questions: Madelaine Maior at (202) 418-1466. Media Bureau, Video Division: For broadcast questions: Dorann Bunkin at (202) 418-1636. Office of Engineering and Technology: For repacking and inter-service interference questions: Aspasia Paroutsas (legal) at (202) 418-7285 or Martin Doczkat (technical) (202) 418-2435. For additional information concerning the Paperwork Reduction Act information collection requirements contained in this document, send an email to PRA@fcc.gov or contact Cathy Williams on (202) 418-2918. SUPPLEMENTARY INFORMATION: This is a summary of the Auction 1000 Request for Comment adopted on December 11, 2014 and released on December 17, 2014, as well as the Order adopted and released on January 7, 2015, extending the dates for responding to the Auction 1000 Request for Comment and the Supplemental Auction 1000 Request for Comment adopted and released on January 15, 2015. The Auction 1000 Request for Comment includes as attachments the following appendices: Appendix A, Incentive Auction General Flow; Appendix B, ISIX Constraints; Appendix C, Clearing Target Optimization; Appendix D, Reverse Auction Pricing and Bid Processing Algorithm; Appendix E, Final Channel Assignment Optimization; Appendix F, Bidding Units, Upfront Payments, and Minimum Opening Bids; Appendix G, Forward Auction Clock Phase; and Appendix H, Forward Auction Assignment Phase. The complete text of the Auction 1000 Request for Comment, including all attachments and related Commission documents, is available for public inspection and copying from 8:00 a.m. to 4:30 p.m. Eastern Time (ET) Monday through Thursday or from 8:00 a.m. to 11:30 a.m. ET on Fridays in the FCC Reference Information Center, 445 12th Street SW., Room CY-A257, Washington, DC 20554. The Auction 1000 Request for Comment and its attachments, as well as related Commission documents, also may be purchased from the Commission's duplicating contractor, Best Copy and Printing, Inc. (BCPI), 445 12th Street SW., Room CY-B402, Washington, DC 20554, telephone 202-488-5300, fax 202-488-5563, or you may contact BCPI at its Web site: http://www.BCPIWEB.com. When ordering documents from BCPI, please provide the appropriate FCC document number, for example, FCC 14-191. The Auction 1000 Request for Comment and its attachments, as well as related documents, also are available on the Internet at the Commission's Web site: http://wireless.fcc.gov/auctions/1000/, or by using the search function for AU Docket No. 14-252, GN Docket 12-268 on the Commission's Electronic Comment Filing System (ECFS) Web page at http://www.fcc.gov/cgb/ecfs/. This document contains proposed information collection requirements. The Commission, as part of its continuing effort to reduce paperwork burdens, invites the general public and the Office of Management and Budget (OMB) to comment on the information collection requirements contained in this document, as required by the Paperwork Reduction Act of 1995, Public Law 104-13. Comments should address: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's burden estimates; (c) ways to enhance the quality, utility, and clarity of the information collected; (d) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology; and (e) way to further reduce the information collection burden on small business concerns with fewer than 25 employees. In addition, pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), we seek specific comment on how we might further reduce the information collection burden for small business concerns with fewer than 25 employees. OMB Control Number: None. Title: Application by a Broadcast Licensee to Participate in a Broadcast Spectrum Incentive Auction (BSIA), FCC Form 177; and 47 CFR 1.22002. Form No.: FCC Form 177. Type of Review: New collection. Respondents: Business or other for profit entities; not-for-profit institutions; State, local or Tribal government. Number of Respondents and Responses: 2,254 respondents; 2,254 responses. Estimated Time per Response: 3 hours. Frequency of Response: One time reporting requirement. Obligation to Respond: Required to obtain benefits. The statutory authority for this information collection is contained in sections 154(i) and 309 of the Communications Act of 1934, as amended. Total Annual Burden: 6,762 hours. Total Annual Costs: N/A. Privacy Act Impact Assessment: N/A. Nature and Extent of Confidentiality: Pursuant to statute, pending the effective date of related license reassignments and spectrum reallocations, the Commission will take all reasonable steps necessary to protect the confidentiality of Commission-held data of a broadcast licensee participating in the broadcast spectrum incentive auction, pursuant to 47 CFR 1.22006. Needs and Uses: Any broadcast licensee choosing to participate in the broadcast spectrum incentive auction must provide information to demonstrate that it is legally, technically, and financially qualified to participate, pursuant to 47 CFR 1.22000 and 1.22004. Information collection on the form will include information regarding the relevant broadcast license, information regarding parties with an ownership interest in the license, and if applicable, information regarding any agreement that the applicant may have to share a broadcast channel in the event that it relinquishes some of its spectrum usage rights through the auction. Statutory Authority: The statutory authority for this information collection is contained in sections 154(i) and 309 of the Communications Act of 1934, as amended. OMB Control Number: 3060-0600. Title: Application to Participate in a FCC Auction; FCC Form 175; 47 CFR 1.2105, 1.2110 and 1.2112. Form No.: FCC Form 175. Type of Review: Revision of currently approved collection. Respondents: Business or other for-profit; Not-for-profit institutions; State, local or Tribal governments. Number of Respondents and Responses: 500 respondents; 500 responses. Estimated Time per Response: 90 minutes. Frequency of Response: On occasion reporting requirement. Obligation to Respond: Required to obtain or retain benefits. Total Annual Burden: 750 hours. Total Annual Costs: N/A. Privacy Act Impact Assessment: N/A. Nature and Extent of Confidentiality: There is no need for confidentiality with this collection of information. Applicants may request confidential treatment of information collected in FCC Form 175 pursuant to 47 CFR 0.459. Needs and Uses: The Commission will revise the FCC Form 175 to require a party to certify compliance with requirements applicable to the incentive auction prior to submitting the Form. Statutory Authority: The statutory authority for this information collection is contained in sections 154(i) and 309 of the Communications Act of 1934, as amended. I. Introduction 1. With the Auction 1000 Request for Comment, the Commission takes another important step toward conducting the broadcast television spectrum incentive auction, a new tool to help meet the Nation's accelerating spectrum needs. The Commission established the rules and policies for the incentive auction in the Report and Order, “Expanding the Economic and Innovation Opportunities of Spectrum Through Incentive Auction,” 79 FR 48441, August 15, 2014 ( Incentive Auction R&O). The Auction 1000 Request for Comment initiates the pre-auction process by which the Commission will develop, based on additional public input, the detailed procedures necessary to carry out the auction. It includes specific proposals on crucial auction design issues such as determination of the initial broadcast television spectrum clearing target, opening bid prices, benchmarks for the final stage rule, and the final television channel assignment process. The legal authority for the Commission's proposals is set forth in the rules the Commission adopted in the Incentive Auction R&O. 2. The incentive auction will include a “reverse auction” in which broadcasters will offer to voluntarily relinquish some or all of their spectrum usage rights, and a “forward auction” of new, flexible-use licenses suitable for providing mobile broadband services. Forward auction proceeds will be used to pay broadcasters that relinquish rights in the reverse auction. As part of the reverse auction, the Commission will reorganize or “repack” the broadcast TV spectrum so that the television stations that remain on the air after the incentive auction occupy a smaller portion of the UHF band. For the incentive auction to succeed, the reverse and forward auctions and the repacking process must work seamlessly. 3. To encourage voluntary broadcaster participation, the Commission is striving to make the reverse auction design simple and transparent from the perspective of the broadcaster bidder. Broadcasters will be able to participate online through an easy-to-use computer interface and will be able to react to prices provided by the auction system rather than having to formulate their own bids. They will have multiple options to relinquish their spectrum usage rights in exchange for a share of auction proceeds—including to cease broadcasting, to continue broadcasting in a different band, or to share a channel with another station. Broadcasters can decide whether to participate after opening prices are announced, and may drop out of the bidding in any subsequent round if they decide the prices are too low. Stations will be treated the same in the repacking process whether or not they participate in the reverse auction. Except for broadcasters that receive auction proceeds in exchange for relinquishing spectrum usage rights, the identities of broadcasters that participate in the auction will remain confidential for a period of two years after the incentive auction. 4. Because the reverse auction and the repacking process are interdependent, the Auction 1000 Request for Comment includes proposals that may affect broadcasters that do not choose to participate in the reverse auction, such as objectives for optimizing final channel assignments in the remaining television bands. In making such proposals, the Commission is mindful of Congress's directive to make all reasonable efforts to preserve the coverage area and population served of eligible broadcasters that remain on the air following the auction, and the Commission seeks to avoid unnecessary disruption to free, over-the-air television service. 5. The proposals in the Auction 1000 Request for Comment are organized into three major sections. First, the integration section addresses how the reverse and forward auctions will be integrated. Among other things, the integration section addresses the determination of an initial spectrum clearing target, how much market variation to accommodate, and the process of moving to subsequent stages of the auction if necessary. The issues and proposals discussed in the integration section may be of interest to potential participants in both the reverse and the forward auctions, as well as to broadcasters that do not choose to participate in the reverse auction. The second and third sections of the Auction 1000 Request for Comment focus on the reverse and forward auctions, respectively. They address opening prices, details of the application process, and bidding procedures for each auction, as well as issues unique to each auction, such as how the repacking process will work in the context of the reverse auction and the final frequency assignment process for licenses won in the forward auction. 6. The Auction 1000 Request for Comment also includes a number of technical appendices, which detail the mechanics of the proposed auction design, such as use of data from the inter-service interference (ISIX) methodology in order to identify potential “impairments” to 600 MHz Band spectrum blocks, optimization procedures for determining the spectrum clearing target and final TV channel assignments, and algorithms for the reverse and forward auctions. The information in the appendices supplements the description of these elements in the Auction 1000 Request for Comment, but the Auction 1000 Request for Comment contains the information necessary for an interested party to evaluate participation in the reverse or forward auction. 7. The major steps of the incentive auction process, based on the proposals in the Auction 1000 Request for Comment, together with the decisions in the Incentive Auction R&O, are illustrated in Appendix A of the Auction 1000 Request for Comment. From the perspective of potential bidders, the major steps will be as follows. (1) Procedures PN: After considering the record produced in response to the Auction 1000 Request for Comment, the Commission will adopt final auction procedures and provide detailed explanations and instructions for potential auction participants in a future public notice ( Procedures PN ). (2) Auction application: Any party wishing to participate in the bidding in either the reverse auction or the forward auction must submit an auction application by a date to be specified in the Procedures PN. Opening prices in the auction will be made available at least 60 days in advance of the deadline for applications to participate in either the reverse or the forward auction. An auction applicant must disclose to the Commission on the application, among other things, specified information about the applicant's identity, certifications, and, for reverse and forward auction applications, respectively, selections regarding bid options or licenses it may wish to bid on. Each applicant will be informed whether its application is complete or deficient in particular respects after Commission staff reviews it for completeness and consistency with the relevant auction rules. Any applicant whose application is incomplete will have a specified period of time within which to resubmit its application to correct deficiencies. (3) Reverse auction initial bid commitment: In order to qualify to bid in the reverse auction, each reverse auction applicant that successfully completes an application must identify one of the bid options it selected on its application as its preferred option, thereby indicating its commitment to relinquish the spectrum usage rights associated with that option at the opening price for that option. (4) Clearing target determination: Based on the commitments of broadcasters in response to the opening prices, the auction system will determine the broadcast TV spectrum clearing