61918 Federal Register / Vol. 80, No. 198 / Wednesday, October 14, 2015 / Rules and Regulations

FEDERAL COMMUNICATIONS Regulatory Flexibility Analysis their spectrum usage rights and a COMMISSION As required by the Regulatory forward auction (Auction 1002) of new, Flexibility Act of 1980, as amended flexible-use licenses suitable for 47 CFR Part 20 (RFA), the Commission has prepared providing mobile broadband services. [GN Docket No. 12–268, MB Docket No. 15– this Supplemental Final Regulatory Forward auction proceeds will be used 146, WT Docket Nos. 14–252, 12–269; FCC Flexibility Analysis (SFRFA) of the to pay broadcasters that relinquish 15–78] possible significant economic impact on rights in the reverse auction. As part of small entities by the procedures and the auction process, the broadcast Broadcast Incentive Auction policies contained in the Auction 1000 television bands will be reorganized or Scheduled To Begin on March 29, Bidding Procedures Public Notice. ‘‘repacked’’ so that the television 2016; Procedures for Competitive stations that remain on the air after the Bidding in Auction 1000 Report to Small Business incentive auction occupy a smaller Administration portion of the ultra-high frequency AGENCY: Federal Communications The Commission’s Consumer and (UHF) band, thereby clearing contiguous Commission. Governmental Affairs Bureau, Reference spectrum that will be repurposed as the ACTION: Final rule. Information Center, will send a copy of 600 MHz Band. The Commission’s the Auction 1000 Bidding Procedures decisions implement its central SUMMARY: In this document, the Public Notice, including this SFRFA, to Commission establishes final bidding objective for the incentive auction: to the Chief Counsel for Advocacy of the allow market forces to determine the procedures and qualifications for SBA (SBA). participation in Auction 1000, the highest and best use of spectrum. In Incentive Auction, including the Paperwork Reduction Act response to the robust public record in forward and reverse auctions, 1001 and this proceeding, its key decisions This document does not contain new include the following: (a) Initial 1002 respectively. This document is or modified information collection intended to familiarize prospective Clearing Target Determination requirements subject to the Paperwork Procedure. The procedure the applicants with the procedures and Reduction Act of 1995 (PRA), Public Commission adopts for selecting the other requirements for participation in Law 104–13. the Incentive Auction. initial clearing target will allow market Congressional Review Act forces to determine the highest and best DATES: Effective October 14, 2015. The Commission will send a copy of use of spectrum on a near-nationwide FOR FURTHER INFORMATION CONTACT: the Auction 1000 Bidding Procedures basis, while permitting a limited Wireless Telecommunications Bureau, Public Notice, including the SFRFA, in amount of impairments in the Auctions and Spectrum Access Division: a report to be sent to Congress and the repurposed 600 MHz Band to avoid the for general auction questions: Linda Government Accountability Office ‘‘least common denominator problem’’: Sanderson at (717) 338–2868; for reverse pursuant to the Congressional Review limiting the amount of spectrum auction legal questions: Erin Griffith at Act. A copy of the Auction 1000 Bidding available in most markets to the (202) 418–0660; for forward legal Procedures Public Notice and SFRFA (or quantity that is available in the most questions: Kathryn Hinton at (202) 418– summaries thereof) will also be constrained markets. To limit 0660. Lisa Stover at (717) 338–2868. published in the Federal Register. impairments, the Commission modifies Media Bureau, Video Division: for its proposal in the Auction 1000 broadcaster questions: Dorann Bunkin at I. Introduction and Executive Summary Comment PN by adopting a scaled (202) 418–1636. 1. The Auction 1000 Bidding standard with a cap that will allow SUPPLEMENTARY INFORMATION: This is a Procedures Public Notice the significantly less than the proposed 20 summary of the Commission’s Commission determined the procedures percent at higher clearing targets, document, Auction 1000 BIA Bidding necessary to carry out the incentive consistent with the consensus that Procedures Public Notice, GN Docket auction, and resolves issues it raised in impairments must be minimized, No. 12–268, WT Docket Nos. 14–252 the Auction 1000 Comment Public particularly at higher clearing targets. and 12–269, MB Docket No. 15–146, Notice (Auction 1000 Comment PN), 80 The Commission’s decisions to allow FCC 15–78, adopted on August 6, 2015 FR 4816, January 29, 2015. In particular, the optimization software to assign and released on August 11, 2015. The the Commission establishes final television stations within the 600 MHz complete text of this document is procedures for setting the initial Band so as to minimize impaired available for public inspection and spectrum clearing target, qualifying to weighted-pops, and not to ‘‘discount’’ copying from 8:00 a.m. to 4:30 p.m. bid, and bidding in the reverse and impairments located in the uplink Eastern Time (ET) Monday through forward auctions. The Auction 1000 portion of the Band, also will help the Thursday or from 8:00 a.m. to 11:30 a.m. Bidding Procedures Public Notice is auction to repurpose as much near- ET on Fridays in the FCC Reference organized from the perspective of nationwide spectrum as possible while Information Center, 445 12th Street SW., potential bidders, with separate sections minimizing impairments; (b) Opening Room CY–A257, Washington, DC 20554. for the reverse and forward auctions, Prices. The Commission adopts its The complete text is available on the each ordered consistent with the overall proposal for calculating opening price Commission’s Web site at http:// sequence of procedures in the incentive offers for each eligible broadcaster based wireless.fcc.gov, or by using the search auction. Bidding in the auction will on a television station’s interference and function on the ECFS Web page at begin on March 29, 2016, which will be population characteristics. This http://www.fcc.gov/cgb/ecfs/. the deadline for reverse auction methodology, which will yield opening Alternative formats are available to applicants to commit to an initial bid price offers in the reverse auction of up persons with disabilities by sending an option. to $900 million, should attract robust email to [email protected] or by calling 2. The incentive auction is composed participation in all areas without the Consumer & Governmental Affairs of a reverse auction (Auction 1001) in undermining other goals of the auction. Bureau at (202) 418–0530 (voice), (202) which broadcasters will offer to Opening prices in the reverse auction 418–0432 (TTY). voluntarily relinquish some or all of will be announced at least 60 days in

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advance of the deadline to file an forward auction: ‘‘Category 1’’ blocks round’’ to give bidders the opportunity application to participate in the reverse with potential impairments that affect to meet the final stage rule without auction; (c) For the forward auction, the zero to 15 percent of the weighted moving to another stage, except that an Commission adopts its proposal to population of a PEA; and ‘‘Category 2’’ extended round will not be triggered if assign a specific number of bidding blocks with potential impairments that the shortfall is greater than 20 percent; units to each spectrum block that will affect between greater than 15 percent (j) Assignment Round. The Commission be available in a Partial Economic Area and up to 50 percent. Prices for adopts the assignment round bidding (PEA) based on the number of weighted- frequency-specific licenses will be procedures proposed in the Auction pops in the PEA, and to use the bidding adjusted downward at the end of the 1000 Comment PN, with a modification: units to calculate minimum opening assignment phase of the forward auction in addition to limiting PEA grouping to bids, upfront payments, and bidder by one percent of the final clock phase PEAs with the same mix of clock-phase eligibility, as well as to measure bidding price for each one percent of winners and winnings, as proposed, the activity. To facilitate bidding across impairment to the license; (g) The Commission will limit PEA grouping to license categories, each block available Commission adopts several measures to unimpaired PEAs. Winning clock-phase in a PEA will have the same number of improve transparency for forward bidders will have the opportunity to bid bidding units. The minimum opening auction bidders. First, the auction for their preferred combinations of bid for each spectrum block will be system will provide them in advance of licenses, consistent with their clock- equal to the number of bidding units bidding with specific information phase winnings, in a series of single assigned to the block times $5,000, and regarding impairments, including the sealed-bid rounds conducted by PEA or, upfront payments will be one-half that actual source and location of the in some cases, PEA group; (k) The amount. Upfront payments will be due impairment. Second, during the clock auction system will incorporate certain after the initial clearing target has been phase, aggregate price information that intra-market contiguity objectives in selected; (d) Reverse Auction Bidding. reflects the progress of the forward determining the frequency-specific Having considered the comments the auction towards satisfying the final license assignments available in the Commission received on its proposal for stage rule, as well as price and aggregate assignment round. To assist forward a Dynamic Reserve Price (DRP) demand information for blocks in each auction bidders in determining whether, mechanism, it has decided not to adopt PEA that reflects progress towards and how much, to bid in each PEA DRP. This decision will encourage completion of bidding in the clock during the assignment phase, all clock- voluntary participation in the reverse phase, will be publicly available; (h) To phase winning bidders across all PEAs auction by removing uncertainty among implement the Commission’s decision will be informed of the extent to which broadcasters, and maximize forward in the Mobile Spectrum Holdings Report contiguous blocks feasibly may be auction spectrum value by eliminating and Order (Mobile Spectrum Holdings assigned to winning bidders from the the possibility of additional R&O), 79 FR 39977, July 11, 2014, to clock phase within each PEA. In impairments in the 600 MHz Band due incorporate a market-based spectrum addition, the auction system will to the operation of the DRP mechanism. reserve in the forward auction, the provide each bidder with bidding In order to make bidding as simple as Commission adopts its proposals to base options that satisfy the feasible possible for reverse auction bidders, the maximum number of reserved contiguity objectives for each PEA in bidders will not be able to submit spectrum blocks in a given PEA on the which the bidder may bid; (l) Final TV ‘‘intra-round’’ bids. The Commission total number of Category 1 and 2 blocks Channel Assignments. The Commission adopts its proposal to establish a simple offered in that PEA; to limit the actual will use optimization techniques to proxy bid mechanism to make it easier number to demand for Category 1 blocks determine a final TV channel for bidders to participate in the auction; by reserve-eligible bidders when the assignment plan that satisfies the (e) The Commission also adopts several auction reaches the spectrum reserve constraints adopted in the Incentive measures to improve transparency for trigger; to reserve only Category 1 Auction R&O and strives for the reverse auction bidders. First, the blocks; and to limit the number of additional policy goals of maximizing auction system will inform them, for reserved blocks in a PEA to two if, when the number of stations that stay on their each station on which they are bidding, the trigger is reached, only one reserve- pre-auction channels, minimizing of their bidding status and the new price eligible bidder demands such blocks. aggregate new interference to individual offers for available bid options. Second, The Commission also affirms its stations, and avoiding channel bidders also will be provided with decision that the spectrum reserve will reassignments for stations with high ‘‘vacancy’’ information regarding the be triggered by satisfaction of the final anticipated costs. These goals, in turn, availability of channels in bands stage rule; (i) To implement the final will help to ensure that the total relevant to each of their stations given stage rule established in the Incentive reimbursement costs associated with the its bid options. Vacancy information Auction Report and Order (Incentive repacking process remain below the may help reverse auction bidders assess Auction R&O), 79 FR 48441, August 15, $1.75 billion in the TV Broadcaster the likelihood that the price offers for a 2014, the Commission adopts the Relocation Fund that Congress made bid option will continue to decrease, as proposed average price and spectrum available, speed the post-auction well as how likely any bid option to benchmarks of $1.25 and 70 megahertz transition process and minimize move to another band is to be available of licensed spectrum, respectively. The disruption for stations and viewers through the current round. Once reverse benchmarks will help to ensure that alike. auction bidding stops in any stage, the winning bids for the licenses in the 3. Consistent with its decision in the total dollar amount of provisionally forward auction reflect competitive Incentive Auction R&O affirming the winning reverse auction bids will be prices and return a portion of the value Wireless Telecommunications Bureau’s announced publicly; (f) Forward of the spectrum to taxpayers without (WTB’s) delegated authority regarding Auction Bidding. The Commission reducing the amount of spectrum auction procedure matters that it adopts its proposal to offer two repurposed for new, flexible-use typically handles, at least 60 days before categories of generic spectrum blocks for licenses. The Commission also adopts the deadline to file auction applications bidding in the clock phase of the its proposals for triggering an ‘‘extended WTB will release a separate public

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notice which will address the pre- Auction R&O as ‘‘the 600 MHz Band included with the appendices to the auction application process, including Plan.’’ Because the Commission will not Application Procedures PN. detailed instructions and deadlines, as know the exact number of licenses or A. Overview well as post-auction procedures their frequencies when the incentive (Auction 1000 Application Procedures auction begins, the 600 MHz Band Plan 9. Based on the array of stations that Public Notice or Application Procedures includes different band plan scenarios apply to participate in the reverse PN). The Application Procedures PN associated with different spectrum auction and the bidding options to will announce the filing window for clearing targets. which they initially commit, the applications to participate in the reverse 6. Additionally, in the Incentive procedure the Commission adopts will and forward auctions, as well as upfront Auction R&O, the Commission use mathematical optimization payments and minimum opening bids recognized the importance of finalizing techniques to determine a provisional for the forward auction. In addition, the TVStudy, the computer software that television channel assignment plan for Application Procedures PN will include will be used in the repacking process, every possible spectrum clearing target. technical formulas implementing final well in advance of the auction. On June For each clearing target, the plan must decisions regarding the initial clearing 30, 2015, the Office of Engineering and include a feasible channel assignment in target determination procedure, the final Technology (OET) finalized TVStudy its pre-auction band for every eligible television channel assignment plan, and and released a detailed summary of station that does not participate in the the assignment of frequency-specific baseline coverage area and population reverse auction and in the VHF band for every applicant designated to move to a licenses to forward auction clock-phase served by each station to be protected in VHF relinquishment option. Consistent winning bidders, as well as algorithms the repacking process, based on then- with the constraints adopted in the for bid processing. The Auction 1000 current information in its databases Incentive Auction R&O to make all BIA Procedures Public Notice, together regarding the stations’ facilities. The reasonable efforts to preserve each with the Application Procedures PN, Commission directs OET to release final eligible station’s coverage area and will provide prospective bidders with a baseline coverage area and population population served, ‘‘[a] feasible complete guide to participating in the served data no later than 60 days before assignment is one in which: (1) All incentive auction. the deadline for auction applications. stations are given a channel assignment, II. Background of Proceeding III. Initial Clearing Target either to a channel or to go off the air; 4. The Commission will conduct Determination Procedure (2) a station can only be assigned to one Auction 1000 (including Auctions 1001 of its allowable channels as defined in and 1002) pursuant to Title VI of the 7. The Commission adopts the the domain.csv file; (3) stations’ channel Middle Class Tax Relief and Job procedure for selecting an initial assignments must not violate adjacent Creation Act of 2012 (Spectrum Act), spectrum clearing target for the and co-channel pairwise interference which authorized incentive auctions to incentive auction. Examination of the restrictions as defined in the help meet the Nation’s accelerating record reflects consensus on several interference_paired.csv file; (4) all non- spectrum needs and required the basic principles: that the goal should be participating stations and stations that Commission to conduct a broadcast to allow market forces to determine how have dropped out of bidding in the television spectrum incentive auction. much spectrum is repurposed; that reverse auction are assigned a channel Since enactment of the Spectrum Act, flexibility to allow some degree of in their pre-auction band; and (5) all the Commission has released a number impairment is critical to achieving that participating stations in the reverse of decisions in which it has adopted goal; and that forward auction licenses auction must be assigned to a valid rules and policies that provide the should be as free from impairments as relinquishment option, that is, an option necessary framework for implementing possible. Consistent with these consistent with the relinquishment the incentive auction. Prospective principles, the procedure the options the bidder selected during the applicants must be familiar with Commission adopts is modified in application process and with the additional specific details from these important respects from that proposed bidding rules of the reverse auction.’’ decisions as well as with the in the Auction 1000 Comment PN. In Stations currently assigned to channels Commission’s general competitive particular, the Commission adopts a 50 or 51 will be provisionally assigned bidding rules in Part 1, Subpart Q of the one-block-equivalent standard with a to different UHF channels. Each Code of Federal Regulations and with cap for limiting impairments that will applicant station must be designated to the procedures, terms, and conditions allow significantly less than the a relinquishment option consistent with contained in the Auction 1000 BIA proposed 20 percent nationwide its initial bid commitment. If a station Bidding Procedures Public Notice, and impairment level at higher clearing initially commits to move to a High- or all other public notices related to targets. Low-VHF channel as its preferred Auction 1000, including Auctions 1001 8. The following provides a high-level relinquishment option, and the auction and 1002. overview of the procedure and then system is unable to accommodate that 5. In the Incentive Auction R&O, the addresses in detail the elements of the option, the system must either designate Commission adopted a ‘‘600 MHz Band procedure related to handling that station to a fallback relinquishment Plan’’ consisting of an uplink band that impairments. In Appendix A to the option selected by the applicant or, if will begin at channel 51 (698 MHz), Auction 1000 Bidding Procedures Public the system is unable do so, to a feasible followed by a duplex gap, and then a Notice, the Commission provides a channel in the station’s pre-auction downlink band. Consistent with the description of how its computer band. The optimization procedure can Incentive Auction R&O, the Commission software will apply the procedure the always accommodate an initial bid refers throughout the Auctions 1000 BIA Commission adopts on a step-by-step commitment to go off-air, including a Bidding Procedures Public Notice to the basis. An updated version of Appendix commitment to go off-air in order to UHF band spectrum that is repurposed C to the Auction 1000 Comment PN channel share. Due to the limited through the incentive auction as ‘‘the setting forth the technical details and availability of channels in the VHF band 600 MHz Band,’’ and to the band plan formulas associated with the procedure and the technical constraints on scenarios adopted in the Incentive that the Commission adopts will be repacking established in the Incentive

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Auction R&O, the procedure may not be nationwide standard for limiting Its decisions to allow the optimization able to accommodate every station that impairments in order to select the software to assign television stations commits to move to the Low- or High- highest possible clearing target that within the 600 MHz Band so as to VHF band. The procedure will try to meets the standard. Under that minimize impaired weighted-pops in accommodate initial bid commitments standard, the amount of impaired applying the primary objective, and not according to the priorities proposed in weighted-pops on a percentage basis to ‘‘discount’’ impairments located in the Auction 1000 Comment PN. If a will be less than the equivalent of the the uplink portion of the Band, also will station’s initial commitment(s) is not weighted-pops of one paired 5+5 promote its goal of allowing market accommodated by the auction system, megahertz spectrum block. For example, forces to determine the highest and best the applicant will be informed prior to if the provisional TV channel use of spectrum. the start of the clock phase of the assignment plan is for a 126 megahertz a. Calculation of Weighted-Pops reverse auction that the station will be spectrum clearing target, then the assigned to a feasible channel in its pre- forward auction licenses in the 13. ‘‘Weighted-pops’’ will be auction band. In the event that the associated 600 MHz Band Plan (120 calculated using the same price index procedure determines that megahertz, or 10 paired license blocks) measure the Commission adopts to relinquishment of a station’s spectrum could only be subject to overall calculate forward auction bidding units. usage rights will be unnecessary to impairments on a near-nationwide basis Specifically, to calculate weighted-pops, achieve a clearing target under any of up to but not including 10 percent, the index of area-specific prices from circumstances, the station will be or less than one out of 10 blocks. The prior auctions is used to weight the assigned a feasible channel in its pre- procedure then will select the highest population in each license area based on auction band, and the applicant will be possible clearing target that satisfies the the relative price of each Economic Area informed prior to the start of the clock standard and the provisional TV (EA) and Cellular Market Area (CMA) rounds of the reverse auction. channel assignment plan for that license (for paired spectrum) in 10. Depending on broadcaster clearing target will be selected for the Auctions 66 (AWS–1), 73 (700 MHz), participation levels, there may not be a initial stage of the auction, along with and 97 (AWS–3). The price per MHz- feasible channel available in the the associated 600 MHz Band Plan. pop of each license is divided into the remaining UHF portion of the TV band Application of this procedure will be average price per MHz-pop of the for all non-participating UHF stations subject to the international agreements corresponding spectrum block to and all UHF applicant stations that are the Commission reaches with Canada produce an index value of the license not assigned to their initial commitment and Mexico. Although the Commission relative to the spectrum block. For or fallback option(s). In such acknowledges it could miss the example, if the price per MHz-pop of circumstances, as a last resort, the opportunity to clear more spectrum by the winning bid for an EA license procedure will assign stations to skipping a clearing target, it may be equaled the average price per MHz-pop channels in the 600 MHz Band necessary to skip the 144, 138, and/or for that spectrum block, then the index according to the primary objective of 108 MHz clearing targets to better value for that license would be 1; if the minimizing the sum of ‘‘weighted- harmonize its band plan with Canada or price per MHz-pop was half the average, then the index value would be 0.5; if the pops’’—population weighted by an Mexico. The Commission expects that price per MHz-pop was twice the index of area-specific prices based on this issue will be addressed in its average, then the index value would be prior Commission spectrum auctions— negotiations with those countries. The 2; etc. Because the past prices are for EA impaired for all licenses by the Commission expects to reach timely and CMA licenses, the index value for assignments, and according to the arrangements with Canada and Mexico each EA and CMA license area is broken additional objectives. The location of that will enable it to carry out the down to the county level and averaged; impairing stations in the 600 MHz Band repacking process in a manner fully the resulting county-level index values will not be limited for purposes of consistent with the requirements of the are aggregated to PEAs. The index applying the clearing target objectives; statute and its goals for the auction. impairing stations may be assigned to values are aggregated to the PEA level the uplink, downlink, and duplex gap B. Objectives in Determining a by multiplying the county’s index value portions of the Band in order to Provisional TV Channel Assignment by the percentage of the PEA’s minimize impairments. In addition to Plan population within the county, and then the primary objective of minimizing summing those results for all of the 1. Primary Objective: Minimizing counties in a PEA. In the Auction 1000 impairments, the procedure will apply Impaired Weighted-Pops the secondary objective of maximizing Comment PN, the Commission stated its the weighted number of ‘‘Category 1’’ 12. The primary objective of intention to update the price index the licenses (those licenses with zero to 15 minimizing impaired weighted-pops Commission provided in Appendix F to percent impairment) nationwide. In nationwide is consistent with the the Auction 1000 Comment PN order to avoid any increase in consensus among both broadcasters and following Auction 97 to account for impairment levels, the secondary wireless providers for limiting the current values. Those results are now objective will be constrained by the impact of impairments overall. In being incorporated into the price index primary objective. Thus, the secondary addition, by using weighted-pops, the to calculate weighted-pops for the objective seeks an assignment plan that optimization tool will disfavor assigning incentive auction. An appendix satisfies the primary objective, and impairing TV stations in major markets providing the final index consistent contains the highest weighted number where they would have the greatest with these decisions will be released of Category 1 licenses nationwide. impact on forward auction spectrum with the Application Procedures PN. 11. Having determined the prices, consistent with commenters’ The explanation the Commission provisional TV channel assignment plan concerns. Weighting will discourage provides here together with the for all clearing targets that best satisfies assignment of impairing TV stations to Application Procedures PN appendix the objectives, the clearing target 600 MHz Band frequencies in or near responds to interested parties’ requests determination procedure, using the 2x2 major markets by increasing the cost of for additional information on how cell calculations, will apply the near- such assignments in the optimization. weighted-pops is calculated and how it

