# Closed Broadcast Auctions Scheduled for September 28, 1999; Comment Sought on Reserve Prices or Minimum Opening Bids and Other Auction Procedural Issues

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URL: https://www.frixlaw.com/law-library/documents/fr%3A99-13768

## Record

- **Collection:** Federal Register
- **Document type:** Notice
- **Published:** June 1, 1999
- **Citation:** 64 FR 29312

## Text

FEDERAL COMMUNICATIONS COMMISSION

[DA 99-940; Report No. AUC-99-25-A (Auction No. 25)]

Closed Broadcast Auctions Scheduled for September 28, 1999;
Comment Sought on Reserve Prices or Minimum Opening Bids and Other
Auction Procedural Issues

AGENCY: Federal Communications Commission.

ACTION: Notice; seeking comment.

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SUMMARY: This Public Notice announces the auction of certain AM, FM,
TV, LPTV, and FM and TV translator construction permits, to commence on
September 28, 1998, and seeks comment on procedural issues relating to
the auction.

DATES: Comments are due on or before June 1, 1999. Reply comments are
due on or before June 14, 1999.

ADDRESSES: To file formally, parties must submit an original and four
copies to the Office of the Secretary, Federal Communications
Commission, Federal Communications Commission, 445 Twelfth Street,
S.W., TW-A325, Washington, D.C. 20554. In addition, parties must submit
one copy to Amy Zoslov, Chief, Auctions and Industry Analysis Division,
Wireless Telecommunications Bureau, Federal Communications Commission,
Room 5202, 2025 M Street N.W., Washington, D.C. 20554. Comments and
reply comments will be available for public inspection during regular
business hours in the FCC Public Reference Room in the Commission's
headquarters at 445 Twelfth Street, S.W., Washington, D.C. 20554.

FOR FURTHER INFORMATION CONTACT: Lisa Scanlan, Audio Services Division,
Mass Media Bureau at (202) 418-2700 or Shaun Maher, Video Services
Division, Mass Media Bureau at (202) 418-1600 or Bob Allen, Auctions
and Industry Analysis Division, Wireless Telecommunications Bureau, at
(202) 418-0660.

SUPPLEMENTARY INFORMATION: This Public Notice was released on May 17,
1999, and is available in its entirety, including Attachment A, for
inspection and copying during normal business hours in the FCC Public
Reference Room in the Commission's headquarters at 445 Twelfth Street,
S.W., Washington, D.C. 20554., and also may be purchased from the
Commission's copy contractor, International Transcription Services,
(202) 857-3800, fax (202) 857-3805, 1231 20th Street, N.W., Washington,
D.C. 20036. It is also available on the Commission's website at http://
www.fcc.gov.

Synopsis of the Public Notice

1. By this Public Notice, the Mass Media Bureau (``MMB'') and the
Wireless Telecommunications Bureau (``WTB'') (collectively,
``Bureaus'') announce the auction of certain AM, FM, TV, LPTV, and FM
and TV translator construction permits to commence September 28, 1999.
Specifically, all spectrum to be auctioned is the subject of pending,
mutually exclusive applications for construction permits for the
referenced broadcast services, for which the Commission has not
approved a settlement agreement that obviates the need for an auction.
This includes mutually exclusive applications for full service FM, AM
and television stations that were subject to the comparative freeze
instituted after the decision of the U.S. Court of Appeals for the
District of Columbia in Bechtel v. FCC, 10 F.3d 875, 878 (D.C. Cir.
1993). The auction will also include pending mutually exclusive
applications for LPTV, FM translator and television translator, as well
as certain mutually exclusive LPTV and television translator DTV
displacement relief applications. Pursuant to Implementation of Section
309(j) of the Communications Act--Competitive Bidding for Commercial
Broadcast and Instructional Television Fixed Service Licenses, First
Report and Order in MM Docket No. 97-234, GC Docket No. 92-52 and GEN
Docket No. 90-264, 63 FR 48615 (``Broadcast First Report and Order'')
and Memorandum Opinion and Order, FCC 99-74, 64 FR 24523 (``Broadcast
Reconsideration Order''), participation in the auction will be limited
to those applicants identified in the Public Notice and applicants will
be eligible to bid on only those construction permits for which they
filed an appropriate long-form application (FCC Forms 301, 346 or 349).
2. Attachment A to the Public Notice sets forth all mutually
exclusive applicant groups (``MX groups'') categorized on a service-by-
service basis, accompanied by their respective minimum opening bids and
upfront payments. All MX groups identified in Attachment A have been
subject to competition through the opening and closing of the relevant
period for filing competing applications, either through the two-step
cut-off list procedures or through an application filing window.
Pursuant to the Broadcast First Report and Order, those specific
situations where both noncommercial and commercial applicants have
filed mutually exclusive applications for nonreserved channels are not
proceeding to auction at this time, and therefore, these application
groups have not been included in Attachment A. In addition, those AM,
FM translator, LPTV and television translator applications in ``daisy
chain'' MX groups (where applications are directly mutually exclusive
with certain applications in their group but not with others) are not
included in this auction. A separate auction for daisy chain MX groups
will be announced shortly.