target for the initial stage of the auction, which will have an associated 600 MHz Band plan. (5) Forward auction upfront payment: After the clearing target along with the associated band plan is determined, forward auction bidders must submit upfront payments to qualify to bid. Each applicant's upfront payment will establish its bidding eligibility in terms of bidding units. (6) Reverse auction bidding clock phase: Reverse auction bidding will begin. Each qualified bidder will have an opportunity to bid by responding in successive clock bidding rounds to price offers, which may be reduced as bidding progresses. If at any time the price offered is lower than a bidder wants to accept, the bidder can drop out of the bidding. (7) Forward auction bidding clock phase: Forward auction bidding will begin on two different categories of licenses. The license categories will reflect the extent of potential impairments from television stations to a given license. Each qualified bidder will have an opportunity to bid by indicating in successive clock bidding rounds its demands for categories of generic license blocks in specific geographic areas. The auction system will check after each round of clock bidding to determine whether the final stage rule has been satisfied. If bidding stops in “high-demand” markets before the final stage rule is satisfied, the auction system will initiate an extended round of bidding for licenses in those markets aimed at satisfying the final stage rule. If the final stage rule is met after any forward auction round (clock or extended), the auction system will implement the market-based spectrum reserve. Bidding rounds will continue in all markets after the final stage rule is met, ending when demand does not exceed supply. (8) Subsequent auction stage if necessary: If the final stage rule is not satisfied in the forward auction portion of the initial stage, the auction system will move to the next stage of the auction. (9) Final TV channel assignment optimization: After the final stage rule is satisfied, the auction system will determine final television channel assignments for all television stations that will remain on the air following the incentive auction. (10) Forward auction assignment phase: After bidding stops in the clock phase of the forward auction, the forward auction assignment rounds will be conducted to assign frequency-specific 600 MHz Band licenses consistent with the demands of specific bidders in specific geographic areas. 8. The Commission intends to begin accepting applications to participate in the broadcast television spectrum incentive auction in the fall of 2015, and to start the bidding process in early 2016. The Commission will finalize specific deadlines in the Procedures PN, but recognizes the need to give parties adequate notice prior to the application filing date. The Commission will endeavor to give several months' notice prior to the application filing deadline. Parties who may be interested in participating in the reverse or forward auction should regularly monitor the LEARN Web site. The broadcast spectrum incentive auction, which is designated as Auction 1000, will begin with bidding in the reverse auction, designated as Auction 1001, followed by bidding in the forward auction, designated as Auction 1002. Since adopting the Incentive Auction R&O in May, the Commission has made progress on a number of auction-related issues, including how to predict potential inter-service interference in certain areas and the auction's potential impact on low-power television stations, wireless microphones, and unlicensed white space devices. The staff also has released additional information regarding the reverse auction and the repacking process. Well in advance of the auction, the Procedures PN will establish final auction procedures and provide detailed explanations and instructions for potential auction participants. The Commission will resolve outstanding issues outside the scope of the pre-auction process in advance of the Procedures PN. II. Background A. Incentive Auction Order i. 600 MHz Band Plan 9. Pursuant to the Incentive Auction R&O, in the forward auction the Commission will offer licenses for the UHF band spectrum that is repurposed through the incentive auction on a geographic area basis. The service areas for these licenses will be Partial Economic Areas (PEAs). The 600 MHz Band will be licensed in 5+5 megahertz paired uplink and downlink blocks, which will be authorized for fixed and mobile Frequency Division Duplex (FDD) operations. 10. The 600 MHz Band Plan the Commission adopted in the Incentive Auction R&O consists of an uplink band that will begin at channel 51 (698 MHz), followed by a duplex gap, and then a downlink band. Because the incentive auction may be conducted in several stages, each for a different “spectrum clearing target,” the Commission adopted a set of band plan scenarios based on the number of television channels cleared. 11. The first stage of the forward auction will offer licenses corresponding to one of these band plan scenarios, and subsequent stages, if necessary, will offer licenses for scenarios corresponding to lower clearing targets. The 600 MHz Band Plan can accommodate variation in the amount of spectrum recovered in different geographic areas in order to prevent the most restricted market from limiting the quantity of spectrum the Commission can offer generally across the nation. If not all PEAs can be cleared, the 600 MHz Band Plan will accommodate market variation either by including some spectrum blocks subject to inter-service interference, or alternatively, fewer spectrum blocks than in most PEAs across the country. ii. Repacking Process 12. Repacking involves reorganizing television stations in the broadcast television bands so that the stations that remain on the air after the incentive auction will occupy a smaller portion of the UHF band, thereby freeing up a portion of that band for new wireless uses. Prior to the commencement of the reverse auction, the staff will determine the coverage area and population served of every television station whose coverage area and population served the Commission will make “all reasonable efforts” to preserve in the repacking process, using the methodology described in the Office of Engineering and Technology Bulletin No. 69. Based on this data, the staff will develop “constraint files” for each station that will be used to check the feasibility of assigning permissible channels to stations that will remain on the air. 13. Before bidding in the reverse auction begins, the initial “clearing target” for how much broadcast TV spectrum will be repurposed through the reverse auction and the repacking process will be determined based on broadcasters' collective willingness to relinquish spectrum usage rights at the opening prices announced by the Commission. The clearing target will dictate the total number of remaining television channels available for the repacking process. 14. At the start of the reverse auction bidding process, television stations will fall into two general categories: Non-participating stations that will remain on the air after the incentive auction, and participating stations that may or may not remain on the air, depending on the reverse auction outcome. The auction system will use a “repacking feasibility checker” to ensure that every non-participating station is assigned a television channel in its pre-auction band consistent with the Commission's statutory obligation to make reasonable efforts to preserve its population and coverage area. Each time a participating station drops out of the auction, it will be assigned a channel in its pre-auction band consistent with this obligation, and the repacking feasibility checker will determine whether a channel that meets these requirements is available for each individual station that continues to participate in the bidding. 15. Television station channel assignments in the remaining television bands will be provisional throughout the bidding stages of the auction. Final channel assignments will be made after the final stage rule is satisfied and bidding ends in the reverse and forward auctions. At that point, the assignments for each television station that will be assigned a channel in the remaining TV bands will be optimized to ensure efficient final channel assignments that preserve the coverage area and population served of each station and account for the additional goals that the Commission has adopted or will adopt in this pre-auction process. iii. Auction Process 16. The incentive auction will consist of reverse and forward auctions. The reverse auction will collect information about the prices at which broadcast television licensees would be willing to voluntarily relinquish some or all of their spectrum usage rights. The forward auction will consist of a clock phase and an assignment phase. The clock phase will identify the prices that potential users of repurposed broadcast television spectrum will pay for generic spectrum blocks. In the assignment phase, winners of blocks in the clock phase will bid for specific licenses to use the spectrum. The results of both auctions will be used to determine whether the overall reserve price, or final stage rule, has been satisfied. Once the reserve price requirements of the final stage rule are met and bidding meets the conditions of a stopping rule, the overall results of the bidding in both auctions will determine those broadcasters selected to relinquish spectrum usage rights and the amounts of their incentive payments from the reverse auction, as well as the winning bidders for flexible-use 600 MHz Band licenses and the prices they will pay for those licenses from the forward auction. After the final stage rule is satisfied and there is no excess demand for licenses, broadcasters that will remain on the air will receive final channel assignments and winners of generic licenses will have the opportunity to bid for specific frequencies. Then the incentive auction will close. 17. The reverse and forward auctions will be integrated in one or more stages. Each stage will consist of a reverse auction and a forward auction bidding process; multiple stages will be run only if necessary. The forward auction bidding process will follow the reverse auction bidding process. If bidding in the forward auction does not satisfy the final stage rule, additional stages will be run with progressively lower spectrum clearing targets in the reverse auction and fewer licenses available in the forward auction, until the final stage rule is satisfied. 18. In the Incentive Auction R&O, the Commission adopted a descending clock format for the reverse auction in which, in each bidding round, stations will be offered prices for one or more bid options and indicate their choices at those prices. The prices offered to each station for options will be adjusted downward as the rounds progress in a way that accounts for the availability of television channels in different bands in the repacking process. A station will continue to be offered prices for bid options until its voluntary relinquishment of rights becomes needed to meet the current spectrum clearing target. When all remaining bidders' relinquishments are needed in this way, the reverse auction for the stage will end. If the final stage rule is satisfied in that stage, then those bidders will be winning bidders, and the price paid to each will be at least as high as the last price it agreed to accept. 19. For the clock phase of the forward auction, the Commission adopted an ascending clock auction format in which bidders will be able to bid for generic spectrum blocks in one or more license categories, to be followed by an assignment mechanism for frequency-specific licenses. Consistent with the Mobile Spectrum Holdings R&O, 79 FR 39977, July 11, 2014, the forward auction will incorporate a market-based spectrum reserve of blocks for certain eligible bidders. There will be a separate clock price for each license category in each PEA, and bidders will indicate the number of blocks that they demand at the current prices. The prices generally will rise from round to round, as long as the demand for blocks exceeds availability. Bidders still demanding blocks when the clock prices stop rising in every license category in every PEA will become winners provided the final stage rule is satisfied. If the rule is not satisfied, bidders will have an opportunity to make additional bids to meet the rule in an extended bidding round. Once the final stage rule is satisfied, winners may indicate their preferences for frequency-specific licenses in the assignment phase of the forward auction. Final license prices will reflect the winning bid amounts from the clock bidding rounds as well as any adjustments from the extended bidding and assignment rounds. B. Inter-Service Interference (ISIX) Order and Further Notice 20. The Commission recently issued an order establishing a methodology for use during the incentive auction to predict inter-service interference in areas where broadcast and wireless services operate on the same or adjacent channels as a result of market variation. In such areas, television channels may not be available in the remaining television bands for all of the stations that will remain on the air, and one or more stations may have to be assigned channels in the 600 MHz Band, that is, in the portion of the UHF spectrum that generally will be repurposed. Assigning channels to television stations in the 600 MHz Band creates a potential for harmful interference to both broadcast and wireless operations. In addition, some areas may be subject to inter-service interference resulting from existing television stations along the borders in Canada and Mexico. The ISIX Order established a methodology (the ISIX methodology) for predicting such interference. 