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will be used during the incentive that will be available in the forward chosen based on the 2x2 grid cell data, auction in relation to impairments and auction under each spectrum clearing using a 10 percent county threshold to to bidding. target will be pre-calculated for each aggregate the ISIX data up to the county 14. Some commenters express station on each channel for each level has very little impact on the concerns with the use of weighted-pops. clearing target. More specifically, the overall result. The Commission disagrees with AT&T ISIX methodology first will be used to 17. Rather than ‘‘discounting’’ the that its approach using weighted-pops is predict potential inter-service population for impairments located in imprecise and will tend to understate interference between TV and wireless the uplink portion of the 600 MHz impairment levels because it ignores services. The ISIX methodology, which Band, as proposed, the procedure the major highways, railways and airports the Commission adopted for purposes of Commission adopts will consider where population levels may be low but the incentive auction, predicts potential uplink and downlink impairments to spectrum values are high. Indeed, by inter-service interference based on have equal weight. The Commission incorporating spectrum values from past deployment of a hypothetical wireless proposed to consider a county that is auctions into the determination of network. The raw data the ISIX impaired in the downlink portion of the where to locate impairments, the methodology produces at a two-by-two 600 MHz Band to also be impaired in optimization tool will be able to account kilometer cell level will be aggregated the uplink portion, but not the reverse. for those areas where spectrum values into county-level data sets for the uplink Thus, only 50 percent of the population are high for reasons not directly related and downlink portions of the 600 MHz of a county with uplink impairments to population, including transportation Band and mapped to specific forward above the threshold would be hubs, and will avoid locating auction licenses. The ISIX methodology considered impaired (i.e., the portion of impairments in those areas, consistent defines each two-by-two kilometer cell the population representing the uplink with its goal of maximizing spectrum as ‘‘impaired’’ or ‘‘unimpaired’’ block); 100 percent of the population of value. AT&T’s criticism appears to depending on whether it is subject to a county with downlink impairments concern how the ISIX methodology any inter-service interference. The above the threshold would be calculates impairments more than the percentage of the population of each considered impaired (i.e., the use of weighted-pops. The former issue county subject to inter-service population representing both the should have been raised in the ISIX interference then will be calculated for downlink and uplink blocks). proceeding. Moreover, the detailed each potential channel assignment of a Commenters generally oppose the information the auction system will TV station to a location in the 600 MHz proposal, arguing that it would tend to provide to forward auction bidders on Band. The procedure will avoid double- understate impairment levels. The the locations where it places counting the population of a county that Commission agrees and concludes that impairments will enable bidders to is subject to potential inter-service adopting it would be inconsistent with evaluate precisely their potential interference from more than one TV the strong record support for impact. The Commission also disagrees station through the use of overlap tables. minimizing impairments. Therefore, the with NAB, which argues that the For any such assignment in which this percentage of population attributed to weighted-pops concept is confusing and percentage is more than 10 percent in uplink impairments will not be overly complex. Although this is the either the uplink or downlink portion, discounted: if the percentage of first time the Commission will apply the entire population of the county will population with predicted impairment in the uplink exceeds 10, the this measure for purposes of be considered impaired for the license impairments, it has used weighted-pops optimization will consider the county if the station is assigned to the channel. in prior auctions to calculate bidding wholly impaired, just as it will for For a given TV channel assignment units. The Commission disagrees that impairments in the downlink portion of plan, the impairment percentage of a use of weighted-pops adds undue the block. The effect of this approach is license is determined by dividing the complexity; rather, it agrees with those that the optimization will not favor sum of the populations of impaired commenters that suggest that using impairing the uplink over impairing the counties by the population of the PEA. weighted-pops will simplify the auction downlink but will focus instead on and avoid locating impairments where 16. The Commission adopts a 10 minimizing impaired weighted-pops in they will unduly harm spectrum values. percent limit on the amount of the 600 MHz Band overall. Further, the By evaluating impairments based on impairment allowed in a county before result of this approach is that any weighted-pops rather than population the entire population of the county is population that is not considered alone, the procedure the Commission considered impaired for the purposes of impaired will be usable for two-way adopts can better account for the costs the measurement procedure. The communication (i.e., both its uplink and associated with impairing specific areas Commission sought comment on setting downlink blocks will be unimpaired). in order to identify a provisional TV this threshold between 10 and 20 18. The measurement procedure will channel assignment plan that minimizes percent. In order to avoid under- be used in applying the additional impairments. predicting potential interference, the objectives as well as the primary Commission chooses a more objective. In creating the provisional TV b. Measuring Potential Impairments conservative threshold at the low end of channel assignment plan for each 15. The Commission adopts its the proposed range. The Commission clearing target, data must be aggregated proposed procedure for determining the emphasized that the optimization to the county level, and a percentage extent of potential impairments, with procedure will use the county threshold must be applied to determine several modifications. The technical measurement only to determine the whether a county is impaired, in order formulas for implementing the modified provisional TV channel assignment to reduce the volume of data inputs to procedure the Commission adopts will plans; the selection of a specific clearing a quantity that reasonably can be be set forth in the Application target will use the more granular 2x2 utilized. Given all of the possible TV Procedures PN. Under the measurement cell data to determine the near- station and channel combinations under procedure the Commission adopts, the nationwide impairments. The every clearing target, the ISIX impairment level—the population Commission notes that because the methodology produces a quantity of subject to impairment—of each license initial clearing target is ultimately data that exceeds the current

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capabilities of optimization techniques. For example, assume a PEA with a contiguous channels starting at the When aggregated to a county level, the population of 100,000 has impairments bottom end of the downlink band to ISIX methodology produces that affect 10,000 people in the facilitate filter design in devices, reduce approximately 3.7 billion separate downlink portion of the A block and the number of filters needed for base records of data for the roughly 3,000 5,000 of the same people in the uplink stations, and maximize two-way counties in the United States. Use of portion of the A block. The A block spectrum. Sennheiser supports data at the next possible level of would be considered 10 percent assigning stations to channels in the granularity—the Census tract—would impaired (10,000 impaired pops divided downlink portion of the band in order result in a 20-fold increase in the by 100,000 total pops in the PEA). to provide greater certainty for number of data records, and use of data Though the impairment affects a unlicensed users in the duplex gap. In at the cell level would result in a 650- population of 5,000 in both the uplink contrast, AT&T and Verizon oppose fold increase. As it stands at the county and the downlink portion of the A assigning TV stations to the downlink level, the measurement procedure the block, 5,000 is not added to the total band because of complications to Commission adopts must consider more impaired pops because that would mobile device filter design. Several than 100,000 decision variables and result in double counting—the commenters caution against assigning over two million constraints. At a more population of 5,000 was already stations to channels in the duplex gap. granular level than the county, the included when tallying the downlink Conversely, AT&T, CCA, Sprint and T- number of decision variables and impairments. The effect of this approach Mobile support assigning stations to the constraints that must be considered is that any population that is not duplex gap. AT&T states that it would would increase to an unsolvable considered impaired will be fully usable likely be less harmful as a technical number. For purposes of applying the for two-way communication (i.e., both matter, and therefore preferable to near-nationwide standard to determine its uplink and downlink blocks will be assignment elsewhere in the 600 MHz whether a plan satisfies the impairment unimpaired), consistent with its Band, and T-Mobile argues that it ‘‘will limit, however, more granular, cell-level prioritization of paired spectrum. allow for more extensive, higher data will be used. c. Assigning TV Stations to the 600 MHz performance 600 MHz broadband 19. Likewise, forward auction licenses Band To Accommodate Market transmissions in the affected geographic will be categorized as Category 1 (zero Variation area license(s) than would be possible if to 15 percent impaired) or Category 2 the broadcast impairment were co- 20. The Commission adopts its channel with broadband operations.’’ (greater than 15 percent and up to 50 proposal to allow the optimization tool Sprint states ‘‘in the event of less robust percent impaired) based on cell-level to assign television stations within the broadcaster participation, in which impairment data, and forward auction 600 MHz Band where necessary to fewer blocks of competitively critical bidders will be provided with cell-level accommodate market variation in a low-band spectrum can be repurposed, data to inform their bidding strategies. manner that best fulfills the clearing repacking television stations in the Specifically, ISIX data will be used to target objectives, and not to restrict it to duplex gap may be the only way to identify the impaired population in both assignments in specific portions of the conduct an auction with a modestly the uplink and downlink portion in the 600 MHz Band—downlink, uplink, or successful amount of auctioned license. This data will show in which duplex gap. Restricting the optimization spectrum.’’ CCA cautions that protecting cells a potential licensee either will be tool to certain portions of the 600 MHz restricted from operating due to harmful Band would undermine its efficacy in the duplex gap will ‘‘reduce the amount interference to an impairing TV station carrying out the primary objective, of spectrum available in the forward or may have its operations infringed likely resulting in more impairment of auction.’’ Henry A. Waxman advocates upon by harmful interference from a TV forward auction licenses and the for an alternative approach in which the station. The population of impaired selection of a lower spectrum clearing assignment of TV stations to the duplex cells across the license—whether the target. Such an outcome is not justified gap is dependent upon whether the impairment results in the uplink or by the competing policies that some clearing target exceeds 84 megahertz. downlink—will be added together and commenters advocate in support of Some commenters oppose repacking TV divided by the total population of the restrictions. stations anywhere in the 600 MHz Band. PEA to calculate the impairment 21. Commenters express conflicting 22. As an initial matter, the percentage. If the total population of the views on where to assign impairing Commission emphasized that the impaired cells within a block is less television stations, arguing for various optimization tool will assign television than or equal to 15 percent of the total reasons that impairments should be stations anywhere in the 600 MHz Band population of the block, the block will restricted to the uplink, downlink, and/ ‘‘only where absolutely necessary.’’ As be offered as a Category 1 block. If the or the duplex gap portion of the 600 the Commission determined in the total population of the impaired cells is MHz Band and identifying problems Incentive Auction R&O, however, and as more that 15 percent but less than or with every possible location within the many commenters acknowledge, equal to 50 percent, the block will be 600 MHz Band. For example, CCA, C flexibility to accommodate some level of offered as a Category 2 block. The Spire, and T-Mobile assert that stations market variation—thus requiring some location of an impairment in the 600 should be assigned to the uplink level of impairment to 600 MHz Band MHz Band will not be determinative for because consumer demand is driving licenses—is critical to avoiding the least the purposes of calculating the the need for more unimpaired downlink common denominator problem. The impairment percentage; the population spectrum than uplink spectrum. T- procedure the Commission adopts of a cell will be considered impaired Mobile and Verizon also suggest that always will favor assigning television even if the impairment only affects the assigning stations to the uplink is stations to channels in the remaining TV uplink or downlink portion of the preferable because carriers can employ bands if possible, and, will select a paired 5+5 megahertz spectrum block. mitigation methods, such as base station clearing target selection that reflects an This conservative approach avoids both filters, to guard against inter-service appropriate trade-off between the the weighting proposed in the Auction interference. On the other hand, Sprint amount of spectrum cleared and the 1000 Comment PN and double counting. supports assigning TV stations on overall impairment level. Further, the

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Commission disagrees with AT&T that thus does not adequately predict the that overlap with the guard bands where assigning TV stations to the 600 MHz effect of placing a TV station in the possible in order to minimize the Band will create problems similar to downlink; and because wireless user impaired weighted-pops pursuant to the those in the 700 MHz Lower A Block equipment (i.e., mobile and portable primary objective the Commission caused by TV stations in channel 51. devices) cannot prevent interference adopts herein, TV stations are more The Commission developed the ISIX into any frequency within the same likely to be assigned to the non- methodology to address this issue filter or ‘‘duplexer.’’ Duplexers are pairs overlapping part of one duplexer than to specifically by creating a methodology of filters, one transmit and one receive, the central part of the downlink where to predict where inter-service that function together to reduce the the duplexers overlap. Furthermore, interference is likely to occur and potential for interference between a technical solutions and enhanced filter proposing to restrict licensees’ service transmitter and a receiver in the same technologies can mitigate the potential in these areas where ‘‘impairments’’ are piece of equipment. AT&T’s criticism of for interference once the 600 MHz Band created. Moreover, wireless licensees the ISIX methodology is unfounded. Plan is finalized following the auction. will be aware of these impairments in The ISIX methodology is consistent As Sprint suggests, enhanced filter advance: The Commission will provide with its rules, which do not offer technologies will make it possible to use bidders with detailed information about interference protection beyond the first separate filters for separate frequencies impairments in the blocks offered prior adjacent channel. Moreover, AT&T in the future, further limiting the impact to the start of the forward auction, ignores the fact that wireless user of a TV station in the downlink portion including the facility causing the equipment is capable of attenuating of the band by the time this band is impairment, and the resulting areas interfering signals at frequencies deployed. The technical details on the where they will be restricted from separated beyond the first adjacent 600 MHz duplexers will not be operating or not be required to operate channel, as required by 3GPP standards. contemplated by 3GPP until the band due to inter-service interference. As a AT&T’s criticism of the ISIX plan and potential market variations are result, bidders can use the facility methodology also is untimely. AT&T finalized after the auction. Once they information about the impairing station failed to seek reconsideration of the are finalized, technical solutions, such to determine how their wireless final order adopting the ISIX as Sprint’s, can mitigate the potential for networks could be deployed around the methodology, or to raise its criticisms of interference given the actual frequencies impairment, or whether they should not the ISIX methodology before the affected. bid on impaired licenses (that is, a Commission adopted that order. 26. Further, the Commission cannot license to operate in a geographic area 25. AT&T’s filter concerns also lack conclude that protecting the duplex gap that is subject to inter-service merit. With regard to blocks co-channel from any impairment is warranted at the interference) in that area. 23. The Commission declines to with or first adjacent channel to an risk of repurposing less spectrum. Its restrict the optimization procedure from impairing TV station, its approach analysis indicates the duplex gap will assigning TV stations to the uplink, recognizes that filters may be ineffective not be subject to any impairment in downlink and/or duplex gap portions of in impaired areas by not requiring most markets even if the optimization the 600 MHz Band in order to carry out wireless user equipment to operate in procedure tool is not restricted in the clearing target objectives. The such areas. In addition, wireless user assigning impairing stations. In Commission is not persuaded that any equipment is prohibited from operating scenarios 1, 2, and 3, the maximum of the technical issues identified by where such equipment could interfere number of TV stations assigned to commenters justify restricting the with digital television receivers. Beyond channels that impair the duplex gap are optimization procedure to create more the first adjacent channel, the signal 6, 7, and 2, respectively. Thus the license impairments and/or a lower attenuation required by 3GPP standards duplex gap will remain free from initial clearing target. Despite the lack of will limit interference regardless of impairment across most of the country consensus on where to locate duplexer performance. The likely use of except for in a relatively small number impairments, most commenters agree two or more duplexers also makes it less of markets. Conversely, protecting the with the principles that impairments likely that a TV station assigned to a duplex gap in every market is likely to should be minimized to the greatest portion of the downlink will render the lead to the selection of a lower clearing extent possible, and that the goal of the entire downlink unusable by wireless target as a result of increased auction should be to repurpose as much user equipment. To the extent that an nationwide impairment levels. In spectrum as market forces allow. The impairing TV station is located in the simulation scenarios 1 and 2 (40–50 procedure the Commission adopts is non-overlapping part of one duplexer, percent and 50–60 percent broadcaster consistent with this view because it the non-affected duplexer will be able to participation in the reverse auction, provides the fullest possible scope for filter out the interfering signals, a fact respectively), protecting the duplex gap implementing the primary objective of that even AT&T appears to concede. For from the assignment of TV stations minimizing the impact of impairments example, for an 84 megahertz clearing raises the nationwide impairment on 600 MHz licenses. target (encompassing blocks A–G), if a percentage beyond the standard for 24. In particular, the Commission TV station is co-channel with the A limiting impairment, thereby requiring disagrees with AT&T and Verizon that block, using two duplexers (one the optimization procedure to drop technical issues justify restricting the covering blocks A–D; the other covering down to a lower clearing target. optimization procedure from assigning blocks D–G), the duplexer covering Protecting the duplex gap also reduced stations to the downlink portion of the blocks D–G at the opposite end of the the number of relatively unimpaired 600 MHz Band. AT&T argues that the downlink band will be able to filter out Category 1 licenses in each scenario. By Commission underestimates the ‘‘real the interfering TV signal. Consequently, reducing the amount of spectrum world’’ impact of placing a TV station wireless user equipment operating in available to generate forward auction in the downlink portion of the 600 MHz those blocks should not experience proceeds, protecting the duplex gap Band because the ISIX methodology harmful interference from the impairing could threaten the overall success of the only measures potential interference TV station. Because the optimization auction, as well as its competition goals within 5 MHz of a channel’s edge and tool will prefer TV station assignments for licensed providers in the 600 MHz

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Band. The Commission notes that the stations located in the remaining TV objective: Maximizing the weighted Spectrum Act prioritizes license 600 bands. Such stations will be entitled to number of Category 1 blocks available in MHz Band services over services the same robust protections in the the forward auction. To calculate the operating in the guard bands. By repacking process as all other eligible weighted number of Category 1 blocks, contrast, the Commission’s decision to TV stations, including preservation of the auction system sums the Category 1 authorize guard band use by wireless coverage area and population served blocks in each PEA, multiplies the microphones and unlicensed devices pursuant to the constraints established result by the value weighted price index was wholly within its discretion. Its in the Incentive Auction R&O, for the PEA, and adds those results for policy regarding impairments will also reimbursement for reasonable relocation all PEAs. Commenters raise concerns affect broadcasters and 600 MHz costs, and protection from inter-service that the impact of impairment on the licenses, wireless microphones, and interference. In addition, by requiring value of spectrum licenses to forward unlicensed devices in this limited the optimization tool to potentially auction bidders cannot be measured number of markets. In addition, in the forego channel assignments that strictly in terms of nationwide limited number of areas where the minimize impaired weighted-pops in percentages. The Commission agrees duplex gap is subject to impairment, it light of station ownership concerns, that it should strive to offer as many may also not be available to protect Sinclair’s proposal would risk greater unimpaired licenses as possible. against interference between licensed impairments to 600 MHz Band licenses 31. In order to avoid any increase in services. In such areas, the methodology and recovery of less spectrum through impairment levels, the secondary proposed in the ISIX Further Notice, 79 the incentive auction. Accordingly, the objective will be constrained by the FR 76282, December 22, 2014, will be Commission concludes that the primary objective. Specifically, the used to prevent inter-service potential benefits of Sinclair’s proposal secondary objective will be constrained interference, rather than the guard band. are outweighed by the costs. by the nationwide impairment While commenters have identified a 29. In determining a provisional TV percentage determined by the primary range of issues associated with assigning channel assignment plan, the objective, rounded up to the nearest stations to the duplex gap, the goals of optimization tool will not assign integer. For example, if after applying repurposing spectrum for mobile impairing stations to channels 50 or 51. the primary objective, the nationwide broadband use, minimizing Many commenters caution against the impairment percentage is 4.4, the impairments, and ensuring a successful assignment of stations to channel 51 due procedure will maximize the weighted auction militate in favor of flexibility to potential interference with Lower 700 number of Category 1 licenses up to an and outweigh the potential benefits of MHz A Block operations. Recognizing impairment percentage of five. Thus, the protecting the duplex gap from any the existing interference concerns secondary objective will function impairment. between television stations on channel primarily as a tie-breaker in choosing a 27. The Commission also rejects 51 and the Lower 700 MHz A Block, the provisional TV channel assignment arguments that impairing stations Commission took action in the Incentive plan: When more than one potential should be restricted to the same portion Auction R&O to encourage early, plan exists with the same minimum of the 600 MHz Band. For example, voluntary relocation of channel 51 level of impairment identified through Sprint proposes that impairing TV stations to further mitigate any potential application of the primary objective, the stations should, to the extent possible, interference. Further, its decision to secondary objective will cause the be assigned to channels side-by-side in create a 600 MHz Band Plan in which optimization tool to choose the one that any market in which multiple stations channels 50 and 51 would be maximizes the weighted number of remain and on common frequencies. repurposed for the 600 MHz wireless Category 1 licenses. Constraining the CCA proposes an alternative ‘‘channel uplink band under every spectrum secondary objective in this manner is stacking plan,’’ which would create a recovery scenario was intended to consistent with the consensus in favor pattern for impairing station improve the interference environment of minimizing impairments and assignments specific to the 600 MHz for 700 MHz licensees. Unlike the 700 maximizing potential spectrum Band Plan associated with the selected MHz service, which is already in recovery. clearing target. CTIA also urges operation, 600 MHz Band licensees will 32. The provisional TV channel consistency in assignment of TV be able to account for potential loss in assignment plan determined based on stations to the 600 MHz Band. The the value of their licenses as a result of application of the first two objectives potential costs of such restrictions— impairments through the mechanism of may include licenses that cannot be reducing the optimization procedure’s the forward auction, and will have full offered in the forward auction because efficacy in minimizing impairments and prior knowledge of the areas of greater than 50 percent of the risking the selection of a lower clearing operation that may be affected by inter- population is subject to impairment. target—outweigh the potential benefits service interference. Moreover, the The optimization procedure will apply that these commenters identify. The proposed ISIX methodology would a tertiary objective in order to maximize unrestricted approach the Commission apply only to licenses in the 600 MHz their potential value in a subsequent adopts is consistent with the consensus Band and, therefore, no mechanism is spectrum auction. More specifically, the for minimizing impairments and available to prevent interference tertiary objective will seek to minimize maximizing potential spectrum between impairing TV stations and the impaired weighted-pops over all recovery. 700 MHz service. The decision to licenses, including licenses with greater 28. Further, the Commission rejects exclude both channels 50 and 51 (each than 50 percent of the population Sinclair’s request to impose constraints totaling six megahertz) will ensure subject to impairment. The primary and to ensure that no licensee of multiple interference protection consistent with secondary objectives will not take television stations is disproportionately its use of technically reasonable guard account of any license with greater than affected by channel assignments in the bands of at least seven megahertz. 50 percent impaired weighted-pops. The 600 MHz Band. The Commission tertiary objective will be constrained by disagrees with Sinclair’s premise that 2. Additional Objectives the first two objectives: It will be stations assigned to the 600 MHz Band 30. The Commission also adopts its applied only to the extent that it neither will be disadvantaged in comparison to proposal to include a secondary increases the nationwide impairment

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percentage resulting from application of same number of weighted-pops across because the tradeoff is different: The the primary objective nor reduces the all clearing targets and is based on the record reflects that more flexibility to weighted number of Category 1 licenses total nationwide 2010 census accommodate market variation is resulting from application of the population multiplied by the index of appropriate at lower clearing targets in secondary objective. Further, it will not area-specific prices from prior auctions order to ensure the auction’s overall decrease the weighted number of based on the relative price of each EA success. While commenters agree that Category 2 licenses existing after the and CMA license (for paired spectrum) minimizing impairments should be a application of the primary and in Auctions 66 (AWS–1), 73 (700 MHz), high priority, many commenters also secondary objectives. Solely for clearing and 97 (AWS–3). The standard is urge the Commission to balance this targets where the lower guard band is 11 capped at 20 percent at clearing targets goal against the goal of ensuring that MHz, the Commission adopts a below 72 megahertz because otherwise sufficient spectrum is made available in quaternary objective of minimizing the the one-block-equivalent approach the forward auction. The Commission number of stations placed on the lower would allow more impairment than the agrees with T-Mobile that at higher channel in the lower guard band to the proposed 20 percent. Commenters raise clearing targets the balance favors extent it does not increase the total concerns that these impairment levels achieving greater uniformity across the number of stations assigned to the 600 are still too high overall. Even if that band plan (by tolerating a lower MHz Band or to any channel in that proves true in a given stage, however, percentage of impairment) and at lower Band. This objective will not affect the the auction design includes a self- clearing targets the balance favors results of the other objectives. correcting mechanism: If the blocks repurposing spectrum by tolerating a greater percentage of impairment. C. Standard To Limit Market Variation offered in a stage are insufficiently valuable to produce the forward auction 36. The Commission emphasized that 33. The Commission adopts a scaled revenues necessary to meet the final the population in most PEAs will not be standard that will limit impairments to stage rule, the auction would transition subject to any impairment under the a level significantly less than the to a new stage with a lower clearing standard it adopts, which will be proposed 20 percent nationwide level at target and a lower level of aggregate applied on a nationwide, aggregate clearing targets above 72 megahertz, impairment. Thus, the auction system basis. In fact, the Commission expects while ensuring an appropriate tradeoff relies on market forces to determine that the vast majority of PEAs will have between spectrum recovery and whether blocks offered in the forward no impaired blocks, although there may impairment level. Instead of a auction are too impaired, even within be some PEAs with more than one percentage-based standard, the standard the limits the Commission adopts. This impaired block. For example, in the the Commission adopts is equivalent to market-based approach avoids unduly Clearing Target Simulations Public the weighted-pops of one paired 5+5 constraining the flexibility to set Notice (CTS PN), 80 FR 30021, May 26, megahertz spectrum block nationwide, reasonable clearing targets that reflect 2015, the simulation resulting in the 84 which translates into the percentages at the level of broadcaster participation. megahertz initial clearing target shows each potential clearing target in the 600 that in 406 PEAs, all but 62 have only MHz Band Plan. At clearing targets 35. The standard the Commission Category 1 licenses. The same is true for below 72 megahertz, the standard is adopts also accounts for the tradeoff all but 53 in the 114 megahertz scenario capped at 20 percent. between the benefits of repurposing and all but 47 in the 126 megahertz 34. This ‘‘one-block-equivalent’’ spectrum and the costs of allowing scenario. In its analysis, AT&T similarly standard responds to concerns impairments at different clearing targets. found that in an 84 megahertz initial expressed by commenters that the For example, a 126 megahertz clearing clearing target all but 64 PEAs will have proposed 20 percent standard would target would repurpose 100 megahertz only Category 1 licenses. AT&T allow excessive impairment, of licensed spectrum, or 10 paired acknowledges that its results ‘‘align particularly at higher clearing targets. It blocks, so the impairment limit at that closely with the published FCC results also responds to concerns that clearing target is the nationwide for the top 20 markets’’ and that repurposing more spectrum may not be equivalent of one of the ten blocks. If differences may be attributed to the justified at the cost of allowing more aggregate impairments equal or exceed power and geography differences of impairment. Instead, T-Mobile argues, the equivalent of the population of one stations assigned to the 600 MHz Band. proportionally less impairment should spectrum block nationwide at that Staff simulations project that at a range be allowed at higher clearing targets, target, the optimization procedure will of clearing targets, the overwhelming and more at lower clearing targets. move to the next lower clearing target. majority of spectrum blocks would be Under the standard the Commission An 84 megahertz clearing target would unimpaired or nearly unimpaired. In adopts, the percentage of impairment repurpose 70 megahertz of licensed each of the simulations in the CTS PN, that is allowed is scaled to the amount spectrum, or seven paired blocks, so the at least 93.4 percent of licenses are of licensed spectrum that would be standard will tolerate a higher Category 1 licenses, and Category 2 repurposed at each clearing target, proportion of impairment—up to the licenses comprise at most 1.3 percent of increasing target by target from equivalent of one out of seven blocks total possible licenses. approximately eight percent at the nationwide, or approximately 14 37. To promote transparency and highest clearing target to 20 percent at percent—but the optimization provide information about the potential targets of 72 megahertz and lower. procedure likewise will move to the results of the clearing target Because the impairment percentage is next lower clearing target if aggregate determination procedure, Commission scaled to the amount of licensed impairments equal or exceed that staff released a public notice in May spectrum that would be repurposed at amount. Thus, the standard has the 2015 showing the results of simulations each clearing target, the standard the effect of moving to a lower clearing of the procedure based on certain Commission adopts also responds to target with one less spectrum block to assumptions regarding broadcaster criticisms that the proposed 20 percent offer if impairments equal or exceed the participation levels and impairments standard was arbitrary and overly equivalent of one block nationwide. The along the borders. These simulations complex. The Commission notes that standard tolerates a higher proportion of project that the procedure, including the the one-block-equivalent standard is the impairment at lower clearing targets ‘‘one-block-equivalent’’ standard, would