[[Page 29313]]

3. Construction permits will be auctioned for each of the MX groups
identified in Attachment A. All applications within an MX group are
directly mutually exclusive with one another and a single construction
permit will be issued for each of those MX groups. The applicants
listed in Attachment A are categorized by service as follows: Primary
Service Television (full service facilities as set forth in the
Commission's television Table of Allotments); Secondary Service
Television (secondary service non-Table-based facilities, specifically,
television translator and LPTV); FM Radio; FM translator; and AM Radio.
The naming conventions employed in Attachment A to identify each MX
Group are set forth below:

Primary Service TV: PST
Secondary Service TV: SST
FM Radio: FM
FM Translator: FMT
AM Radio: AM

The total number of long form applications being disposed of in
this proceeding is 968. These long form applications are grouped
together in a total of 265 MX groups.
4. 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 when FCC licenses or construction
permits are subject to auction (i.e., because the applications are
mutually exclusive), unless the Commission determines that a reserve
price or minimum bid is not in the public interest. Consistent with
this mandate, the Commission has directed the Bureaus to seek comment
on the use of minimum opening bids and/or reserve prices prior to the
start of each broadcast auction. This is consistent with the policy
applied in earlier spectrum auctions and is pursuant to the
Commission's rules. The Commission has concluded that either or both of
these mechanisms may be employed for auctions and has delegated the
requisite authority to the Bureaus to make determinations regarding the
appropriateness of employing either or both.
5. Normally, a reserve price is an absolute minimum price below
which an item will not be sold in a given auction. Reserve prices can
be either published or unpublished. A minimum opening bid, on the other
hand, is the minimum bid price set at the beginning of the auction
below which no bids are accepted. It is generally used to accelerate
the competitive bidding process. Also, in a minimum opening bid
scenario, the auctioneer generally has the discretion to lower the
amount later in the auction.
6. In anticipation of these auctions and in light of the Balanced
Budget Act, the Bureaus propose to establish minimum opening bids. The
Bureaus believe a minimum opening bid, which has been utilized in other
auctions, is an effective tool in conducting an auction. A minimum
opening bid, rather than a reserve price, will help to regulate the
pace of the auction. The minimum opening bids will be calculated
according to the factors set forth below. A listing of the proposed
minimum opening bids for the MX groups can be found in Attachment A of
the Public Notice.
7. For full service television construction permits, the Bureaus
have based the proposed minimum opening bids upon the type of service
that will be offered, market size, industry cash flow data and recent
broadcast transactions. For radio construction permits, the Bureaus
have based the proposed minimum opening bids upon the service and class
of facility that will be offered, the population covered by the
proposed facilities for which parties intend to bid and recent
broadcast transactions. Comment is sought on this proposal. If
commenters believe that the minimum opening bids proposed in Attachment
A will result in substantial numbers of unsold construction permits,
or, in particular instances, do not constitute reasonable amounts, or
that they should instead operate as a reserve price, they should
explain why this is so, and comment on the desirability of an
alternative approach. Commenters are advised to support their claims
with valuation analyses and suggested reserve prices or minimum opening
bid levels or formulas. Commenters should detail any alternative method
they propose for valuing given spectrum, providing examples and
citations for each part of their formula. Alternatively, comment is
sought on whether, consistent with the Balanced Budget Act, the public
interest would be served by having no minimum opening bids or reserve
prices.