21. The ISIX methodology varies depending on the applicable interference scenario or case. Cases 1 and 2 relate to interference from television to wireless operations (base stations and user equipment, respectively). Cases 3 and 4 relate to interference from wireless operations (base stations and user equipment, respectively) to digital TV receivers. The applicable interference case depends on where television stations are placed in the 600 MHz Band. 22. In the Incentive Auction R&O, the Commission defined an “impaired” PEA as one in which a 600 MHz Band licensee is restricted to some extent from operating within the geographic boundary of the PEA in order prevent harmful interference to television operations in the 600 MHz Band; and conversely, one in which a 600 MHz Band licensee may receive harmful interference from television operations in the 600 MHz Band. In the ISIX Order, the Commission further clarified that impairments may result in “restricted” and “infringed” areas within a 600 MHz Band service area. A “restricted” area is one in which the wireless operator could cause harmful interference to a television station. An “infringed” area is one in which the wireless operator may receive harmful interference from a television station. The Commission proposed in the ISIX Further Notice, 79 FR 76282, December 22, 2014, to allow wireless carriers to operate in areas where they may receive interference from TV stations, but not in areas where they may cause any harmful interference to television operations in the 600 MHz Band. The Commission further proposed that a 600 MHz Band licensee with an “impaired” license would hold the license for the entire PEA but would be limited to operations within the boundaries permitted under the inter-service interference rules. The ISIX Further Notice also proposed a methodology for use after the auction to prevent inter-service interference based on actual deployment of wireless networks, including a zero-percent threshold for interference to TV stations from wireless services. C. Mobile Spectrum Holdings Order 23. The Commission established the maximum amount of licensed spectrum that will be reserved in each PEA for eligible entities (reserve-eligible entities) in the forward auction for different initial stage spectrum clearing targets. A spectrum clearing target will include licensed spectrum and guard bands; however only licensed spectrum is relevant to determination of the reserve. If the auction does not close in the initial stage, the maximum amount of reserved licensed spectrum in each PEA in subsequent stages will be the smaller of (1) the maximum amount in the previous stage, or (2) the amount that the reserve-eligible bidders demanded at the end of the previous stage. The maximum amount of reserved spectrum is 30 megahertz for initial clearing targets with more than 100 megahertz of licensed spectrum. The Mobile Spectrum Holdings R&O inadvertently omitted the 80 megahertz clearing scenario established by the Commission (as set forth in the technical appendix to the Incentive Auction R&O ) from an accompanying chart. Consistent with the Commission's finding that a maximum spectrum reserve of 30 megahertz is appropriate for most levels of total available spectrum licenses except for levels less than 70 megahertz, the maximum amount of reserved spectrum for an 80 megahertz clearing scenario is 30 megahertz. The actual amount of reserved spectrum will depend on the demand by reserve-eligible bidders when the auction reaches a “spectrum reserve trigger.” The auction system will set the spectrum reserve trigger at the point when the final stage rule is satisfied. III. Proposed Procedures for Overall Incentive Auction Structure, Including Integration of Reverse and Forward Auctions 24. The Commission seeks comment on integrating the reverse and forward auction bidding processes consistent with the staged structure it established in the Incentive Auction R&O. In particular, the Commission seeks comment on procedures for setting the broadcast television spectrum clearing target and for determining whether the final stage rule is satisfied, as well as on the steps triggered by the determination that the final stage rule is satisfied. A. Setting an Initial Spectrum Clearing Target and Determining Impairments 25. The Commission proposes procedures for setting the initial clearing target for the auction. The approach the Commission proposes will establish the highest clearing target possible from among the available options given broadcaster participation in the reverse auction. Alternatively, the Commission seeks comment on whether it should omit any initial clearing targets, such as the 108 MHz clearing target. The auction system will use mathematical optimization techniques to identify provisional TV channel assignments that protect the coverage area and population served of non-participating television stations as required by the Spectrum Act. Where necessary, non-participating stations will be assigned to channels in the 600 MHz Band. Any stations assigned to channels in the 600 MHz Band will be entitled to the same protection in the repacking process as other TV stations, and will be protected from inter-service interference under the standards the Commission adopted in the ISIX proceeding, in which it has proposed strict standards to protect TV stations from such interference. In making such assignments, the Commission proposes that the auction system will minimize potential inter-service interference to 600 MHz Band licenses. To limit the extent of market variation in the provisional TV channel assignment plan, the Commission proposes to limit impairments on a nationwide aggregated basis to less than 20 percent of the total U.S. population (measured on a weighted basis). If a provisional channel plan does not exceed this limit, the auction system may apply any secondary objectives for TV channel assignments that the Commission establishes. If a provisional channel plan exceeds the less than 20 percent limit, however, the process will start again with the next lower clearing target. 26. The Commission first addresses its proposed approach to measuring the extent of potential inter-service interference to 600 MHz Band PEAs in order to set the clearing target. Second, the Commission addresses objectives for determining the location of any TV stations that must be assigned to the 600 MHz Band to accommodate market variation. Third, the Commission explains its proposal to use “weighted-pops” to calculate the market variation associated with a clearing target and propose a standard for limiting market variation. Fourth, the Commission addresses the use of optimization techniques under its proposed approach to setting a clearing target. i. Measuring the Extent of Potential Impairments 27. In order to determine a clearing target, the auction system must be able to evaluate the extent of any potential impairments to licenses in the 600 MHz Band as a result of market variation. In the ISIX R&O, the Commission adopted the ISIX methodology to predict potential inter-service interference between TV and wireless services. Appendix B of the Auction 1000 Request for Comment details how the Commission proposes to use the data produced using this methodology to generate mathematical constraints that enable the auction system to measure the extent of potential impairments to 600 MHz Band licenses in order to set a clearing target. Under the proposed procedure, the raw data the ISIX methodology produced at the two-by-two kilometer cell level would be aggregated into uplink and downlink, county-level data sets (a table cross-referencing counties to PEAs is available on the Commission's Web site at http://transition.fcc.gov/oet/info/maps/areas/ ) and mapped to specific 600 MHz Band licenses in advance of the incentive auction. The percentage of the population of each county subject to inter-service interference then would be calculated for every TV station eligible for protection in the repacking process on every possible channel in the 600 MHz Band. Consistent with the ISIX methodology, which defines each cell as “impaired” or “unimpaired” depending on whether it is subject to any inter-service interference, the procedure would apply a threshold to determine whether a county is “impaired” for each possible TV station and channel combination. 28. The Commission invites comment on a threshold for determining whether a county is “impaired” for purposes of determining impairments for a given clearing target. In particular, the Commission invites comment on setting a threshold within the range of 10-to-20 percent. Under the Commission's proposed methodology, a county with predicted impairment above the threshold for a specific station-channel assignment would be considered wholly impaired, i.e., 100 percent of the county population, for purposes of measuring the extent of impairment in the PEA when setting the clearing target. In considering the impaired population to which the Commission will apply the threshold, it also proposes to distinguish between uplink and downlink impairments. In this regard, a TV station in the uplink portion of the 600 MHz Band might allow unimpaired use of the downlink portion of a paired 5+5 megahertz license. Accordingly, the Commission proposes that rather than consider uplink impairments above the threshold to be wholly impaired as it does with downlink impairments, it consider a county with uplink impairments above the threshold to be 50 percent impaired. Commenters that advocate a different threshold or approach should explain why they believe their approach would better inform the setting of a clearing target. 29. The Commission proposes to aggregate the data in order to reduce the volume of data inputs to a quantity that reasonably can be utilized in setting a clearing target. The data would be aggregated to this level only for use in the optimization procedure to set a clearing target; the Commission proposes that the auction system would provide more detailed data on the location and extent of impairment to 600 MHz Band licenses during the forward auction. 30. Under the Commission's proposed procedure for setting an initial clearing target, the mathematical constraints for measuring impairments that are the inputs to the optimization procedure would be generated before the auction, so that during the auction the optimization can dynamically calculate the percentage of impaired population within each license for any possible combination of TV stations and channel assignments in the 600 MHz Band by adding the total population of the “impaired” counties within the PEA and dividing that sum by the total population of all of the counties within the PEA. The Commission proposes that if a 600 MHz Band license is more than 50 percent impaired by the assignment, the optimization procedure will consider all of the associated weighted-pops to be impaired, consistent with its proposal not to offer such licenses in the forward auction. ii. Assigning TV Stations to the 600 MHz Band as Necessary To Accommodate Market Variation 31. The Commission seeks comment on certain details for assigning television stations to the 600 MHz Band as necessary to accommodate market variation. Under the Commission's proposed approach, the auction system will use mathematical optimization techniques to identify a provisional TV channel assignment plan for stations that elect not to participate in the auction that best meets certain primary objectives. While these techniques will identify channels in the remaining TV bands for as many of these stations as possible, the auction system may not be able to assign channels in the remaining bands to all of the stations that must be assigned channels in areas that are constrained due to factors such as lack of broadcaster participation in the reverse auction or international border-related issues. Under such circumstances, the auction system will assign television stations to channels in the 600 MHz Band. Any television stations assigned to channels in the 600 MHz Band will be entitled to the same protection in the repacking process as other TV stations, and will be protected from inter-service interference under the standards the Commission adopts in the ISIX proceeding, in which it has proposed not to allow any harmful interference to TV stations from wireless services. 32. Importantly, although TV channel assignments in the broadcasting portion of the band will be provisional until the final channel assignment process, which occurs after bidding ends in the final stage of the auction, under the Commission's proposed approach any assignments of television stations to channels in the 600 MHz Band will be fixed prior to the start of the forward auction for that stage, and those assignments will be final if no subsequent stages of the auction are necessary. Thus, a television station's assignment to a channel in the 600 MHz Band for purposes of setting a clearing target may determine both its post-auction channel assignment and the specific impairments to 600 MHz Band blocks that will be offered in the forward auction, depending on whether the final stage rule is satisfied in that stage. If subsequent stages are necessary, the auction system will generate a new band plan that may involve different provisional TV station and channel assignments in the 600 MHz Band. In contrast to any TV channel assignments in the 600 MHz Band, the vast majority of assignments to channels in the remaining television bands will change constantly during the repacking process. 