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result in the selection of a high initial identical to the one used in the CTS PN. Federal de Telecomunicaciones (IFT) clearing target with the vast majority of The Commission also declines to release and the FCC are working on a joint licenses available in Category 1. The all of the data underlying the repurposing of the 600 MHz Band that Commission notes that for purposes of simulations: The CTS PN identified the places Mexican TV stations below the CTS PN impairment analysis, the critical information necessary to channel 37 while providing additional total number of licenses analyzed at evaluate its clearing target channels for U.S. stations to use in the each clearing target level included only determination procedure, and it is reorganized TV band. those licenses that could be offered in persuaded that the release of more data 40. The Commission rejects the continental United States (i.e., in is warranted. With regard to broadcaster arguments by AT&T, Verizon, and 406 out of the 416 PEAs). When participation, rather than attempt to others for a standard that allows no calculating impairments for the predict whether thousands of individual impairment except in border areas. In its incentive auction, the procedure will stations will choose to participate based May 1, 2015 Ex Parte Letter, AT&T include all 416 PEAs. In particular, on subjective factors, for purposes of the acknowledges that ‘‘an approach that these simulations result in an initial simulations certain categories of stations permits the Commission absolutely no clearing target of 84 megahertz assuming were assumed not to participate based flexibility’’ except in border areas ‘‘is 40 to 50 percent of broadcasters on objective factors (e.g., major network probably too stringent’’ and instead participate in the reverse auction affiliates, the major PBS station in an suggests allowing up to three percent (Scenario 1); an initial clearing target of area, etc.). Because the simulations impairment outside border areas plus 114 megahertz assuming 50 to 60 require some assumptions regarding eight to nine percent in border areas. percent participate (Scenario 2); and an participation, it was reasonable to base The resulting 11–12 percent standard is initial clearing target of 126 megahertz those assumptions on such objective similar to the standard the Commission assuming 60 to 70 percent participate factors rather than merely a randomized adopts at a number of clearing targets (Scenario 3). In Scenario 1, of the 2842 array of stations. In any event, the and indeed, more stringent than what it possible licenses, only 46 are Category purpose of the scenarios described in adopts for higher clearing targets. 2 licenses. In Scenario 2, of the 3654 the CTS PN was to test the results of the Subsequently, in its July 1, 2015 Ex possible licenses, only 50 are Category clearing target determination procedure Parte Letter, AT&T proposed that the 2 licenses. And in Scenario 3, of the against a range of potential broadcast Commission allow impairments at the 4060 possible licenses, only 48 are stations in the reverse auction. border, without a set maximum Category 2 licenses. In all three percentage, and a three percent on non- 39. With regard to impairments along border-related impairments. Such an scenarios, 88 to 93 percent of the the borders, some commenters question licenses in the high-demand markets approach would not provide the why the simulations did not include flexibility that is necessary to account (i.e., PEAs 1–40) are Category 1 licenses assumptions based on information about and 84 to 88 percent of PEAs contain for the unique challenges the incentive interference from Mexican television auction presents. Market variation may only Category 1 licenses. Under stations that AT&T has placed in the Scenario 1, of the 2654 Category 1 be caused by a variety of factors, record of this proceeding. Reliable including varying levels of spectrum licenses, 2535 are entirely free of information about potential interference impairments (i.e., zero percent of the congestion and broadcaster from Mexican TV stations is not participation in different areas, as well weighted-pops in the PEA are publicly available at present, and as border-related constraints. Although impaired). In Scenario 2, of the 3469 AT&T’s filing does not reflect Mexico’s AT&T argues that 84 megahertz or more Category 1 licenses, 3334 are entirely plans to change its television service in of spectrum could be repurposed under free of impairments; and in Scenario 3, the near future. Instead, Commission an approach allowing for impairments of the 3886 Category 1 licenses, 3753 are staff chose to use the information only in border markets, its analysis entirely free of impairments. reflecting current treaty agreements with relies on optimistic assumptions about 38. While commenters generally Mexico—that is, to protect all Mexican reverse auction participation by support the release of the simulations to allotments—but not to consider broadcasters. The Commission fully provide greater transparency, some interference from Mexican stations into expects high levels of participation by question the staff’s assumptions, request the U.S. Thus, the only potential broadcasters; indeed, achieving such release of all of the underlying data or impairments excluded from the participation is a chief goal of its request additional simulations based on simulations are areas in which 600 MHz decision. At the same time, the purpose different assumptions. The Commission licensees could operate but might of the nationwide aggregate approach concluded that additional simulations experience interference from Mexican the Commission adopts is to provide are not necessary. On July 10, 2015 the TV stations that may or may not exist. flexibility in the event of non- Incentive Auction Task Force provided While that approach may under-predict participation by broadcasters in certain additional data for each of the six such interference to a limited extent, the areas or other factors that it cannot fully scenarios released in the CTS PN, Commission cannot conclude that it was predict in advance. including the assumptions regarding unreasonable. The Commission assures 41. The Commission also rejects broadcaster participation, the specific forward auction bidders that this EOBC’s proposal to base the selection of DMAs with impairing TV stations and information will be made available an initial clearing target on the degree with stations in the duplex gap, and the before the forward auction to allow of impairment in Los Angeles or New channel to which each impairing station bidders to evaluate all types of potential York in the interest of simplicity. Like was assigned. The CTS PN provided impairments caused by international TV AT&T’s proposal, EOBC’s simply does information regarding a range of stations, in addition to domestic ones. not provide sufficient flexibility to illustrative participation scenarios and The Commission also does not want to accommodate market variation. Indeed, clearing targets that afforded the public over-predict Mexican interference into depending on levels of broadcaster ample opportunity to understand and the U.S. given Mexico’s suggestions that participation, EOBC’s approach could comment on the clearing target it will try to keep all radio and defeat the purpose of its decision to determination procedure that the television broadcast below channel 37. accommodate market variation in the Commission adopts, which procedure is The Commission notes that the Instituto first place by constraining the choice of

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an initial clearing target to the two levels on a nationwide, aggregate basis. serves the intended purpose and the markets with the most highly congested Accordingly, and based on staff Commission therefore will require all broadcast spectrum in the nation. simulations reflecting the number of applicants in the reverse auction to Further, EOBC’s simulations showing Category 1 licenses that the Commission make the certification. The Commission that the Commission can reallocate at projects would be available in major describes the available bid options, least 126 MHz in New York and Los markets under the procedure it adopts, adopts procedures for setting the Angeles are simply not possible. Even the Commission is not persuaded that a opening prices, and adopts the process under the most optimistic assumptions separate standard to limit impairment by which applicants that are willing to regarding broadcaster participation, the levels in major markets is necessary, accept the opening price for one or more simulations analyzed in the Clearing particularly at the cost of added relinquishment options will commit to Target Simulations PN, did not result in complexity and less flexibility in that option and a fallback option(s), if 10 unimpaired pairs in both New York accommodating market variation. they so choose, in order to become qualified to bid in the clock phase of the and Los Angeles. EOBC’s approach also IV. Qualifying To Bid would sacrifice the precision of the reverse auction. A. Qualifying To Bid in the Reverse optimization-based approach the 1. Options for Relinquishing Spectrum Auction Commission adopts, focusing Usage Rights exclusively on two important markets, 43. In order to qualify to bid in the 44. Reverse auction applicants will be but which are not necessarily proxies clock phase of Auction 1001, the reverse for the rest of the nation. Accordingly, able to select from three possible bid auction, an eligible broadcast television options to relinquish their spectrum the Commission concludes that EOBC’s licensee interested in voluntarily approach would risk its goal of allowing usage rights on their auction relinquishing spectrum usage rights in applications. An applicant’s ability to market forces to determine the highest exchange for an incentive payment must and best use of spectrum. For example, select options on its application will be submit an application in which it limited by its pre-auction band and the in Scenario 1 of the simulations run for identifies, for each station that it wishes the CTS PN, the initial clearing target hierarchy of relinquishment options. to enter in the clock phase of the reverse These options correspond to the bid would have to be lowered from 84 auction, every relinquishment option for megahertz to 78 megahertz because options that will be available to bidders which it would consider bidding for in the clock phase of the reverse there are only six unimpaired blocks that station. If the broadcaster’s auction. The three bid options are a bid available in the New York PEA. For the application is timely filed and deemed to go off-air (available to all stations), a same reason, the Commission also complete, it must then commit to at bid to move to a Low-VHF channel rejects AT&T’s proposal to allow for least one relinquishment option per (available to UHF or High-VHF stations), only three percent of the population station at the opening price for that and a bid to move to a High-VHF nationwide to be affected by non-border option for that station. Administrative channel (available only to UHF related impairments. Given that the top details regarding the application and stations). A participant that intends to two PEAs each comprise well over three initial bid commitment procedures, share a channel with another station percent of the U.S. population and the including the application deadline, will post-auction will bid to go off-air. The next two PEAs each comprise be addressed in the Application auction system will treat the intention approximately three percent, to adopts Procedures PN. The Commission adopts to relinquish spectrum usage rights in EOBC’s or AT&T’s approach would also its proposal with respect to an order to channel share the same as a bid undermine the purpose of adopting additional certification by applicants in to go off-air because ‘‘from the market variation in the first place: To the reverse auction regarding their perspective of the auction system, a prevent the lack of spectrum in one or exercise of due diligence. In the Auction channel sharing bid is identical to a two markets from lowering the clearing 1000 Comment PN, the Commission license relinquishment bid.’’ No parties target. EOBC’s and AT&T’s approaches sought comment on requiring all filed comments directly addressing the also fail to reflect that different tradeoffs applicants in the reverse auction to proposed bid types. The Commission are appropriate between spectrum certify to the truth of the following concludes that offering these three bid recovery and impairment level at statement: ‘‘The applicant acknowledges options is appropriate to implement the different clearing target levels in order and agrees that any information relinquishment options that the to ensure the auction’s overall success. provided by the Commission’s outside Commission adopted in the Incentive 42. Finally, the Commission declines contractors who are advising and Auction R&O and is consistent with its to establish a separate standard to limit assisting it with education and outreach goal of making reverse auction impairment levels in major markets. The in connection with the reverse auction participation straightforward for procedure the Commission adopts is for informational purposes only and broadcasters. protects major markets from impairment that neither the Commission nor any of 45. Option Hierarchy. The auction by weighting the population in such its outside contractors makes any system will treat the three possible bid markets more heavily. The Commission representations or warranties with options as a one-way hierarchy during rejects arguments that the procedure it respect to any such information and the clock phase of reverse auction adopts might disproportionately impair shall have no liability to the applicant bidding. The hierarchy reflects the top markets. These commenters express in connection therewith.’’ The relative value of the relinquishment concern that the optimization procedure Commission noted that this certification options to the auction system’s ability to will impair top markets to allow for will help assure that each applicant recover spectrum and simplifies the fewer impaired markets nationwide. On accepts responsibility for its bids and bidding process. Of greatest value in the the contrary, the procedure will seek to will not attempt to place responsibility hierarchy is a bid to go off-air, which is avoid impairing high-demand markets for its bids on either the Commission or a bid to relinquish all spectrum usage due to the added cost of such the information provided by third rights to a particular channel. This impairments in the mathematical parties as part of its outreach. The option is followed in order of value by optimization. The one-block-equivalent Commission received no comments in a bid to move to the Low-VHF band, standard strictly limits impairment response. The additional certification then a bid to move to the High-VHF

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band. For each station, the final option the options without restriction. Based clock price at $900 per unit of volume in the hierarchy is always to exit the on the available vacancy in the VHF so that the maximum opening price auction in order to remain on the air in band, the reverse auction bid processing offer to any particular station is $900 its pre-auction band. The option to system will reduce the price differential million. The Commission will calculate which a bidder is designated pursuant between the off-air and VHF prices, in a volume for each eligible station based to its initial commitment will represent order to encourage bidders that can be on its interference and population the most spectrum rights it will be able accommodated in the VHF band to bid characteristics. The Commission will to bid to relinquish in the auction. If the to move to VHF rather than to go off-air. then re-scale this volume calculation so bidder subsequently decides to switch Substantial movement back and forth that the highest volume for a UHF its bid option in accordance with the between options could reduce the station is one million, in order to yield reverse auction bidding procedures, the overall efficiency of repacking in the the maximum opening price for a UHF only bid option(s) available to the VHF bands. Additionally, bidders that station to go off-air of $900 million. If bidder will be options that relinquish move to VHF are unlikely to want to any VHF stations have a higher less spectrum usage rights. The one- switch to off-air bids, as Joint calculated volume than the highest directional nature of the bid options is Broadcasters posit, because generally volume UHF station, such stations may important for bidders to consider when the price to go off-air will decline more have their volume re-scaled to greater filling out their auction applications and rapidly than the price to move to High- than one million. However, because the committing to an initial relinquishment or Low-VHF. Accordingly, the opening clock prices for VHF stations option. Commission is unconvinced that the are calculated as fractional portions of 46. Some broadcasters support the one-way hierarchy design will unduly the base clock price, the Commission one-way option hierarchy because it restrict bidders. The benefits of the one- expects that the opening price offers for will ‘‘facilitate the orderly conduct of way hierarchy in terms of added VHF stations will always be lower than the reverse auction,’’ while others simplicity, preventing harmful strategic $900 million. By scaling based upon the advocate for flexibility to switch bidding, and repacking efficiency highest volume UHF station, the between bid options without restriction. outweigh any costs in terms of lost Commission can ensure that one station Contrary to concerns that its design will bidder flexibility. will be offered an opening price of discourage participation or complicate 2. Opening Price Offers exactly $900 million. Although the decision-making, the Commission Commission proposed to scale the concludes that limiting the direction in 48. The Commission adopts its volume of other stations based on the proposal for calculating opening price which bidders may switch bid options— highest volume station, regardless of its offers for each station using two factors: from greater to lesser relinquishments— pre-auction band, the Commission (i) A base clock price of $900, which will make bidding easier because it will concludes that using the highest volume represents the full per-unit of volume establish a simple framework for UHF station is more appropriate value to the auction of clearing a evaluating options and will improve because that station’s off-air price will channel in the UHF band; and (ii) a price predictability. A bidder that reflect the greatest value to the auction. wishes to preserve flexibility to bid for station-specific ‘‘volume’’ factor that all the options may do so by selecting equally weights a station’s interference- 50. The Commission concludes that a all of its options on its auction free population and the number of $900 base clock price strikes the correct application and committing to go-off-air constraints that it imposes on the balance between attracting robust as its preferred initial relinquishment auction system’s ability to repack other broadcaster participation across option. Furthermore, allowing bidders stations. The Commission will calculate multiple markets and conducting an to ‘‘move freely between any opening price offers for UHF stations to efficient—and ultimately, successful— relinquishment options’’ as Joint go off-air by multiplying the base clock auction. The Commission disagrees with Broadcasters suggest would create a price of $900 by their station-specific broadcasters who argue that the base significant risk of harmful strategic volumes. Opening price offers for bid clock price should be increased to bidding. Allowing bidders to switch options other than a UHF station reflect the results of Auction 97 (AWS– bids unrestricted by the hierarchy bidding for off-air relinquishment will 3). Raising the base clock price would, would create opportunities for them to be calculated by multiplying fractional according to these commenters, manipulate prices in the auction by portions of the nationwide uniform motivate greater broadcaster moving back and forth between off-air $900 base clock price by a station’s participation because stations would be and VHF options. Creating such volume. The Commission will publicly offered higher opening prices, and this strategic opportunities would actually announce opening price offers for each increased participation would make bidding more complicated for bid option available to each station ultimately result in more cleared broadcasters because they would have eligible to participate in the reverse spectrum. There is no basis to believe, to consider a broader range of strategies auction at least 60 days in advance of beyond broadcasters’ assertions, that prior to and during the bidding. the deadline to file an application to opening prices of up to $900 million 47. Joint Broadcasters posit that the participate in the reverse auction. will be insufficient to encourage reverse one-way hierarchy will create auction participation. On the other inefficiencies since a bidder might be a. Base Clock Price and VHF Clock hand, increasing the base clock price as willing to bid to go off-air once the price Prices suggested would raise the cost of to move to VHF falls too low, but such 49. The Commission adopts a slightly repurposing spectrum and likely reduce a bidder would be precluded from doing modified version of its proposal to set the amount of repurposed spectrum. so by the one-way-hierarchy. The a nationwide uniform base clock price, Increasing the base clock price would Commission disagrees. The one-way representing the full per-volume value raise clearing costs for a given clearing hierarchy, together with the reverse to the auction of clearing a channel in target, increasing the likelihood of not auction bid processing system the the UHF band, from which it will meeting the final stage rule, Commission adopts, will provide for a calculate the opening clock prices for necessitating additional stages at lower more efficient repacking than if each bid option for stations in each spectrum clearing targets. These risks broadcasters were able to shift among band. The Commission will set the base would be compounded by the absence

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of a dynamic reserve pricing (DRP) clock rounds depending upon 54. Several broadcasters oppose mechanism, because the auction system congestion in the VHF bands. offering opening prices for the bid will not have a mechanism to mitigate 52. More specifically, the Commission options to move to VHF that are lower the risk that a station will receive its will apportion the base clock price for than the bid option to go off-air. As an opening price. Thus, increasing the a station to move from the UHF band to initial matter, the Commission rejects opening prices in actuality would likely off-air among the equivalent series of NAB’s unsupported claim that it lack result in fewer stations having the intermediate moves using the midpoint the statutory authority under the opportunity to become winners in the of the ranges the Commission proposed Spectrum Act to offer different prices auction. In addition, increasing the base in the Auction 1000 Comment PN. The for VHF options. Although the statute clock price would risk increasing the per-volume opening price for a UHF does not expressly authorize different length of the auction, making station to move to Low-VHF will be 75 price offers for VHF options, it does not participation more difficult and costly percent of the base clock price (or $675), follow that the Commission lacks for both forward and reverse auction and the per-volume opening price to authority to offer different prices: Such bidders. Accordingly, the Commission move from UHF to High-VHF will be 40 authority is inherent in its mandate to adopts the $900 base clock price to percent of the base clock price (or $360). conduct a reverse auction—which ensure robust broadcaster participation The ranges that the Commission requires establishing opening price without undermining its other auction proposed represent the relative value of offers—and nothing in the Spectrum goals. each band and its related Act’s statutory language, context, or relinquishment options to the auction, legislative history suggests that in doing 51. While opening price offers for a and reflect the scarcity of channels and so the Commission cannot distinguish UHF station to go off-air will always different technical characteristics of between relinquishment options. The equal the base clock price multiplied by each VHF band. In response to Commission also rejects PBS’s argument the station’s volume, opening price commenters that urge the Commission that discounting UHF to VHF bid offers for other bid options—for a UHF to increase the opening prices for VHF options ‘‘is inconsistent with the basic station to move to VHF or for VHF options, it is persuaded that it should purpose of the auction’’ to discover stations to move to a lower band or to not choose opening prices at the bottom prices through market-based means. go off-air—will equal the station’s of the proposed ranges in order to avoid Setting opening price offers for bid volume multiplied by a portion of the discouraging broadcasters from options that are proportional to the base clock price. Because the value to choosing these options. At the same value of the relinquishment to the the auction of a cleared channel in the time, choosing opening prices at the top auction will send the appropriate price UHF band is the same whether a UHF of the ranges proposed would run the signals to bidders regarding the relative station relinquishes its spectrum by risk of under-incentivizing the option to value of the options to the auction going off-air or the channel is cleared go off-air or to consider channel sharing. system and encourage bidders to through a series of intermediate moves The Commission concludes that the initially commit to go off-air, involving VHF bids, the Commission values it choose strike the right balance recognizing that as price offers are will calculate the per-volume opening between conducting an efficient auction reduced, they may request to switch to prices for intermediate moves to add up and encouraging bidders to consider all one of the VHF options. Moreover, price to the per-volume opening price for a bid options, include the VHF options. offers for VHF options and VHF stations UHF station to go off-air. Thus, the per- 53. Because the opening price for a in subsequent rounds will be volume opening prices for a UHF station UHF station to move to Low-VHF will determined by the actual demand for to move to High-VHF, a High-VHF be 75 percent of the base clock price, the VHF options and the availability of station to move to Low-VHF, and a Low- opening price for a move from Low-VHF channels in the VHF bands. As a result, VHF station to go off-air will add up to to off-air must be 25 percent of the base the relative values for the various bid equal the base clock price, since these clock price for these two intermediate options will not remain fixed at the three moves are equivalent to a UHF moves to add up to the base clock price opening bid offer amounts, and the station going off-air in terms of value to (i.e., 100 percent). Similarly, because ultimate prices paid to winning bidders the auction. Likewise, the per-volume the opening price for a UHF station to will reflect market demand for the opening prices for other intermediate move to High-VHF will be 40 percent of options in the auction. moves will add to the opening price for the base clock price, the opening price 55. The Commission disagrees with an equivalent direct move. Thus, in per- for a move from High-VHF to off-air NAB and the Joint Broadcasters that the volume terms, the opening price offer must be 60 percent of the base clock auction system should be indifferent for a direct move from High-VHF to off- price. Lastly, since the opening price for between the relinquishment options air will equal the sum of the opening a UHF station to move to High-VHF is available to UHF stations because each price for a move from High-VHF to Low- 40 percent and for a Low-VHF station to option will result in clearing a channel VHF and the opening price for a move go off-air is 25 percent, the opening in the UHF band. In order to clear a from Low-VHF to off-air. During the price for a move from High-VHF to Low- UHF channel by paying a UHF station clock rounds, however, the portion of VHF must be 35 percent of the base to move to the VHF band, the auction the base clock price attributable to each clock for these intermediate moves to system may first have to pay one or intermediate move will vary from sum and equal the base clock price. more stations to relinquish spectrum round-to-round, since price offers to Given a per-volume opening base clock usage rights in the VHF band. A bid to stations during the clock rounds will price of $900, the per-volume opening go off-air also is of greater value than a also depend upon the availability of price for a Low-VHF station to go off-air bid to change bands because it provides channels in the VHF bands in the will therefore be $225 (25 percent of the auction system with more repacking station’s area. For example, while the $900), for a High-VHF station to go off- flexibility: Accepting an off-air bid by a per-volume opening price for a High- air will be $540 (60 percent of $900), UHF station clears a UHF channel VHF station to go off-air will be 40 and for a High-VHF station to move to without first requiring the system to percent of the opening base clock price, Low-VHF will be $315 (35 percent of find a feasible channel in another band. this percentage will vary in subsequent $900). Conversely, a UHF station that agrees to

