Auction of the Phase II 220 MHz Service Licenses; Scheduled for September 15, 1998Minimum Opening Bids and Other Procedural Issues

FEDERAL COMMUNICATIONS COMMISSION

[DA 98-1010; Report No. AUC-98-18-B (Auction No. 18)]

Auction of the Phase II 220 MHz Service Licenses; Scheduled for

September 15, 1998--Minimum Opening Bids and Other Procedural Issues

AGENCY: Federal Communications Commission.

ACTION: Notice.

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SUMMARY: This Public Notice announces the procedures and minimum

opening bids for the upcoming Phase II 220 MHz Service (``220 MHz

Service'') auction. On January 13, 1998, the Commission released a

Public Notice, (``220 MHz Public Notice''), seeking comment on the

establishment of reserve prices or minimum opening bids for the 220 MHz

Service auction. In addition, the Commission also sought comment on a

number of procedures to be used in the 220 MHz Service auction.

EFFECTIVE DATES: June 29, 1998.

FOR FURTHER INFORMATION CONTACT: Lisa Hartigan, Bob Reagle, or Frank

Stilwell, Auctions and Industry Analysis Division, Wireless

Telecommunications Bureau at (202) 418-0660, Scott A. Mackoul,

Commercial Wireless Division at (202 418-7240, or Marty Liebman, Policy

Division, Wireless Telecommunications Bureau at (202 418-1310.

SUPPLEMENTARY INFORMATION: This is the summary of a Public Notice

released May 29, 1998. The text of the public notice in its entirety,

including attachments, is available for inspection and copying during

normal business hours in the FCC Reference Center (Room 239), 1919 M

Street, NW, Washington, DC and also may be purchased from the

Commission's copy contractor, International Transcription Services,

Inc. (ITS), 1231 20th Street, NW, Washington, DC 20036, (202) 857-3800.

In addition, the text of the public notice in its entirety, including

attachments, is available on the World Wide Web at http://www.fcc.gov/

wtb/auctions/220/220.htmlPN.

1. Introduction

1. The Federal Communications Commission (``FCC'' or

``Commission'') will hold an auction for 908 licenses to operate in the

220-222 MHz band. These licenses encompass the United States, the

Northern Mariana Islands, Guam, American Samoa, the United States

Virgin Islands and Puerto Rico. Specifically, the licenses include: (1)

five licenses in each of 172 geographic areas known as Economic Areas

(EAs) and three EA-like areas; (2) five licenses in six Economic Area

Groupings (EAGs); and (3) three Nationwide licenses which encompass the

same territory as all of the EAGs combined (see Attachment A for a

complete listing of licenses). The licenses include the following

channels:

------------------------------------------------------------------------

Channels

------------------------------------------------------------------------

(1) EA Block:

A: Channel Groups 2, 13.................................... 10

B: Channel Groups 3, 16.................................... 10

C: Channel Groups 5, 18.................................... 10

D: Channel Groups 8, 19.................................... 10

E: Channel 171-180......................................... 10

(2) EAG Block:

F: Channel Groups 1, 6, 11................................. 15

G: Channel Groups 4, 9, 14................................. 15

H: Channel Groups 7, 12, 17................................ 15

I: Channel Groups 10, 15, 20............................... 15

J: Channel 186-200......................................... 15

(3) Nationwide Block:

K: Channels 51-60.......................................... 10

L: Channels 81-90.......................................... 10

M: Channels 141-150........................................ 10

------------------------------------------------------------------------

Auction Date: The auction will commence on September 15, 1998. The

initial schedule for bidding will be announced by public notice at

least one week before the start of the auction. Unless otherwise

announced, bidding will be conducted on each business day until bidding

has stopped on all licenses.

Auction Title: The Phase II 220 MHz Service--Auction No. 18.

Bidding Methodology: Simultaneous multiple round bidding. Bidding

will be permitted only from remote locations, either electronically (by

computer) or telephonically.

Pre-Auction Deadline

Auction Seminar..................... August 6, 1998.

Short Form Application (FCC Form August 17, 1998; 5:30

175). p.m. ET.

[[Page 35214]]

Upfront Payments (via wire transfer) August 31, 1998; 6:00

p.m. ET.

Orders for Remote Bidding Software.. September 1, 1998; 5:30

p.m. ET.

Mock Auction........................ September 11, 1998 (time

TBA).

Telephone Contacts

FCC National Call Center............ (888) CALL-FCC ((888) 225-

5322) (For Bidder

Information Packages,

General Auction,

Information, and Seminar

Registration, press

option #2 at the

prompt). Hours of

service: 8 a.m.-5:30

p.m. ET.

FCC Technical Support Hotline....... (202) 414-1250 (V), (202)

414-1255 (TTY). Hours of

service: 8 a.m.-6 p.m.

ET, Monday-Friday; 9

a.m.-5 p.m. ET, weekend

of August 15-16, 1998.

List of Attachments

Attachment A

Summary of Phase II 220 Mhz Licenses to be Auctioned

Attachment B

List of Cases Pending before the Commission Involving Non-

Nationwide Phase I 220 MHz Licensees

Attachment C

Guidelines for Completion of FCC Forms 175 and 159, and Exhibits

Attachment D

Electronic Filing and Review of FCC Form 175

Attachment E

Summary Listing of Documents from the Commission and the Wireless

Telecommunications Bureau Addressing Application of the Anti-Collusion

Rules

Attachment F

List of Commenters

I. Background

2. In March 1997, the Commission restructured the licensing

framework that governs the 220 MHz Service. Site-specific licensing,

used in the Phase I 220 MHz Service, is to be replaced with a

geographic-based system in the Phase II 220 MHz Service which is the

subject of the upcoming auction. This geographic-based licensing

methodology is similar to that used in other commercial mobile radio

services (``CMRS''). The geographic areas for the licenses were created

based upon Economic Areas (EAs), developed by the Bureau of Economic

Analysis of the U.S. Department of Commerce. The Economic Area

Groupings (EAGs), developed by the Commission, include groupings of EAs

and encompass the sum total of all EAs. Three Nationwide licenses,

including all of the EAGs, are also to be offered in the Phase II 220

MHz Service auction. Service and operational requirements for the Phase

II 220 MHz Service are contained in Part 90 of the Commission's Rules,

47 CFR Part 90.

3. On May 21, 1998, the Commission released a Memorandum Opinion

and Order on Reconsideration in PR Docket No. 89-552, 63 FR 32579; June

12, 1998. Among other things the Commission removed the spectrum

efficiency standard that applied to equipment operating in the 220-222

MHz band, eliminated installment payments for small business and very

small businesses, and increased bidding credits for such entities.

II. Due Diligence

4. Potential bidders are reminded that there are a number of

incumbent Phase I 220 MHz licensees already licensed and operating on

frequencies that will be subject to the upcoming auction. Such

incumbents must be protected from harmful interference by Phase II 220

MHz licensees in accordance with the Commission's Rules. See 47 CFR

90.763. These limitations may restrict the ability of such geographic

area licensees to use certain portions of the electromagnetic spectrum

or provide service to certain areas in their geographic license areas.

5. In addition, potential bidders seeking licenses for geographic

areas that are near the Canadian border should be aware that the use of

some or all of the channels they acquire in the auction could be

restricted as a result of a future agreement with Canada on the use of

220-222 MHz spectrum in the border area.

6. Potential bidders should also be aware that certain applications

(including those for modification), waiver requests, petitions for

reconsideration and applications for review are pending before the

Commission that relate to particular incumbent non-nationwide 220 MHz

licensees. The Commission notes that resolution of these matters could

have an impact on the availability of spectrum for EA and EAG

licensees. In addition, while the Commission will continue to act on

pending applications, requests and petitions, some of these matters may

not be resolved by the time of the auction.

III. Potential Bidders Are Solely Responsible for Investigating and

Evaluating the Degree to Which Such Pending Matters May Affect

Spectrum Availability in Areas Where They Seek EA or EAG Licenses

7. To aid potential bidders, Attachment B to this Public Notice

lists pending matters of which the Commission is aware that relate to

licenses or applications for the 220 MHz service. The Commission makes

no representations or guarantees that the listed matters are the only

pending matters that could affect spectrum availability in the 220-222

MHz band. Parties may submit additions or corrections to the list,

provided such additions or corrections are filed with the Commission

within ten (10) business days from release of this Public Notice. Such

submissions should be limited to identifying pleadings or papers

previously filed with the Commission. No new pleadings or arguments on

the merits will be accepted as explicitly provided by Commission Rules.