33. Because of differences in wireless uplink and downlink transmission technologies, location of a television station in the downlink or uplink portion of the 600 MHz Band is likely to affect the extent of impairments to affected PEAs and, therefore, 600 MHz Band license prices. In particular, uplink impairments are likely to affect larger geographic areas than downlink impairments, although whether that interference to a larger area translates into a significantly larger impact on value to the forward auction licenses depends on the population density within a PEA. Uplink impairments also may affect fewer spectrum blocks than downlink impairments, however, because they would allow for unimpaired use of the downlink portion of a 600 MHz Band license by carriers with below-1 GHz uplink spectrum. On the other hand, assigning stations to the downlink band would limit the geographic reach of impairments and promote greater contiguity with television stations in the remaining TV bands. Assigning stations to the downlink band, and/or only to the licensed portion of the uplink band, would also result in more consistently usable nationwide spectrum for wireless microphones and unlicensed devices that will operate in the duplex gap, i.e., the guard band between 600 MHz Band uplink and downlink services. In cases where a television station must be assigned to a channel in the 600 MHz Band in order to meet a given clearing target, the Commission proposes to assign these stations based on its goal of minimizing the loss of value due to impairments, i.e., minimizing the total impaired weighted-pops nationwide. Under this proposal, the optimization procedure could assign TV stations to any frequency in the 600 MHz Band. This could lead to assignments in the uplink portion of the 600 MHz Band in some markets, and in the downlink portion in others. The Commission proposes to include this objective in the optimization procedure consistent with its goals of limiting the potential for inter-service interference and maintaining a generally consistent band plan. In addition, the proposed objective will increase the likelihood of meeting the incentive auction reserve price conditions at the initial clearing target. On the other hand, the Commission recognizes that this approach may result in assigning television stations to the duplex gap or other guard bands in some markets, and limit the contiguity of TV stations if they are not assigned to the downlink portion of the 600 MHz Band. 34. Alternatively, the Commission seeks comment on whether it should assign stations to the downlink portion of the 600 MHz Band whenever feasible to do so, in the interest of greater contiguity and ensuring more consistently usable nationwide unlicensed spectrum. The Commission notes that by limiting the choice of assignments, a downlink-only approach may make it more difficult to identify an assignment of TV stations that meets the less than 20 percent standard than would its more flexible proposed approach and, therefore, could result in setting a lower clearing target. The Commission invites commenters to address the costs and benefits of its proposal and the alternative, including the potential impact on broadcast and wireless licensees, as well as on wireless microphones and unlicensed devices, and to discuss how the Commission should prioritize objectives where multiple outcomes are possible. In the Part 15 NPRM, 79 FR 69709, November 21, 2014, the Commission proposed technical criteria for wireless microphones and unlicensed devices for each possible guard band size (7, 9, or 11 megahertz). iii. Standard for Limiting Market Variation 35. In the Incentive Auction R&O, the Commission established that the 600 MHz Band Plan will allow for market variation, while recognizing that it is important to limit the potential for inter-service interference and maintain a generally consistent band plan nationwide by applying a “near-nationwide” standard. The Commission therefore proposes to limit the amount of market variation associated with the initial spectrum clearing target by limiting impairments on a nationwide aggregated basis to less than 20 percent of “weighted-pops.” The Commission believes that its proposed approach will promote the central goal of a successful auction that allows market forces to determine the highest and best use of spectrum. By accommodating market variation, it will ensure that broadcasters have the opportunity to participate in the reverse auction in markets where interest is high, and avoid the need to restrict the licenses offered in the forward auction to the number available in the most constrained market. At the same time, by strictly limiting the total amount of market variation associated with a clearing target, it will limit the potential for inter-service interference and help 600 MHz Band licensees achieve economies of scale when deploying their new networks. The Commission's proposed approach also takes into account the relative costs and benefits of impairing licenses in different PEAs. 36. For purposes of applying the near-nationwide standard, the Commission proposes to measure the impact of potential impairments in terms of “weighted-pops,” weighting the affected population in a license area by an index of area-specific prices from prior auctions. The same weighted-pops amount will be applied for each spectrum block in a PEA. This index is the same index used for calculating bidding units before applying the proposed decile approach. Both indices are provided in Appendix F of the Auction 1000 Request for Comment . The Commission proposes to incorporate the final results of the auction of AWS-3 licenses (Auction 97) when calculating the indices. The Commission seeks comment on whether it should group the index by deciles for purposes of applying the near-nationwide standard as it proposes for calculating bidding units. Under this approach, for a given clearing target and assignment of TV stations to channels, the Commission calculates the percentage of the population impaired in every PEA for each license using the county level data generated using the measurement approach. The Commission multiplies that percentage by the weighted-pops associated with the PEA to determine the “impaired weighted-pops” for the license. To calculate a nationwide total of impaired weighted-pops, the impaired weighted-pops for all licenses associated with a clearing target will be added together. This total will then be divided by the nationwide total number of weighted-pops for all licenses associated with that clearing target to determine whether the maximum aggregate nationwide impairment standard or threshold is satisfied. The Commission believes that its proposed approach to applying a threshold provides for flexibility in balancing the population that will be affected by potential inter-service interference with the number of markets that will be affected, and accounts for the relative value of the market to wireless providers based on past auction prices. Alternatively, the Commission seeks comment on whether it should use a metric that does not weight population by the amount of bandwidth and/or by a price index. For example, an alternative metric could require that 80 percent of the U.S. population (or price-weighted population) must be in areas not considered impaired, regardless of the quantity of impaired spectrum in any one area. 37. The Commission proposes to set the near-nationwide standard at less than 20 percent. Under this standard, a clearing target could be chosen only if 80 percent or more of the weighted-pops in the targeted amount of spectrum nationwide is considered unimpaired according to its methodology. If the provisional TV channel assignment plan associated with a clearing target results in potential impairments to 20 percent or more of the total number of weighted-pops nationwide, the auction system would consider a lower clearing target. The Commission believes that a less than 20 percent limit is appropriate to avoid reducing the amount of spectrum that will be available in most areas nationwide while ensuring that, for any given clearing target, 600 MHz Band Plan licenses generally will not be affected by inter-service interference. The Commission's proposal to use weighted-pops also will help to ensure that most of the spectrum in the most heavily-weighted PEAs remains unimpaired. 38. The Commission seeks comment on these proposals. The Commission also invites comment on alternatives to its proposed near-nationwide standard. For example, should the Commission set a lower standard? Should the Commission require that certain PEAs, or a specific number of PEAs ( e.g., 40 of the top 50 PEAs as measured by total population), not have any Category 2 licenses in order to choose a clearing target? The Commission encourages commenters to address the trade-offs involved in any alternative approach that they advocate. iv. Clearing Target Optimization Procedure 39. Consistent with the Incentive Auction R&O, the process the Commission will use to set the initial clearing target will incorporate mathematical optimization techniques. The proposed optimization procedure is set forth in detail in Appendix C of the Auction 1000 Request for Comment . This process will also provisionally assign television stations to channels under an assignment plan that best meets the rules and objectives the Commission proposes. Once a clearing target is set, the resulting provisional assignment plan of television stations to channels in the television bands will be used by the reverse auction system as the initial tentative assignment, and information about license impairments due to stations assigned in the 600 MHz Band will be used in the forward auction portion of the stage. 40. The proposed procedure will apply a number of rules or constraints that any provisional assignment plan must satisfy. It will ensure that any assignment plan includes a permissible channel in its pre-auction band for every television station that is not participating in the reverse auction. The procedure will apply the technical repacking constraints established in the Incentive Auction R&O, taking into account any fixed constraints specific to an area or a channel that would prevent an assignment of a station to a channel, as well as all other stations that cannot be located on a co- or adjacent channel. The procedure also will determine an initial assignment of participating stations to relinquishment options consistent with the station's initial commitments made during the application process and will attempt to assign as many stations as possible to their preferred option. 41. The Commission proposes that the primary objective of the proposed clearing target optimization procedure will be to minimize the total impaired weighted-pops nationwide. The optimization procedure will measure the percentage of population impaired in a PEA for a given television station and channel assignment using the measurement approach and described in more detail in Appendix C of the Auction 1000 Request for Comment . Thus, the optimization procedure will determine a feasible assignment of television stations to channels in the remaining TV bands where possible and, as necessary, assign stations to channels in the 600 MHz Band so as to minimize potential impairments to 600 MHz Band licenses. 42. In addition to these primary rules and objectives, the procedure could consider additional criteria in setting a clearing target. For example, should the procedure apply criteria to account for operation of the proposed dynamic reserve price process? Should it apply criteria to increase the likelihood of satisfying the final stage rule? The Commission seeks comment on whether to apply additional criteria in setting a clearing target. The Commission asks commenters to keep in mind that the tradeoff from stricter requirements may be to move to a lower clearing target, where fewer licenses will be available and fewer stations will be needed to relinquish spectrum usage rights. 43. Any channel assignment plan that satisfies the primary rules and objectives also may be modified for secondary objectives, provided that it does not violate the Commission's less than 20 percent standard for impairments. Should the Commission incorporate a secondary objective that would favor an initial channel assignment with at least a minimum level of vacancy in the broadcasting portion of the band, so as to give the auction system more flexibility to find feasible assignments during the bidding rounds, potentially avoiding the need to move to a lower clearing target because it failed to meet the final stage rule? In this context, should the Commission consider requiring that the 20 percent nationwide standard include sufficient vacancy to accommodate additional impairments created during any reverse auction dynamic reserve pricing procedures? The Commission seeks comment on possible secondary objectives to be applied in the optimization procedure. Because the optimization procedure may identify more than one possible assignment plan that satisfies the primary rules and objectives, the Commission particularly seeks comment on how the procedure should choose between plans to best meet the goals of the incentive auction. For example, the Commission asks commenters to consider whether the procedure should favor an assignment in which the number of 600 MHz Band blocks, or the number of Category 1 blocks (a Category 1 license is any license with potential impairments that do not exceed 15 percent of the population) is most nearly the same in the largest number of PEAs, in order to promote the geographic contiguity of the band plan. Alternatively, the Commission invites comment on whether the optimization procedure should try to minimize the number of PEAs—or the number of particular PEAs—in which Category 2 blocks outnumber Category 1 blocks, to avoid having PEAs with significantly fewer Category 1 blocks than are available in most areas nationwide. B. Final Stage Rule 44. The final stage rule the Commission adopted in the Incentive Auction R&O incorporates an aggregate reserve price based on the bids in the forward auction. Satisfaction of the rule conditions will cause the current stage to become the final stage for the auction's clock bidding rounds. The rule has two components, both of which must be satisfied. The first and second components are complementary and not cumulative. The auction must satisfy both components, but it need not raise sufficient proceeds to satisfy the first in addition to the second. Rather, the same bids and proceeds can be considered when satisfying each component. The Commission seeks comment on determining the price and spectrum clearing benchmarks for the first component of the rule, as well as on other rule implementation issues. i. First Component: Average/Aggregate Prices in Forward Auction 45. The Commission proposes an average price per MHz-pop (the term MHz-pop is defined as the product derived from multiplying the number of megahertz associated with a license by the population of the license's service area, i.e., PEA, for the 600 MHz band, specifically) benchmark of $1.25 for spectrum offered in the largest 40 PEAs by population in the forward auction and a forward auction spectrum benchmark of 70 megahertz, corresponding to a broadcast spectrum clearing target of 84 megahertz. The Commission also seeks comment on its proposal to consider a subset of those licenses in applying the first component of the final stage rule. 46. The first component ensures that winning bids for the licenses in the forward auction reflect competitive prices. The Commission explained in the Incentive Auction R&O that the first component of the reserve price will be satisfied if, for a given stage of the auction: (1) The average price per MHz-pop for licenses in the forward auction meets a price benchmark that will be set by the Commission in the pre-auction process; or (2) the total proceeds associated with licenses in the forward auction exceed the product of the price benchmark, the forward auction spectrum benchmark, and the total number of pops for those licenses. The determination of the average price and spectrum clearing benchmarks is therefore essential to the implementation of the first component of the final stage rule. 47. Setting an average unit price benchmark of $1.25 per MHz-pop in the largest 40 PEAs by population will accomplish the Commission's goal of “assuring that prices for licenses in the forward auction reflect competitive values without reducing the amount of spectrum repurposed for new, flexible-use licenses.” The closest comparable spectrum auction—Auction 73—generated an auction-wide average price per MHz-pop of $1.28 and an average price among paired spectrum blocks of $1.36. Since that auction closed in early 2008, spectrum prices generally appear to have increased, although the growth rate cannot be validated based on comparable data due to the absence of final results for a large-scale auction in that period. Moreover, because the prices of 600 MHz Band licenses will be determined by the forward auction bidding, the Commission believes that any aggregate reserve price it sets should reflect a “floor” and not a “ceiling” of the “competitive values” of these licenses, in order to provide sufficient margin to account for the inherent price uncertainty present in any auction. 