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move to one of the VHF bands is less precisely the point of offering higher auction. Once the auction system has valuable because it must be assigned a opening prices to UHF stations to move calculated a station’s volume, its feasible channel in that band, limiting to Low-VHF than to move to High-VHF. volume metric will be fixed throughout the auction’s ability to assign another Nor are the Commission persuaded that the auction. While AT&T encourages the station to VHF, and significantly requiring stations moving to VHF to pay Commission to consider a dynamic increasing the complexity of the relocation expenses will ‘‘greatly volume adjustment based upon the repacking process. A station that agrees reduc[e] the desirability of a UHF-to- provisional assignment of stations to to move to Low-VHF is of greater value VHF move.’’ Bidders can—and, the channels, the Commission finds that the to the auction than one that agrees to Commission expects, will—factor their approach it adopts for calculating price move to High-VHF due to the greater relocation expenses into their reductions will capture similar availability of channels in the Low-VHF consideration of whether to accept a efficiencies with less complexity. band and the greater number of stations price offer. The value inherent in a 60. The Commission rejects for which that bid option will be station retaining the exclusive right to arguments by EOBC and other available, both of which make repacking use a full six megahertz channel will broadcasters against considering easier. Consequently, of least value to encourage stations to seriously consider population when calculating each the auction is a station that agrees to bidding for VHF options. station’s volume metric. As an initial move to High-VHF, since in many 58. The Commission also disagrees matter, EOBC’s argument that markets few channels are available, and with the Joint Broadcasters’ argument considering population is inconsistent only UHF stations may bid on this that offering lower opening prices for with the policies the Commission option. VHF options will hinder the efficient adopted in the Incentive Auction R&O is 56. The Commission also disagrees use of spectrum by encouraging channel without merit. The Commission with NAB that offering the same price sharing over moving to VHF, thereby expressly stated in the Incentive for all three bid options would better reducing its flexibility to repurpose Auction R&O that the factors to be used serve the public interest by encouraging additional UHF spectrum in the future. in setting prices could ‘‘include the stations to move to the VHF band and First, the Spectrum Act authorizes only number of stations that a station would continue to provide broadcast television one broadcast television spectrum interfere with and block from being service. NAB’s premise is flawed, incentive auction. Its goal, therefore, is assigned channels, the population the because a UHF station moving to VHF to ensure the success of this auction. station covers, or a combination of such may necessitate a VHF station going off- Second, contrary to the Joint factors.’’ EOBC points out that the air first. In any event, in keeping with Broadcasters’ assumption, the two Incentive Auction R&O ‘‘explained that its goal of allowing market forces to options are not mutually exclusive: Two a station’s price would account for determine the use of spectrum, the UHF stations may agree to share a objective factors ‘that affect the public interest will be best served by channel in VHF (with one agreeing to go availability of channels in the repacking pricing bid options according to their off-air, and the other bidding to move to process and, therefore, the value of a value to the auction and the repacking a VHF channel which both stations station’s bid to voluntarily relinquish process, rather than based on separate would share) in order to receive greater spectrum usage rights.’ ’’ The broadcast-related policy goals. The compensation than if only one station Commission’s volume formula is wholly Commission also rejects PBS’s participated in the auction. consistent with this explanation. suggestion that if the Commission Likewise, its formula is consistent with b. Station-Specific Volume discounts price offers for VHF options, its statement that ‘‘a station with a high it should provide a bidding credit for 59. The auction system will calculate potential for interference will be offered noncommercial educational (NCE) each participating station’s volume a price that is higher than a station with stations that successfully bid to move to using the following formula: Station less potential for interference to other VHF in order to help pay for their Volume = (Interference)0.5 * stations’’: Between two otherwise relocation expenses. Unlike in the (Population)0.5. The Commission will identical stations, the one with more traditional auction context, where set the interference component to equal interference constraints will have a bidding credits are intended to help the number of co- and adjacent channel greater volume, and thus higher opening small or disadvantaged businesses that constraints a station would impose on price offers. The Commission did not may lack the financial resources to repacking on a pairwise basis, and the state that stations with more effectively compete for licenses with population component to equal the interference constraints would receive larger ones, winning bidders in the number of people residing within the higher offers than those with fewer reverse auction will receive—and not station’s interference-free service area. interference constraints regardless of make—payments, and can factor their The Commission’s approach to setting other factors. Contrary to EOBC’s relocation expenses into their the interference component along the argument that population has nothing to consideration of whether to accept a borders will be subject to the do with a station’s impact on the price offer. agreements it reaches with Canada and repacking process, ‘‘population served 57. The Commission disagrees with Mexico. For instance, it may be [is] one of the major constraints on the the Joint Broadcasters that its opening necessary to adjust the interference availability of channels in the repacking price offers for VHF bid options will fail component for the purpose of process’’ in light of the Spectrum Act’s to account for the ‘‘substantial technical determining station-specific volume. mandate that during the repacking inferiority of VHF channels’’ and to Considering population will ‘‘enable[e] process the Commission make all ‘‘provide the proper incentives for the Commission to clear more spectrum reasonable efforts to preserve the broadcasters to accept these in markets where the forward auction population served of eligible stations limitations.’’ Contrary to Joint value of relinquished spectrum usage that will remain on the air. Broadcasters’ argument, its approach rights is apt to be higher,’’ and it 61. Moreover, considering population does provide an incentive to accept the concludes that a volume formula that alongside interference will allow the less favorable propagation equally balances interference and auction system to clear more spectrum characteristics and other technical population components will best in markets where the value to the properties of VHF channels—this is achieve the goals of the incentive forward auction is likely to be highest.

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The purely interference-based approach the spectrum value for the public and efficiency of algorithms similar to its advocated by EOBC and other avoiding unjust enrichment in the pricing and bid processing algorithm. broadcasters would result in larger context of the reverse auction because 63. EOBC additionally argues that payments to stations that serve small these statutory provisions apply only to reducing the weight of population populations and smaller payments to auctions of licenses. Even if EOBC were would be in the public interest because stations that serve particularly large correct, nothing in the statute precludes it would result in less loss in broadcast populations—an outcome at odds with the Commission from considering these service, since smaller stations would both the typical metric by which goals in designing the reverse auction, more often become winning bidders. In spectrum is valued in spectrum auctions and the Commission concludes that keeping with its goal of allowing market (i.e., MHz-pops) and with stations’ own doing so will serve the public interest. forces to determine the highest and best assessments: As WRNN points out, The Commission also rejects Local use of spectrum, the public interest will ‘‘[p]opulation is one of the most, if not Media TV’s proposal to calculate be best served by setting prices the most, important elements by which volume based entirely upon the according to each station’s value to the the Commission and other broadcasters pairwise interference constraint files. auction and the repacking process. value its properties, and distinguish its 62. The Commission also disagrees While encouraging stations that serve stations from others. This is critical for with arguments that, if it retains a smaller populations to go off-air might the repacking process because population component, it should reduce result in loss of service for fewer over- participation of many stations with high its weight in its volume formula. In the-air viewers, it would do so at the risk of discouraging large stations in population counts, especially in the particular, EOBC proposes a formula high-demand markets from participating major cities, is essential to meet larger that would reduce the weight of the in the auction. In order to fulfill the clearing targets.’’ The Commission notes population component from 0.5 to 0.25, goals of the Spectrum Act, it is that high participation levels by stations raising opening prices for almost all appropriate to set price signals that that serve small populations in markets stations and de-emphasizing the impact encourage broadcasters to relinquish adjacent to high-demand markets will of population in price offers. The their spectrum usage rights in the not make up for low participation levels Commission is not persuaded by the reverse auction, not to discourage by stations in high-demand markets that supposed benefits of this unbalanced certain stations from participating so weighting. The Commission rejects serve large populations. Participation by that they will remain on the air. The both types of stations is required in broadcasters’ assertions that it more Commission concludes, therefore, that order to allow the auction to repurpose closely reflects the pricing policy the considering population and a significant amount of spectrum. While Commission adopted in the Incentive interference, in an equal, balanced the Commission affirms its Auction R&O, for much the same reason weighting, will best achieve the goals of determination in the Incentive Auction it rejected EOBC’s consistency the incentive auction. R&O not to set bid prices based upon a argument. The Commission has no station’s enterprise value, population is reason to think, and broadcasters have 3. Committing to an Initial nevertheless an important metric for not established, that its opening price Relinquishment Option assessing spectrum value. Ignoring this methodology results in prices that are 64. As the second condition for metric would send the wrong price too low to attract robust participation. qualifying to bid in the clock phase of signals and discourage participation by However, raising opening prices would the reverse auction, an applicant that large stations in major markets, thereby raise the costs of repurposing spectrum, has submitted a timely and complete harming its ability to clear spectrum in increase the likelihood of repurposing application must commit to a preferred such markets. For example, in certain less spectrum, and could even relinquishment option for each station border markets, a small Class A station jeopardize the success of the auction. that it intends to bid for in the reverse may serve only a small population but Absent Dynamic Reserve Prices (DRP), auction, and under the circumstances, it there may also be few channels the Commission no longer has any may commit to additional ‘‘fallback’’ available for repacking stations. In such mechanism to reduce prices in markets options. An applicant will be able to markets, the value of clearing and that are particularly constrained (due to commit only to relinquishment selling this spectrum in the forward the impact of Canadian or Mexican option(s) that it identified for a auction may likewise be low. Ignoring stations, or non-participants), further particular station when initially or reducing the weight of population, as increasing opening prices would submitting its auction application. If an proposed by EOBC, could potentially decrease the likelihood of a successful applicant did not identify a particular result in the Class A station being auction. Reducing the weighting of relinquishment option on its auction offered an opening price significantly population would also likely increase application, that option will not be higher than a full power station in a clearing costs significantly for the same available to the applicant when it logs major market that serves many more amount of cleared spectrum, which in to the FCC software to commit to an people, regardless of the price at which could drive the auction to lower initial relinquishment option for that each station values itself. Furthermore, clearing targets because forward auction station. The commitment(s) will the value of clearing and selling the revenue is insufficient to close the constitute an irrevocable offer by the spectrum in the forward auction in the auction in a given stage. On the other applicant to relinquish the relevant larger market is likely to be much hand, using a balanced weighting where spectrum usage rights in exchange for higher. Using the balanced volume the sum of the exponents equals one the opening price offer for that bid formula that the Commission adopts will result in appropriate price signals option. A commitment to a fallback will help to avoid these results and will for all stations: If a broadcast station has relinquishment option is treated as a result in higher price offers to stations twice the number of constraints and binding commitment in the alternative in markets where the spectrum is twice the population of another, under to the preferred option. An applicant particularly valuable. The Commission its approach its opening prices will be need only commit to a fallback option need not resolve EOBC’s argument that twice as much. Furthermore, a square- in the event that its preferred option is it is not required to consider the root weighted volume score (i.e., using to move either to the Low- or High-VHF statutory goals of recovering a portion of an exponent of 0.5) can improve the band. Therefore, the auction will

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commence with the submission of auction system will attempt to designate system may determine that certain initial bid commitments. An applicant a station to the preferred option for that stations will always have a feasible that fails to commit to an initial station. If the auction system is unable assignment in their pre-auction band at relinquishment option for a given to accommodate a station in its the initial and all subsequent clearing station by the applicable deadline will preferred option, the system will targets. Such stations’ spectrum usage not be qualified to bid in the clock attempt to designate the station to its rights will never need to be purchased phase of the auction for that station. fallback option(s), if the applicant to meet the clearing target and their 65. As part of determining an initial committed to any. If an applicant participation in the clock phase of the clearing target, the auction system will declines to commit to a fallback for a reverse auction is not needed. Qualified assign or designate each station to a station and its preferred option for the bidders will begin the first round of the relinquishment option consistent with station cannot be accommodated—or, if clock phase bidding for each station’s its initial bid commitment in order of neither its preferred nor fallback options designated initial relinquishment the priority rules proposed in the can be accommodated— the station will option. Each applicant that submits an Auction 1000 Comment PN (proposing be designated to be repacked in its pre- initial commitment is obligated to the following priority order: (1) auction band and will not participate in relinquish at the relevant opening price Minimize the number of participating the reverse auction bidding. the spectrum usage rights associated UHF stations that must be repacked in 66. As applicants consider which with its initial relinquishment option if their pre-auction band; (2) minimize the option to commit to as the preferred the auction system selects its station to option for a station, they should be number of participating VHF stations relinquish its rights at the opening bid mindful that once the bidding system that must be repacked in their pre- price. designates a station to an initial 68. Prior to the deadline to apply to auction band; (3) maximize the number relinquishment option, future bid participate in the reverse auction, the of participating stations that will options for that station will be limited Commission intends to provide, in commence bidding on their preferred by the one-way hierarchy of various formats, detailed educational option; (4) maximize the number of relinquishment options. For example, if information to would-be participants, participating stations that will a UHF bidder identified all three including among other things an auction commence bidding on their alternative options on its auction application and tutorial that will be available on the bid option to go off-air; and (5) then committed to go off-air, it may, in Auction 1000 Web page for prospective minimize the sum of impaired a subsequent bidding round, request to bidders to walk through the auction weighted-pops across all licenses), switch to Low-VHF or High-VHF. process and the application and bidding modified by the additional priority rules However, if that same bidder instead screens. Once applicants have qualified the Commission adopts to take account committed to move to Low-VHF as its to participate in the clock phase of of the secondary and tertiary objectives preferred option and the auction system Auction 1001, registration materials will in the initial clearing target were able to accommodate that option, be distributed. Additionally, all bidders determination procedure. The technical that bidder would begin the auction qualified to bid in the clock phase will details of the modification to take bidding to move to Low-VHF and would be able to participate in a mock reverse account of the additional clearing target be precluded from ever bidding to go auction prior to bidding in the clock objectives will be released in an off-air. phase of Auction 1001, which will appendix to the Application Procedures enable bidders to obtain hands-on 4. Final Auction Application Status PN. That relinquishment option will be experience with the auction system. the starting point for each station to bid 67. Once the auction system processes Further details about the mock auction in the clock phase of the reverse the initial bid commitments and and the auction tutorial, including auction. Due to the limited availability designates each station that can be relevant dates and how to access these of VHF channels and the technical accommodated to an initial tools, will be announced in the constraints on repacking, the auction relinquishment option, the Commission Application Procedures PN. system may not be able to accommodate will send confidential letters to each every station that commits to move to reverse auction applicant to inform B. Qualifying To Bid in the Forward the Low- or High-VHF band. The them of their status with respect to the Auction auction system can always clock phase of the reverse auction. The 69. In order to qualify to bid in accommodate going off-air as a preferred letters will notify applicants for each of Auction 1002, an applicant must timely option because going off-air does not their stations either that (1) the station submit an auction application that is require finding a feasible channel is qualified to participate in the clock deemed complete and timely make a assignment. In order to increase the phase of the reverse auction; (2) the sufficient upfront payment. The amount likelihood that stations will be able to station is not qualified because no of the upfront payment will determine participate in the auction, the initial commitment was made, and a bidder’s initial bidding eligibility in Commission established procedures to therefore, that station will be designated terms of bidding units, i.e., the allow applicants that commit to move to to be repacked in its pre-auction band; maximum number of blocks, as VHF as their preferred option to also (3) the commitment(s) made by the measured by their associated bidding commit to a fallback option(s) if they so applicant for the station could not be units, a bidder may demand in the clock choose. Applicants that commit to a accommodated, and therefore, that phase of the forward auction. The preferred option may decline to commit station is not qualified and will be Application Procedures PN will address to fallback options. In order to qualify designated to be repacked in its pre- the process of applying to participate in to bid in the clock phase of the reverse auction band, or (4) the auction system Auction 1002, including descriptions of auction, an applicant that identified determined that the station is not the information required to be only one relinquishment option on its needed, and therefore, the station is not disclosed, instructions for completing auction application must still qualified and will be designated to be the form, and specific deadlines for affirmatively commit to that option as repacked in its pre-auction band. As submission. The Commission adopts its preferred option—it will not have part of the process of determining the procedures for assigning bidding units any fallback options available to it. The initial clearing target, the auction to each spectrum block that will be

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available in the forward auction. The Commission will divide the result of the incorporating auction-specific Commission also adopts a method for calculation by 1,000 and round it using anomalies from prior auctions. calculating the upfront payment each the Commission’s standard rounding 74. The Commission is not persuaded applicant must make to obtain bidding procedures for auctions. Specifically, by CCA’s argument that including eligibility for forward auction spectrum the Commission will round numbers pricing data from Auction 97 will blocks. greater than 10,000 to the nearest prejudice smaller bidders. Prices from Auction 97 are useful in that they 1. Bidding Units thousand; numbers less than 10,000 and greater than 1,000 to the nearest provide the most recent data on the 70. The Commission will assign to hundred; numbers less than 1,000 and relative prices bidders were willing to each spectrum block that will be more than 10 to the nearest ten; and pay for spectrum licenses in various available in the forward auction a numbers less than 10 to the nearest one. markets. While prices in Auction 97 specific number of bidding units and All PEAs will have at least one bidding generally were higher than in previous will use the bidding units to calculate unit. As a result, the Commission will auctions, the Auction 97 information minimum opening bids, upfront calculate bidding units for the spectrum being incorporated consists of payments, and bidder eligibility, and for blocks in most PEAs as (pops * index)/ additional data on relative prices across measuring bidding activity. In 1000, rounded. Because not all of the markets and does not reflect overall particular, as the Commission proposed, licenses covering U.S. territories and price levels. The updates will have a it will assign bidding units to spectrum protectorates had winning bids in past varying effect on different markets, but blocks in each PEA by using a weighted auctions, for spectrum blocks in the it will not result in a substantial change population method similar to the PEAs for Puerto Rico, Guam-Northern in the total number of bidding units, method it will use for measuring the Mariana Islands, U.S. Virgin Islands, upfront payments, and minimum extent of impairment in a PEA. The only and American Samoa, the Commission opening bids. difference is that, in measuring the will divide the results of the weighted extent of impairment in a PEA, the 2. Upfront Payment Due After Initial population calculation by 2,000 and 600 MHz Band Plan Determined Commission will use the index value round the results. Further, the 75. The Commission adopts an specific to the PEA—it will not group Commission will assign one bidding upfront payment amount of $2,500 per the price index by deciles and apply the unit to spectrum blocks in the Gulf of bidding unit—half of the amount of the lowest index value in a decile to all of Mexico PEA. the PEAs in that decile, as it does for minimum opening bid for each calculating bidding units. 72. Each block available in a PEA will spectrum block. The upfront payment 71. The Application Procedures PN have the same number of bidding units amounts for generic blocks in every PEA will set forth the updated indices and regardless of category. This approach for Auction 1002 will be announced in number of bidding units that will be will facilitate bidding across categories the Application Procedures PN. The assigned to spectrum blocks in each by enabling bidders to switch their Commission will base the upfront PEA under its adopted approach. The demand for Category 1 blocks to payment for each generic block on the Commission notes that some of the Category 2 blocks and vice versa number of bidding units associated with bidding unit values that will be without affecting their bidding the blocks in a specific PEA established. announced will differ from those in eligibility. The number of bidding units The Commission notes that in the Appendix F of the Auction 1000 for the blocks in a given PEA will be Auction 1000 Comment PN it proposed Comment PN because they will fixed and will not change during the to multiply the number of bidding units incorporate the results of Auction 97. auction, regardless of price changes. of a spectrum block by $2,500 and then The Commission will derive these 73. The Commission disagrees with round the result of that calculation. The values by incorporating auction results arguments that it should determine upfront payments the Commission from Auction 66, Advanced Wireless bidding units (and, therefore, upfront adopts here will use the same Services (AWS–1); Auction 73, 700 MHz payments and minimum opening bids) calculation, but the result will not be Band; and Auction 97, Advanced based solely on population or without rounded so as to maintain a two to one Wireless Services (AWS–3) into an regard for the final results from Auction relationship between minimum opening index of area-specific relative prices 97. By incorporating past prices, its bids and upfront payments. This from prior auctions. This relative price approach reflects the relative value approach is consistent with its usual index is the same index used for bidders have assigned to the different practice and supported by the record. measuring the impaired weighted-pops markets in the past better than would a Thus, to become a qualified bidder, a for a license. Consistent with the calculation based solely on population, forward auction applicant must make an approach used for Auction 96 (H Block) and hence, is more likely to reflect the upfront payment sufficient to obtain and Auction 97, the Commission will relative prices for markets in this bidding eligibility for the quantity of multiply the population of each PEA by auction. Its approach also helps ensure generic blocks in each PEA on which it the index value for the PEA. The that bidders’ upfront payments are may wish to bid in any round. Commission will incorporate the results reasonably proportional to the market 76. Its experience in past spectrum from past auctions for spectrum prices of the spectrum blocks they license auctions indicates that requiring licensed in Economic Areas (EAs) and demand. Further, using a price index upfront payments protects against Cellular Market Areas (CMAs) by rather than a population index ensures frivolous or insincere bidding and breaking the data down to the county that the Commission does not exclude provides the Commission with a source level and then aggregating the county- significant past price differences of funds from which to collect payments level data up to the PEA level. For the between similarly-sized markets in its owed at the close of the auction. For purpose of assigning bidding units to calculations. At the same time, using the these reasons, the Commission declines spectrum blocks in each PEA, the results of several previous auctions and to reduce the upfront payment to $1,000 Commission will group the relative the decile approach helps to reduce the per bidding unit as suggested by CCA. price index by deciles and apply the impact of any unusual price variation Contrary to CCA’s assertions, the lowest index value in each decile to all from a single auction. Thus, this Commission finds that insincere PEAs in that decile. Next, the approach addresses concerns about bidding is a real risk in any spectrum