8. Corrections and additions must be filed with the Office of the

Secretary, Federal Communications Commission, 1919 M Street, NW.,

Washington, DC 20554. One copy of each submission should also be sent

to International Transcription Service, Inc., 1231 20th Street, NW.,

Washington, DC 20036, while an additional courtesy copy may be sent to

Scott A. Mackoul, Policy and Rules Branch, Commercial Wireless

Division, Wireless Telecommunications Bureau, Federal Communications

Commission, 2100 M Street, NW., 7th Floor, Washington, DC 20554.

Parties filing additions or corrections should include the internal

reference number (DA 98-1010) on their submissions. Parties also are

reminded that some of the proceedings are restricted proceedings

governed by the Commission's ex parte rules. Accordingly, any

submission filed pursuant to this Public Notice that is directed to the

merits or outcome of any restricted proceeding must be served on

[[Page 35215]]

all parties to that restricted proceeding. See generally 47 CFR 1.1200-

1.1216.

9. Additional information regarding matters identified in

Attachment B is available to the public. Licensing information is

contained in the Commission's licensing database, which is available

for inspection in the Wireless Telecommunications Bureau's Pubic

Reference Rooms, located at 2025 M Street, NW., Room 5608, Washington,

DC 20554, and 1270 Fairfield Road, Gettysburg, PA 17325. In addition,

copies of the pleadings are available for public inspection only in the

Gettysburg Public Reference Room.

10. In addition, potential bidders may search for information (but

not the pleadings) regarding incumbent 220 MHz licensees on the World

Wide Web at http://www.fcc.gov/wtb. In particular, information can be

accessed by downloading databases by selecting ``WTB Database Files''

(http://www.fcc.gov/wbt/databases.html), or searching on-line by

selecting ``Search WTB Databases'' (http://gullfoss.fcc.gov:8080/cgi-

bin/ws.exe/beta/genmen/index.hts). Any telephone inquiries regarding

these matters should be directed to the Technical Support Hotline at

(202) 414-1250 (V) or (202) 414-1255 (TTY).

IV. The Commission Makes no Representations or Guarantees Regarding

the Accuracy or Completeness of Information That Has Been Provided

by Incumbent Licensees and Incorporated Into the Database.

Potential Bidders Are Strongly Encouraged to Physically Inspect any

Sites Located in or Near the Geographic Area for Which They Plan to

Bid

11. Participation: Those wishing to participate in the auction

must:

Submit a short form application (FCC Form 175) by the

above-listed deadline.

Submit a sufficient upfront payment and an FCC Remittance

Advice Form (FCC For 159) by the above-listed deadline.

Comply with all provisions outlined in this Public Notice.

12. Prohibition of Collusion: To ensure the competitiveness of the

auction process, the Commission's Rules prohibit applicants for the

same geographic license area from communicating with each other during

the auction about bids, bidding strategies, or settlements. This

prohibition begins with the filing of short-form applications, and ends

on the down payment due date. In the 220 MHz Service auction, for

example, the rule would apply to an applicant bidding for an EAG and an

applicant bidding for an EA within that EAG. Applicants that apply to

bid for ``all markets'' or a nationwide license would be precluded from

communicating with all other applicants. An exception is where

applicants enter into a bidding agreement before filing their short-

form applications, and disclose the existence of the agreement in their

short-form applications. See 47 CFR 1.2105(c). The Commission notes

that Section 1.65 of the Commission's Rules requires an applicant to

maintain the accuracy and completeness of information furnished in its

pending application and to notify the Commission within 30 days of any

substantial change that may be of decisional significance to that

application. Thus, Section 1.65 requires an auction applicant to bring

to the Commission's attention any communication not permissible under

the applicant's certification of compliance with Sec. 1.2105(c).

Finally, bidders are reminded that they have a duty to notify the

Commission of any violation of the anti-collusion rules upon learning

of such violation. Bidders are therefore required to make such

notification to the Commission immediately upon discovery.

13. Bidder Information Package: More complete details about this

auction are contained in a Bidder Information Package. The Commission

will provide one copy to each company free of charge. Additional copies

may be ordered at a cost of $16.00 each, including postage, payable by

Visa or Master Card, or by check payable to ``Federal Communications

Commission'' or ``FCC.'' To place an order, contact the FCC National

Call Center at (888) CALL-FCC (888) 225-5322, press option #2 at the

prompt). Prospective bidders that have already contacted the FCC at

this number expressing an interest in this auction will receive a

Bidder Information Package in approximately three weeks, and need not

call again unless they wish to order additional copies.

14. Relevant Authority: Prospective bidders must familiarize

themselves thoroughly with the Commission's Rules relating to the Phase

II 220 MHz Service, contained in Title 47, Part 90 of the Code of

Federal Regulations, and those relating to application and auction

procedures, contained in Title 47, Part 1, of the Code of Federal

Regulations.

15. Prospective bidders must also be thoroughly familiar with the

procedures, terms and conditions (collectively, ``Terms'') contained in

Amendment of Part 90 of the Commission's Rules to Provide for the Use

of the 220-222 MHz Band by the Private Land Mobile Radio Service, PR

Docket No. 89-552, RM-8506, GN Docket No. 93-252, PP Docket No. 93-253,

Third Report and Order and Fifth Notice of Proposed Rulemaking, 12 FCC

Rcd 10943 (1997), 62 FR 15978 (April 3, 1997) (``220 MHz Third Report

and Order''). The Commission resolved petitions for reconsideration of

the 220 MHz Third Report and Order in Amendment of Part 90 of the

Commission's Rules to Provide for the Use of the 220-222 MHz Band by

the Private Land Mobile Radio Service, Implementation of Sections 3(n)

and 332 of the Communications Act, Regulatory Treatment of Mobile

Services, Implementation of Section 309(j) of the Communications Act--

Competitive Bidding, PR Docket No. 89-552, GN Docket No. 93-252, PP

Docket No. 93-253, FCC 98-93, Memorandum Opinion and Order on

Reconsideration (rel. May 21, 1998), 63 FR 32580 (June 12, 1998) (``220

MHz MO&O'').

16. For general background on the Phase I 220 MHz Service, see,

among other materials: Amendment of Part 90 of the Commission's Rules

to Provide for the Use of the 220-222 MHz Band by the Private Land

Mobile Radio Services, PR Docket No. 89-552, Report and Order, 6 FCC

Rcd 2356 (1991), 56 FR 19598 (April 29, 1991); Amendment of Part 90 of

the Commission's Rules to Provide for the Use of the 220-222 MHz Band

by the Private Land Mobile Radio Services, PR Docket No. 80-552,

Memorandum Opinion and Order, 7 FCC Rcd 4484 (1992), 57 FR 32448 (July

22, 1992).

17. For further information about the 220 MHz Service, see

Amendment of Part 90 of the Commission's Rules to Provide for the Use

of the 220-222 MHz Band by the Private Land Mobile Radio Service, PR

Docket No. 89-552, GN Docket No. 93-252, Second Report and Order, 11

FCC Rcd 3668 (1996), 61 FR 3841 (Feb. 2, 1996) (``220 MHz Second Report

and Order''); Amendment of Part 90 of the Commission's Rules to Provide

for the Use of the 220-222 MHz Band by the Private Land Mobile Radio

Service, PR Docket No. 89-552, Fourth Report and Order, 12 FCC Rcd

13453 (1997), 62 FR 46211 (Sept. 2, 1997).

18. The Terms contained in the Commission's Rules, relevant orders,

public notices and bidder information package are not negotiable.

Potential bidders are reminded that the 220 MHz MO&O, released May 21,

1998, which resolved petitions for reconsideration filed in response to

the 220 MHz Second Report and Order and the 220 MHz Third Report and

Order altered some of the decisions and rules adopted in those orders.

In addition, the decisions reached in the 220 MHz proceeding are

[[Page 35216]]

the subject of a judicial appeal and may be the subject of additional

reconsideration or appeal. See, e.g., PLMRS Narrowband Corp., et al. v.

Federal Communications Commission, No. 92-1432, et al. (D.C. Cir.,

filed September 18, 1992).

