To all: Be on guard for Round 40, because at that point the FCC may decide to end the auction forthwith if activity is slow.
b. LMDS Bidding Procedures
(1) Stopping Rules
315. When simultaneous multiple round auctions are used, a stopping rule must be established for determining when the auction is over. In the Third NPRM, we proposed a simultaneous stopping rule in which bidding generally remains open on all licenses until there is no new acceptable bid on any license. No specific comments were filed in response to this proposal.
316. We will adopt a simultaneous stopping rule for LMDS. The auction will close after one round passes in which no new valid bids, proactive activity rule waivers (as defined at paragraphs 319 through 326, infra), or bid withdrawals are submitted. We will retain the discretion, however, to keep the auction open even if no new valid bids, proactive waivers, or bid withdrawals are submitted. In the event that this discretion is exercised, the effect will be the same as if a bidder had submitted a proactive waiver. This will help ensure that the auction is completed within a reasonable period of time, because it will enable the Commission to utilize larger bid increments, which speed the pace of the auction, without risking premature closing of the auction. Since we also impose an activity rule (as discussed infra), we believe that simultaneous closing for all licenses will afford bidders flexibility to pursue back-up strategies without running the risk that bidders will hold back their bidding until the final rounds. In addition, we retain the discretion to declare after forty rounds that the auction will end after some specified number of additional rounds. If this option is used, we will accept bids only on licenses where the high bid has increased in at least one of the last three rounds.
(2) Duration of Bidding Rounds
317. We proposed in the Third NPRM to reserve the discretion to vary the duration of the bidding rounds or the interval at which bids are accepted. No specific comments were filed in response to this proposal. Because in simultaneous multiple round auctions bidders may need a significant amount of time to evaluate back-up strategies and develop their bidding plans, we reserve the discretion to vary the duration and frequency of bidding rounds. We will announce
any changes to the duration of rounds and intervals between bidding either by Public Notice prior to the auction or by announcement during the auction.
(3) Bid Withdrawals
318. In the Third NPRM, we proposed to permit a high bidder to withdraw one or more of its high bids during the bid withdrawal period in each round subject to the bid withdrawal payments specified below. The only comment on this proposal was WCA's suggestion that we
restructure our bid withdrawal provisions if we decided to award more than one license per geographic service area. Because we are awarding two licenses of different size (1,150 megahertz and 150 megahertz) per geographic area, we find it unnecessary to address the merits of WCA's alternative proposal, which was predicated on the assumption that we would award two LMDS licenses of equal size (450 megahertz each). We will not make use of a bid withdrawal period within each round as we have in previous auctions, but will permit a high bidder to withdraw the high bid from a previous round subject to the bid withdrawal payments discussed below. If a high bid is withdrawn (and not bid upon in the same round), the license
will be offered in the next round at the second highest bid price. We may at our discretion adjust the offer price in subsequent rounds until a valid bid is received on the license. In addition, to
prevent a bidder from strategically delaying the close of the auction, we retain the discretion to limit the number of times that a bidder may re-bid on a license from which it has withdrawn a high bid.
(3) Activity Rules
319. In the Competitive Bidding Second Report and Order, we adopted the Milgrom- Wilson activity rule as our preferred activity rule where a simultaneous stopping rule is used. The Milgrom-Wilson approach encourages bidders to participate in early rounds by limiting their maximum participation to some multiple of their minimum participation level. In the Third NPRM, we tentatively concluded that the Milgrom-Wilson activity rule should be used in
conjunction with the proposed simultaneous stopping rule for LMDS auctions. We believed that the Milgrom-Wilson approach would best achieve the Commission's goals of affording bidders flexibility to pursue back-up strategies, while at the same time ensuring that
simultaneous auctions are concluded within a reasonable period of time.
320. In its comments, ComTech urges the Commission to adopt bidder activity rules that assume only one license covering 1 gigahertz of spectrum for each service area and which establish the number of households covered as the activity criterion. That is, bidders would declare their eligibility solely in terms of households.
321. For LMDS auctions, we will use the Milgrom-Wilson activity rule with some variations. Milgrom and Wilson divide the auction into three stages. We will set, by announcement before the auction, the minimum required activity levels for each stage of the
auction. We retain the discretion to set and, by announcement before or during the auction, vary the required minimum activity levels (and associated eligibility calculations) for each auction stage. Retaining this flexibility will improve our ability to control the pace of the auction and help ensure that the auction is completed within a reasonable period of time.
322. For the LMDS auctions, we will use the following transition guidelines: The auction will begin in Stage One and will generally move from Stage One to Stage Two and from Stage Two to Stage Three when the auction activity level is below ten percent for three consecutive rounds. Under no circumstances can the auction revert to an earlier stage. However, we retain the discretion to determine and announce during the course of an auction when, and
whether, to move from one auction stage to the next, based on a variety of measures of bidder activity, including, but not limited to, the auction activity level as defined above, the percentage
of licenses (measured in terms of bidding units) on which there are new bids, the number of new bids, and the percentage increase in revenue.
323. To avoid the consequences of clerical errors and to compensate for unusual circumstances that might delay a bidder's bid preparation or submission in a particular round, we will provide bidders with a limited number of waivers of the above-described activity rule. We believe that some waiver procedure is needed because we do not wish to reduce a bidder's eligibility due to an accidental act or circumstances not under the bidder's control.
324. We will provide bidders with five activity rule waivers that may be used in any round during the course of the auction. If a bidder's activity is below the required activity level, a waiver will be applied automatically. That is, for example, if a bidder fails to submit a bid in a round, and its activity from any standing high bids (that is, high bids at the end of the previous round) falls below its required activity level, a waiver will be automatically applied. A
waiver will preserve current eligibility in the next round. An activity rule waiver applies to an entire round of bidding and not to a particular BTA service area. Initial eligibility is determined
by the amount of the upfront payment received and the licenses identified in the applicant's FCC Form 175, which are discussed below.
325. Bidders will be afforded an opportunity to override the automatic waiver mechanism when they place a bid if they intentionally wish to reduce their bidding eligibility and
do not want to use a waiver to retain their eligibility at its current level. If a bidder overrides the automatic waiver mechanism, its eligibility will be permanently reduced, and it will not be
permitted to regain its bidding eligibility from a previous round. An automatic waiver invoked in a round in which there are no new valid bids will not keep the auction open. Bidders will have
the option of entering a proactive activity rule waiver during any round. If a bidder submits a proactive waiver in a round in which no other bidding activity occurs, the auction will remain
open.
326. We retain the discretion to issue additional waivers during the course of an auction for circumstances beyond a bidder's control. We also retain the flexibility to adjust by Public
Notice prior to an auction the number of waivers permitted, or to institute a rule that allows one waiver during a specified number of bidding rounds or during specified stages of the auction. |