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license auction. Moreover, the simultaneously will need to ensure that Commission license or has been Commission is not persuaded that its upfront payment provides enough delinquent on any non-tax debt owed to setting an upfront payment amount at eligibility to cover more than one paired any Federal agency—must submit an half of the minimum opening bid price 5+5 megahertz generic block in the PEA. upfront payment equal to 50 percent will threaten small carrier participation. 80. An applicant does not have to more than that set for each spectrum Even after applying discounts for make an upfront payment to cover block. Recently in the Updating Part 1 license impairments and bidding blocks in all of the PEAs the applicant Competitive Bidding Rules 80 FR 56764, credits, the final winning bid amount selected on its auction application, but September 18, 2015 proceeding, the for a license will exceed the ‘‘cost’’ (i.e., it should make an upfront payment that Commission narrowed the scope of the upfront payment) to obtain enough covers the maximum number of bidding defaults and delinquencies considered eligibility to bid for the generic block. units that are associated with the for purposes of this rule. Under its Thus, it is reasonable to require that quantity of blocks in the PEAs on which amended rules, applicants may exclude forward auction applicants be willing it wishes to place bids in any given from consideration as a former default and able to make upfront payments in round. The total upfront payment does any cured default on a Commission the amount of $2,500 per bidding unit. not affect the total dollar amount the license or delinquency on a non-tax 77. The Commission finds it bidder may bid for quantities of generic debt owed to a Federal agency for which unnecessary to discount upfront blocks, nor will it be attributed to any of the following criteria are met: (1) payments for Category 2 licenses. The specific blocks or PEAs. Rather, the The notice of the final payment upfront payment is a refundable deposit bidder may place bids for quantities of deadline or delinquency was received meant to help ensure sincere bidding blocks in any combination of the PEAs more than seven years before the and to establish initial eligibility levels it selects on its auction application, relevant auction application deadline; for use with the activity rules. Basing an provided that the total number of (2) the default or delinquency amounted upfront payment on a spectrum block’s bidding units associated with those to less than $100,000; (3) the default or potential degree of impairment would blocks will not exceed its eligibility delinquency was paid within two not further the purpose of an upfront when it places the bid(s). Bidders will quarters (i.e., six months) after receiving payment, especially since the number of not be able to increase their eligibility the notice of the final payment deadline spectrum blocks in each category and during the auction; bidders only will be or delinquency; or (4) the default or their respective degrees of impairment able to maintain or decrease their delinquency was the subject of a legal may change from stage to stage of the eligibility. Thus, in calculating its or arbitration proceeding that was cured auction. upfront payment and hence its initial upon resolution of the proceeding. 78. Upfront payments will be due bidding eligibility, an applicant must Additional details concerning the after the initial clearing target and determine the maximum number of application of the Commission’s former associated band plan scenario has been bidding units on which it may wish to defaulter rules to forward auction determined. This timing will enable an bid in any single round and submit an applicants, including any required applicant to take into account the upfront payment covering that total certifications and the higher upfront number of spectrum blocks in the band number of bidding units. payment requirement, will be set forth plan scenario associated with the initial 81. For example, under the approach in the Application Procedures PN. After clearing target when determining the the Commission adopts, assume there the auction, applicants that are not amount of its upfront payment. In are 27,000 bidding units associated with winning bidders or are winning bidders keeping with the Commission’s usual each block in the New York, New York whose upfront payment exceeded the practice in spectrum license auctions, PEA, and 21,000 bidding units total net amount of their winning bids all upfront payments must be made by associated with each block in the Los may be entitled to a refund of some or wire transfer in U.S. dollars. Specific Angeles, California PEA. If a bidder all of their upfront payment. instructions for submitting upfront wishes to bid on one block in both PEAs payments, including wiring in a round, it must have selected both 3. Final Auction Application Status instructions, will be set forth in the PEAs on its auction application and 83. Consistent with its normal auction Application Procedures PN. purchased at least 48,000 bidding units procedures, a public notice will 79. An applicant’s total upfront (27,000 + 21,000) of bidding eligibility. announce all qualified bidders for the payment must be enough to establish If a bidder only wishes to bid on a block forward auction (Qualified Bidders PN). eligibility to bid on at least one block in in one of these PEAs, purchasing 27,000 Qualified bidders are those applicants one of the PEAs selected on its auction bidding units would allow the bidder to with submitted auction applications application for Auction 1002, or else the bid on a block in either PEA, but not on that are deemed timely-filed and applicant will not be qualified to bid in a block in both PEAs at the same time. complete, provided that such applicants the auction. An applicant must select on If the bidder purchased only 21,000 have timely submitted an upfront its auction application one or more bidding units, it would have enough payment that is sufficient to qualify PEAs in which it may place bids during eligibility to bid on a block in Los them to bid. Since the rule prohibiting the forward auction. An applicant will Angeles, but not on a block in New certain communications applies to both not be required to identify on its auction York. If a bidder wishes to bid on more reverse and forward applicants and the application the number of blocks within than one block in a PEA, it must have prohibition commences on the auction a PEA it demands because the purchased sufficient eligibility for that application deadline, the Commission Commission will not know the number of blocks. Thus, continuing anticipates setting concurrent maximum number of spectrum blocks with its example, a bidder interested in application filing deadlines for the that will be offered in the forward bidding on three blocks in Los Angeles reverse and forward applicants. auction until the initial spectrum must purchase at least 63,000 bidding 84. Similar to what will be provided clearing target is determined. Because units (21,000 * 3) of bidding eligibility. for potential reverse auction bidding unit amounts pertain to a single 82. The Commission notes that its participants, the Commission intends to paired 5+5 megahertz block for each rules require that any auction applicant provide, in various formats, detailed PEA, a bidder that wishes to bid on that certifies it is a former defaulter— educational information regarding the multiple generic blocks within a PEA i.e., has been in default on any forward auction, including among other

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things an auction tutorial that will be have access to certain auction procedure. Many commenters support available on the Auction 1000 Web page information, while auction participants this approach. Some suggest that the for prospective bidders to walk through will have secure access to additional Commission announce a clearing target the auction process and the application non-public information. Details of how before broadcasters make initial and bidding screens. Registration to access auction information will be commitments, in order to assist materials will be distributed to qualified provided in the Application Procedures broadcasters in doing so. The initial bidders prior to the auction. All PN. commitments, however, are an essential qualified bidders will be eligible to 88. The Application Procedures PN component for determining the initial participate in a mock auction prior to also will detail the prohibition on clearing target. The Commission will bidding in Auction 1002, which will communicating information relating to announce the initial clearing target enable bidders to obtain hands-on bids or bidding strategies, such as the before any bidding takes place in the experience with the auction system non-public information that bidders clock phase of the reverse auction. prior to the auction. Further details may access in the auction system, to 92. Once the bidding in the clock about the mock auction and the auction broadcast licensees eligible to phase of the reverse auction begins, the tutorial, including relevant dates and participate in the reverse auction or to Commission will make publicly how to access these tools, will be forward auction applicants, subject to available information about the current announced in the Application specified exceptions. The Commission stage of the auction and whether or not Procedures PN. cautions eligible broadcast licensees reverse (or forward) auction bidding is that communicating non-public currently open. Information regarding V. Reverse Auction Bidding information that they receive to others, amounts necessary to meet the final 85. The Commission will use a whether directly or indirectly through stage rule will be public, as well as descending clock auction format in the third-parties or public disclosure, could whether or not the final stage rule has reverse auction, in which participants violate that prohibition. been met. Such information will include will bid over a series of rounds by 89. In response to the numerous the aggregate amount of provisionally responding to new price offers for one commenters that contend that the winning reverse auction bids to or more relinquishment options. The Commission should make as much relinquish spectrum usage right, which Commission establishes reverse auction information available regarding the is part of the second component of the bidding procedures and explain how the reverse auction as possible, either to the final stage rule. In addition, the auction auction system will both calculate new public or to the auction participants, system will provide each reverse price offers during the clock rounds and more information will be provided to auction bidder with non-public process bids to determine which bidders both the public and reverse auction information that it can use in will be selected by the auction, and at participants than was proposed in the determining how it will bid. More what price, to relinquish spectrum Auction 1000 Comment PN. The specifically, the auction system will usage rights. Commission will make public, before provide to each bidder—but not to the 86. The Commission generally adopts the deadline for filing applications to public—each station’s bidding status the reverse auction bidding procedures participate in the reverse auction, the and price offers for all options relevant proposed in the Auction 1000 Comment opening prices for all stations whose given the station’s status. PN, except that the Commission will not spectrum usage rights are eligible to be 93. The auction system also will use dynamic reserve prices (DRP), and offered in the auction and for each bid provide each reverse auction bidder the Commission adopts its alternative option available to each station. The with vacancy index information, proposal to simplify the reverse auction Commission set forth the formula for indicating the relative availability of bidding process by not providing an these prices in the Auction 1000 channels in each relevant band, as part intra-round bidding option. Bidding Procedures Public Notice. of each round’s bidding results for Notwithstanding the potential benefits Prices for each station and for each bid active stations. Providing this of using DRP, the Commission option for each station may be information is consistent with the strong concludes that not using it will calculated using this formula and record support for providing reverse encourage voluntary participation in the publicly available information. Rather auction participants with as much reverse auction by removing uncertainty than require each licensee to make these information as possible to help with among broadcasters, and is consistent calculations separately, the Commission bidding. A broadcaster can use vacancy with the record consensus in favor of will make them public. The information to assess the likelihood of minimizing the potential for Commission does so to encourage various developments, such as whether impairments. In addition to the participation, to further the a price for a given option may continue information the Commission proposed transparency of the auction, and in to decline. Given that the auction to provide, the auction system will response to comments requesting that system incorporates such information in provide information to each active the Commission do so. price computations, and sophisticated bidder regarding the available room for 90. Reverse auction bidders will be bidders might be able to extract the repacking stations at the end of each informed of the initial bidding round information in a limited set of cases, the round of the auction. schedule when they are informed that Commission concludes that providing they are qualified to bid in the clock such information to each bidder will A. Availability of Auction-Related phase. The schedule will establish the promote transparency and information Information length of time each round will last. parity among all bidders, and that the 87. The Commission will make Bidders may respond to price offers for auction system can provide such auction information public as soon as available bid options in each round. information without unduly possible, consistent with its rules, Round results will be released to complicating participation or policies, and procedures that help bidders after each bidding round. compromising the confidentiality of protect the competitiveness of the 91. The Commission will make public participation in the reverse auction. auction, as well as with applicable the initial spectrum clearing target as 94. The auction system calculates statutory requirements. As in past soon as possible after completion of the vacancy information when setting Commission auctions, the public will initial clearing target determination prices. For a given station, the auction

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system will determine the number of setting the values will be provided in provide more uniform information, in channels available in the station’s the Application Procedures PN. particular assuring that the information ‘‘neighborhood’’ for the relevant band. A 96. In all cases, a value in the low each bidder possesses is the same station’s neighborhood consists of all range for the index will indicate a regardless of the number of stations it active stations, i.e., all participating higher potential for the relevant band to offers in the auction. The Commission stations that have not exited or become fill soon; a value in the medium range disagrees. Some bidders might be able to provisional winners including the will indicate less likelihood; and a value infer information unavailable to others station itself, that could interfere in the high range will indicate still less based on a combination of average DMA directly with the station in the relevant likelihood. The Commission emphasizes vacancy information and station- band and therefore potentially limit that this information will be based on specific vacancy information, which is assigning the station to an available the results of the prior round and will used by the auction system to calculate channel in that band. The auction provide no certainty with respect to prices. The approach the Commission system uses each station’s volume to developments in future bidding rounds. adopts will provide each bidder with weight the number of channels available Ultimately, the bidding of other reverse station-specific information without to it and then averages those weighted auction participants will determine providing an advantage to some bidders. results for all stations in the station’s when any available channels are filled. Further, providing vacancy index neighborhood. The vacancy index Nevertheless, the vacancy index information for each station will avoid information that the auction system will information based on past round results putting participants with fewer stations provide to bidders will indicate whether will help bidders make rough estimates in the auction at a disadvantage, as the average of weighted channels of whether a particular bid option will bidders will have the same information available to active stations in the continue to be available, as well as relative to each of their participating neighborhood falls within one of three provide bidders with a sense of the stations. ranges, low, medium, or high. The range relative likelihood that a station’s 98. Because the vacancy index the format should prevent the information various bid options will continue to be Commission adopts will assist from being used to identify the available. Changes to the vacancy index broadcasters seeking to forecast the neighboring stations consistent with its from round to round also may provide outcome of the auction, it addresses obligation to protect the confidentiality helpful information regarding changes requests by commenters for information of reverse auction participation. in the status of neighboring stations at regarding the reverse auction that would current clock prices. The Commission enable ‘‘outcome discovery’’ by 95. More specifically, for each bidder notes, however, that a station’s vacancy broadcasters. The other information that with an active UHF station, the UHF index may change if a second will be provided satisfies many requests vacancy index will indicate whether the neighboring station becomes that commenters make for specific average of weighted UHF channels provisionally winning, even though that information regarding the reverse available to the active stations in the did not change the number of available auction, such as the initial spectrum neighborhood is: Less than three (low); channels. For example, if a non- clearing target and opening prices for all greater than or equal to three, but less neighboring third station’s decision to stations. In combination, all of the than or equal to six (medium); or more exit the auction made it infeasible to information will facilitate efforts by than six (high). Given the smaller repack the neighboring second station, broadcasters to forecast prices in the number of channels in the VHF band, the neighboring station would become a auction. The Commission conclude that the ranges will be narrower. For each provisional winner and therefore would providing additional information to bidder with an active VHF station, the no longer be included in the calculation reverse auction bidders could unduly vacancy index in the station’s pre- of the first station’s vacancy index. In complicate participation in the reverse auction band will indicate whether the that circumstance, the first station’s auction or compromise the average of weighted channels available index may change even though no confidentiality of such participation. to the active stations in the available channel in its neighborhood 99. In addition to the bidding neighborhood for the pre-auction band was filled. information, the Commission will use of the bidder’s station is: Less than two 97. The Commission declines to adopt the auction system to make auction (low); greater than or equal to two, but EOBC’s proposed alternative to the announcements regarding any other less than or equal to four (medium); or vacancy index, which likewise uses the necessary information to reverse auction more than four (high). With respect to average of the weighted number of participants, such as schedule changes. relevant bands other than a station’s channels available to all stations in a Providing auction announcements pre-auction band (i.e., for UHF stations, given station’s neighborhood, but through the auction system has been an High-VHF and Low-VHF, and for High- instead of providing station-specific effective and efficient way to VHF stations, Low-VHF), the values information on a confidential basis communicate necessary information to used to define the three ranges will be would involve averaging that auction participants in past auctions, determined based on the ratio of the information across all stations in each and the Commission expects that this level of vacancy in that band to the level Designated Market Area (DMA) and will be the case for the reverse auction of vacancy in the station’s pre-auction disclosing the information publicly. The as well. band. This ratio is already used in vacancy index will confidentially 100. The Commission notes that while setting prices for moving to the same provide each bidder with information reverse auction bidders will have access bands. Consequently, bidders with targeted to its station(s), which should to far more information than it prices for a station that may move to a better predict how soon a price offered originally proposed, in order to serve new band could infer the information that station is likely to freeze. The the interests of broadcasters, it is without the vacancy index. The vacancy station-specific information provided by required to make less information index puts it to use in an explicit report the vacancy index the Commission public regarding the reverse auction to the bidder. The auction system will adopts also will be more uniformly than it does regarding the forward report the values that define the ranges useful to all bidders than EOBC’s auction. To begin with, the Spectrum when providing the vacancy index alternative. EOBC argues that a publicly Act expressly requires that the information. The technical formulas for disclosed metric is fairer as it would Commission take reasonable steps to

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keep confidential Commission-held data decremented by five percent, the price increases in costs. Because the forward of licensees with respect to their offer will decrease by five percent. and reverse auctions run sequentially participation in the reverse auction, Unlike opening price offers, however, within a stage and because there may be including their identities. Commission the new price offers in clock rounds for multiple stages, it is important to limit rules further extend confidential UHF stations to move to the VHF bands, the number of reverse auction rounds. treatment with respect to non-winning or for VHF stations to move to a lower The combination of (i) and (ii) ensures bids and bidders for two years after the band or go off-air, will reflect the that the reverse auction will require no close of the auction, so that broadcasters relative availability of channels for each more than 52 rounds in any stage. In may participate in the reverse auction station in the VHF bands. Opening subsequent stages, the reverse auction without being compelled to disclose prices for intermediate moves will in may require even fewer rounds, their willingness to relinquish spectrum aggregate be equal to the full base clock depending on the level to which the usage rights for that longer period. price (or, in percentage terms, will sum base clock price must be reset after a 101. Accordingly, the Commission to 100 percent) for a move from UHF to new stage transition, and how quickly will not disclose the name of the off-air since in terms of value to the newly-active stations either drop out or licensee, the channel number, call sign, auction intermediate moves, when taken become provisionally winning. Using a or facility identification number of its together, are equivalent to a move from decrement of one percent would require participating station(s), or its network UHF to off-air, which is set by the base considerably more bidding rounds. For affiliates in connection with the clock price. The opening prices for example, using just part (ii) of the participation of any licensee in the intermediate moves will form the Commission’s price decrement rule—a reverse auction. The Commission also starting point for prices for such moves price decrement of one percent of the will keep confidential any other in the clock bidding rounds, but as base clock’s opening value—would information that may reasonably be relative vacancy rates change, these require 100 rounds, whereas using a withheld to protect the identity of the prices will vary. These differences in price decrement of one percent of the licensee as a reverse auction participant, relative price changes are intended to current base clock value, without part such as information regarding the status encourage moves that promote more (ii) or a similar mechanism, could cause of licensees as participants or efficient repacking of the VHF bands. the auction to continue for hundreds of provisional winners during the auction. For example, if the High-VHF band is more rounds as the decrement gets To safeguard this confidential particularly congested in an area, the increasingly smaller. The Commission information, the Commission will not price offer for a UHF station in that area recognizes commenters’ concerns that make public any information relating to to move to High-VHF will decrease larger decrements could cause some applications to participate in the reverse more quickly than if the High-VHF band stations to drop out quickly, but find auction until after the auction were less congested. As a result, a UHF that with a decrement of five percent concludes. Whether similar information station will have less incentive to any loss of efficiency or increased costs was made public in prior spectrum request a move to High-VHF than if the is likely to be de minimis. Moreover, a license auctions, or has been provided High-VHF band were less congested and decrement of one percent risks on a non-public basis by the price offers decrease more slowly. By increasing the cost of repurposing Commission, does not change whether setting price offers in this way, the spectrum. In the absence of the the rule applies. Unlike in conventional auction system will encourage moves proposed DRP mechanism, the prices spectrum license auctions, the that are particularly beneficial to the offered to stations in some areas may Commission will not issue public reverse auction’s goal of clearing ‘‘freeze’’ near opening price levels; in notices with respect to the status of the spectrum in the UHF band. such cases, a one-percent decrement reverse auction applications that are might require higher payments to filed. Instead, the Commission will 103. In each round of the reverse individual stations. Higher payments communicate regarding these auction, the base clock price decrement are likely when stations are able to applications directly—and will be the larger of: (i) Five percent of engage in coordinated behavior to confidentially—with the respective the current base clock value or (ii) one manipulate the point at which their applicants. Finally, because information percent of the $900 opening base clock prices ‘‘freeze.’’ The Commission’s rules regarding a participant’s station is price. Consistent with the Commission’s and procedures are intended to prevent integral to determining the bids offered standard auction procedures and as such manipulation, but do not prevent in the auction, information regarding proposed in the Auction 1000 Comment coordinated behavior by bidders that specific bids during the course of the PN (to reduce the base clock price by own multiple stations within an auction cannot be made public. between three percent and 10 percent individual market. In addition, five per round) the size of the decrement percent price decrements would be B. Determining New Price Offers in may be adjusted in the reverse auction. Clock Rounds small enough to allow the system to Although the Commission does not provide useful information to 102. Under the descending clock anticipate that the decrement in the participants to guide their bidding. auction format that the Commission reverse auction will need to be adjusted, adopted for the reverse auction, in every if circumstances warrant, the change C. Bidding Mechanics clock round, the auction system will and the new decrement will be 104. Consistent with its proposed decrement the per-volume nationwide announced at least 24 hours in advance procedures, at the commencement of the base clock price. As with opening price to all bidders. Although several clock phase of the reverse auction, each offers, a UHF station will be offered a commenters urge the Commission to participating bidder will begin bidding price to go off-air in each clock round decrease prices by no more than one for each of its stations at the opening that will equal the base clock price percent in each round, a decrement of price for that station’s ‘‘currently held multiplied by its station-specific volume five percent will better balance its option,’’ which will be the initial factor. The price offer for a UHF station interests in completing the reverse relinquishment option determined by to go off-air is the base clock price times auction bidding within a reasonable the initial commitment procedures. So the station’s volume. Therefore, if the amount of time while avoiding long as the auction system can per-volume base clock price is significant losses of efficiency or determine a feasible channel assignment

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for that station in its pre-auction band— submitted a bid to accept the new price be able to report round results more by conducting a ‘‘feasibility check’’ offer for the option, requested to switch quickly. Furthermore, not providing for prior to the clock round—the system to a different option, or bid to drop out intra-round bidding will have minimal will continue making new, reduced of the auction. This will provide effect on the reverse auction’s efficiency price offers to that station. For each strategic simplicity for bidders by and cost given the relatively small price station the auction system must, prior to ensuring that bidding to accept a new decrements that the Commission has processing its bid, find a feasible price offer will never result in a station chosen. For reasonably sized price channel assignment in the station’s pre- receiving a lower price for its option decrements (within the three to 10 auction band—that is, an assignment than it could have received if it refused percent range that the Commission that does not violate any of the pairwise to accept the offer. proposed), the loss in efficiency and constraints and is therefore consistent 105. A bidder that has or is interested cost is of ‘‘second-order’’ to the size of with the Spectrum Act’s preservation in only a single bid option will have a the decrement because the likely mandate. To do this, the system simple choice: Whether to accept the number of instances in which there is conducts a ‘‘feasibility check’’ using lower clock price offered for its station’s any loss at all for any particular bidder mathematical satisfiability-solver currently held option or to rejects that and the magnitude of the loss when it software to quickly determine whether offer and drop out of the bidding. If a occurs are both proportional to the such a channel assignment exists. The bidder fails to place a bid, the auction percentage bid decrement. Specifically, bid options for which the system will system will treat this bidder as the likelihood of loss is proportional to calculate price offers will be based on unwilling to accept a lower offer. A the bid decrement because there is a bidder that is considering more than one the station’s pre-auction band, the loss only when two competing bidders of the relinquishment options currently options the bidder selected for that attempt to make incompatible changes available to its station will additionally station on its application, the currently to their bids in exactly the same clock be able to request to switch bid options, held option for that station, and the round. The magnitude of the loss is consistent with the hierarchy of options. hierarchy of bid options. If, however, a likewise proportional to the decrement Since the auction system may not feasible channel assignment does not because two competing bidders that try always be able to find a feasible channel exist for a station in its pre-auction band to change in the same round have the assignment for a station to switch to one in the first round, the station will be same value to the auction, within one of the VHF bands, the system will ‘‘frozen’’ in its currently held option decrement, in terms of cost and prompt a bidder requesting to switch efficiency. The price decrements the from the start of the auction at the options to provide a fallback bid in case opening price offer to which it initially Commission chooses are large enough to the system cannot accommodate its ensure a reasonably speedy reverse committed. The system will then ask the request. A fallback bid allows the bidder bidder to place a bid for that station by auction while at the same time small to choose either to accept the lower enough that removing intra-round indicating whether it is willing to accept price offered for its station’s currently the new price offer for its currently held bidding will not have a substantial held option or to drop out of bidding if impact on the outcome of the auction. option, wishes to switch to a different the system cannot accommodate its bid option (if applicable), or wishes to request to switch bid options. The 107. The Commission adopts a simple drop out of bidding. If the system is able Commission reminds bidders that each proxy bid mechanism to make it easier to find a feasible channel assignment for bid placed is a binding commitment by for bidders to monitor the auction. the station in its pre-auction band the bidder to accept a payment that is EOBC, the only commenter to address during bid processing, it will adjust the no less than the price offered in return this proposal, urges the Commission to station’s currently held option for relinquishing the spectrum usage adopt it. Under the bidding procedures according to its bid (honoring its request rights associated with its bid option the Commission adopts, a bidder will be to switch options if feasible) and reduce should the auction system select the bid able to submit a proxy bid to continue its current price to the accepted price as a winning bid. bidding for its station’s currently held offer for that option. Otherwise, the 106. Responding to numerous option until the price offer drops below system will ‘‘freeze’’ that station’s commenters that urge the Commission some specified price. A station that is currently held option without reducing to make reverse auction bidding as frozen but not provisionally winning its current price. Once a UHF station is simple as possible, the Commission (i.e., that has the status of either frozen, it becomes a provisionally determines that it can reduce ‘‘frozen—currently infeasible’’ or winning bidder and will not be asked to complexity without sacrificing ‘‘frozen—pending catch up’’) may also bid for the rest of the reverse auction in efficiency by foregoing the use of intra- place a proxy bid notwithstanding the that stage. If a VHF station is frozen, round bidding. In the Auction 1000 fact that it is not given a price offer in however, it does not necessarily become Comment PN, the Commission sought the round and it is not otherwise provisionally winning if the station may comment on bidding procedures submitting a bid, because the station be unfrozen later in the reverse auction without intra-round bidding due to its may become unfrozen in a later round. in the same stage. This could occur, for concern that intra-round bidding could Additionally, the Commission will limit example, if a UHF station that was increase the complexity of auction the range that a bidder can set its proxy bidding to move to VHF chooses to drop participation for broadcasters. Absent bid, so that the specified price for a out of bidding, thus freeing up a intra-round bidding, bidders will face a proxy bid may be no less than 75 channel in the VHF band. If this free simpler choice to accept or rejects a new percent of a station’s price offer in the channel enables the system to feasibly lower price, or to switch bid options at round. This limit may be adjusted up or assign a frozen VHF station to a channel the lower price, rather than having to down at any point in the auction. Such in its pre-auction band, the system will indicate precise prices at which their an adjustment will be announced at unfreeze the VHF station and ask it to choices change. In addition, because the least one round before the new limit on bid at its new price offers. The system number of computationally complex proxy bids. Thus, a bidder who wishes will freeze a station in its currently held feasibility checks that the system must to remain active in the auction may be option without reducing its current solve during bid processing will be required to submit a new proxy bid price regardless of whether the station greatly reduced, the auction system will periodically. Bidders will be able to