48. The Commission proposes to set the forward auction spectrum benchmark to correspond with the spectrum recovery scenario in which the Commission clears 84 megahertz of broadcast TV spectrum and offer licenses for 70 megahertz of spectrum in the forward auction. The spectrum benchmark will be used as part of the alternative formulation of the final stage rule's first component, which “recognizes that if the incentive auction repurposes a relatively large amount of spectrum for flexible uses, per-unit market prices may be expected to decline consistent with the increase in available supply.” An 84 megahertz broadcast TV spectrum clearing target, which would repurpose all of the spectrum between TV channel 37 and the 700 MHz Band and provide 70 megahertz of spectrum in the forward auction, would promote the Commission's competitive goals by enabling multiple bidders to obtain low-band spectrum. Therefore, the Commission believes that this threshold is appropriate for the forward auction spectrum benchmark. 49. The Commission proposes to determine whether the first component of the final stage rule is satisfied based on the average prices for a subset of PEAs likely to be subject to the greatest level of demand. The Commission proposes to include in the subset the 40 largest PEAs by population because they cover geographic areas that have usually generated the highest average prices per MHz-pop in prior spectrum license auctions. In previous auctions, prices for licenses in these “high-demand” areas have accounted for a substantial fraction of total auction revenues, and further, licenses in “high-demand” areas tend to reach their final prices well before bidding stops on all licenses, making these markets a good leading indicator of final auction revenues. Further, using this subset of PEAs will promote a speedy auction by enabling the auction system to determine quickly when the final stage rule will not be met necessitating a new stage with a lower clearing target. The Commission seeks comment on this use of “high-demand” PEAs and the proposed definition of this “high-demand” subset. 50. The Commission further proposes, in considering whether average prices meet the benchmark, to consider only bids for spectrum blocks in Category 1. The Commission proposes to offer spectrum blocks in two categories of generic licenses for bidding in the forward auction. Specifically, the Commission defines a Category 1 license as any license with potential impairments that affect zero to 15 percent of the population of a specific PEA, and as Category 2, any license with potential impairments that affect greater than 15 percent but less than or equal to 50 percent of the population. Limiting the Commission's consideration of blocks in this manner is consistent with its proposed use of data from other auctions in determining the relevant average price, as the licenses in those prior auctions were not impaired in a manner comparable to the proposed licenses in Category 2. 51. Applying the Commission's proposals to the first component of the final stage rule, as explained in more detail in Appendix G of the Auction 1000 Request for Comment, the first component will be satisfied if the average price per MHz-pop for Category 1 licenses in “high-demand” PEAs in the forward auction equals or exceeds $1.25 per MHz-pop at clearing targets at or below the benchmark clearing target. For clearing targets above the benchmark clearing target, the Commission proposes to consider current auction proceeds for all licenses when comparing to the proceeds that would be generated by the benchmark price for “high demand” PEAs and the benchmark clearing target. This simplifies the evaluation of the formulation since the Commission will compare a number publicly announced at the end of every round (the total forward auction proceeds) to a fixed number known in advance (the product of the price and spectrum benchmarks that it adopts, and the total number of pops covered by licenses in “high-demand” PEAs). Under this formula, the first component of the final stage rule may be satisfied even if the overall average price per MHz-pop in the “high-demand” PEAs fails to meet the proposed $1.25 price benchmark. 52. In evaluating whether the first component of the final stage rule is satisfied, the Commission also proposes not to take into account any adjustments to final clock prices. Thus, the Commission proposes to rely on gross bids, rather than bids net of individual bidders' bidding credits or any adjustments for impairments. The first component is intended to assess whether the bids reflect competitive prices for the licenses. The Commission tentatively concludes that the clock prices will adequately measure competitive prices for the licenses in the proposed Category 1, even though the full amount of the clock price may not be collected from every winning bidder. Moreover, since winning bidders will not yet be determined at the time the final stage rule is met, it will not be clear which licenses will be subject to bidding credits. The clock price reflects a common metric for pricing the licenses and is appropriate to use in assessing whether the first component of the final stage rule has been satisfied. ii. Second Component: Covering Costs 53. The second component of the final stage rule requires that the proceeds of the forward auction be sufficient to meet mandatory costs and expenses set forth in the Spectrum Act and any Public Safety Trust Fund amounts needed in connection with FirstNet. Given the purpose of assuring sufficient proceeds for specified purposes, the Commission proposes a conservative approach to estimating the proceeds resulting from forward auction bids for evaluating whether the second component is met. 54. The Spectrum Act requires that the forward auction generate proceeds sufficient to pay three types of expenses: payments to winning bidders in the reverse auction; the Commission's relevant administrative costs of the auction; and an estimate of broadcaster relocation costs eligible for reimbursement. In addition, the Commission concluded that the forward auction proceeds also must cover a fourth expense: any Public Safety Trust Fund amounts still needed to provide funding for FirstNet as contemplated in the Spectrum Act. 55. The reverse auction itself will determine the amount of the first expense. With regard to the second expense, the Commission cannot yet provide a reliable estimate of the amount of its expenses in conducting the incentive auction because there is still much work to do before it can conduct the auction. The Commission therefore proposes here to provide an estimate in the Procedures PN and a maximum percentage by which the final amount might vary from that estimate. The final amount for purposes of the final stage rule would be provided no later than the commencement of bidding. The flexibility in this approach will enable the Commission to discharge its statutory obligation to recover the relevant expenses from auction proceeds while providing adequate information to potential and actual auction participants to make informed decisions about participating and bidding. 56. With regard to the third expense that must be covered, the actual amount that will be needed to reimburse broadcasters from the TV Broadcaster Relocation Fund (Reimbursement Fund) will not be known until sometime after the auction. In any event, the Spectrum Act provides that the forward auction must generate proceeds sufficient to meet the Commission's estimate of the total expenses, as opposed to the actual amount. The Commission proposes to estimate this amount at $1.75 billion, the maximum amount that the Spectrum Act permits it to deposit in the Reimbursement Fund. The Commission considers setting this expense at the maximum amount to be prudent in light of the difficulty of estimating the amount in advance and the substantially conflicting range of estimates suggested in the record to date. 57. With regard to the fourth expense, the Commission proposes to announce in the Procedures PN any amount needed in the Public Safety Trust Fund to provide funding for FirstNet. The maximum amount of the Public Safety Trust Fund deposits to be made available to FirstNet for build out under the Spectrum Act is $7 billion. The amount that the incentive auction must provide will depend on the proceeds generated for FirstNet by the auction of AWS-3 licenses (Auction 97) and whether, once Auction 97 has been concluded, there are any Public Safety Trust Fund amounts still needed to provide funding for FirstNet as contemplated in the Spectrum Act. The Commission is optimistic that upon the conclusion of Auction 97, it will be clear that deposits to the Public Safety Trust Fund will be sufficient to fully fund requisite amounts for FirstNet. 58. The Commission proposes to take into account discounts that may affect actual amounts paid by winning bidders when evaluating whether the second component of the final stage rule is satisfied. Given the second component's purpose of assuring sufficient proceeds for specified purposes, the Commission believes a more conservative approach to estimating the ultimate proceeds resulting from forward auction bids is appropriate than for the first component of the final stage rule. Accordingly, in determining whether the second component has been satisfied, the Commission proposes to take into account any discounts based on impairments, as well as discounts based on small business bidding credits applicable to particular bidders. 59. A final license price may be adjusted to take into account the extent of any impairments that exist in the license. Accordingly, the Commission proposes here that it use the available information regarding the extent of the impairments when evaluating the final stage rule to discount the current clock price by the impairments. Doing so effectively will apply the same percentage discount that will be applied to the final price for the license, presuming the final stage rule is satisfied. The estimate used will be the lowest amount possible for the final price, which ultimately may be larger based on bidding in clock rounds and any additional bidding on the license in the assignment phase. 60. It is more difficult to estimate the final effect of small business bidding credits on auction proceeds prior to the conclusion of the auction. In order to do so, the Commission proposes that the auction system will presume that the bidder with the largest bidding credit will win the blocks it is bidding on and then proceed to the bidder with the next largest bidding credit and so on, until there are no more blocks left. Moreover, the Commission proposes to presume that the bidders with the largest bidding credits will win the blocks that are least impaired and thus, subject to the least adjustment based on the extent of impairment. The Commission believes that this approach is appropriate in light of the purpose of the second component. The Commission notes that a more conservative approach would be to discount all bids by the largest bidding credit claimed by any bidder in the auction, thereby assuring that the final winning bids could not be any lower than the estimate. However, the Commission does not propose to take this more conservative approach because it likely would overestimate substantially the discounts on final winning bids. 61. Unlike other bidding credits, winning bidders initially apply for Tribal lands bidding credits after the close of bidding, and so the amount of any Tribal lands bidding credits will not be known until after the auction, making it very difficult to assess their effect on auction proceeds. In past auctions, the Commission addressed this difficulty with a rule (47 CFR 1.2110(f)(3)(v)) that limits any amounts disbursed as Tribal lands bidding credits based on the available funds that exceed the relevant reserve price. The rule thus allows the award of Tribal lands bidding credits so long as the awards do not reduce the amount of funds otherwise required by a reserve price. The second component of the final stage rule specifically functions to assure that auction proceeds will equal or exceed the total of the four expenses that the second component reflects. Accordingly, the Commission proposes to apply 47 CFR 1.2110(f)(3)(v) with respect to the amount of the second component to preclude the possibility that the post-auction award of Tribal lands bidding credits could reduce auction proceeds below the total of the four expenses. Under this proposal, so long as there are sufficient proceeds to fund both the four expenses and any Tribal lands bidding credits, the credits will be awarded in full. If the proceeds are not sufficient to cover both the four expenses and any such Tribal lands bidding credits, the credits will be reduced proportionally as provided in 47 CFR 1.2110(f)(3)(v) so that the four expenses will be covered in full and any credits awarded will use only proceeds in excess of the total of the four expenses. Commenters objecting to this proposal should specify an alternative approach to prevent total auction proceeds from falling below the amount of the final stage rule's second component. C. Stage Structure 62. In the Incentive Auction R&O, the Commission decided that the incentive auction will begin with reverse auction bidding followed by forward auction bidding in the initial stage and that, if necessary, bidding will continue over multiple stages, each including reverse and forward auctions, for successively lower clearing targets, until the final stage rule is met. Here the Commission seeks comment on remaining issues related to the stage structure. In particular, the Commission proposes procedures to determine whether the auction is in its final stage. The Commission also proposes procedures for moving to an extended round if certain conditions are met, as well as steps for transitioning to a new stage if necessary. i. Sequence of Reverse and Forward Auctions 63. Consistent with the Commission's decision in the Incentive Auction R&O regarding the first stage, the Commission intends that in any stage, the reverse auction will occur first, to be followed by the forward auction. Under this proposal, the reverse auction will run until the reverse auction stopping rules are met. The forward auction will commence once the reverse auction has stopped. 