19. The Commission may amend or supplement the information

contained in its public notices or the bidder information package at

any time, and will issue public notices to convey any new or

supplemental information to bidders. It is the responsibility of all

prospective bidders to remain current with all Commission Rules and

with all public notices pertaining to this auction. Copies of most

Commission documents, including public notices, can be retrieved from

the FCC Internet node via anonymous [email protected] or the FCC World

Wide Web site at http://www.fcc.gov/wtb/auctions. Additionally,

documents may be obtained for a fee by calling the Commission's copy

contractor, International Transcription Service, Inc., at (202) 857-

3800.

20. Bidder Alerts: All applicants must certify on their FCC Form

175 applications under penalty of perjury that they are legally,

technically, financially and otherwise qualified to hold a license, and

not in default on any payment for Commission licenses (including down

payments) or delinquent on any non-tax debt owed to any Federal agency.

Prospective bidders are reminded that submission of a false

certification to the Commission is a serious matter that may result in

severe penalties, including monetary forfeitures, license revocations,

exclusion from participation in future auctions, and/or criminal

prosecution.

V. The FCC Makes no Representations or Warranties About the Use of

This Spectrum for Particular Services. Applicants Should be Aware

That an FCC Auction Represents an Opportunity to Become an FCC

Licensee in This Service, Subject to Certain Conditions and

Regulations. An FCC Auction Does Not Constitute an Endorsement by

the FCC of Any Particular Services, Technologies or Products, nor

Does an FCC License Constitute a Guarantee of Business Success.

Applicants Should Perform Their Individual Due Diligence Before

Proceeding as They Would With Any New Business Venture

21. As is the case with many business investment opportunities,

some unscrupulous entrepreneurs may attempt to use the Phase II 220 MHz

Service auction to deceive and defraud unsuspecting investors. Common

warning signals of fraud include the following:

The first contact is a ``cold call'' from a telemarketer,

or is made in response to an inquiry prompted by a radio or television

infomercial.

The offering materials used to invest in the venture

appear to be targeted at IRA funds, for example by including all

documents and papers needed for the transfer of funds maintained in IRA

accounts.

The amount of the minimum investment is less than $25,000.

The sales representative makes verbal representations

that: (a) the Internal Revenue Service (``IRS''), Federal Trade

Commission (``FTC''), Securities and Exchange Commission (``SEC''),

FCC, or other government agency has approved the investment; (b) the

investment is not subject to state or federal securities laws; or (c)

the investment will yield unrealistically high short-term profits. In

addition, the offering materials often include copies of actual FCC

releases, or quotes from FCC personnel, giving the appearance of FCC

knowledge or approval of the solicitation.

22. Information about deceptive telemarketing investment schemes is

available from the FTC at (202) 326-2222 and from the SEC at (202) 942-

7040. Complaints about specific deceptive telemarketing investment

schemes should be directed to the FTC, the SEC, or the National Fraud

Information Center at (800) 876-7060. Consumers who have concerns about

specific Phase II 220 MHz Service proposals may also call the FCC

National Call Center at (888) CALL-FCC ((888) 225-5322).

2. Bidder Eligibility and Small Business Provisions

A. General Eligibility Criteria

23. As described above, this auction offers: (1) Five licenses in

each of 172 geographic areas known as Economic Areas (EAs) and three

EA-like areas; (2) five licenses in six Economic Area Groupings (EAGs);

and (3) three Nationwide licenses which encompass the same territory as

all of the EAGs combined (see Attachment A for a complete listing of

licenses).

(1) Determination of Revenues

24. For purposes of determining which entities qualify as very

small businesses or small businesses, the Commission will attribute to

the applicant the gross revenues of all of its controlling principals

and affiliates. For purposes of this auction, the Commission will not

impose specific equity requirements on controlling principals. However,

in order to qualify as a very small business or small business, an

applicant's qualifying principals must maintain control of the

applicant. The term ``control'' includes both de facto and de jure

control of the applicant. Typically, de jure control is evidenced by

ownership of at least 50.1 percent of an entity's voting stock. De

facto control is determined on a case-by-case basis. The following are

some common indicia of control:

The entity constitutes or appoints more than 50 percent of

the board of directors or management committee;

The entity has authority to appoint, promote, demote, and

fire senior executives that control the day-to-day activities of the

licensee; or

The entity plays an integral role in management decisions.

(2) Application Showing

25. Applicants should note that they will be required to file

supporting documentation to establish that they satisfy the eligibility

requirements to qualify as a very small business or small business for

this auction. See 47 CFR 90.1009 and 1.2105.

B. Bidding Credits

26. Qualifying Phase II 220 MHz applicants are eligible for bidding

credits. The size of a Phase II 220 MHz bidding credit depends on the

annual gross revenues of the bidder and its controlling principals and

affiliates, as averaged over the preceding three years:

A bidder with gross annual revenues of not more than $15

million receives a 25 percent discount on its winning bids for Phase II

220 MHz Service licenses; and,

A bidder with gross annual revenues of not more than $3

million receives a 35 percent discount on its winning bids for Phase II

220 MHz Service licenses.

27. Bidding credits are not cumulative: applicants that qualify

receive either the 25 percent or the 35 percent bidding credit, but not

both. The definitions of very small business and small business

(including calculation of gross annual revenue) are set forth in 47 CFR

90.1021(b).

28. Phase II 220 MHz Service bidders should note that unjust

enrichment provisions apply to winning bidders that use bidding credits

and subsequently assign or transfer control of their licenses to an

entity not qualifying for the same levels of bidding credits. See 47

CFR 90.1017(b). Finally, Phase II 220 MHz Service bidders should also

note that there are no

[[Page 35217]]

installment payment plans in the 220 MHz Service auction.

3. Pre-Auction Procedures

A Short-form Application (FCC Form 175)--Due August 17, 1998

29. In order to be eligible to bid in this auction, applicants must

first submit an FCC Form 175 application. This application must be

received at the Commission by 5:30 p.m. ET on August 17, 1998. Late

applications will not be accepted.

30. There is no application fee required when filing an FCC Form

175. However, to be eligible to bid, an applicant must submit an

upfront payment. See 3.C. infra.

(1) Filing Options

31. Auction applicants are strongly encouraged to file their

applications electronically in order to take full advantage of the

greater efficiencies and convenience of electronic filing, bidding and

access to bidding data. For example, electronic filing enables the

applicant to: (a) receive interactive feedback while completing the

application; and (b) receive immediate acknowledgement that the FCC

Form 175 has been submitted for filing. In addition, only those

applicants that file electronically will have the option of bidding

electronically. However, manual filing (via hard copy) is also

permitted. Please note that manual filers will not be permitted to bid

electronically and must bid telephonically, unless the FCC Form 175 is

amended electronically prior to the resubmission date for incomplete or

deficient applications. Applicants that file electronically may make

amendments to their applications until the filing deadline. The

following is a brief description of each filing method.

(a) Electronic Filing

32. Applicants wishing to file electronically may generally do so

on a 24-hour basis beginning July 20, 1998. The window for filing the

FCC Form 175 electronically will remain open until 5:30 p.m. ET on

August 17, 1998. Information about installing and running the FCC Form

175 application software is included in Attachment D to this Public

Notice. Technical support is available at (202) 414-1250 (V) or (202)

414-1255 (TTY); the hours of service are 8 a.m.-6 p.m. ET, Monday-

Friday, and 9 a.m.-5 p.m. ET, the weekend of August 15-16.

(b) Manual Filing

33. Auction applicants will be permitted to file their FCC Form 175

applications in hard copy. When any manually filed FCC Form 175 and

175-S exceeds five pages in length, the FCC additionally requires that

all attachments be submitted on a 3.5-inch diskette, or the entire

application be filed in a microfiche version. Manual filers must use

the May 1998 version of FCC Form 175 and the October 1995 edition of

the 175-S (if applicable). Earlier versions of the FCC Form 175 will

not be accepted for filing. Copies of FCC Forms 175 and 175-S can be

obtained by calling (202) 418-FORM.

34. Manual applications may be submitted by hand delivery

(including private ``overnight'' courier) or by U.S. mail (certified

mail with return receipt recommended), addressed to: FCC Form 175

Filing, Auction No. 18, Federal Communications Commission, Wireless

Telecommunications Bureau, Auctions & Industry Analysis Division, 1270

Fairfield Road, Gettysburg, PA 17325-7245.

Note: Manual applications delivered to any other location will

not be accepted.