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revise or cancel any proxy bid before it system will consider the first feasible that are ‘‘frozen—currently infeasible’’ is processed or in subsequent rounds station and process its bid, removing it so that they may monitor price while the proxy bid instructions are still from the queue, before resuming its decreases in case they become unfrozen in effect. Proxy bids will remain search for the next feasible station in the and must resume bidding in later confidential from other bidders and queue. The auction system will repeat rounds, but such stations will not be from Commission staff other than those this process of considering bidding asked to submit a bid so long as they staff authorized during the auction to stations until each station remaining in remain frozen. monitor bidding and the operation of the queue is ‘‘frozen’’ in its currently 111. Two parties disagree with the bidding system. held option at its current price. aspects of the bid processing procedures and algorithm the Commission D. Processing Between Clock Rounds 110. Under the procedures that the Commission established, when the proposed, and filed comments 108. The Commission establish auction system considers a station that proposing alternatives. AT&T proposes procedures by which bids will be bids to accept the new price offer for the that, after each round, the auction processed at the conclusion of each station’s currently held option, the system recompute the repacking round to determine new provisional auction system will reduce the station’s constraint files based upon the channel assignments and the new current price to the new price offer for provisional TV channel assignment plan bidding status for stations. The that option. When the auction system in order to link price decrements to the Commission adopts the bid processing considers a station that bids to switch difficulty of repacking a station in each procedures detailed in Appendix D of round. Professors Sandholm and relinquishment options, the system will the Auction 1000 Comment PN, except Nguyen propose to remove the first perform a feasibility check to that the auction system will not use hierarchical restriction on bid options determine whether the station’s request DRP. As bids are processed, for each and use mathematical optimization to can be accommodated: The system will station bidding in the current round, the calculate price offers and process bids. only switch the station’s currently held auction system will either process its As an initial matter, neither of these option if the station can feasibly be bid and reduce its current price to the commenters has demonstrated, either in assigned to a channel in the requested accepted price offer or freeze the station, theory or by means of simulations, that VHF band. In that case, the auction keeping its current price and currently their proposals have significant system will update the station’s held option unchanged, depending on advantages over the auction procedures the results of feasibility checking during currently held option and current price the Commission establishes herein. The bid processing. Once all bids have been to the option and price offer for the pricing procedures the Commission processed, the auction system will requested bid option. If the station adopts take into account some measure update the bidding status of all stations cannot be feasibly assigned to a channel of repacking difficulty for VHF options and begin a new round or, if the in the new band, the system will instead and VHF stations. However, in stopping rule has been met, the reverse process the station’s fallback bid—either comparison to AT&T’s proposed auction will conclude for the stage. to accept the lower price offer for its approach, the procedures that the currently held option or to drop out of 1. Bid Processing Commission adopts provide the bidding. If a station’s fallback bid is to significant advantage of greater price 109. After a clock round closes, the drop out of bidding, the system will certainty and predictability for UHF auction system will process bids using mark the station as exited. Similarly, stations bidding to go off-air, which the bid processing algorithm the when the system considers a station should speed the auction and encourage Commission proposed, except without whose only bid is to drop out of the bidders to consider this relinquishment intra-round bidding. Under these auction, the system will mark the option. The Commission therefore is not procedures, the auction system will first station as exited. An exited station will persuaded that AT&T’s proposal offers establish an order or ‘‘processing be assigned a provisional channel in its substantial benefits over the procedures queue’’ for processing the bids of pre-auction band and will no longer be it adopts. stations that are bidding in the current given price offers or asked to bid for the 112. The Commission also rejects the round. The system will order all such remainder of the auction. After bid alternative approach proposed by stations in descending order of the per- processing, the auction system will Professors Sandholm and Nguyen. They volume difference between the station’s again perform feasibility checks for all argue that the sequencing of bids under current price and its new price offer. stations to determine if any stations the approach the Commission adopts Specifically, this metric is calculated by processed earlier in the queue that had provides an unfair advantage to stations subtracting the station’s new price offer a feasible assignment are no longer that are processed first. However, bids from its current price and then dividing feasible as a result of later processing. must always be processed sequentially by its volume. Since the system cannot Any such stations will then be frozen in due to the relationship between the change the status of provisionally their currently held option at the reverse auction and the repacking winning stations within a stage or of already-reduced current price. Because process, which must guarantee a exited stations at any point in the the system will have already updated feasible assignment: Stations face price auction, the system does not consider the currently held option and reduced competition in the reverse auction as a such stations during bid processing. The the current price of stations that became result of the number of stations that auction system will break any ties infeasible due to later processing, these must be repacked into a limited number between stations following this stations will be frozen at the lower price of channels. Thus, stations must always calculation by using pseudo-random offer that they accepted or in the new be repacked one at a time in order to numbers. The system will then bid option that they switched into at the guarantee a feasible assignment. In any sequentially conduct feasibility checks start of the next round. For all stations event, some bid sequencing (and thus for each station in the queue to find the that will be active in the next round, the possible price variation) is required for first station in the queue that can auction system will then calculate any processing algorithm. Indeed, even feasibly be assigned a channel in its pre- prices for the next round using the price the optimization-based approach auction band given the current reduction procedures. The auction proposed by Professors Sandholm and provisional channel assignment. The system will calculate prices for stations Nguyen relies upon the sequencing of

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bids, they just disagree with how the constraints or other factors), the 3. Bidding Status Commission achieves this sequencing Commission explained that DRP would 117. Based on the bid processing and instead propose an optimization- allow it to set higher opening prices for procedures the auction system will based approach that would optimize to all stations, reduce the overall cost of determine the bidding status of each reduce costs. While bids processed repurposing spectrum, and increase the station prior to each round of the earlier may limit the options available to likelihood of a successful auction. Based reverse auction. The auction system will bidders later in the queue (e.g., if two on examination of the record, however, also determine the bidding status of otherwise identical stations both request the Commission concludes that the each bidder prior to the first round of to switch to High-VHF, but there is only potential benefits of DRP are the reverse auction after bidders commit one channel available in the band), this outweighed by its potential costs. to an initial relinquishment option, as sequencing provides the best value to Broadcasters unanimously oppose the well as prior to the first round after the auction, because the stations that use of DRP procedures, arguing that it transitioning to a new stage. The system have the largest price decreases will be will ‘‘artificially reduc[e] prices,’’ will inform each bidder of the currently processed first. Furthermore, stations undermine trust in the fairness of its held option, the current price for this processed later in the queue are more auction procedures, increase complexity option, and the bidding status of each of likely to be frozen at a higher price offer. and uncertainty, and discourage its stations. The bidding status of each Any price variation due to sequencing participation. A broad range of station will be one of the following: (1) will be no larger than one price commenters also oppose use of DRP Bidding in the current round, (2) decrement for identical bidders, in line because it risks increasing the degree of frozen—provisionally winning, (3) with the price variation found in the impairment to repurposed spectrum. frozen—currently infeasible, (4) Commission’s simultaneous multiple Commenters argue that using DRP will frozen—pending catch up, (5) exited— round auctions. The Commission inevitably increase the amount of therefore does not regard this outcome voluntary, or (6) exited—not needed. impairments to or close to the near- 118. Bidding in the Current Round. If to be problematic. nationwide standard and detract from the auction system determines that a 113. In addition, Professors the value of repurposed spectrum. Sandholm’s and Nguyen’s alternative station can be feasibly assigned a 115. The Commission agrees with channel in its pre-auction band, its procedures for eliciting information commenters that it should adopt auction from bidders and for setting clock prices bidding status will be ‘‘bidding in the procedures that minimize impairments. current round’’ and the system will offer would add strategic complexity to the By not using DRP procedures, the reverse auction and might deter a new reduced price offer for each of the Commission eliminates the possibility participation. For eliciting bids, they options currently available to it, of creating additional impairments after propose that each bidder indicate a set consistent with the bid option hierarchy the determination of a clearing target. In of acceptable options, rather than a and price determination procedures. A addition, based on examination of the single preferred option in each round. station will be offered lower prices and record, the Commission is concerned For determining prices, they suggest asked to submit a bid in each round so that using DRP as proposed would optimization-based procedures to set long as its status remains ‘‘bidding in discourage voluntary broadcaster clock prices in which a bidder’s prices the current round.’’ However, if the participation in the auction, contrary to could continue to fall even after it can system determines that a station can be its commitment to encouraging such no longer be assigned a feasible channel feasibly assigned a channel in its pre- in its pre-auction band. The Professors participation. Accordingly, the auction band but will be not needed for claim certain advantages of their Commission will not use DRP the remainder of the auction, its status proposed algorithm, but offer no procedures. Instead, price offers will be will become ‘‘exited—not needed.’’ comparison of their proposal to the reduced only in accordance with the 119. Frozen—Provisionally Winning. algorithm described in the Auction 1000 procedures, and any stations with no If the auction system determines that a Comment PN. Their proposed approach feasible channel assignments at the station can never be assigned a feasible would create significant new beginning of the reverse auction bidding channel in its pre-auction band in the opportunities for some bidders to affect will be frozen at their opening prices. current stage, the station will be final prices for their own bid options, Combined with its decisions regarding declared ‘‘frozen—provisionally adding strategic complexity to the the initial clearing target selection winning.’’ For the remainder of the auction. Such complexity would make procedure and the information that will stage, the current price and currently bidding errors more likely, raise the be available to bidders, not using DRP held option of a station with this costs of bidding, and potentially deter will promote its auction goals by bidding status will remain unchanged. If participation, making these procedures encouraging reverse auction the final stage rule is met during that unsuitable for the reverse auction. participation, minimizing impairments, stage, such stations will become and providing transparency for bidders. winning stations. Otherwise, at the 2. Dynamic Reserve Prices 116. The Commission also declines to beginning of the next stage, the auction 114. The Commission elects not to adopts EOBC’s alternative proposal for a system will again evaluate the feasibility adopt DRP procedures, which would ‘‘round zero reserve’’ pricing of assigning the station to a channel in enable the bidding system to reduce the mechanism which would offer, before its pre-auction band, and the station’s prices offered to all UHF stations in the bidding begins, an undefined (but high) status may change to ‘‘frozen—pending early rounds of the reverse auction, take-it-or-leave-it price to each station catch up,’’ ‘‘frozen—currently regardless of whether a station could be that would otherwise begin the reverse infeasible,’’ ‘‘bidding in the current feasibly repacked into its pre-auction auction bidding process ‘‘frozen’’ at its round,’’ or ‘‘exited—not needed.’’ If at band. By providing a ‘‘safety valve’’ for opening price. EOBC and others support any point the system is unable to find stations whose opening prices otherwise this proposal only as a substitute for a feasible assignment for a UHF station, would remain frozen because no DRP, and the Commission is not its status will become ‘‘frozen— feasible channel assignment is available persuaded that EOBC’s alternative provisionally winning.’’ for them in the remaining television would provide the benefits of its 120. Frozen—Currently Infeasible. If bands (due to international border proposed DRP procedures. the auction system is currently unable

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to find a feasible channel assignment for assignment will never be found for all system will accept the currently held a VHF station in its pre-auction band, possible future behavior of bidders in relinquishment option of each winning but a feasible channel assignment could this stage. station. Bidders whose stations won will become available in a later round of the 122. Exited—Voluntary. If a bidder receive their current prices at the time current stage, the station’s bidding places a bid for its station to drop out the stations became ‘‘frozen— status will be ‘‘frozen—currently (or the system placed this bid because provisionally winning.’’ infeasible’’ and the system will freeze the bidder failed to submit a bid for its VI. Forward Auction Bidding the station in its currently held option station that had the status of ‘‘bidding at its current price. A station with this in the current round’’) and the bid is A. Bidding in the Clock Phase status will not be asked to bid and will processed, the station’s status will 126. The forward auction will utilize keep its currently held option and its become ‘‘exited—voluntary,’’ and that an ascending clock auction format station will no longer bid in the auction. current price in each round in which its under which each qualified bidder will Stations with this status will no longer status remains ‘‘frozen—currently indicate in successive clock bidding be offered prices nor allowed to place infeasible.’’ However, a station with this rounds its demands for categories of bids in the auction, and will be status may become unfrozen and resume generic license blocks in specific designated for repacking in their pre- bidding in later rounds if the system is geographic areas. After bidding stops in auction bands. able to find a feasible channel the clock phase of the forward auction, assignment for the station in its pre- 123. Exited—Not Needed. If the auction system determines at any point the forward auction assignment phase auction band. Such a station will be able will be conducted to assign frequency- to monitor the price offers for its that a feasible channel assignment will always be available for a station in its specific 600 MHz Band licenses different options as clock prices are consistent with the demands of specific decremented, and may submit proxy bid pre-auction band, its status will change to ‘‘exited—not needed,’’ and that bidders in specific geographic areas. instructions that will apply if and when 127. The initial stage of the forward it becomes unfrozen. Likewise, stations station will no longer bid in the auction. Since the auction system will never auction will begin on the second with this status may later become business day after the close of bidding ‘‘frozen—provisionally winning’’ if the freeze a station that has a feasible assignment, such a station will be in the reverse auction, but no sooner system determines that, for all possible than 15 business days after the release future behavior of bidders in the current dropped out of the bidding rather than forcing it to continue bidding until the of the Qualified Bidders PN. The stage, a feasible assignment will never Qualified Bidders PN will announce the be found. This bidding status is only price offer decreases to $0. As with stations that voluntarily drop out, list of forward auction qualified possible for a VHF station because a bidders—those applicants with feasible channel assignment in the VHF stations with this status will be designated for repacking in their pre- submitted auction applications that are band may become available in a deemed timely-filed and complete, subsequent round if a UHF station auction bands, and will not participate in the remainder of the auction. provided that such applicants have currently designated to move to this timely submitted an upfront payment VHF option drops out of the bidding or E. Stopping Rule that is sufficient to qualify them to bid. switches to a different VHF option. 124. Under the procedures the Forward auction qualified bidders will 121. Frozen—Pending Catch Up. If, at Commission establishes, bidding rounds have access to the detailed impairment the start of a new stage, the auction in a stage of the reverse auction will information once they receive their system determines that a station that continue until no participating stations registration materials, which will be was ‘‘frozen—provisionally winning’’ at are ‘‘active’’ and all participating sent after release of the Qualified the end of the prior stage is no longer stations have the status ‘‘frozen— Bidders PN. Detailed impairment provisionally winning, but the base provisionally winning,’’ ‘‘exited— information will be available only to clock has not caught up to the station’s voluntary,’’ or ‘‘exited—not needed.’’ At forward auction qualified bidders. ‘‘catch up point,’’ or the base clock price that point, each participating station Forward auction qualified bidders must ® at the time that the station became will either have its currently held use the SecurID tokens included with provisionally winning in a previous option tentatively accepted or it will be their registration materials to access the stage, the station’s bidding status will provisionally assigned to a feasible impairment information. All forward change to ‘‘frozen—pending catch up’’ channel in its pre-auction band. The auction qualified bidders will have an and its currently held option and procedures the Commission adopts opportunity to participate in a mock current price will remain unchanged. A answer EOBC’s objection that bidding auction prior to bidding in the clock station with this status will not be should stop when it ‘‘does not need any phase of the forward auction. The offered lower prices nor asked to bid in additional volunteers.’’ The Commission anticipates that forward each round so long as the base clock Commission will ‘‘not need any auction qualified bidders will have at remains above the station’s catch-up additional volunteers’’ when no actively least 10 business days after receiving point. However, a station with this bidding stations remain in the auction their registration materials to analyze status may become unfrozen and resume and the reverse auction in that stage will impairment data before the first round bidding in later rounds if the base clock end. of bidding begins in the forward reaches this price. As a result, such a auction. In subsequent stages, if station will be able to submit proxy bid F. Final Winning Bids necessary, the forward auction will instructions that will apply in case it 125. If the current stage is the final begin on the next business day after the becomes unfrozen and its status changes stage of the incentive auction—that is, if close of bidding in that stage of the back to ‘‘bidding in the current round.’’ the final stage rule is satisfied in the reverse auction. Forward auction Likewise, stations with this status may forward auction portion of the current bidders will be given detailed later become ‘‘frozen—provisionally stage—stations with ‘‘frozen— impairment information for a winning’’ if, prior to the base clock provisionally winning’’ status when the subsequent stage prior to the start of the reaching the station’s catch up point, reverse auction stops in that stage will reverse auction in that stage, which will the system determines that a feasible become winning stations, and the give them adequate time to analyze such

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information. Therefore, the Commission impairments measured in pops of licenses. For example, NAB asserts that declines to provide any additional time counties containing the hypothetical providing information about all between the conclusion of the reverse wireless base station which causes potential impairments will aid auction and start of the forward auction interference to a 2x2 kilometer cell transparency for bidders in the forward in any subsequent stage. within a television station’s protected auction and prevent disputes as to contour, regardless of whether this cell whether or not winning bidders 1. Availability of Auction-Related has population provided in CSV format Information understood their future obligations with only (because 600 MHz Band wireless respect to inter-service interference. a. Impairment Information for Bidders base stations will not be deployed until Sprint argues that bidders must know 128. In order to make the forward after the incentive auction, for purposes precisely how impairments may affect auction transparent for bidders, and in of applying the ISIX methodology particular licenses. Similarly, CTIA response to commenters’ concerns during the auction, the optimization states that detailed information regarding the challenges associated with software will assume the location of regarding the location of impairments bidding for impaired licenses, more hypothetical wireless base stations by ‘‘would greatly enhance the ability of information regarding impairments will applying uniformly spaced sample bidders to develop strategies and make be available than what the Commission locations, spaced every ten kilometers sound choices.’’ Specifically, CTIA proposed in the Comment PN. Forward within the boundaries of every wireless suggests that the FCC provide auction qualified bidders will have license area that is within 500 information regarding the impairing access to detailed impairment kilometers of the television station); (6) stations, including key operating information, including the actual source impairments measured in pops at the parameters—such as station location, and location of any impairment, upon 2x2 kilometer cell level for ISIX Case 4, antenna height, and power level—to receipt of their registration materials. provided in CSV format only; and (7) forward auction bidders on a Information regarding the actual source reference files giving the location of all confidential basis. Bidders will know and location of any impairment, i.e., the 2x2 cells, the location of all for each impaired license the percentage facility information of the impairing hypothetical base stations, information of impairment (by population), whether stations, will be determined when the on stations interfered with by the impairment is located in the uplink clearing target for a stage is set. More hypothetical base stations, and or downlink portion of the license, and specifically, the auction system will information on the spectrum overlap, in the geographic location of the give forward auction qualified bidders megahertz, between the interfering impairment. Bidders can use the facility access to the following information transmitter channel and the interfered- information about the impairing station about the licenses offered in all PEAs: with receiver channel. This information to determine how their wireless (1) Aggregated impairments at the will be provided to forward auction networks could be deployed around the license level (for every block of every qualified bidders for each stage, and impairment. Further, Verizon PEA), with impairment level will not become fixed unless and until recommends Commission outreach in percentages calculated using population the final stage rule is satisfied. The order to ‘‘educate potential forward (pops) including the associated license Commission rejects Sprint’s suggestion auction bidders about how to participate category (i.e., Category 1 or Category 2), that it re-optimize the provisional from a technical and administrative provided in two formats (CSV [Comma- channel assignment plan at the close of point of view.’’ The Commission separated values (CSV) files provide the reverse auction in a stage in order provides extensive information prior to tabular data in a plain text format] and to further reduce impairments, then the bidding in every auction, including PEA maps); (2) uplink and downlink release this information to forward publicly available seminars and/or impairments at the license level (for auction bidders who would have two tutorials and—for qualified bidders— every block of every PEA), with weeks before the forward auction mock auctions. The Commission impairment level percentages calculated begins. Because the reverse auction can intends that the education and outreach using pops, provided in two formats only increase the number of stations efforts in advance of Auction 1000 will (CSV and PEA maps); (3) impairments that must be assigned channels in the be even more detailed and extensive measured in pops at the 2x2 kilometer UHF band between the start of a stage than normal in light of the many new cell level for each impairing station for and the end of a stage, the potential aspects of this auction and the ISIX Case 1, including the facility ID efficiency gains of re-optimizing are procedures necessary to conduct it. (i.e., the specific television station, extremely limited and do not warrant Several commenters request that in domestic or international, that will delaying the auction for two weeks. If addition to providing the ISIX data cause the impairment) of and the the final stage rule is not satisfied at a results based on the F(50,50) statistical channel assigned to the source of particular clearing target, the clearing measure incorporated into the potential interference to the wireless target will be lowered, and forward Commission’s ISIX methodology, the base station as well as the difference auction bidders will be provided with auction system provide data using the between the interference threshold and new impairment information for the F(50,10) statistical measure. While the the interfering field strength, provided new clearing target. The Commission Commission declines to provide in CSV format only; (4) impairments also plans to release sample data in multiple sets of ISIX data results to measured in pops at the 2x2 kilometer advance of the auction for bidders to bidders, the impairment information cell level for each impairing station for examine, which—if desired—would that will be provided will allow a ISIX Case 2, including the facility ID, allow bidders to build their own forward auction bidder to analyze the domestic or international, of and the analysis tools. potential interference employing any channel assigned to the source of 129. Providing this detailed statistical measure it chooses. The potential interference to the user information responds to concerns Commission will address Sprint’s equipment as well as the difference commenters raised about whether pending Petition for Reconsideration of between the interference threshold and forward auction bidders would have the use of the F(50,50) measure for the the interfering field strength, provided sufficiently detailed information to ISIX methodology in the ISIX in CSV format only; (5) for ISIX Case 3, make informed bids on impaired proceeding.