64. The Commission seeks to provide the minimum necessary time between the reverse and forward auctions in any stage. The Commission therefore proposes to start forward auction bidding in the initial stage on the second business day after the close of bidding in the stage's reverse auction. With respect to any subsequent stages, the Commission proposes to start forward auction bidding on the next business day after the close of reverse auction bidding. Before forward auction bidding commences in any stage of the auction, forward auction bidders will be informed of the number of blocks to be offered in each PEA and the degree to which any of those blocks are impaired. The Commission seeks comment on this proposal. If commenters suggest a longer interval, the Commission asks that they provide details on why a longer period is desirable. ii. Final Stage Determination and Implementation of Extended Round 65. The Commission proposes to evaluate whether the final stage rule is met throughout forward auction bidding in order to determine as quickly as possible whether the auction is in its final stage. This approach will allow the auction system to implement procedures triggered by satisfaction of the rule as early as possible and promote the speedy conclusion of the overall auction process. Specifically, the auction system will evaluate whether forward auction proceeds are sufficient to satisfy the final stage rule as part of the bid processing that occurs after each round of forward auction bidding. As prices and associated auction proceeds increase during the forward auction, the auction system will have the needed information to evaluate whether all required conditions of the final stage rule have been met. 66. The Commission also proposes to implement an “extended round” in which bidders will have the opportunity to increase their bids to make up any shortfall in the final stage rule under specified circumstances. The purpose of an extended round is to attempt to satisfy the final stage rule without moving to a new stage and lower clearing target. In the absence of an extended round, the current stage of the auction would be deemed to have failed and the auction would move to a new stage with a reduced clearing target. iii. Transition to Any Subsequent Stages 67. After the conclusion of a stage that has ended without satisfying the final stage rule, and prior to beginning of any subsequent stage, the Commission proposes that the auction system will announce the new bidding schedule, including the date and time that bidding will start in the reverse auction portion of the next stage. If the auction must move to a new stage, the Commission proposes to set the clearing target for the next stage as the next lowest clearing target. Alternatively, the Commission seeks comment on whether the benefits outweigh the costs of skipping some clearing targets. For example, should the Commission skip the 108 MHz clearing target when moving to a lower clearing target because under that scenario two downlink blocks are separated from the remaining downlink blocks by channel 37? D. After the Final Stage Rule Is Satisfied 68. When forward auction bidding satisfies the final stage rule, that stage of the auction will be the final stage. Meeting the final stage rule will not “close” the forward auction, however, as long as demand exceeds supply in any PEA. Rather, bidding will continue until demand does not exceed supply for all blocks in all PEAs. When this clock phase of the auction ends, the next step in the forward auction will be the assignment phase in which successful forward auction bidders will bid for frequency-specific licenses equal to the number of blocks they won in the clock phase. The Commission proposes that bidding in the assignment phase of the forward auction will start five business days after the auction system provides more detailed information about the assignment phase. The Commission recognizes that forward auction bidders will need a period of time to develop bidding strategies for the assignment phase, particularly since this is the first time it has conducted a frequency assignment phase. However, the Commission's goal is to conclude the incentive auction as efficiently as possible. Thus, the Commission believes the interval it proposes before beginning the assignment phase should be adequate. IV. Proposed Reverse Auction Procedures A. Relinquishment Options and Information Available 69. The Commission explained in the Incentive Auction R&O that the purpose of the reverse auction is to identify broadcasters willing to relinquish some or all of their spectrum usage rights, and the corresponding incentive payments those broadcasters will require, in order to clear a stage-specific spectrum clearing target. To this end, the Commission adopted a descending clock auction format, relinquishment options, and a repacking methodology that will be incorporated into the reverse auction system. Bidding will take place in a series of rounds in which a bidder will be presented with price offers for each of its valid options for relinquishing spectrum usage rights. The Commission seeks comment on procedures to implement the various relinquishment options it established. The Commission also addresses the information that will be made available to bidders and to the public during the reverse auction bidding process. i. Options for Relinquishing Spectrum Usage Rights 70. The Commission proposes to implement the relinquishment options established in the Incentive Auction R&O by giving each bidder the opportunity to bid for the various options that are open to it given the station's pre-auction band location (UHF, High-VHF, or Low-VHF). Specifically, a licensee with a UHF station can bid to relinquish all spectrum usage rights and go off-air, or to move to a High-VHF channel or a Low-VHF channel. A licensee with a High-VHF station can bid to go off-air or to move to a Low-VHF channel. A licensee with a Low-VHF station can bid only to go off-air. To incorporate the channel sharing option into the bidding process, the Commission proposes that a participant that wishes to relinquish rights in order to share another licensee's channel will bid to go off-air, following the same bidding procedures as bidders that wish to go off-air without retaining a license. Throughout the auction, all bidders will maintain the option of declining to accept a price offer for an option, indicating that at this price or lower, they choose to drop out of the bidding. 71. The Commission proposes to treat the various options available to broadcasters, from license relinquishment to remaining on the air in their pre-auction bands, as a hierarchy in order of relinquishment and value to the auction. With regard to a UHF station, bidding to go off-air would be at the top, or first, in the hierarchy, followed by a move to Low-VHF, then to High-VHF, and finally, remaining on the air in its pre-auction band. Bidding to go off-air would be first in the hierarchy for High-VHF and Low-VHF stations as well, followed by a move to Low-VHF (for High-VHF stations only), and then remaining on the air in their respective pre-auction bands. The Commission will later refer to this ordering in addressing several of its proposed reverse auction implementation procedures. 72. The Commission proposes that a bidder will not be permitted to bid for options that would involve greater relinquishments than the most recent option selected. Under the Commission's proposal, the auction system will permit a bidder to move up (from greater relinquishment to less), but not down. For example, assuming a bidder with a UHF station selects all three relinquishment options in its application and then indicates its preferred option is to go off-air, the auction system will allow the bidder to choose the option of moving to a Low-VHF channel (if there is a vacancy in the Low-VHF band) later in the bidding, but not vice versa. If and when the auction system accepts that change in the bidder's preferred option, the bidder will not be allowed to request to go off-air later because that would represent a move down in the hierarchy of options. Likewise, selecting the option of moving to a High-VHF bid would preclude later bidding to go off-air. The Commission proposes this approach so that the auction system can calculate price offers based on consistent indications of bidder preferences, which will simplify bidding choices and lead to a speedier reverse auction. 73. The Commission proposes to treat a channel-sharing bid as the Commission does a bid to go off-air because, from the perspective of the auction system, a channel sharing bid is identical to a license relinquishment bid. Under this proposal, a bidder that seeks to relinquish its rights and share a channel with another broadcaster will be required to enter into a channel sharing agreement before the bidding, and will continue to hold a broadcasting license following the auction, but will not be subject to different bidding procedures during the auction than other participants that are going off the air. A broadcaster that relinquishes spectrum usage rights in order to share a channel will have its post-auction channel determined according to its contract with its channel sharer—that is, another broadcaster that remains on-air. The Commission notes that parties to a channel sharing agreement bear the consequences of any defects in the agreement or the failure of either party to perform pursuant to its terms. The Commission is not a guarantor or an enforcer of channel sharing agreements. ii. Reverse Auction Information Available During the Auction 74. The Commission proposes to limit the disclosure of information regarding bidding during the auction. This proposal is separate and apart from the Commission's statutory obligation to maintain the confidentiality of information regarding the identity of participating broadcasters. 75. Specifically, the Commission proposes that the auction system will offer each reverse auction bidder only the prices for options specific to its station(s). Under the Commission's proposed approach bidders will not know the prices being offered to other bidders. 76. The Commission proposes that while the incentive auction is open, it will disclose to the public the current stage status, specifically the stage number and whether or not bidding is still open in the reverse auction for that stage. When bidding in the reverse auction for a stage is closed, the Commission also will disclose to the public the total of reverse auction bids that the forward auction proceeds must satisfy as part of the second component of the final stage rule. B. Application To Participate and Commitment to Initial Relinquishment Option 77. The Commission seeks comment on particular aspects of the reverse auction application process. Specifically, the Commission seeks comment on information to be provided from potential channel sharers, i.e., stations that may or may not participate directly in the auction and that have agreed to share a channel with an auction participant that relinquishes its spectrum usage rights in the auction. The Commission also seeks comment on information to be required from certain participants whose eligibility is uncertain, and from all participants with respect to their exercise of due diligence prior to participating. In addition, the Commission describes how each applicant will identify—and commit to—its initial preferred option among the available options for relinquishing spectrum usage rights. i. Information From Channel Sharing Participants 78. The Commission proposes that any auction applicant submitting a channel sharing agreement with its application also be required to submit a separate certification by the channel sharer that the channel sharing agreement submitted is a true, correct, and complete copy of the channel sharing agreement between the parties. This certification must be executed by a party with authority to make such representations on behalf of the channel sharer. The Commission adopted rules in the Incentive Auction R&O outlining the information required of an applicant seeking to participate in the auction in order to share a channel after the auction. Under these rules, channel sharers—stations that agree to share their channels after the auction with stations that relinquish rights in the auction in order to channel share—need not apply to participate in the