(2) Completion of the FCC Form 175

35. Applicants should carefully review 47 CFR 90.1009 and 1.2105,

and must complete all items on the FCC Form 175 (and Form 175-S, if

applicable). Instructions for completing the FCC Form 175 are in

Attachment C of this Public Notice.

36. Failure to sign a manually filed FCC Form 175 (for both

electronic and manual filers) will result in dismissal of the

application and loss of the ability to participate in the auction. Only

original signatures will be accepted for manually filed applications.

(3) Electronic Review of FCC Form 175

37. The FCC Form 175 review software may be used to review and

print applicants' FCC Form 175 applications. In other words, applicants

that file electronically may review their own completed FCC Form 175.

Applicants also have access to view other applicants' completed FCC

Form 175s, after the filing deadline has passed and the FCC has issued

a public notice explaining the status of the applications. There is a

fee of $2.30 per minute for accessing the system. See Attachment D for

details.

B. Application Processing and Minor Corrections

38. After the deadline for filing the FCC Form 175 applications has

passed, the FCC will process all timely applications to determine which

are acceptable for filing, and subsequently will issue a public notice

identifying: (1) those applications accepted for filing (including FCC

account numbers and the licenses for which they applied); (2) those

applications rejected; and (3) those applications which have minor

defects that may be corrected, and the deadline for filing such

corrected applications.

39. As described more fully in the Commission's Rules, after the

August 17, 1998, short form filing deadline, applicants may make only

minor corrections to the FCC Form 175 applications. Applicants will not

be permitted to make major modifications to their applications (e.g.,

change their license selections, change the certifying official or

change control of the applicant). See 47 CFR 90.1009 and 1.2105.

C. Upfront Payments--Due August 31, 1998

40. In order to be eligible to bid in the auction, applicants must

submit an upfront payment accompanied by an FCC Remittance Advice Form

(FCC Form 159). Manual filers must use the July 1997 version of FCC

Form 159. Earlier versions of this form will not be accepted. All

upfront payments must be received at Mellon Bank in Pittsburgh, PA, by

6:00 p.m. ET on August 31, 1998.

Please note that:

All payments must be made in U.S. dollars.

All payments must be made by wire transfer.

Upfront payments for Auction No. 18 go to a lockbox number

different from the ones used in previous FCC auctions, and different

from the lockbox number to be used for post-auction payments.

Failure to deliver the upfront payment by the August 31,

1998 deadline will result in dismissal of the application and

disqualification from participation in the auction.

(1) Making Auction Payments by Wire Transfers

41. Wire transfer payments must be received by 6:00 p.m. ET on

August 31, 1998. To avoid untimely payments, applicants should discuss

arrangements (including bank closing schedules) with their banker

several days before they plan to make the wire transfer, and allow

sufficient time for the transfer to be initiated and completed before

the deadline. Applicants will need the following information:

ABA Routing Number: 043000261.

Receiving Bank: Mellon Pittsburgh.

BNF: FCC/AC 910-0171.

OBI Field: (Skip one space between each information item)

``Auctionpay''.

Taxpayer Identification No.: (Same as FCC Form 159, block 26).

Payment Type Code: (Enter ``A22U'').

[[Page 35218]]

FCC Code: 1 (Same as FCC Form 159, block 23A: ``18'').

Payer Name: (Same as FCC Form 159, block 2).

Lockbox No.: 358430.

Note: The BNF and Lockbox number are specific to the upfront

payments for this auction; do not use BNF or Lockbox numbers from

previous auctions.

42. Applicants must fax a completed FCC Form 159 to Mellon Bank at

(412) 236-5702 at least one hour before placing the order for the wire

transfer (but on the same business day). On the cover sheet of the fax,

write ``Wire Transfer--Auction Payment for Auction Event No. 18.''

Bidders may confirm receipt of their upfront payment at Mellon Bank by

contacting their sending financial institution.

(2) FCC Form 159

43. Each upfront payment must be accompanied by a completed FCC

Remittance Advice Form (FCC Form 159). Proper completion of FCC Form

159 is critical to ensuring correct credit of upfront payments.

Detailed instructions for completion of FCC Form 159 are included in

Attachment C to this Public Notice and will also be included in the

Bidder Information Package.

(3) Amount of Upfront Payment

44. In the 220 MHz Third Report and Order, the Commission delegated

to the Bureau the authority and discretion to determine an appropriate

upfront payment for each license being auctioned. 62 FR at 15981. In

the 220 MHz Public Notice, (63 FR 2976, January 20, 1998) the

Commission proposed for the Phase II 220 MHz Service auction an upfront

payment of one cent per MHz/POP with no amount less than $2,500. 63 FR

at 2978.

45. For the Phase II 220 MHz Service auction the Commission will

adopt its proposal of one cent per MHz/POP with no amount less than

$2,500. This upfront payment amount, based upon the data in Attachment

A, will be the amount required to bid on a particular license(s) in

Auction No. 18. The Commission believes that this is the appropriate

upfront payment formula, considering such factors as the population in

each geographic license area, and the value of spectrum similar to that

being offered in the 220 MHz Service. The Commission notes that this

upfront payment amount is lower than that used in many previous

auctions--e.g., the PCS spectrum auctions--but believes a reduction is

appropriate, for the reasons expressed by a commenter, namely, the size

of the likely participants in the 220 MHz Service auction.

46. The upfront payments are not attributed to specific licenses,

but instead will be translated to bidding units to define the bidder's

maximum bidding eligibility. For Auction No. 18, the total number of

bidding units assigned to each bidder is equal to the amount of the

upfront payment, e.g., a $25,000 upfront payment provides the bidder

with 25,000 bidding units. The total upfront payment defines the

maximum amount of bidding units on which the applicant will be

permitted to bid (including standing high bids) in any single round of

bidding. Thus, an applicant does not have to make an upfront payment to

cover all licenses for which the applicant has applied, but rather to

cover the maximum number of bidding units associated with licenses the

bidder wishes to place bids on and hold high bids on at any given time.

In order to be able to place a bid on a license, in addition to having

specified that license on FCC Form 175, a bidder must have an

eligibility level that meets or exceeds the number of bidding units

assigned to that license. At a minimum, an applicant's total upfront

payment must be enough to establish eligibility to bid on at least one

of the licenses applied for on FCC Form 175, or else the applicant will

not be eligible to participate in the auction.

47. In calculating the upfront payment amount, an applicant should

determine the maximum number of bidding units it may wish to bid on in

any single round, and submit an upfront payment covering that number of

bidding units.

Note: An applicant may, on its FCC Form 175, apply for every

license being offered, but its actual bidding in any round will be

limited by the bidding units reflected in its upfront payment.

(4) Applicant's Wire Transfer Information for Purposes of Refunds

48. Because experience with prior auctions has shown that in most

cases wire transfers provide quicker and more efficient refunds than

paper checks, the Commission will use wire transfers for all Auction

No. 18 refunds. To avoid delays in processing refunds, applicants

should include wire transfer instructions with any refund request they

file; they may also provide this information in advance by faxing it to

the FCC Billings and Collections Branch, ATTN: Linwood Jenkins or

Geoffrey Idika, at (202) 418-2843. Please include the following

information:

Name of Bank

ABA Number

Account Number to Credit

Correspondent Bank (if applicable)

ABA Number

Account Number

Contact and Phone Number

(Applicants should also note that implementation of the Debt Collection

Improvement Act of 1996 requires the FCC to obtain a Taxpayer

Identification Number (TIN) before it can disburse refunds.)

Eligibility for refunds is discussed in 5.D., infra.

D. Auction Registration

49. Approximately ten days before the auction, the FCC will issue a

public notice announcing all qualified bidders for the auction.

Qualified bidders are those applicants whose FCC Form 175 applications

have been accepted for filing and that have timely submitted upfront

payments sufficient to make them eligible to bid on at least one of the

licenses for which they applied.

50. All qualified bidders are automatically registered for the

auction. Registration materials will be distributed prior to the

auction by two separate mailings, each containing part of the

confidential identification codes required to place bids. These

mailings will be sent only to the contact person at the applicant

address listed in the FCC Form 175.

51. Applicants that do not receive both registration mailings will

not be able to submit bids. Therefore, any qualified applicant that has

not received both mailings by noon on Thursday, September 10, 1998

should contact the FCC National Call Center at (888) CALL-FCC ((888)

225-5322, press option #2 at the prompt). Receipt of both registration

mailings is critical to participating in the auction and each applicant

is responsible for ensuring it has received all of the registration

material.