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130. The Commission finds that not provide it to them. The Commission that these procedures would not be an providing information to forward cautions forward auction participants effective tool for deterring anti- auction bidders about impairing stations that communicating the non-public competitive behavior. This helps ensure is consistent with its statutory information that they receive to others, the competitiveness of the bidding. The confidentiality obligation because whether directly or indirectly through Commission reiterates that auction providing this data will not reveal the third-parties or public disclosure, could applicants could violate the prohibition identity of licensees that elect to violate the Commission’s rule on communicating certain forward participate in any stage of the reverse prohibiting communication of certain auction information by communicating auction. Impairing stations in the 600 auction information. non-public information that they receive to others, whether directly or indirectly MHz Band could be stations that elected b. Bidding Information not to participate in the reverse auction through third-parties or public at all, stations that applied but failed to 131. As in past Commission auctions, disclosure. make an initial commitment and the public will have access to certain 133. The public notice announcing therefore did not become qualified to auction information, while auction qualified bidders for the forward participants will have secure access to bid in the clock phase of the reverse auction also will announce the forward additional non-public information. auction, stations that the system could auction’s initial bidding round Details of how to access auction not accommodate during the initial schedule. The schedule will establish information will be provided in the commitment process, or stations that the length of time each round will last. Application Procedures PN. dropped out in a prior stage. In any Bidders may respond to prices in each 132. The Application Procedures PN round. Each bidding round will be subsequent stage, an impairing station also will detail the prohibition on followed by the release of round results. may also have been a bidder in a prior communicating information relating to 134. Before bidding begins in the stage that has dropped out. Forward bids or bidding strategies, such as the forward auction clock phase, auction bidders will not be able to non-public information that bidders information on the target amount distinguish previously participating may access in the auction system, to needed to satisfy each component of the impairing stations from impairing other forward auction applicants or to final stage rule will be publicly stations that never participated. broadcast licensees eligible to available, based on the results of the Moreover, forward auction bidders will participate in the reverse auction, reverse auction bidding for the current not be able to infer which licensees subject to specified exceptions. As in all stage. Specifically, depending on elected to participate in the reverse recent Commission spectrum license whether or not the clearing target for the auction from the impairment auctions, it will limit the availability of stage is above the spectrum clearing information they receive. The vast forward auction information in order to benchmark of 70 megahertz, the target majority of non-participating stations prevent the identification of forward gross proceeds or average price in will be assigned to channels in the auction bidders placing particular bids relevant PEAs required to satisfy the remaining TV bands, and forward until after the auction is over. first component of the final stage rule auction bidders will not receive any Specifically, the Commission will not and the target estimated aggregate net information about those stations. make publicly available until after the proceeds required to satisfy the second Therefore, forward auction bidders will auction concludes: The PEAs that an component will be publicly announced. not have enough information about the applicant selects for bidding in its 135. After each round of forward full complement of non-participating application, the amount of any upfront auction clock phase bidding concludes, stations from which to surmise the payment made by or on behalf of the whether the final stage rule has been identity of participating stations. This applicant, any information on any met and detailed information regarding impairment information will be applicant’s bidding eligibility, including the progress toward meeting it will be available only to forward auction whether an applicant is eligible to bid publicly available. Given the provision qualified bidders. Forward auction on reserve spectrum, and any other of this information regarding whether participants need this information to bidding-related information that might the final stage rule may be satisfied, the make informed bids, but other parties reveal the identity of the bidders placing Commission need not address U.S. do not need to know this information to bids and taking other bidding-related Cellular’s argument that, if such participate effectively in the auction; in actions. The Commission cautions information is not provided, the bidders particular, the Commission declines to forward auction participants that should have an opportunity to change provide this information to all auction communicating the non-public their bids when the rule is satisfied. participants, because knowing this type information regarding bids or bidding Available detailed information will of information could lead to undesirable strategies, such as PEAs selected in the include the aggregate gross proceeds strategic behavior by reverse auction auction application, could violate its and average price in relevant PEAs with bidders. Additionally, the Commission rule prohibiting communication of respect to the first component of the will not provide this information to the certain auction information. These final stage rule, and the estimated impairing stations. The impairing procedures have helped safeguard past aggregate net proceeds, rounded down stations’ assignments will remain auctions against potential anti- to the nearest $10 million, with respect provisional only until the final stage competitive behavior, such as retaliatory to the second. Rounding will help rule is satisfied and the final TV bidding, and should do so here as well. prevent any attempt to infer information channel assignment plan is determined As in prior auctions, the Commission about applicable bidding credits and the (the assignments will become will make available to the public before identity of bidders and rounding down permanent if the auction closes in the the bidding begins the other contents of will prevent any confusion that could current stage, however, so forward applications to participate in the result from a rounded amount appearing auction bidders will know the actual forward auction. The Commission to meet the target before the actual impairing stations for any given stage). retains the discretion not to limit estimate does so. In addition, for each Thus, although the Commission information regarding the identities of category of license in each PEA in the recognizes that impairing stations may forward auction bidders pursuant to the just completed round, the supply, the be interested in this information, it will procedures if circumstances indicate aggregate demand, the price at the end

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of the last completed round, and the percent threshold for Category 1 blocks. broaden Category 2 to blocks with price for the next round, will be Many commenters agree that some level impairments from one to 50 percent). publicly announced. This detailed price of impairment is acceptable in generic The Commission also agrees with CCA, information will indicate the progress of blocks, supporting a range of T-Mobile and U.S. Cellular that the auction, both towards satisfying the percentages. Moreover, the record adopting this alternative would create final stage rule and, separately, towards reflects that wireless operators have the excessively wide disparities in the level completion of bidding. The Commission ability to mitigate the impact of of impairment in Category 2 licenses, addresses the information that will be impairments within license areas: ultimately harming their fungibility. provided to forward auction bidders Operators normally expect some degree 140. The 15 percent threshold the regarding the assignment phase of the of signal degradation due to attenuation, Commission adopts also serves its forward auction below. scattering, interference, or other factors, competition goals. Only Category 1 136. In addition to the bidding and have various methods of mitigating blocks will be placed in the spectrum information described here, the interference from impairing TV stations. reserve. In addition, Category 1 blocks Commission will use auction In choosing a specific threshold, the will be reserved after all bidders, announcements to report any other Commission must balance the need to including non-reserve-eligible bidders, necessary information to forward ensure fungibility of blocks within have already established bidding auction participants, such as schedule Category 1 with its auction design goal interests in them. The amount of changes. Providing auction of maximizing the number of such reserved spectrum will be based on announcements through the auction licenses available in the forward demand by reserve-eligible bidders at the time the final stage rule is met, in system has been an effective and auction, which in turn will promote its efficient way to communicate necessary part so that ‘‘entities that acquire competitive goals and the overall information to auction participants in reserved spectrum would pay their fair success of the auction. The Commission past auctions, and the Commission share of the cost of the Incentive finds that a 15 percent threshold strikes expects that this will be the case for the Auction.’’ The 15 percent threshold the appropriate balance. Its analysis forward auction as well. maximizes the number of Category 1 projects that the vast majority of blocks, which will help to ensure that 2. Available Generic Spectrum Blocks Category 1 blocks will have no a full complement of reserved blocks impairments. In Scenario 1 (84 137. In the clock phase of the forward can be made available in each market, auction, the Commission will offer megahertz repurposed), 2535 of the while also allowing an equitable generic blocks in two bidding categories 2654 Category 1 licenses in the distribution of Category 1 blocks among based on the extent to which the blocks continental United States would have reserve-eligible and non-reserve-eligible may be impaired by broadcast television no impairments. In Scenario 2 (114 bidders. stations repacked in the 600 MHz Band. megahertz), 3334 of the 3469 Category 1 141. Category 2. The Commission also The Commission adopts its proposed licenses would have no impairments. adopts its proposal to establish an approach to categorizing blocks for And in Scenario 3 (126 megahertz), impairment threshold for Category 2 bidding, including how it define generic 3753 of the 3886. The 15 percent blocks of greater than 15 percent but blocks in two categories. The threshold the Commission adopts less than or equal to 50 percent. The Commission also addressed provides the flexibility to include in this record reflects that impaired spectrum implementation of the spectrum reserve Category blocks with a limited range of blocks retain significant value and established the Mobile Spectrum impairments that should be manageable utility for wireless providers. In the Holdings R&O. for wireless operators and are unlikely Incentive Auction R&O, the Commission to affect major population centers stated that it will offer paired spectrum a. Bidding Categories within the PEA. Major population blocks and declined to offer downlink- 138. The Commission will offer two centers in Category 1 blocks are likely only blocks. The thresholds for Category categories of generic blocks for bidding to be unimpaired because in most PEAs, 2 blocks are consistent with this policy, in the clock phase of the forward such areas would likely comprise more and therefore the Commission declines auction. ‘‘Category 1’’ will include any than 15 percent of the population in the to adopt T-Mobile’s proposal to revise block with potential impairments that PEA. The fungibility of such blocks will the Category 2 thresholds. The affect zero to 15 percent of the be enhanced by the discount that will be Commission concludes that the 15-to-50 population of a PEA. The impairment available at the end of the assignment percent range that it establish strikes a percentage will be calculated based on phase of the forward auction, and reasonable balance between ensuring the population impaired in a PEA as bidders will be provided with detailed the fungibility of blocks within Category measured at the two-by-two kilometer information in order to prevent 2 and its other goals. So long as cell level. ‘‘Category 2’’ will include any uncertainty regarding the inventory of Category 2 blocks in a PEA are block with potential impairments that Category 1 blocks available in each PEA. economic substitutes, which means that affect greater than 15 percent but less The Commission recognizes that bidders sufficiently raising the price of one than or equal to 50 percent of the will judge impairments and their impact license in a set of Category 2 blocks population of a PEA. Any block with on the value of a block differently. The would cause demand to switch to a potential impairments that affect more detailed information the auction system lower priced license in the set, the than 50 percent of the population will will provide on the levels, including relative prices of the Category 2 licenses not be offered in the forward auction. locations and types, of impairments in within a PEA can be determined by After the assignment phase, the auction a block will enable bidders to reflect bidding in the assignment phase. The system will provide a price adjustment their own assessment of the anticipated minimal range of to the final clock phase price equal to impairment’s impact on the value of the impairments between Category 2 blocks one percent for each one percent of license with their bids both in the clock within individual PEAs, means that the impairment to account for varying and assignment phase. For these difference between the most impaired degrees of impairment to the licenses. reasons, the Commission declines to license, to which clock phase bidders 139. Category 1. The Commission adopt the proposed alternative to limit bid, and the other Category 2 blocks will adopts its proposal to establish a 15 Category 1 to unimpaired blocks (and also be minimal and bidders, and

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therefore likely economic substitutes. included more, but more narrowly remains consistent for all bidders, Blocks within Category 2 will be subject defined, categories, as AT&T suggests. allowing them to assess each license, its to significant impairment levels by Given the need to assure that the final level of impairment (if any), and its definition, and the Commission projects stage rule remains satisfied once it is relative value, which they can then that there will be very few of them met, the procedures the Commission express through their bidding in the available in the forward auction. In adopts herein will limit bidders’ ability assignment round. many cases, only one Category 2 block to reduce demand for blocks in a 144. The Commission also agree with will be available in a PEA. Staff category unless there is excess demand T-Mobile that when the price simulations demonstrate that from in the category. With fewer categories adjustment is ‘‘accompanied by more among the top 20 PEAs, only 2 PEAs for bidding, the likelihood that there granular information about the had more than one Category 2 block in will be excess demand in any one impairments,’’ it will provide ‘‘enough Scenarios 1 & 3 and only three PEAs category is greater, giving bidders’ commonality among [blocks] to allow had more than one Category 2 block in greater flexibility to modify their for generic . . . bidding. By providing Scenario 2. Further, the variation in bidding strategies. In addition, limiting bidders with detailed information about impairment levels among Category 2 the number of categories to two will impairments, including the impairing blocks in a specific PEA likely will be simplify the auction interface and make station, the auction system will enable minimal. Category 2 blocks within a the bidding process more manageable bidders to assess whether they should single PEA will likely be affected by the for forward auction bidders. bid on, and how much they should bid for, impaired licenses in a particular same impairing station, resulting in 143. Clock Phase Price Adjustment for PEA. For example, if a bidder considers similar levels of impairment and Impaired Blocks. To enhance the impairments in a particular block to be geographic footprints across the fungibility and offset the variation in more detrimental to the value of the Category 2 blocks. Thus, although the value of the generic blocks within the license than is accommodated by the range of impairments in Category 2 is two categories the Commission adopts, discount, it can bid less or shift its between 15 and 50 percent, the actual it incorporates a price adjustment to preference to another block in the range in any one PEA is likely to be account for impairment for both assignment round. This includes any much smaller. Accordingly, the Category 1 and Category 2 blocks. valuation a bidder may have on either Commission finds that a wider range of Specifically, for a given frequency- expanding its service footprint to impairments is appropriate for Category specific license, the final clock phase 2 than for Category 1. Given the currently unserved areas or acquiring price in the assignment round will be more spectrum in its service area. The minimal number of PEAs in which the discounted by one percent for each one Commission expects multiple Category Commission notes that U.S. Cellular’s percent of impairment to the license. assertion that ‘‘areas subject to inter- 2 blocks to be available, and the limited The auction system will calculate the impairment range of Category 2 blocks service interference could be categories of generic licenses based on concentrated in the portions of the PEA within such PEAs, the Commission is the percentage of the population not concerned that its decision puts too that encompass a carrier’s current impaired in each block as measured at service area, and thus have the greatest much emphasis on bidding in the the two-by-two kilometer cell level. For assignment phase, as some commenters value to the carrier,’’ assumes that all example, if a Category 1 block is ten carriers will value spectrum in their suggest. As with Category 1 blocks, the percent impaired, it will be subject to a existing service areas more than fungibility of Category 2 blocks will be ten percent discount off the final clock spectrum in areas they currently do not enhanced by the discount that will be phase price. The price adjustment will serve. available at the end of the assignment be applied at the end of the assignment 145. Alternative Proposals. The phase, and bidders will be provided phase of the forward auction. While Commission declines to offer in the with detailed information to prevent several commenters argue that the forward auction any spectrum blocks uncertainty regarding the available impact of impairments on forward that are more than 50 percent impaired. inventory of Category 2 blocks. The auction license value will not Specifically, the Commission declines fungibility of Category 2 licenses will be necessarily be linear, most commenters to offer such blocks as ‘‘overlay’’ further enhanced by the Commission’s either support or do not oppose a price licenses in the assignment phase in decision not to weight impairments adjustment, and no commenter conjunction with frequency-adjacent located in the downlink portion of the identifies an alternative that would be licenses in the same PEA. The 600 MHz Band for purposes of more effective in enhancing fungibility. Commission finds that doing so would measuring the extent of potential Consistent with the Commission’s unduly complicate the assignment impairments, as the percentage of reasoning for adopting its proposed phase of the forward auction, making impairment permitted for Category 2 price adjustment, it declines to adopt T- bidder strategies more difficult and licenses will be lower for uplink Mobile’s proposal to offer different price potentially interfering with the impairments than the Commission adjustments for foreign-origin assignment phase’s primary purpose: To proposed initially. impairments. The value that bidders optimally assign licenses to winning 142. The comparatively wide ascribe to each license is likely to vary bidders consistent with their frequency impairment range for Category 2 also based on a variety of factors in addition preferences and the contiguity goals the serves its auction design goals by to the level of impairment, including the Commission adopts. Specifically, this enabling the Commission to limit the location of the impairments and the approach would complicate the total number of generic blocks wireless operators’ existing coverage assignment phase priority of assigning categories to two, thereby simplifying area. The price adjustment the contiguous blocks. Consistent with prior the auction and providing bidders with Commission adopts is designed to Commission actions with regard to more flexibility. Limiting the number of accommodate a range in values and licenses that remained unsold after an categories to two will enable bidders to enhance fungibility, and is not intended initial auction for a new spectrum band, more easily switch their demands from to fully compensate for that range or the Commission could offer heavily one category to another or from one PEA resolve all differences in value, impaired 600 MHz licenses in a to another than if the clock phase however. Indeed, the price adjustment subsequent auction.

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146. The Commission rejects PEA is domestic or foreign, and can total number of Category 1 blocks and commenters’ proposals that it offer only adjust and prioritize their preferences Category 2 blocks (if any) offered in that one category of generic blocks in the accordingly. PEA. In addition, the spectrum reserve forward auction or a single category of only will include Category 1 blocks, and b. Market-Based Spectrum Reserve wholly-unimpaired licenses outside of the demand determining the actual border areas. Although these 148. The Commission starts by amount of reserve at the time the commenters assert that their proposals addressing issues related to the market- spectrum reserve is triggered will be the would improve fungibility of the generic based spectrum reserve adopted in the demand by reserve-eligible bidders for licenses, the Commission finds that the Mobile Spectrum Holdings R&O. First, Category 1 blocks. Further, the potential benefits in terms of increased the Commission denies a petition for Commission adopts its proposal that the fungibility would be outweighed by the reconsideration of the Mobile Spectrum actual spectrum reserve in a PEA with harms to its other auction goals. Holdings R&O insofar as it seeks to only one reserve-eligible entity bidding Limiting available blocks to a single change its determination that the on Category 1 blocks at the time the category of unimpaired or lightly spectrum reserve will be triggered when spectrum reserve is triggered will be no impaired blocks, whether nationwide or both components of the final stage rule more than 20 megahertz. However, the outside of border areas, would limit the are satisfied. The Commission addresses Commission rejects commenters’ amount of spectrum available in the this specific T-Mobile reconsideration proposals to adopt a cap of 20 forward auction, potentially reducing request here, rather than in the Mobile megahertz on the amount of reserved auction revenues, complicating bidding Spectrum Holdings proceeding along spectrum that any reserve-eligible for forward auction bidders, and with the other reconsideration requests bidder may acquire in a PEA if there is undercutting its competitive goals. With filed in that proceeding. Unlike the more than one reserve eligible entity staff simulations demonstrating that other requests in the Mobile Spectrum bidding at the time the reserve is only a small portion of available Holdings proceeding, T-Mobile’s request triggered. Lastly, the Commission licenses will be Category 2, and in light that the Commission reconsider the declines to adopt various other of the demonstrated interest in these spectrum reserve trigger is interrelated proposals offered by commenters in moderately-impaired licenses, the with arguments in this proceeding that response to the Auction 1000 Comment Commission finds good reason to offer the $1.25 benchmark that it adopts for PN. both types of licenses. Further, the the average price component of the final stage rule is not an appropriate (i) Background Commission projects that its approach benchmark for purposes of triggering the 150. In the Mobile Spectrum Holdings will result in the vast majority of spectrum reserve. The Commission R&O, the Commission established a licenses available in the forward auction notes that T-Mobile’s Petition for market-based spectrum reserve. The being unimpaired or only minimally Reconsideration also requests that the Commission first established the impaired. The Commission is persuaded Commission change the size of the maximum amount of licensed spectrum that the categories it adopts strike the maximum spectrum reserve at initial that will be reserved in each PEA for appropriate balance between ensuring clearing targets, an issue that was raised reserve-eligible entities in the forward fungibility and its other goals. in several of the comments in response auction for different initial clearing Conversely, the Commission rejects to the Auction 1000 Comment PN. The targets. The Commission affirms these CCA’s suggestion that it offer a single Commission does not address this issue maximum amounts in the Mobile category of generic blocks with a wider here. Rather, the Commission affirms in Spectrum Holdings Order on range of impairments because such an the Mobile Spectrum Holdings Order on Reconsideration. The Commission notes approach would fail to ensure the Reconsideration that it will not increase that if the available amount of spectrum fungibility of generic blocks within the the maximum amount of reserved (Category 1 and Category 2 licenses) one category. spectrum. The Commission finds that offered in a PEA at the initial stage is 147. The Commission also rejects this determination continues to further 30 megahertz or less, there will be no Sprint’s proposal for bidding on its underlying goals, particularly in light spectrum reserved in that PEA, as the frequency-specific spectrum blocks in of its adoption herein of $1.25 as the maximum reserve chart in the Mobile the clock phase rather than generic average price component of the final Spectrum Holdings R&O did not blocks as inconsistent with the basic stage rule. Second, the Commission provide for a spectrum reserve at those auction design the Commission affirms that the maximum spectrum clearing levels. established in the Incentive Auction reserve will be set based on the initial 151. If the auction does not close, the R&O. In the Incentive Auction R&O, the clearing target and will be reduced in a maximum amount of reserved spectrum Commission adopted an ascending PEA in the transition to a new stage in each PEA in subsequent stages will clock mechanism to collect bids on only if actual demand by reserve- be the smaller of the maximum amount generic categories, to be followed by a eligible bidders in the prior stage does of reserved spectrum in the previous separate assignment mechanism to not reach the maximum. Third, the stage or the amount that the reserve- assign frequency-specific licenses. Commission clarifies the criteria eligible bidders demanded at the end of Because auction speed correlates to determining whether an applicant will the previous stage. For example, if the costs for both forward and reverse qualify to bid on reserved spectrum in initial clearing target is 70 megahertz, auction participants, the Commission a PEA. the maximum reserve will be 30 found that bidding on generic blocks 149. Next, the Commission addresses megahertz in the next stage, provided enhances the speed and efficiency of the implementation issues raised in the that reserve-eligible bidders continue to auction because bidders will not need to Auction 1000 Comment PN. In demand that amount. If reserve-eligible bid iteratively across rounds on several particular, the Commission adopts its bidders demand less than 30 megahertz similar blocks. Finally, the Commission proposals that, for a given PEA in which at the end of the initial stage, the declines to treat impairments in border the Commission offers fewer Category 1 maximum reserve for the next stage will regions differently. Under the approach blocks than the nationwide clearing be that demand. The same rule holds for the Commission adopts, bidders will target, the maximum number of reserved any subsequent stages as well. In know whether an impairing station in a spectrum blocks, will be based on the addition, the Commission determined

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that the actual amount of reserved with two components, both of which 155. The Commission also disagrees spectrum will depend on the demand by must be satisfied. The first component with T-Mobile, Sprint, and CCA that the reserve-eligible bidders when the final requires that the average price per MHz- link between the spectrum reserve stage rule is satisfied. To be reserve- pop for licenses in the forward auction trigger and one or both components of eligible, an entity must not hold an meets or exceeds a specified price per the final stage rule creates a significant attributable interest in 45 megahertz or MHz-pop benchmark (average price risk of undesirable strategic bidding by more of below-1–GHz spectrum in a component). The second ‘‘requires that non-reserve-eligible bidders. The PEA, or must be a non-nationwide the proceeds of the forward auction be Commission finds that the clock auction provider. The Commission noted that it sufficient to meet mandatory expenses format of the forward auction, together would revise the short-form application set forth in the Spectrum Act and any with the auction procedures it adopts in to provide for a certification by an Public Safety Trust Fund amounts the Auction 1000 Bidding Procedures applicant intending to bid on reserved needed in connection with FirstNet’’ Public Notice, place significant spectrum that it meets the qualification (cost component). The Commission limitations on the possibility for such criteria. If any entity plans to file a pre- rejects various requests that it either undesirable strategic bidding. First, auction divestiture application to come eliminate or modify the link between those procedures will not allow bidders into compliance with the below-1–GHz the spectrum reserve trigger and the to switch demand away from a product holdings threshold, it will have to file final stage rule. except when there is excess demand for in sufficient time to qualify by the short- 154. First, the Commission rejects T- the product and its price is rising, form application deadline. Additional Mobile’s request, in its petition for thereby limiting the ability of non- details regarding completing the short- reconsideration of the Mobile Spectrum reserve-eligible bidders to drive up form application will be provided in the Holdings R&O, that the Commission prices prior to the spectrum reserve Application Procedures PN. eliminate the link between the spectrum being triggered without incurring 152. In the Auction 1000 Comment reserve trigger and the average price significant risk. Second, the efficacy of PN, the Commission proposed that in a component of the final stage rule, as a strategy to drive up prices will be given PEA, the maximum number of well as more recent requests by limited: For instance, since ‘‘jump reserved spectrum blocks would be commenters to eliminate the link bidding’’ cannot occur in a clock based on the total number of Category between the spectrum reserve trigger auction, bidders will be limited in their 1 and Category 2 blocks offered in that and the cost component of the final ability to strategically bid up particular PEA. Further, the Commission proposed markets relative to other markets. In an that the spectrum reserve would include stage rule or eliminate the link to the final stage rule altogether. In particular, SMR auction, ‘‘jump bidding’’ occurs only Category 1 blocks. The when an entity bids more than what is Commission proposed that the actual the Commission disagrees with arguments that linking the spectrum required or necessary to be a currently number of reserved blocks would be winning bidder. Jump bidding is not based on demand for Category 1 blocks reserve trigger to one or the other component of the final stage rule possible in a clock auction. Moreover, in by reserve-eligible bidders at the time a clock auction, prices increase at a the auction reaches the spectrum undermines its goals in establishing the spectrum reserve. Rather, the steady rate as long as there is any excess reserve trigger. As a result, in the demand; in an SMR auction, prices can Commission’s implementation, if Commission affirms that linking the spectrum reserve trigger to the average increase more quickly the greater the demand for Category 1 blocks in a PEA extent of excess demand. by reserve-eligible bidders is less than price component is important to ‘‘fairly the maximum reserved spectrum, then distribute the responsibility for 156. In addition, by limiting the use fewer reserved blocks would be satisfying the costs of the Incentive of extended rounds to situations where available in that PEA. Alternatively, the Auction among all bidders,’’ bidding has come close to meeting the Commission sought comment on particularly in light of its decision to set final stage rule during the clock phase, whether it should include Category 2 the average price component at $1.25. the Commission limit the potential for blocks in the spectrum reserve in any Moreover, linking the spectrum reserve bidders to successfully implement an PEAs with fewer Category 1 blocks than trigger to the cost component ensures undesirable strategic bidding strategy by the maximum spectrum reserve. that the existence of the spectrum taking advantage of a higher clock Further, the Commission proposed that reserve will not reduce the amount of increment in the top 40 markets in an the amount of reserved spectrum in any spectrum being cleared for mobile extended round. Further, in response to PEA be limited to 20 megahertz if there broadband use. The Commission found Sprint’s contention that uncertainty is only one reserve-eligible bidder in the Mobile Spectrum Holdings R&O about when the final stage rule will be demanding blocks when the trigger is that satisfaction of both components of met will cause reserve-eligible bidders reached. the final stage rule would ensure that to inefficiently maintain bidding reserve-eligible bidders pay significant activity across multiple PEAs and across (ii) Spectrum Reserve Trigger prices for spectrum, that they are paying bidding categories, the Commission 153. The spectrum reserve is designed the same price as other bidders at the notes that it will make publicly to provide the opportunity for multiple time that the final stage rule is met, and available during the auction on a round- service providers to have access to low- that the final stage rule is met before the by-round basis information showing band spectrum, while also ensuring that spectrum reserve is implemented. In how close forward auction revenues are all bidders bear a fair share of the cost essence, the Commission concluded that to the final stage rule. This will enable of the forward auction. To facilitate its linking the spectrum reserve with reserve-eligible bidders to assess how underlying goals, the Mobile Spectrum satisfaction of the final stage rule their current bidding activity will affect Holdings R&O tied the actual amount of ensured that reserve-eligible bidders the spectrum reserve in each PEA when the spectrum reserve to the quantity would be contributing ‘‘a fair share’’ of the final stage rule is met. Accordingly, demanded by reserve-eligible bidders in the final stage rule requirements, the Commission denies T-Mobile’s each PEA at the point the final stage including ‘‘a portion’’ of the value of the petition for reconsideration insofar as it rule is satisfied in the forward auction. spectrum for the public and the costs of requests that the spectrum reserve The final stage rule is a reserve price clearing the spectrum. trigger should not be linked to the