auction. However, they must provide any “necessary” certifications. The Commission believes that the proposed certification is necessary in order to smooth the post-auction transition by helping to assure the accuracy of the channel sharing agreement submitted with the application. ii. Agreement to Escrow, if Necessary for Participation 79. The Incentive Auction R&O considered the circumstances of broadcasters that have licenses that have expired or are subject to a revocation order (collectively a “license validity proceeding”), or that have Class A stations subject to a downgrade order, when the license validity proceeding or Class A downgrade order has not become final and non-reviewable by a date prior to commencement of the auction that will be specified in the Procedures PN. If the license invalidity determination becomes final between the time a broadcaster is found to be qualified to participate in the reverse auction and commencement of reverse auction bidding, the broadcaster will be excluded from participating in the reverse auction. In those circumstances, the Commission established that the broadcaster is allowed to participate provided that its reverse auction proceeds would be placed in escrow pending the final outcome of the license validity proceeding or order. The Commission similarly established that a broadcaster with a pending enforcement matter or a pending license renewal application that raises an enforcement issue is allowed to participate in the reverse auction, on condition that such a broadcaster that no longer would hold any broadcast licenses upon acceptance of a license relinquishment bid agrees that a share of its reverse auction proceeds be placed by the Commission in escrow to cover potential forfeiture costs. The Commission now proposes the mechanism for implementing this arrangement in those circumstances where it is appropriate. Specifically, the Commission proposes that broadcasters with pending enforcement, license renewal, or other potential eligibility impediments must agree, as part of their application to participate in the auction, that auction proceeds which they otherwise could receive for relinquishing spectrum usage rights will be held by the U.S. Treasury. The U.S. Treasury would maintain the funds that are held back in a manner that accounts for each broadcaster's potential share pending the final resolution of specified issues, or for two years, as described in the Incentive Auction R&O. In addition, all such broadcasters that would not control any other television stations if its bid or bids were accepted must agree to remain subject to the Commission's jurisdiction and authority to impose enforcement or other FCC liability post-auction. The Commission seeks comment on this proposal. 80. This proposal implements the Commission's determination that such broadcasters may be qualified to participate even though they (a) have uncertain eligibility to participate due to particular circumstances or (b) have certain outstanding potential liabilities to the Commission. More specifically, the Commission provided that a broadcaster that has a license that is subject to pending proceedings that, if resolved against the broadcaster, would make the broadcaster ineligible to participate, might become qualified to bid if the broadcaster agrees to have the full amount of any incentive auction proceeds it might win held by the U.S. Treasury, pending resolution of the outstanding proceedings. 81. The Commission also concluded that a broadcaster might participate in the reverse auction even though the relinquishment of its broadcast spectrum usage rights might otherwise limit the Commission's ability to recover potential liabilities to it, provided that the broadcaster agrees that some of any incentive payment would be held by the U.S. Treasury to cover potential forfeiture amounts. In the second case, when such a broadcaster is notified of its eligibility to participate in the reverse auction after filing an application, the Wireless Telecommunications, Media, and Enforcement Bureaus will provide that broadcaster with information about any pending enforcement matter that cannot be resolved before the reverse auction. In addition, the Bureaus will indicate the amount of reverse auction proceeds that will be held should the broadcaster relinquish its license(s) as a result of the auction and therefore otherwise no longer be subject to the Commission's jurisdiction. 82. As to the amount to be held with respect to a particular broadcaster, all of the relevant auction proceeds would be held pending the final resolution of the status of the license in the case of a broadcaster with a license that may be determined post-auction not to have been eligible for relinquishment at the time of the auction. In the case of a broadcaster that has outstanding potential liabilities and might cease to be subject to Commission jurisdiction after relinquishing all of its broadcast spectrum usage rights, the amount determined prior to the auction by the Bureaus would be held. As described in the Incentive Auction R&O, amounts held will be released to the broadcaster or the Commission, as appropriate in light of the final resolution of the relevant specified issues. 83. The Commission also invites comment on an alternative proposal, under which, instead of holding the funds in the U.S. Treasury, it would deposit the relevant amounts in a third party financial institution to serve as a private escrow agent. Under this alternative, prior to the auction, the Commission would designate a private escrow agent for each broadcaster agreeing to the escrow in its application. The Commission will require that any escrow agent maintain the confidentiality of Commission-held data of broadcasters participating in the reverse auction. The Commission seeks comment on this alternative, including the terms of any escrow agreement with a third-party agent. iii. Certification Regarding Due Diligence 84. The Commission proposes that all applicants will be required to certify the truth of the following statement as a part of their application to participate in the reverse auction: “The applicant acknowledges and agrees that any information provided by the Commission's outside contractors who are advising and assisting it with education and outreach in connection with the reverse auction is for informational purposes only and that neither the Commission nor any of its outside contractors makes any representations or warranties with respect to any such information and shall have no liability to the applicant in connection therewith.” The Commission's rules already provide that an applicant to participate in the reverse auction must certify that it has sole responsibility for investigating and evaluating all technical and marketplace factors that may have a bearing on the bids it submits in the reverse auction. The Commission's proposed additional certification will likewise help assure that each applicant accepts responsibility for its bids and will not attempt to place responsibility for its bids on either the Commission or the information provided by third parties as part of the Commission's outreach. Requiring this proposed certification is also consistent with the Commission's rule providing that an application will contain “such additional information as may be required,” 47 CFR 1.2204(c)(11). iv. Committing to an Initial Relinquishment Option 85. The specific opening prices for each bidding option available to each station eligible to participate in the reverse auction will be provided at least 60 days in advance of the deadline to apply to participate in the reverse auction. The Commission proposes that each applicant to participate in the reverse auction will indicate for each of its stations listed in its application all of the spectrum relinquishment options available to it that it may be willing to consider. After Commission staff reviews a submitted application and the applicant has resolved any issues regarding the information provided, the applicant will be required to indicate a single preferred relinquishment option for each of its stations from among those that it previously indicated it would be willing to consider. An applicant must indicate a preferred relinquishment option and in certain cases may also specify alternative(s) for that preferred option. An applicant must specify a preferred option (and any alternative(s), if it so chooses) for each station listed in its application in order to qualify as a bidder with respect to those stations in the reverse auction. This step will constitute a commitment by the applicant to fulfilling the terms of its preferred option (or alternative(s)) for a particular station, i.e., relinquishing the relevant spectrum usage rights in exchange for the opening price in the event the auction system can accommodate the preference (or an alternative). This first commitment will establish the starting point for bidding in the clock rounds. 86. In order for an applicant's commitment for a station to be a valid starting point for bidding, it must be feasible for the auction system to accommodate an option for that station. The auction system can always accommodate going off-air as a preferred option because going off-air does not require finding a feasible channel assignment. However, the auction system may not be able to accommodate moving to either the Low-VHF or High-VHF band as a preferred option if there are not enough channels available in that band (vacancy) at the start of the auction to accommodate all stations with such a preference. Accordingly, the Commission proposes that an applicant that selects moving to either Low-VHF or High-VHF as its preferred option for a station may indicate alternative options for that station, which would be used in the event that the preferred option cannot be accommodated. Under the Commission's proposal, the auction system will attempt to accommodate the preferred option. If it cannot and the applicant indicated one or more alternative options for the station, the system will attempt to accommodate one of the alternative options when determining an initial assignment of stations to relinquishment options. If the system assigns the station to one of its alternative options, that option will constitute the applicant's commitment and become that station's assigned option at the start of bidding. If the auction system cannot accommodate an applicant's preferred option or any of its alternative options for a station, that station will be assigned a channel in its pre-auction band. Thus, an applicant that wants to guarantee a station's participation in the bidding should indicate going off-air as either its preferred option or as an alternative option, as a vacancy for every station to move to Low-VHF or High-VHF cannot be guaranteed. 87. The Commission proposes that once bidding begins in the clock rounds a bidder will not be permitted to bid for options that would involve greater relinquishments than the previous option selected. Thus, under the Commission's proposal, an applicant considering multiple relinquishment options for a station will need to consider the restriction on moving one way up the hierarchy of options in deciding which option to commit to at the commitment stage of the application process, since its choice may preclude later being able to bid for other options below it. For example, initially committing to moving to Low-VHF would preclude later switching options to going off-air; initially committing to moving to High-VHF would preclude later switching options to going off-air or moving to Low-VHF; and initially committing only to moving to either Low-VHF or High-VHF, without committing as an alternative to going off-air, could result in non-participation if there is no vacancy in either of these bands at the start of the auction. 88. Initial Assignment. Once each station has made an initial commitment(s), the auction system will determine an initial assignment of stations to relinquishment options using optimization techniques. This initial assignment will determine the relinquishment option for which a station will be offered prices at the beginning of the reverse auction. Due to the limited availability of VHF channels, the Commission proposes to prioritize rules that will be used to determine, in the event that all participating stations cannot be assigned to their preferred options, how to choose an alternative option for some stations. If a station cannot be assigned to its preferred option or an alternative option, it will not participate in the reverse auction bidding and will be assigned to a channel in its pre-auction band. As set forth in detail in Appendix C of the Auction 1000 Request for Comment, the Commission proposes the following rules in order of priority: (1) Minimize the number of UHF participating stations that must be assigned to their pre-auction band; (2) minimize the number of VHF participating stations that must be assigned to their pre-auction band; (3) maximize the number of participating stations that can be assigned to their preferred relinquishment option; (4) maximize the number of participating stations that can be assigned to go off the air as an alternative option; and (5) minimize the sum of impaired weighted-pops across all licenses ( i.e. solve for the primary objective of the clearing target optimization). The Commission proposes to give rules (1) and (2) the highest priority to minimize the number of stations that are assigned to their pre-auction band and, therefore, cannot participate in the reverse auction. Rule (1) precedes all others to minimize the likelihood of creating additional impairing stations in the 600 MHz Band. If not all stations can simultaneously be assigned to their preferred option pursuant to rule (3), rule (4) would ensure that the maximum number of stations that must be assigned an alternative option are assigned the option to go off the air, in order to provide the most opportunities for bidding in the reverse auction. Finally, rule (5) would require the optimization to choose among the remaining options based on the primary objective of minimizing the sum of impaired weighted-pops across all licenses in the 600 MHz Band. C. Descending Clock Bidding Procedures 89. In adopting a descending clock format for the reverse auction, the Incentive Auction R&O explained that “bidders will be faced with relatively simple choices of determining whether or not they are still willing to accept the current prices for bid options.” It determined that price offers for bid options generally will start high and descend between rounds for each participating station, and indicated that price offers for each station may be adjusted based upon factors reflecting that particular station's impact on the repacking process. In the Incentive Auction R&O, the Commission adopted rules allowing for the use of reserve pricing in the reverse auction, and noted that it may adopt procedures to implement a form of dynamic reserve pricing (DRP). The Commission also explained in general terms the descending clock auction procedures for selecting winning bids and determining prices to be paid to winning bidders. 