Qualified bidders should note that lost login codes, passwords or

bidder identification numbers can be replaced only by appearing in

person at the FCC Auction Headquarters located at 2 Massachusetts

Avenue, NE., Washington, DC 20002. Only an authorized representative or

certifying official, as designated on an applicant's FCC Form 175, may

appear in person with two forms of identification (one of which must be

a photo identification) in order to receive replacement codes.

E. Remote Electronic Bidding Software

52. Qualified bidders that file or amend the FCC Form 175

electronically are allowed to bid electronically, but must purchase

remote electronic bidding software for $175.00 by September 1, 1998.

(Auction software is tailored to a specific auction, so software from

prior auctions will not

[[Page 35219]]

work for Auction No. 18.) A software order form is included in the

Bidder Information Package.

F. Auction Seminar

53. On August 6, 1998, the FCC will sponsor a seminar for the Phase

II 220 MHz Service auction in Washington, DC. The seminar will provide

attendees with information about pre-auction procedures, conduct of the

auction, FCC remote bidding software, and the 220 MHz Service and

auction rules.

54. To register, complete the registration form to be included in

the upcoming Phase II 220 MHz Service auction Bidder Information

Package. The registration form will include details about the time and

location of the seminar. Registrations are accepted on a first-come,

first-served basis.

G. Mock Auction

55. All applicants whose FCC Form 175 and 175-S have been accepted

for filing will be eligible to participate in a mock auction beginning

September 11, 1998. The mock auction will enable applicants to become

familiar with the electronic software prior to the auction. Free

demonstration software will be available for use in the mock auction.

Due to different bidding procedures in the Phase II 220 MHz Service

auction from previous Commission auctions, participation by all bidders

is strongly recommended. Details will be announced by public notice.

4. Auction Event

56. The first round of the auction will begin on September 15,

1998. The initial round schedule will be announced in a Public Notice

listing the qualified bidders, to be released approximately 10 days

before the start of the auction.

A. Auction Structure

(1) Simultaneous Multiple Round Auction

57. The Commission adopts its proposal, in the 220 MHz Public

Notice, to award the 908 licenses in the Phase II 220 MHz Service in a

single, simultaneous multiple round auction. 63 FR at 2977. Unless

otherwise announced, bids will be accepted on all licenses in each

round of the auction. This approach, the Commission believes, is most

administratively efficient. In addition, the Commission believes that

the Phase II 220 MHz licenses are interdependent and bidders may prefer

to substitute different types of licenses during the same auction.

(2) Maximum Eligibility and Activity Rules

58. In the 220 MHz Public Notice, the Commission proposed that the

amount of the upfront payment submitted by a bidder would determine the

initial maximum eligibility (as measured in bidding units) for each

bidder. For the Phase II 220 MHz Service auction the Commission will

adopt this proposal. The amount of the upfront payment submitted by a

bidder determines the initial maximum eligibility (in bidding units)

for each bidder. Upfront payments are not attributed to specific

licenses, but instead will be translated into bidding units to define a

bidder's initial maximum eligibility. The total upfront payment defines

the maximum number of bidding units on which the applicant will

initially be permitted to bid. The Commission notes that there is no

provision for increasing a bidder's maximum eligibility during the

course of an auction.

59. In order to ensure that the auction closes within a reasonable

period of time, an activity rule requires bidders to bid actively

throughout the auction, rather than wait until the end before

participating. Bidders are required to be active on a specific

percentage of their maximum eligibility during each round of the

auction.

60. A bidder is considered active on a license in the current round

if it is either the high bidder at the end of the previous bidding

round and does not withdraw the high bid in the current round, or if it

submits an acceptable bid in the current round (see ``Minimum Accepted

Bids'' in Part 4.B.(3), infra). A bidder's activity level in a round is

the sum of the bidding units associated with licenses on which the

bidder is active. The minimum required activity level is expressed as a

percentage of the bidder's maximum bidding eligibility, and increases

as the auction progresses. Because these procedures have proven

successful in maintaining the pace of previous auctions as set forth

under ``Auction Stages'' in Part 4.A.(4) and ``Stage Transitions'' in

Part 4.A.(5), infra, the Commission adopts them for the 220 MHz Service

auction.

(3) Activity Rule Waivers and Reducing Eligibility

61. In the 220 MHz Public Notice, the Commission proposed that each

bidder in the auction would be provided five activity rule waivers that

may be used in any round during the course of the auction.

62. Based upon the Commission's experience in previous auctions,

the Commission concludes that each bidder will be provided five

activity rule waivers that may be used in any round during the course

of the auction. Use of an activity rule waiver preserves the bidder's

current bidding eligibility despite the bidder's activity in the

current round being below the required minimum level. An activity rule

waiver applies to an entire round of bidding and not to a particular

license.

63. The FCC auction system assumes that bidders with insufficient

activity would prefer to use an activity rule waiver (if available)

rather than lose bidding eligibility. Therefore, the system will

automatically apply a waiver (known as an ``automatic waiver'') at the

end of any round where a bidder's activity level is below the minimum

required unless: (1) there are no activity rule waivers available; or

(2) the bidder overrides the automatic application of a waiver by

reducing eligibility, thereby meeting the minimum requirements.

64. A bidder with insufficient activity that wants to reduce its

bidding eligibility rather than use an activity rule waiver must

affirmatively override the automatic waiver mechanism during the round

by using the reduce eligibility function in the software. In this case,

the bidder's eligibility is permanently reduced to bring the bidder

into compliance with the activity rules as described in ``Auction

States,'' Part 4.A.(4). Once eligibility has been reduced, a bidder

will not be permitted to regain its lost bidding eligibility.

65. Finally, a bidder may proactively use an activity rule waiver

as a means to keep the auction open without placing a bid. If a bidder

submits a proactive waiver (using the proactive waiver function in the

bidding software) during a round in which no bids are submitted, the

auction will remain open and the bidder's eligibility will be

preserved. An automatic waiver invoked in a round in which there are no

new valid bids or withdrawals will not keep the auction open.

(4) Auction Stages

66. In the 220 MHz Public Notice, the Commission proposed to

conduct the auction in stages and employ an activity rule. The

Commission concludes that the auction will be composed of three stages,

which are each defined by an increasing activity rule. Below are the

proposed activity levels for each stage of the auction. The FCC

reserves the discretion to alter the activity percentages before and/or

during the auction.

67. Stage One: In each round of the first stage of the auction, a

bidder desiring to maintain its current

[[Page 35220]]

eligibility is required to be active on licenses encompassing at least

80 percent of its current bidding eligibility. Failure to maintain the

requisite activity level will result in a reduction in the bidder's

bidding eligibility in the next round of bidding (unless an activity

rule waiver is used). During Stage One, reduced eligibility for the

next round will be calculated by multiplying the current round activity

by five-fourths (\5/4\).

68. Stage Two: In each round of the second stage, a bidder desiring

to maintain its current eligibility is required to be active on 90

percent of its current bidding eligibility. During Stage Two, reduced

eligibility for the next round will be calculated by multiplying the

current round activity by ten-ninths (\10/9\).

69. Stage Three: In each round of the third stage, a bidder

desiring to maintain its current eligibility is required to be active

on 98 percent of its current bidding eligibility. In this final stage,

reduced eligibility for the next round will be calculated by

multiplying the current round activity by fifty-fortyninths (\50/49\).

Caution: Since activity requirements increase in each auction

stage, bidders must carefully check their current activity during the

bidding round of the first round following a stage transition. This is

especially critical for bidders that have standing high bids and do not

plan to submit new bids. In past auctions, some bidders have

inadvertently lost bidding eligibility or used an activity rule waiver

because they did not reverify their activity status at stage

transitions. Bidders may check their activity against the required

minimum activity level by using the bidding software's bidding module.

70. Because the foregoing procedures have proven successful in

maintaining proper tempo in previous auctions, the Commission will

adopt them for the Phase II 220 MHz Service auction.

(5) Stage Transitions

71. In the 220 MHz Public Notice, the Commission proposed that the

auction would advance to the next stage (i.e., from Stage One to Stage

Two, and from Stage Two to Stage Three) when, in each of three

consecutive rounds of bidding, the high bid has increased on 10 percent

or less of the licenses being auctioned (as measured in bidding units).