II. Other Auction Procedural Issues

8. The Balanced Budget Act requires the Commission to ``ensure
that, in the scheduling of any competitive bidding under this
subsection, an adequate period is allowed * * * before issuance of
bidding rules, to permit notice and comment on proposed auction
procedures * * *.'' Consistent with the provisions of the Balanced
Budget Act and to ensure that potential bidders have adequate time to
familiarize themselves with the specific provisions that will govern
the day-to-day conduct of an auction, the Commission directed the
Bureaus, under their existing delegated authority, to seek comment on a
variety of auction-specific issues prior to the start of each auction.
The Bureaus seek comment on the following issues.
a. Auction Sequence, License Groupings and Auction Design
9. Because the grouping together of construction permit
applications by MX groups, as described above, is appropriate for the
broadcast services that are the subject of this auction, the Bureaus
seek comment on the use of MX groups, as represented in Attachment A,
for the awarding of construction permits. Further, because it is most
administratively appropriate and allows bidders to take advantage of
any synergies that exist among licenses, the Bureaus propose to award
the construction permits in a single simultaneous multiple-round
auction. The Bureaus seek comment on this proposal.
b. Structure of Bidding Rounds, Activity Requirements, and Criteria for
Determining Reductions in Eligibility
10. The Bureaus propose a single stage auction. In order to ensure
that auctions close within a reasonable period of time, an activity
rule requires bidders to bid actively on a percentage of their maximum
bidding eligibility during each round of the auction rather than
waiting until the end to participate. A bidder that does not satisfy
the activity rule will either lose bidding eligibility in the next
round or use an activity rule waiver.
11. The Bureaus propose that, in each round of the auction a bidder
desiring to maintain its current eligibility is required to be active
on construction permits encompassing one hundred (100) 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). In
each round of the auction a bidder's current eligibility will therefore
be equal to their activity level in the previous round. The Bureaus
seek comment on these proposals.
c. Minimum Accepted Bids
12. Once there is a standing high bid on a construction permit, a
bid increment will be applied to that construction permit to establish
a minimum acceptable bid for the following round. The Bureaus propose
to initially set the bid increment at 10% per bid per construction
permit. The

[[Page 29314]]

Bureaus retain the discretion to change the methodology for determining
the minimum bid increment if they determine that circumstances so
dictate. The Bureaus seek comment on this proposal.
d. Initial Maximum Eligibility for Each Bidder
13. The Bureaus have delegated authority and discretion to
determine an appropriate upfront payment for each construction permit
being auctioned, taking into account such factors as efficiency of the
auction process and the potential value of the spectrum. With these
guidelines in mind, the Bureaus propose the schedule of upfront
payments contained in Attachment A to the Public Notice. The Bureaus
seek comment on this proposal.
14. The Bureaus further propose that the amount of the upfront
payment submitted by a bidder will determine the initial maximum
eligibility (as measured in bidding units) for each bidder. Upfront
payments will not be attributed to specific construction permits, but
instead will be translated into bidding units to define a bidder's
initial eligibility, which cannot be increased during the auction.
Thus, in calculating the upfront payment amount, an applicant must
determine the maximum number of bidding units it may wish to bid on (or
hold high bids on) in any single round, and submit an upfront payment
covering that number of bidding units. In this auction, most bidders
shall be potentially eligible to bid in relatively few MX groups, or,
in some cases, potential eligibility may be limited to one MX group.
This is because bidding in any MX group is potentially open only to
those applicants that have previously filed a long form application.
Nonetheless, in those cases where an applicant has filed qualifying
long form applications for more than one MX group, the total of upfront
payments tendered will be translated into bidding units to define that
bidder's initial maximum eligibility, as explained above.
15. Failure to submit an upfront payment of sufficient size to
provide bidding eligibility for every MX group in which an applicant
has a pending long form application, will limit the bidding eligibility
of that applicant. For example, where a bidder has submitted
applications for three construction permits (``A,'' ``B'' and ``C'')
and the upfront payment requirements are: ``A'': $1,000; ``B'': $500;
and ``C'': $250, once the auction commences, eligibility to bid on
construction permit ``A'' will require 1000 bidding units; with
construction permits ``B'' and ``C'' requiring 500 units and 250 units,
respectively. If the bidder submits an upfront payment of $1,000, it
may bid on construction permit ``A'' or on construction permits ``B''
and ``C'' in the same round, but not on all three. In this example, the
bidder would, however, be eligible to bid on construction permit ``A''
in the first round of the auction and on ``B'' and ``C'' in a later
round, so long as the bidder does not have a standing high bid on
``A.'' In the case of this hypothetical bidder submitting an upfront
payment of $500, it could not bid on construction permit ``A,'' (since
it would have insufficient bidding units) but would be potentially
eligible to pursue construction permits ``B'' and ``C,'' though not
both in the same round (since it would lack sufficient bidding
credits). To have unrestricted bidding eligibility in the situation
posed by this example, the bidder would have to submit an upfront
payment of $1,750, or enough to acquire sufficient bidding units to bid
on or hold high bids on all three construction permits concurrently.
The Bureaus seek comment on this proposal.
e. Activity Rule Waivers and Reducing Eligibility
16. 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 construction
permit. Activity waivers are principally a mechanism for auction
participants to avoid the loss of auction eligibility in the event that
exigent circumstances prevent them from placing a bid in a particular
round.
17. 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 bidding period 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.
18. 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
bidding period 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 above. Once eligibility has been reduced, a bidder will not
be permitted to regain its lost bidding eligibility.
19. 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 bidding period 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 will not keep the auction open, under the simultaneous
stopping rule. The Bureaus propose that each bidder be provided with
five activity rule waivers that may be used in any round during the
course of the auction. The Bureaus seek comment on this proposal.
f. Information Regarding Bid Withdrawal and Bid Removal
20. The Bureaus propose the following bid removal and bid
withdrawal procedures. Before the close of a bidding period, 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.
21. Once a round closes, a bidder may no longer remove a bid.
However, in the next round, a bidder may withdraw standing high bids
submitted in a previous rounds using the withdraw bid function. A high
bidder that withdraws its standing high bid from a previous round is
subject to the bid withdrawal payment provisions. The Bureaus seek
comment on these bid removal and bid withdrawal procedures.
22. In the Part 1 Third Report and Order, the Commission explained
that allowing bid withdrawals facilitates efficient aggregation of
licenses and the pursuit of efficient backup strategies as information
becomes available during the course of an auction. The Commission
noted, however, that in some instances bidders may seek to withdraw
bids for improper reasons, including to delay the close of the auction
for strategic purposes. The Bureau, therefore, has discretion, in
managing the auction, to limit the number of withdrawals to prevent
strategic delay of the close of the auction or other abuses. The
Commission stated that the Bureau should assertively exercise its
discretion, consider limiting the number of rounds in which bidders may