90. The Commission proposes procedures for determining the prices reverse auction bidders will be offered during the bidding rounds. The Commission then address the bidding process in detail, proposing procedures for the types of acceptable bidder responses to price offers in a round, including procedures for bidding for multiple relinquishment options. The Commission also addresses how the auction system will process bidder responses to determine which stations will have their bids accepted. Finally, the Commission proposes procedures to implement bidding activity and stopping rules. i. Determining Price Offers 91. The Commission clarifies that a “bid” in this descending clock auction means a response to a price that is offered to the bidder. This is consistent with the fundamental premise of a clock auction, where bidders do not initiate bids but rather indicate over a series of rounds whether they are willing to accept offered prices that increase or decrease, depending upon whether it is an auction to sell or buy. The clock prices stop increasing or decreasing when there is no longer competition among the bidders to buy or sell an item. For example, in a simple procurement auction to buy one item, the auction stops when only one bidder is left that is willing to supply the item at the current price offer. In the reverse auction, the Commission will aim to “procure” a targeted amount of cleared television spectrum and bidders will compete to relinquish spectrum usage rights to enable that clearing. Through their bids in each round, bidders will indicate their continued willingness to accept a given offer price for a relinquishment option, which will constitute a commitment to relinquish their spectrum usage rights at that price, or they will reject the offer, possibly indicating a lowest price they are willing to accept. a. Opening Price Methodology 92. Opening prices must be high enough to encourage robust participation in the reverse auction, but not so high that the reverse auction requires many hundreds of rounds to reach final clearing prices. In designing a system of competitive bidding, which includes setting opening prices, the Commission promotes several statutory goals, including “recovery for the public of a portion of the value of the public spectrum resource made available for commercial use and avoidance of unjust enrichment through the methods employed to award uses of that resource,” 47 U.S.C. 309(j)(3)(C). To balance these objectives, the Commission proposes to calculate an opening bid price for each station, using a station-specific “volume” factor and an underlying base clock price for a UHF station going off air. The opening bid for the UHF off-air and channel sharing options will be the same, as both would result in the return of a full six megahertz of UHF spectrum for reallocation to flexible-use licenses. Because the Commission will not know the initial clearing target prior to accepting bidder applications, and therefore will not exclude any stations or markets from the auction in advance, the Commission intends to provide opening prices to every eligible broadcaster. If, upon establishing the initial clearing target, the auction system identifies markets where broadcaster participation is not needed, it will so inform broadcasters in any such market and provisionally assign each of them channels in their pre-auction bands. The opening prices may be zero for stations that the auction system determines do not constrain the Commission from reorganizing the UHF band. The opening off-air bid for UHF stations would be the product of each station's volume factor and the base clock price. Opening bid prices for a move from the UHF band to the Low-VHF or High-VHF band would be calculated by applying a specific discount to the off-air bid amount for each of these options. 93. The Commission proposes to calculate a station's volume using this formula: Station Volume = (Interference) 0.5 * (Population) 0.5 . The Commission proposes to set interference equal to the number of co- and adjacent channel constraints a station would impose on repacking on a pairwise basis. The interference component measures a station's potential impact on repacking. More specifically, for each station pairing, the Commission first determines the maximum number of constraints that can exist between the two stations on any channel in bands into which both stations can be repacked. Thus, between two UHF stations, the Commission would consider all channels in the UHF, High-VHF or Low-VHF bands (channels 2-51) to determine the maximum number of constraints that exist between the two stations consistent with the hierarchy of relinquishment options. Between a UHF station and a High-VHF station, the Commission would consider only channels in the High-VHF band (channels 7-13) and Low-VHF band (channels 2-6) to determine the maximum number of constraints that exist between the two stations. Between a UHF station and a Low-VHF station, the Commission would consider only channels in the Low-VHF band (channels 2-6) to determine the maximum number of constraints that exist between the two stations. The Commission then sums up these maximums for each station to set its interference metric. The Commission proposes to measure population as the number of people residing within the station's interference-free service area. A fuller description of this calculation is set out in Appendix D of the Auction 1000 Request for Comment. 94. To calculate a station's opening bid price, the Commission will multiply its volume times a base clock price. The base clock price is a constant amount per unit of volume. Based on the Commission's work to date on the design of the incentive auction, it expects that a base predicated on an opening bid price of $900 million for the station with the highest volume will achieve robust participation by stations across multiple markets. The Commission therefore proposes to set the base clock price so as to yield an opening bid of $900 million for this station. It should be noted that if this highest volume station is not in UHF, its base clock price would be decreased by the discount applied to its pre-auction band. This discount is detailed in Appendix D to the Auction 1000 Request for Comment. The Commission will calculate volume for all stations and then rescale so that the maximum station volume is one million. Dividing the $900 million opening bid price for the highest volume station by one million results in a base clock price of 900. The base clock price will drop in each round of the reverse auction, while a station's volume will remain constant. The price offered to a bidder to go off air in a given round will be the product of the base clock price in that round and the station's volume. The markets and stations needed in the reverse auction will depend on which stations choose to participate, and actual compensation to stations will be determined by the auction. 95. The Commission tentatively concludes that this formula appropriately balances the manifold goals that Congress has charged it with in connection with the incentive auction. First, a combined interference-population volume establishes opening bid prices that should provide the necessary incentive for broadcaster participation. Consistent with the Commission's determination in the Incentive Auction R&O, its proposed approach will yield opening bid prices that reasonably approximate underlying relative differences in value of stations to the auction. The Commission's proposed formula is not based on a station's market or enterprise value. If a station has many constraints and blocks many other stations from being repacked, then under the Commission's proposal, its opening price will reflect that contribution to the auction's ability to clear spectrum. The population component complements the interference metric by enabling the Commission to clear more spectrum in markets where the forward auction value of relinquished spectrum usage rights is apt to be higher. Second, the opening bid price set using the proposed methodology will enable the Commission to close the auction in a reasonable number of rounds, providing ease of participation for broadcasters and enhancing the prospects for a successful auction. Third, the balanced approach the Commission proposes will meet its statutory obligation to promote the interests of taxpayers in getting a portion of the value of the spectrum sold at the forward auction. Finally, use of a population factor is consistent with the fact that the spectrum recovered from broadcasters will enable flexible use licenses to be offered in the forward auction subject to procedures that are based, among other things, on the population covered by each PEA. 96. Under the Commission's proposed approach, opening bid prices for moving from the UHF band to the Low-VHF or to the High-VHF band (the VHF options) will be set at a value relative to the opening price for going off-air. For moving from UHF or High-VHF to Low-VHF, the Commission tentatively concludes that a station's opening price should be between 67 and 80 percent of the station's price to go off-air. For moving from UHF to High-VHF, the Commission tentatively concludes that a station's opening bid price should be between 33 and 50 percent of the station's off-air price. The Commission seeks comment on where in these ranges it should set the discounts or whether some other discount is appropriate for these bid options. The Commission emphasizes that these would only be opening discounts. Final discounts for the VHF options will be determined by the demand by bidders for VHF channels and the availability of those channels. 97. The Commission proposes to calculate the opening prices for the VHF options as a discount off the off-air opening price because a winning bidder electing one of the VHF options will retain a full six megahertz channel, and thus should not receive the same compensation as bidder that relinquishes its rights to a six megahertz channel. The proposed level of the discounts reflects a comparison of the technical characteristics of UHF and VHF channels and of the characteristics of Low-VHF and High-VHF channels. In particular, VHF frequencies are more susceptible to interference than UHF frequencies. Specifically, noise from nearby electrical devices can disrupt reception on these lower frequencies, especially indoor reception. While present across the VHF bands, this issue is more pronounced on low-VHF channels than on High-VHF channels. Thus, while the opening price for a VHF option should not be the same as for the off-air relinquishment option, it should be high enough to offset the potential loss in value associated with this increased interference potential. 98. The smaller discount for the Low-VHF option as compared to High-VHF reflects that television receivers are subject to greater interference in the Low-VHF band. The proposed respective discounts for the Low-VHF and High-VHF options also reflect the relative number of unoccupied channels in each band. There are substantially more unoccupied Low-VHF channels than High-VHF channels. As a result, in nearly all markets, a station could move to a Low-VHF channel without the need to reassign any channels in that band. Conversely, there are relatively few markets where a station could move to High-VHF channels unless other stations vacate that band or are repacked within the band. In at least some scenarios, therefore, the Commission may need to pay two stations in connection with a UHF-to-High-VHF move: A High-VHF station to vacate its channel, and UHF licensee to move to High-VHF. A smaller discount, i.e., a higher opening price, for the Low-VHF option would signal the greater value of this option to the auction. The Commission seeks comment on its proposed approach to setting opening prices for the VHF options, the appropriate discount levels, or whether there are additional factors or approaches that the Commission should consider. b. Price Offers in Initial and Subsequent Rounds 99. The Commission proposes that, in the first clock round of the reverse auction, a bidder whose commitment to a preferred or assigned alternative option at the opening price is not provisionally accepted by the auction system will be offered a lower price for the assigned option. As long as the bidder indicates it is willing to accept the offered prices, and if a feasible channel assignment exists for the station in its pre-auction band, the auction system will progressively offer lower prices for that option. When the Commission refers to checking a feasible channel assignment in a station's pre-auction band when determining price offers, for stations with a pre-auction band of UHF, the Commission is referring to the remaining television portion of the UHF band. A bidder that indicates it will consider multiple bidding options will be informed of current prices for those options and will have the opportunity to request to switch to bidding for another option. A bidder that switches bidding options will then be offered progressively lower prices for that option, but only so long as a feasible channel assignment exists for the station in its pre-auction band. 100. The Commission proposes to offer a bidder lower prices for relinquishment options as long as the bidder is still competing with other stations to relinquish rights, c [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2015-01607. Public record. Not legal advice.