72. The Commission concludes that the auction will start in Stage

One. Under the FCC's general guidelines it will advance to the next

stage (i.e., from Stage One to Stage Two, and from Stage Two to Stage

Three) when, in each of three consecutive rounds of bidding, the high

bid has increased on 10 percent or less of the licenses being auctioned

(as measured in bidding units). However, the Bureau will retain the

discretion to regulate the pace of the auction by announcement. This

determination will be based on a variety of measures of bidder

activity, including, but not limited to, the auction activity level,

the percentages of licenses (as measured in bidding units) on which

there are new bids, the number of new bids, and the percentage increase

in revenue. The Commission believes that these stage transition rules,

having proven successful in prior auctions, are appropriate for use in

the Phase II 220 MHz Service auction.

(6) Auction Stopping Rules

73. In the 220 MHz Public Notice, the Commission proposed to retain

the discretion to keep the auction open, even if no new acceptable bids

or proactive waivers are submitted and no previous high bids are

withdrawn. In addition, the Commission proposed that the Bureau reserve

the right to declare that the auction will end after a specified number

of additional rounds (``special stopping rule'').

74. Barring extraordinary circumstances, bidding will remain open

on all licenses until bidding stops on every license. Thus, the auction

will close for all licenses when one round passes during which no

bidder submits a new acceptable bid on any license, applies a proactive

waiver, or withdrawns a previous high bid.

75. The Bureau retains the discretion, however, to keep an auction

open even if no new acceptable bids or proactive waivers are submitted,

and no previous high bids are withdrawn. In this event, the effect will

be the same as if a bidder has submitted a proactive waiver. Thus, the

activity rule will apply as usual, and a bidder with insufficient

activity will either lose bidding eligibility or use an activity rule

waiver (if it has any left).

76. Further, in its discretion, the Bureau reserves the right to

declare that the auction will end after a specified number of

additional rounds (``special stopping rule''). If the FCC invokes this

special stopping, rule it will accept bids in the final round(s) only

for licenses on which the high bid increased in at least one of the

preceding specified number of rounds. The FCC intends to exercise this

option only in extreme circumstances, such as where the auction is

proceeding very slowly, where there is minimal overall bidding

activity, or where it appears likely that the auction will not close

within a reasonable period of time. Before exercising this option, the

FCC is likely to attempt to increase the pace of the auction by, for

example, moving the auction into the next stage (where bidders would be

required to maintain a higher level of bidding activity), increasing

the number of bidding rounds per day, and/or increasing the amount of

the minimum bid increments for the limited number of licenses where

there is still a high level of bidding activity.

77. Adoption of these rules, the Commission believes, is most

appropriate for the Phase II 220 MHz auction because our experience in

prior auctions demonstrates that the simultaneous stopping rule

balanced the interests of administrative efficiency and maximum bidder

participation. The substitutability between and among licenses in

different geographic areas and the importance of preserving the ability

of bidders to pursue backup strategies support of use of a simultaneous

stopping rule.

(7) Auction Delay, Suspension, or Cancellation

78. In the 220 MHz Public Notice, the Commission proposed that, by

police notice or by announcement during the auction, the Bureau may

delay, suspend, or cancel the auction in the event of natural disaster,

technical obstacle, evidence of an auction security breach, unlawful

bidding activity, administrative or weather necessity, or for any other

reason that affects the fair and competitive conduct of competitive

bidding.

79. Because this approach has proven effective in resolving exigent

circumstances in previous auctions, the Commission will adopt our

proposed auction cancellation rules. By public notice or by

announcement during the action, the Burean may delay, suspend or cancel

the auction in the event of natural disaster, technical, obstacle,

evidence of an auction security breach, unlawful bidding activity,

administrative or weather necessity, or for any other reason that

affects the fair and competitive conduct of competitive bidding. In

such cases, the Bureau, in its sole discretion, may elect to: resume

the auction starting from the beginning of the current round; resume

the auction starting from some previous round; or cancel the auction in

its entirety. Network interruption may cause the Bureau to delay or

suspend the auction. The Commission emphasizes that exercise of this

authority is solely within the discretion of the Bureau, and its use is

not intended to be a substitute for situations in which bidders may

wish to apply their activity rule waivers.

[[Page 35221]]

B. Bidding Procedures

(1) Round Structure

80. The initial bidding schedule will be announced by public notice

at least one week before the start of the auction, and will be included

in the registration mailings. The round structure for each bidding

round contains a single bidding round followed by the release of the

round results.

81. The FCC has discretion to change the bidding schedule in order

to foster an auction pace that reasonably balances speed with the

bidders' need to study round results and adjust their bidding

strategies. The FCC may increase or decrease the amount of time for the

bidding rounds and review periods, or the number of rounds per day,

depending upon the bidding activity level and other factors.

(2) Reserve Price or Minimum Opening Bid

82. The Balanced Budget Act of 1997 calls upon the Commission to

prescribe methods by which a reasonable reserve price will be required

or a minimum opening bid established with FCC licenses are subject to

auction (i.e., because they are mutually exclusive), unless the

Commission determines that a reserve price or minimum opening bid is

not in the public interest. Consistent with this mandate, the

Commission has directed the Wireless Telecommunications Bureau

(``Bureau'') to seek comment on the use of a minimum opening bid and/or

reserve price prior to the start of each auction. The Bureau was

directed to seek comment on the methodology to be employed in

establishing each of these mechanisms. Among other factors, the Bureau

should consider the amount of spectrum being auctioned, levels of

incumbency, the availability of technology to provide service, the size

of the geographic service areas, the extent of inference with other

spectrum bands, and any other relevant factors that could have an

impact on valuation of the spectrum being auctioned. The Commission

concluded that the Bureau should have the discretion to employ either

or both of these mechanisms for future auctions.

83. In the 220 MHz Public Notice, the Bureau proposed to establish

minimum opening bids for the 220 MHz Service auction and to retain

discretion to lower the minimum opening bids. Specifically, the Bureau

proposed the following formula for calculating minimum opening bids for

Auction 18:

1. EA Licenses

$0.0175 MHz * POP

2. EAG Licenses

$0.015 MHz * POP

3. Nationwide Licenses

$0.02 MHz * POP

with a minimum of no less than $2,500 per license. In the alternative,

the Bureau sought comment on whether, consistent with the Balanced

Budget Act, the public interest would be served by having no minimum

opening bid or reserve price.

84. The Commission adopts minimum opening bids for each of the

licenses in the Phase II 220 MHz Service auction that are reducible at

the discretion of the Bureau. The levels will be set as follows:

1. EA Licenses

$0.015 MHz * POP

2. EAG License

$0.0125 MHz * POP

3. Nationwide Licenses

$0.0175 MHz * POP

with a minimum of no less than $2,500 per license.

85. As was the case in prescribing minimum opening bids in the

auction of the upper channels in the 800 MHz SMR service and the LMDS

auctions, Congress has enacted a presumption that unless the Commission

determines otherwise, minimum opening bids or reserve prices are in the

public interest. The Bureau is unpersuaded by commenters' assertions

that minimum opening bids for the Phase II 220 MHz Service auction are

not in the public interest. Setting the level of the minimum opening

bids is a difficult task, especially in the case of the Phase II 220

MHz Service where the channels are narrow, encumbered and the potential

uses of the band remain to be explored. To address this concern, the

minimum opening bids adopted here are reducible. This will allow the

Bureau flexibility to adjust the minimum opening bids if circumstances

warrant. The Commission emphasizes, however, that such discretion will

be exercised sparingly and early in the auction, ie., before bidders

lose all waivers and begin the lose eligibility. During the course of

the auction, the Bureau will not entertain any bidder requests to

reduce the minimum opening bids on specific licenses.

86. The Commission concludes that the revised formula presented

here best meets the objectives of our auction authority in establishing

a reasonable minimum opening bid. The Commission has noted in the past

that the reserve price and minimum opening bid provision is not a

requirement to maximize auction revenue but rather a protection against

assigning licenses at unacceptably low prices and that the Commission

must balance the revenue raising objective against its other public

interest objectives in setting the minimum bid level. In doing so, the

Commission agree with commenters that the 220 MHz channels are narrow

and the likely auction participants will be small business

entrepreneurs. In addition, the Commission recognizes that the EAG

licenses are more substantially encumbered than are the other license

types. The Commission has adjusted its minimum opening bids

accordingly. In sum, the Commission's experience in using minimum

opening bids in the 800 MHz SMR auction and the LMDS auction supports

the fact that minimum opening bids promote efficient allocation of

licenses and speed the course of the auction while ensuring that

valuable assets are not sold for nominal prices.