[[Page 29315]]

withdraw bids, and prevent bidders from bidding on a particular market
if the Bureau finds that a bidder is abusing the Commission's bid
withdrawal procedures.
23. Applying this reasoning, the Bureaus propose to limit each
bidder in the auction to withdrawals in no more than two rounds during
the course of the auction. To permit a bidder to withdraw bids in more
than two rounds would likely encourage insincere bidding or the use of
withdrawals for anti-competitive strategic purposes. The two rounds in
which withdrawals are utilized will be at the bidder's discretion;
withdrawals otherwise must be in accordance with the Commission's
rules. There is no limit on the number of standing high bids that may
be withdrawn in either of the rounds in which withdrawals are utilized.
Withdrawals will remain subject to the bid withdrawal payment
provisions specified in the Commission's rules. The Bureaus seek
comment on this proposal.
g. Stopping Rule
24. The Bureaus propose to employ a simultaneous stopping approach.
The Bureaus have discretion to establish stopping rules before or
during multiple round auctions in order to terminate the auction within
a reasonable time. A simultaneous stopping rule means that all
construction permits remain open until the first round in which no new
acceptable bids, proactive waivers or withdrawals are received. After
the first such round, bidding closes simultaneously on all construction
permits. Thus, unless circumstances dictate otherwise, bidding would
remain open on all construction permits until bidding stops on every
construction permit.
25. The Bureaus seek comment on a modified version of the
simultaneous stopping rule. The modified stopping rule would close the
auction for all licenses after the first round in which no bidder
submits a proactive waiver, a withdrawal, or a new bid on any license
on which it is not the standing high bidder. Thus, absent any other
bidding activity, a bidder placing a new bid on a construction permit
for which it is the standing high bidder would not keep the auction
open under this modified stopping rule. The Bureaus further seek
comment on whether this modified stopping rule should be used.
26. We propose that the Bureaus retain the discretion 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 had submitted a proactive
waiver. The activity rule, therefore, will apply as usual and a bidder
with insufficient activity will either lose bidding eligibility or use
a remaining activity rule waiver.
27. The Bureaus propose to reserve the right to declare that the
auction will end after a specified number of additional rounds
(``special stopping rule''). If the Bureaus invoke this special
stopping rule, it will accept bids in the final round(s) only for
construction permits on which the high bid increased in at least one of
the preceding specified number of rounds. The Bureaus propose to
exercise this option only in certain circumstances, such as, for
example, where the auction is proceeding very slowly, there is minimal
overall bidding activity, or it appears likely that the auction will
not close within a reasonable period of time. Before exercising this
option, the Bureaus are likely to attempt to increase the pace of the
auction by, for example, increasing the number of bidding rounds per
day, and/or increasing the amount of the minimum bid increments for the
limited number of construction permits where there is still a high
level of bidding activity. The Bureaus seek comment on these proposals.
h. Information Relating to Auction Delay, Suspension or Cancellation
28. The Bureaus propose that, by Public Notice or by announcement
during the auction, they 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 Bureaus,
in their 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 Bureaus to delay or suspend the
auction. The Bureaus emphasize that exercise of this authority is
solely within the discretion of the Bureaus, and its use is not
intended to be a substitute for situations in which bidders may wish to
apply their activity rule waivers. The Bureaus seek comment on this
proposal.
i. Information Pertaining to Further Auction Details
29. Future public notices will include further details regarding
short form (FCC Form 175) application filing and payment deadlines, a
bidder seminar, and other pertinent information.

Federal Communications Commission.
Gerald P. Vaughan,
Deputy Bureau Chief, Wireless Telecommunications Bureau.
[FR Doc. 99-13768 Filed 5-28-99; 8:45 am]
BILLING CODE 6712-01-P

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A99-13768. Public record. Not legal advice.