(3) Minimum Accepted Bids

87. In the 220 MHz Public Notice, the Commission proposed to use an

exponential smoothing methodology to calculate minimum bid increments.

The Commission further proposed to retain the discretion to change the

minimum bid increment if circumstances so dictate.

88. Because these techniques have proven effective in prior

auctions, the Commission adopts its proposal for the 220 MHz Service

auction. Once there is a standing high bid on a license, a bid

increment will be applied to that license to establish a minimum

acceptable bid for the following round. For the Phase II 220 MHz

Service auction, the Commission will utilize, as described immediately

below, an exponential smoothing methodology to calculate minimum bid

increments. The Bureau retains the discretion to change the minimum bid

increment if it determines that circumstances so dictate. The

exponential smoothing methodology has been used in previous auctions,

including the WCS auction and the 800 MHz SMR auction.

Exponential Smoothing

89. The exponential smoothing formula calculates the bid increment

for each license based on a weighted average of the activity received

on each license in the current and all previous rounds. This

methodology will tailor the bid increment for each license based based

on activity, rather than setting a global increment for all licenses.

For every license that receives a bid, the bid increment for the next

round for that license will be established using the exponential

smoothing formula.

90. Using exponential smooting, the calculation of the percentage

bid increment for each license will be based

[[Page 35222]]

on an activity index, which is calculated as the weighted average of

the current activity and the activity index from the previous round.

The activity index at the start of the auction (round 0) will be set at

0. The current activity index is equal to a weighing factor times the

number of new bids received on the license in the current bidding round

plus one minus the weighting factor times the activity index from the

previous round. The activity index is then used to calculate a

percentage increment by multiplying a minimum percentage increment by

one plus the activity index with that result being subject to a maximum

percentage increment. The Commission will initially set the weighting

factor at 0.5, the minimum percentage increment at 0.05, and the

maximum percentage increment at 0.15.

Equations

Ai=(C*Bi)+((1-

C)*Ai-1)

Ii=smaller of (1+Ai)*N) and M

Where:

Ai=activity index for the current round (round i)

C=activity weight factor

Bi=number of bids in the current round (round i)

Ai-1=activity index from previous round (round

i-1), A0 is 0

Ii=percentage bid increment for the current round (round i)

N=minimum percentage increment

M=maximum percentage increment

Under the exponential smoothing methodology, once a bid has been

received on a license, the minimum acceptable bid for that license in

the following round will be the new high bid plus the dollar amount

associated with the percentage increment (variable Ii from

above times the high bid). This result will be rounded to the nearest

thousand if it is over ten thousand or to the nearest hundred it it is

under ten thousand.

Examples

License 1

C=0.5, N=0.05, M=0.15

Round 1 (2 new bids, high bid = $1,000,000)

1. Calculation of percentage increment using exponential smoothing:

A1=(0.5*2) + (0.5*0) = 1

I1 = (1+1) *0.05=0.1

2. Minimum bid increment using the percentage increment

(I1 from above)

0.1*$1,000,000=$100,000

3. Minimum acceptable bid for round 2=1,100,000

Round 2 (3 new bids, high bid=2,000,000)

1. Calculation of percentage increment using exponential smooting:

A2=(0.5 * 3) + (0.5 * 1) = 2

I2=(1 +2) * 0.05 = 0.15

2. Minimum bid increment using the percentage increment

(I2 from above)

0.15 * $2,000,000 = $300,000

3. Minimum acceptable bid for round 3 = 2,300,000

Round 3 (1 new bid, high bid = 2,300,000)

1. Calculation of percentage increment using exponential smoothing:

A3 = (0.5 * 1) + (0.5 * 2) = 1.5

I3 = (1 + 1.5) * 0.05 + 0.125

2. Minimum bid increment using the percentage increment

(I3 from above)

0.125 * $2,300,000 = $287,500

3. Minimum acceptable bid for round 4 = 2,588,000

(4) High Bids

91. Each bid will be date- and time-stamped when it is entered into

the computer system. In the event of tie bids, the Commission will

identify the high bidder on the basis of the order in which bids are

received by the Commission, starting with the earliest bid. The bidding

software allows bidders to make multiple submissions in a round. As

each bid is individually date and time-stamped according to when it was

submitted, bids submitted by a bidder earlier in a round will have an

earlier date- and time-stamped than bids submitted later in a round.

(5) Bidding

92. During a bidding round, a bidder may submit bids for as many

licenses for which it is eligible, as well as withdraw high bids from

previous bidding rounds, remove bids placed in the same bidding round,

or permanently reduce eligibility. Bidders also have the option of

making multiple submissions and withdrawals in each bidding round, and

will not have a separate period to withdraw bids. If a bidder submits

multiple bids for a single license in the same round, the system takes

the last bid entered as that bidder's bid for the round, and the date-

and time-stamped of that bid reflect the latest time the bid was

submitted.

93. Please note that all bidding will take place either through the

automated bidding software or by telephonic bidding (Telephonic bid

assistants are required to use a script when handling bids placed by

telephone. Telephonic bidders are therefore reminded to allow

sufficient time to bid, by placing their calls well in advance of the

close of a round, because four to five minutes are necessary to

complete a bid submission.) There will be no on-site bidding during

Auction No. 18.

94. A bidder's maximum eligibility in the first round of the

auction is determined by two factors: (1) the licenses applied for on

FCC Form 175; and (2) the upfront payment amount deposited. The bid

submission screens will be tailored for each bidder to include only

those licenses for which the bidder applied on its FCC Form 175. A

bidder also has the option to further tailor its bid submission screens

to call up specified groups of licenses.

95. The bidding software requires each bidder to log in to the FCC

auction system during the bidding round using the FCC account number,

bidder identification number, and the confidential security codes

provided in the registration materials. Bidders are strongly encouraged

to download and print bid confirmations after they submit their bids.

96. The bid entry screen of the Automated Auction System software

for the Phase II 220 MHz Service auction allows bidders to place

multiple increment bids which will let bidders increase high bids from

one to nine bid increments. A single bid increment is defined as the

difference between the standing high bid and the minimum acceptable bid

for a license.

97. To place a bid on a license, the bidder must enter a whole

number between 1 and 9 in the bid increment multiplier (Bid Mult)

field. This value will determine the amount of the bid (Amount Bid) by

multiplying the bid increment multiplier by the bid increment and

adding the result to the high bid amount according to the following

formula:

Amount Bid = High Bid + (Bid Mult * Bid Increment)

Thus, bidders may place a bid that exceeds the standing high bid by

between one and nine times the bid increment. For example, to bid the

minimum acceptable bid, which is equal to one bid increment, a bidder

will enter ``16'' in the bid increment multiplier column and press

submit.

98. For any license on which the FCC is designated as the high

bidder (i.e., a license that has not yet received a bid in the auction

or where the high bid was withdrawn and a new bid has not yet been

placed), bidders will be limited to bidding only the minimum acceptable

bid. In both of these cases no increment exists for the licenses, and

bidders should enter ``1'' in the Bid Mult field. Note that any whole

number between 1 and 9 entered in the multiplier column will result in

a bid value at the minimum acceptable bid amount.

[[Page 35223]]

Finally, bidders are cautioned in entering numbers in the Bid Mult

field because, as explained in the following section, a high bidder

that withdraws its standing high bid from a previous round, even if

mistakenly or erroneously made, is subject to bid withdrawal payments.

(6) Bid Removal and Bid Withdrawal

99. In the 20 MHz Public Notice, the Commission proposed bid

removal and bid withdrawal rules. With respect to bid withdrawals, the

Commission proposed limiting each bidder to withdrawals in no more than

two rounds during the course of the auction.

a. Procedures

100. Before the close of a bidding round, a bidder has the option

of removing any bids placed in that round. By using the remove bid

function in the software, a bidder may effectively ``unsubmit'' any bid

placed within that round. A bidder removing a bid placed in the same

round is not subject to withdrawal payments. Removing a bid will affect

a bidder's activity for the round in which it is removed. This

procedure will enhance bidder flexibility and, may serve to expedite

the course of the action. Therefore, the Commission will adopt these

procedures for the 220 MHz Service auction.

101. Once a round closes, a bidder may no longer remove a bid.

However, in the next round, a bidder may withdraw standing high bids

from previous rounds using the withdraw bid function (assuming that the

bidder has not exhausted its withdrawal allowance). A high bidder that

withdraw its standing high bid from a previous round is subject to the

bid withdrawal payments specified in 47 CFR 90.1007, 1.2104(g), and

1.2109. The procedure for withdrawing a bid and receiving a withdrawal

confirmation is essentially the same as the bidding procedure described

in ``High Bids,'' Part 4.B.2.c.(4).

102. In previous auctions, the Commission has detected bidder

conduct that, arguably, may have constituted strategic bidding through

the use of bid withdrawals. While the Commission continues to recognize

the important role that bid withdrawals play in an auction, i.e.

reducing risk associated with efforts to secure various geographic area

licenses in combination, the Commission concludes that, for the 220 MHz

Service auction, adoption of a limit on their use to two rounds is the

most appropriate outcome. By doing so the Commission believes it

strikes a reasonable compromise that will allow bidders to use

withdrawals. The Commission's decision on this issue is based upon its

experience in prior auctions, particularly the PCS D, E and F block

auction, 800 MHz SMR auction, and LMDS auction, and is in no way a

reflection of its view regarding the likelihood of any speculation or

``gaming'' in the 220 MHz Service auction.

103. The Bureau will therefore limit the number of rounds in which

bidders may place withdrawals to two rounds. These rounds will be at

the bidder's discretion and there will be no limit on the number of

bids that may be withdrawn in either of these rounds. Withdrawals will

still be subject to the bid withdrawal payments specified in 47 CFR

90.1007, 1.2104(g), and 1.2109. Bidders should note that abuse of the

Commission's bid withdrawal procedures could result in the denial of

the ability to bid on a market.

104. If a high bid is withdrawn, the license will be offered in the

next round at the second highest bid price, which may be less than, or

equal to, in the case of tie bids, the amount of the withdrawn bid,

without any bid increment. The FCC will serve as a ``place holder'' on

the license until a new acceptable bid is submitted on that license.

b. Calculation

105. Generally, a bidder that withdraws a standing high bid during

the course of an auction will be subject to a payment equal to the

lower of: (1) the difference between the net withdrawn bid and the

subsequent net winning bid; or (2) the difference between the gross

withdrawn bid and the subsequent gross winning bid for that license.

See 47 CFR 90.1007, 1.2104(g), and 1.2109. No withdrawal payment will

be assessed if the subsequent winning bid exceeds the withdrawn bid.

(7) Round Results

106. The bids placed during a round are not published until the

conclusion of that bidding period. After a round closes, the FCC will

compile reports of all bids placed, bids withdrawn, current high bids,

a new minimum accepted bids, and bidder eligibility status (bidding

eligibility and activity rule waivers), and post the reports for public

access.

107. Reports reflecting bidders' identities and bidder

identification numbers for Auction No. 18 will be available before and

during the auction. Thus, bidders will know in advance of this auction

the identities of the bidders against which they are bidding.

(8) Auction Announcement

108. The FCC will use auction announcements to announce items such

as schedule changes and stage transitions. All FCC auction

announcements will be available on the FCC remote electronic bidding

system, as well as the Internet and the FCC Bulletin Board System.

(9) Other Matters

109. As noted in 3.B., after the short-form filing deadline,

applicants may make only minor changes to their FCC Form 175

applications. For example, permissible minor changes include deletion

and addition of authorized bidders (to a maximum of three) and revision

of exhibits. Filers should make these changes on-line, and submit a

letter to Amy Zoslov, Chief, Auctions and Industry Analysis Division,

Wireless Telecommunications Bureau, Federal Communications Commission,

2025 M Street, N.W., Room 5202, Washington, D.C. 20554 (and mail a

separate copy to Frank Stilwell, Auctions and Industry Analysis

Division), briefly summarizing the changes. Questions about other

changes should be directed to Frank Stilwell of the FCC Auctions and

Industry Analysis Division at (202) 418-0660.

5. Post-Auction Procedures

A. Down Payments and Withdrawn Bid Payments

110. After bidding has ended, the Commission will issue a public

notice declaring the auction closed, identifying the winning bids and

bidders for each license, and listing withdrawn bid payments due.

111. Within ten business days after release of the auction closing

notice, each winning bidder must submit sufficient funds (in addition

to its upfront payment) to bring its total amount of money on deposit

with the Government to 20 percent of its net winning bids (actual bids

less any applicable bidding credits). See 47 CFR 90.1011(b). In

addition, by the same deadline all bidders must pay any withdrawn bid

amounts due under 47 CFR 1.2104(g), as discussed in ``Bid Removal and

Bid Withdrawal,'' Part 4.B.2.c(6). (Upfront payments are applied first

to satisfy any withdrawn bid liability, before being applied toward

down payments.)

B. Long-Form Application

112. Within ten business days after release of the auction closing,

notice winning bidders must submit a properly completed long-form

application and required exhibits for each Phase II 220

[[Page 35224]]

MHz Service license won through the auction. Winning bidders that are

small businesses or very small businesses must include an exhibit

demonstrating their eligibility for bidding credits. See 47 CFR

90.1013. Further filing instructions will be provided to auction

winners at the close of the auction.

C. Default and Disqualification

113. Any high bidder that defaults or is disqualified after the

close of the auction (i.e., fails to remit the required down payment

within the prescribed period of time, fails to submit a timely long-

form application, fails to make full payment, or is otherwise

disqualified) will be subject to the payments described in 47 CFR

1.2104(g)(2). In such event the Commission may re-auction the license

or offer it to the next highest bidders (in descending order) at their

final bids. See 47 CFR 1.2109(b) and (c). In addition, if a default or

disqualification involves gross misconduct, misrepresentation, or bad

faith by an applicant, the Commission may declare the applicant and its

principals ineligible to bid in future auctions, and may take any other

action that it deems necessary, including institution of proceedings to

revoke any existing licenses held by the applicant. See 47 CFR

1.2109(d).

D. Refund of Remaining Upfront Payment Balance

114. All applicants that submitted upfront payments but were not

winning bidders for any Phase II 220 MHz Service license may be

entitled to a refund of their remaining upfront payment balance after

the conclusion of the auction. No refund will be made unless there are

excess funds on deposit from that applicant after any applicable bid

withdrawal payments have been paid.

115. Bidders that drop out of the auction completely may be

eligible for a refund of their upfront payments before the close of the

auction. However, bidders that reduce their eligibility and remain in

the auction are not eligible for partial refunds of upfront payments

until the close of the auction. Qualified bidders that have exhausted

all of their activity rule waivers, have no remaining bidding

eligibility, and have not withdrawn a high bid during the auction must

submit a written refund request which includes wire transfer

instructions, a Taxpayer Identification Number (``TIN''), and a copy of

their bidding eligibility screen print, to: Federal Communications

Commission, Billings and Collections Branch, Attn: Regina Dorsey or

Linwood Jenkins, 1919 M Street, NW. Room 452, Washington, DC 20554.

116. Bidders can also fax their request to the Billings and

Collections Branch at (202) 418-2843. Once the request has been

approved, a refund will be sent to the address provided on the FCC Form

159.

Note: Refund processing generally takes up to two weeks to

complete. Bidders with questions about refunds should contact

Linwood Jenkins or Geoffrey Idika at (202) 418-1995.

Federal Communications Commission.

Magalie Roman Salas,

Secretary.

Attachment A--Summary of Phase II 220 MHZ Licenses to be Auctioned

Attachment B--List of Cases Pending Before the Commission Involving

Non-Nationwide Phase I 220 MHZ Licensees

Attachment C--Guidelines for completion of FCC Forms 175 and 159, and

Exhibits

Attachment D--Electronic Filing and Review of FCC Form 175

Attachment E--Summary Listing of Documents From the Commission and the

Wireless Telecommunications Bureau Addressing Application of The Anti-

Collusion Rules

Attachment F--List of Commenters

Note: Attachments A through F are not printed in the Federal

Register. See the beginning of the Supplementary Information section

for availability.

[FR Doc. 98-17147 Filed 6-26-98; 8:45 am]

BILLING CODE 6712-01-M