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average price component of the final steeply decline in subsequent auction to maintain a balance of price increases stage rule, and it rejects proposals by stages—that is not founded in the across geographic license areas. commenters to delink the spectrum record. On the other hand, the 160. The Commission also rejects reserve trigger from the cost component Commission previously found that tying arguments against tying the spectrum or both components of the final stage the spectrum reserve trigger to both reserve trigger to the average price rule. components of the final stage rule—the benchmark of $1.25 in the top 40 PEAs 157. The Commission also rejects cost component as well as the average proposed in the Auction 1000 Comment recent arguments that tying the price component—is necessary to PN. T-Mobile contends that the spectrum reserve trigger to the cost ensure that the reserve does not cause benchmark price should be set as low as component of the final stage rule a reduction in the spectrum clearing possible and no more than $1.25 in the increases the risk of foreclosure pricing. target and to ensure that reserve-eligible top 25 PEAs, while Sprint proposes that Commenters contend that, because the bidders contribute a fair share of the the spectrum reserve be set at the cost component must be satisfied before costs of meeting the auction’s revenue beginning of the clock phase, subject to the reserve is triggered, high clearing requirements. The Commission is not a condition subsequent of spectrum costs under a high clearing target could persuaded that the benefits of tying the being de-reserved if reserve-eligible allow non-reserve eligible bidders to spectrum reserve trigger to both bidders do not, in aggregate, demand intentionally increase prices to components of the final stage rule are quantities equivalent to the supply. foreclosure levels in key markets in the outweighed by the risk of foreclosure They argue that tying the spectrum early rounds of bidding, forcing reserve- that T-Mobile and others have reserve trigger to the average price eligible bidders to reduce demand prior identified. Untying the reserve trigger benchmark of $1.25 in the top 40 PEAs to the split and thereby reducing the from the cost component also would will allow strategic bidding by the two amount of reserved spectrum. Moreover, place the onus on the Commission to largest providers to foreclose their major they argue, because the auction system accurately predict clearing costs—which competitors, both on a nationwide and does not reset prices if the auction drops is difficult to do, as T-Mobile has argued market-specific basis. CCA states that to the next lower clearing target, the in its initial advocacy to untie the there should not be a price per MHz-pop impact of any such foreclosure bidding reserve trigger from the average price reserve trigger; however, if the would be carried forward to these later component of the final stage rule— Commission chooses to move forward stages, even if clearing costs drop. To rather than allowing the market to with a price per MHz-pop reserve address these possibilities, T-Mobile determine when the reserve is triggered. trigger, then it should be set at no more proposes a ‘‘safety valve’’ of retaining Accordingly, the Commission affirms its than $1.25 per MHz-pop in the largest the $1.25 price per MHz-pop trigger in judgment to tie the spectrum reserve 40 PEAs, based on gross bids, which is the top 40 PEAs, but amending the other trigger to the cost component of the final what the Commission proposed in the component of the trigger to be either (1) stage rule. In so affirming, the Auction 1000 Comment PN. By contrast, an average of $2 per MHz-pop in the top Commission considered information AT&T and Verizon argue that $1.25 is 40 PEAs; or (2) the cost component of that T-Mobile and Sprint filed in too low a trigger, and will result in too the final stage rule, whichever is met support of their arguments along with a much spectrum being allocated to the first. Other parties propose a single request for confidential treatment. In spectrum reserve and a windfall for spectrum reserve trigger of $2 per MHz- light of the Commission’s decision, it reserve-eligible bidders. They contend that $1.25 is not an appropriate ‘‘market pop for the top 40 markets, either dismisses as moot Verizon’s requests generally or limited to spectrum price’’ to ensure that reserve-eligible that the Commission strike this clearing targets of more than 84 bidders pay their fair share, noting that information from the record without megahertz. Verizon and AT&T oppose this price is only approximately half of consideration or, alternatively, reject the T-Mobile’s ‘‘safety valve’’ proposal, prices paid in the AWS–3 auction and request for confidential treatment and arguing that triggering the reserve before significantly less than prices paid in the make the information public, and the the cost component is met will result in 700 MHz auction. Commission declines to address the lower auction revenue and threaten the 161. The Commission rejects the merits of Verizon’s arguments in success of the auction. various arguments that the price 158. The Commission affirms its support of these requests. benchmark should be increased or decision to tie the spectrum reserve 159. The Commission emphasizes, decreased for purposes of triggering the trigger to the cost component of the final however, that it takes very seriously its spectrum reserve. Contrary to arguments stage rule as well as the average price duty to ensure the integrity of its by AT&T and Verizon, ensuring that component and decline to adopts T- auctions. To this end, all auctions are reserve-eligible bidders pay a ‘‘fair Mobile’s ‘‘safety valve’’ or another monitored carefully, and appropriate share’’ does not require that the alternative trigger. The foreclosure actions will be taken if undesirable Commission determine the ‘‘true scenarios that T-Mobile and other strategic behavior is discovered. The competitive market value of the 600 competitive carriers fear are extremely Commission also adopts additional MHz spectrum’’ and set the spectrum unlikely. The clock auction format, as measures to help it meet this objective. reserve trigger price ‘‘as close as well as the bidding procedures the For instance, the Commission adopts a possible’’ to that value, or that the Commission adopts, including the no- smaller minimum clock price increment Commission determine and set a price excess supply rule and the limitation on than it proposed in the Auction 1000 that represents the exact point at which the use of an extended round, will limit Comment PN and authorizes clock price foreclosure of reserve-eligible bidders the ability of certain bidders to increments to be changed on a PEA-by- could occur. The Commission strategically bid up prices in order to PEA basis. This allows a smaller previously concluded that satisfaction disadvantage others, and impose on any increment to be used in specific PEAs of both components of the final stage such bidders the risk of being forced to should clock prices rise too fast in some rule would ensure, among other things, purchase unwanted spectrum at high markets relative to others. Its auction that reserve-eligible bidders pay prices. Further, T-Mobile’s ‘‘hangover procedures typically provide for this significant prices for spectrum, and that effect’’ scenario is premised on an tool, which has been available in past they are paying the same price as other assumption—that clearing costs will Commission auctions and implemented bidders at the time that the final stage

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rule is met. Consistent with that consistent with its goals for the spectrum holdings for purposes of conclusion, the Commission affirms that spectrum reserve: basing the maximum applying a mobile spectrum holding tying the spectrum reserve trigger to reserve amount on the initial spectrum limit to the licensing of spectrum satisfaction of the cost component of the clearing target will ensure the efficacy of through competitive bidding (as well as final stage rule and an average price the reserve and will protect its applying the initial spectrum screen to component of $1.25 is sufficient to competitive goals by preventing the secondary market transactions). achieve its goal of ensuring that reserve- reserve from being reduced if the final 167. The Mobile Spectrum Holdings eligible bidders bear a fair share of the stage rule is not satisfied in the initial R&O stated that ‘‘non-nationwide costs of the forward auction. stage and reserve-eligible bidders providers’’ include any provider other 162. Likewise, the Commission rejects continue to demand the maximum level. than Verizon Wireless, AT&T, Sprint, arguments that $1.25 is too high to By contrast, reducing the maximum and T-Mobile, but that Order also achieve its pro-competitive goals. The reserve amount based on later clearing included attribution rules ‘‘for purposes Commission is not persuaded that a fair targets, regardless of demand by reserve- of . . . applying a mobile spectrum distribution of the costs of the incentive eligible bidders, would likely create holding limit’’ in the auction. Those auction would occur if the price for incentives for non-reserve-eligible attribution rules were intended to reserved spectrum is determined solely bidders to suppress demand at the ensure the integrity of its underlying by competition among reserve-eligible initial stage in order to reduce the rule, by permitting eligibility for the bidders for reserved spectrum instead of amount of the spectrum reserve. reserved spectrum only when being tied to satisfaction of the final 165. Contrary to AT&T’s assertions, appropriate to enhance competitive stage rule. Moreover, the Commission is this procedure is consistent with its choices beyond nationwide providers not convinced that its approach of tying observation that every bidder will have and when eligibility would present a the spectrum reserve trigger to the final the opportunity to bid for and win at lesser risk of anti-competitive behaviors stage rule creates a significant risk of least half of the 600 MHz Band due to ‘‘relative lack of resources.’’ undesirable strategic behavior by non- spectrum in each PEA. Generally, if Accordingly, the Commission clarifies reserve-eligible bidders, including at the non-reserve-eligible bidders bid actively that the attribution criteria set forth in $1.25 average price component that it on spectrum in the initial stage, the 47 CFR 20.22 govern the application of determine herein represents a portion of bidding either will meet the final stage all aspects of the mobile spectrum the value of the spectrum. In addition, rule, or due to insufficient demand by holding limit in the incentive auction, the maximum amount of spectrum in reserve-eligible bidders, the bidding will regardless of whether an entity is the reserve is tied to bidders’ demands not meet the final stage rule (thus attempting to qualify to bid on the in order to balance the underlying goals reducing the spectrum reserve for the spectrum reserve as a holder of less than of the spectrum reserve. If reserve- next stage). In either case, the market- 45 megahertz of low-band spectrum in eligible bidders’ demand is insufficient, based spectrum reserve rule would not the relevant market or as a non- then the Commission finds that it is have prevented non-reserve-eligible nationwide provider. appropriate to set aside less than the bidders from winning at least half of the 168. CCA has expressed concern maximum in order to balance the 600 MHz Band spectrum in each PEA. about the potential impact that Commission’s objectives. The attribution of long-term leases of (iv) Attribution for Purposes of Commission also rejects T-Mobile’s spectrum from nationwide providers to Qualifying to Bid on Reserved Spectrum alternate proposal to tie the spectrum otherwise non-nationwide providers reserve to a $1.25 benchmark across 166. For purposes of qualifying to bid may have on the eligibility of those non- only the top 25 PEAs, rather than the on reserved spectrum as a non- nationwide providers to bid on reserve top 40 PEAs. nationwide provider, the Commission spectrum. To address this concern, clarifies that an entity is subject to the although the Commission will attribute (iii) Determination of Maximum attribution criteria set forth in 47 CFR long-term transfer leasing arrangements Spectrum Reserve for a New Stage 20.22(b). For example, all interests of set forth in 47 CFR 20.22(b)(vii) for 163. As the Commission set out in the ten percent or more by a nationwide purposes of qualification based on low- Mobile Spectrum Holdings R&O, the provider in a non-nationwide provider band spectrum holdings, the maximum amount of reserve established will eliminate that non-nationwide Commission will not attribute such based on the initial spectrum clearing provider from being considered reserve- leasing arrangements to lessees and target will not be reduced in any later eligible as a non-nationwide provider, sublessees for purposes of qualifying as stages of the incentive auction based on though that provider still could qualify a non-nationwide provider. Attributing lower clearing targets, although it will based on low-band holdings of less than long-term leasing arrangements in be subject to demand by reserve-eligible 45 megahertz. An entity can qualify to individual PEAs for purpose of bidders. The Commission concluded in bid on reserved spectrum by either: (1) qualification based on low-band the Mobile Spectrum Holdings R&O that Holding an attributable interest in less spectrum holdings is consistent with the the maximum amount of licensed than 45 megahertz, on a population- Commission’s intent that entities spectrum that will be reserved in each weighted basis, of below-1–GHz lacking significant low band spectrum market will be identified at the initial spectrum in a given PEA; or (2) being a resources in those PEAs should have an stage. In the Auction 1000 Comment PN, non-nationwide provider. Attributable opportunity to bid on reserved the Commission reiterated that the holdings include, for example, spectrum, and such attribution is maximum reserve will be set according controlling interests, non-controlling consistent with the Commission’s to the initial clearing target. interests of 10 percent or more, and methodology for competitive review of 164. Accordingly, AT&T’s claim is long-term de facto transfer leasing spectrum acquisition. However, incorrect that its prior decision arrangements and long-term spectrum attributing long-term leasing established that the maximum spectrum manager leasing arrangements that arrangements to lessees from reserve amount would be tied to the enable commercial use. In the Mobile nationwide providers for purposes of spectrum clearing target in each stage, Spectrum Holdings R&O, the qualifying as a non-nationwide not just the initial stage. The Commission adopted criteria to attribute provider—which would have the effect Commission finds that this procedure is partial ownership and other interests in of disqualifying providers ‘‘with

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networks that are limited to regional target, the maximum number of reserved PEA that are demanded by reserve- and local areas’’ from bidding on blocks will be determined by the total eligible bidders. For example, if there reserved spectrum as a non-nationwide number of Category 1 blocks and are 50 megahertz of Category 1 blocks provider—would be inconsistent with Category 2 blocks (if any) offered in that and 10 megahertz of Category 2 blocks its intent to ‘‘permit bidding on 600 PEA. This approach will help facilitate made available in a PEA at the initial MHz reserve spectrum by regional and the availability of more reserved stage, with a maximum reserve of 20 local service providers in all PEAs, spectrum in the limited number of PEAs megahertz, the maximum reserve will including those where such a provider in which the Commission offers fewer remain 20 megahertz at each subsequent holds more spectrum than its 45 Category 1 blocks than the nationwide stage, provided that 20 megahertz of megahertz holding threshold of the clearing target, relative to an approach Category 1 blocks continue to be offered available low-band spectrum.’’ As the based solely on Category 1 blocks. The in that stage and reserve-eligible bidders Commission indicated in the Mobile Commission notes that in a limited demanded that amount in the prior Spectrum Holdings R&O, non- number of PEAs, it will offer fewer stage. nationwide service providers enhance licenses (either Category 1 or Category 171. In addition, the Commission competitive choices for consumers in 2) than the nationwide clearing target adopts its proposal that the spectrum the mobile wireless marketplace, and because blocks with greater than 50 reserve will include only Category 1 help promote deployment in rural areas. percent impairment will not be made blocks. That is, in the limited number of 169. CCA has similarly expressed available for acquisition. In these PEAs in which there are both Category concern that it would be inconsistent instances, the Commission’s balancing 1 and Category 2 blocks, Category 1 blocks will be allocated to the spectrum with the intent of the reserve, in certain of goals to facilitate post-auction unique circumstances involving limited reserve up to the maximum number of competition and to provide equity interests, to apply an attribution reserved spectrum blocks, assuming that opportunities for all bidders to acquire rule that would prevent non-nationwide reserve-eligible bidders demand up to 600 MHz spectrum does not support providers from bidding for reserved that maximum. The Commission notes setting the maximum spectrum reserve spectrum or participating in the auction that any remaining Category 1 blocks, as based on the nationwide clearing target, entirely. CCA notes as examples various well as all Category 2 blocks, will be rather than based on the total number of insignificant passive equity interests unreserved, and both reserve-eligible Category 1 and Category 2 licenses. that nationwide providers have in and non-reserve-eligible bidders will be Thus, if there are 50 megahertz of certain long-standing rural partnerships able to bid on these blocks. This also and argues that the FCC should consider Category 1 blocks and 10 megahertz of will help ensure the efficacy of the pro- certain limiting factors so as not to Category 2 blocks made available in a competitive policies that the foreclose those partnerships from PEA at the initial stage, the available Commission adopted in the Mobile bidding on reserve spectrum. The amount of spectrum offered in that PEA Spectrum Holdings R&O by ensuring Commission agrees. In particular, where will be 60 megahertz, with a that reserve-eligible bidders, who by the nationwide provider is not the corresponding maximum reserve of 20 definition currently hold little or no managing partner of the rural megahertz. That, in turn, will promote low-band spectrum, have access through partnership, has not and will not its competitive goals for the reserve by the spectrum reserve to unimpaired or provide funding for the purchase of the providing an opportunity for reserve- minimally-impaired spectrum blocks in licenses in spectrum auctions by the eligible bidders, who likely will be more areas with impairments. Limiting the rural partnership, including the reliant than non-reserve eligible bidders spectrum reserve to Category 1 blocks incentive auction, the rural partnership in particular PEAs on 600 MHz Band also will simplify the forward auction is of long standing, the nationwide spectrum, to utilize the market-based for bidders by limiting the number of provider’s interest in the rural reserve to expand coverage and enter license categories that must be ‘‘split’’ at partnership is non-controlling and is new geographic areas. As the the time the spectrum reserve is less than 33 percent, and the Commission has noted, this auction will triggered. partnership’s retail service is not be the last offering of a significant 172. The Commission declines to branded under the name of the amount of nationwide ‘‘greenfield’’ low- adopt AT&T’s alternative proposal to fill nationwide provider, non-attribution band spectrum for the foreseeable future the reserve first with Category 2 blocks may enhance competitive choices for and access to this spectrum by smaller in the PEA, followed by any Category 1 consumers by giving the partnerships an bidders is particularly important to blocks necessary to meet the reserve opportunity to gain access to low-band increasing competition and choice in allocation. AT&T and Verizon assert spectrum through the spectrum reserve, the wireless marketplace. If a particular that the approach the Commission and without creating an undue risk of stage of the auction is not the final stage, adopts will undermine its incentive anti-competitive behaviors due to the the maximum amount of reserved auction goals by preventing them from rural partnership’s relative lack of spectrum in each PEA in subsequent acquiring the spectrum they need to resources. The Commission will specify stages will be the smaller of the effectively serve their customers, and in the Application Procedures PN how maximum amount of reserved spectrum will result in lower spectrum clearing such rural partnerships can secure in the previous stage or the amount that targets and auction revenues. The status as non-nationwide providers for the reserve-eligible bidders demanded at Commission disagrees. First, the purposes of qualifying to bid on the the end of the previous stage. Similarly, Commission notes that AT&T and spectrum reserve. the Commission notes here that, in Verizon themselves are eligible to PEAs in which it offers fewer Category acquire reserved 600 MHz spectrum in (v) Applying the Spectrum Reserve in 1 blocks than the nationwide clearing those PEAs where they have the most PEAs With Category 1 and Category 2 target, the maximum amount of reserve need, that is, in those PEAs where they Blocks established in the initial stage in a PEA hold less than one-third of currently 170. The Commission adopts its will not be reduced in any subsequent suitable and available low-band proposal that, for a given PEA in which stages of the incentive auction so long spectrum. Indeed, AT&T and Verizon the Commission offers fewer Category 1 as there are a sufficient number of will be eligible to bid on reserved blocks than the nationwide clearing Category 1 blocks being offered in that spectrum in PEAs that cover

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approximately 40 percent of the total implementing the spectrum reserve in reserve trigger, i.e., when the final stage population of the United States. And, of PEAs with impairments violates the rule is satisfied. The Commission rejects course, they can bid on substantial Spectrum Act as an auction-specific arguments that the actual number amounts of non-reserved spectrum restriction that would dramatically should be based on reserve-eligible nationwide. increase the barriers to AT&T’s bidders’ demand for Category 1 and 173. According to the simulations ‘‘participation’’ in this ‘‘system of Category 2 blocks. Given its decision to conducted by staff, approximately 84 to competitive bidding.’’ AT&T has not limit reserve blocks to Category 1 88 percent of PEAs (and 88 to 93 demonstrated that its approach, which blocks, the most logical measure for percent of high-demand PEAs) will will apply in a limited number of determining demand at the reserve contain only Category 1 blocks, and markets and is necessary to carry out its trigger are the Category 1 blocks. even in PEAs with Category 2 blocks the goals in establishing the spectrum (vi) Other Proposals Related to Bidding vast majority of blocks offered in the reserve, undermines its reasoning in the by Reserve-Eligible Entities forward auction will fall into Category Mobile Spectrum Holdings R&O that the 1. And the record reflects that Category reservation of spectrum in the incentive 178. As the Commission indicated in 2 blocks are of substantial value and auction is fully consistent with its the Mobile Spectrum Holdings R&O, will provide utility to wireless service authority under Title III and the and after opportunity for comment in providers for future advanced Spectrum Act. More specifically, AT&T the Auction 1000 Comment PN, in order broadband deployment. Accordingly, has not demonstrated that its approach to balance the needs of all bidders and the Commission is not persuaded that transforms an otherwise permissible to promote competition within the the approach it adopts to implementing application of the spectrum reserve into forward auction, the Commission adopts the spectrum reserve will have a an approach that is no longer a rule of its proposal to limit the maximum significant impact on either the amount ‘‘general applicability’’ or a provision amount of reserved spectrum in a PEA of spectrum that is repurposed through that would ‘‘prevent’’ any entity ‘‘from to 20 megahertz if there is only one the auction or on auction revenues. participating’’ in a ‘‘system of reserve-eligible bidder demanding Moreover, as stated above, in the limited competitive bidding.’’ Category 1 blocks when the spectrum number of areas with Category 2 blocks 176. The Commission also rejects reserve trigger is reached. The for sale, its approach is critical to proposals from prospective reserve- Commission notes that DISH supports realizing the pro-competitive goals of eligible bidders to reserve the least this proposal; no commenter has the Mobile Spectrum Holdings R&O by impaired Category 2 blocks in any PEAs opposed it. The Commission does not ensuring that service providers that lack with fewer Category 1 blocks than the believe the public interest benefits of a a sufficient mix of low-band and high- maximum spectrum reserve. As the maximum of 30 megahertz of reserved band spectrum to compete robustly have Commission explained in the Auction spectrum would be realized without the opportunity to gain access to low- 1000 Comment PN, to implement more than one reserve-eligible bidder in band spectrum. separate reserved categories for both a PEA. 174. Likewise, the Commission rejects Category 1 and Category 2 blocks in 179. CCA, T-Mobile, and U.S. Cellular Mobile Future’s argument that its individual PEAs where they exist would argue that, regardless of the number of approach will harm consumers by significantly complicate the design of reserve-eligible bidders in a PEA, no ‘‘skew[ing]’’ access to 600 MHz Band the auction by necessitating an reserve-eligible bidder should be spectrum. Rather, its approach will additional bidding category, potentially permitted to purchase more than 20 benefit consumers by promoting extending the length of the auction and megahertz of reserved spectrum in any competition and reducing the potential requiring additional procedures for PEA in order to protect license diversity for competitive harm. Contrary to dividing bidder demands at the time the among reserve-eligible bidders. The Mobile Future’s suggestion, its decisions spectrum reserve is triggered. Reserving Commission finds that giving more than to allocate Category 1 blocks to the only Category 1 blocks will simplify the one reserve-eligible bidder an reserve up to the maximum number auction design and promote its goal of opportunity to acquire reserve spectrum (subject to demand by reserve-eligible a successful auction. Indeed, T-Mobile in smaller, more rural PEAs where 30 bidders), while counting both Category recognizes that dividing both Category 1 megahertz of reserve spectrum is 1 and Category 2 blocks towards the and Category 2 blocks into reserved and available will further its goal of maximum number, are not inconsistent. unreserved categories would create facilitating post-auction competition in The two decisions involve separate significant complications of managing those areas. Competition in these areas issues. The Commission first needs to four simultaneous auction clocks—two is generally less robust than in larger, decide how much licensed spectrum is in the reserved and two in the non- more urban areas. As the Commission in the maximum spectrum reserve. In reserved blocks—across the large has observed, ‘‘92 percent of non-rural the Mobile Spectrum Holdings R&O, the number of licenses expected to be consumers, but only 37 percent of rural Commission determined that the offered in the incentive auction. The consumers are covered by at least four maximum spectrum reserve is to be Commission also concludes that filling 3G or 4G mobile wireless providers’ based on the ‘‘Licensed Spectrum in the out the reserve with Category 2 blocks networks and more than 1.3 million Initial Clearing Target.’’ Its decision would create an imbalance between its people in rural areas have no mobile here implements that determination: pro-competitive goals and ensuring that broadband access.’’ The Commission Both Category 1 and Category 2 licenses all bidders, including non-reserve- has frequently stressed the importance are going to be auctioned and are eligible bidders, have an opportunity to of competition and consumer choice in included in the initial clearing target. acquire a significant amount of 600 MHz rural as well as in urban areas. The And placing only Category 1 blocks in Band spectrum in the incentive auction. policies in the Mobile Spectrum the reserve makes sense to provide 177. Finally, the Commission adopts Holdings R&O were intended to ‘‘ensure reserve-eligible bidders with the best its proposal that the actual number of that all Americans, regardless of opportunity to increase competition and reserved blocks will be based on whether they live in an urban, choice in the wireless marketplace. demand for Category 1 blocks by suburban, or rural area, can enjoy the 175. The Commission also rejects reserve-eligible bidders at the time the benefits that competition provides.’’ The AT&T’s claim that its approach to forward auction reaches the spectrum Commission found there that regional

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and local service providers enhance will be no decrease in competition in bidders’ demand for spectrum in a given competitive choices for consumers in the bidding for reserved spectrum in the PEA should be assigned to the lowest- the mobile wireless marketplace, and larger, more urban PEAs. The price spectrum available between the are ‘‘important sources of competition Commission finds that in smaller PEAs, reserved and unreserved categories. The in rural areas, where multiple any such concerns are outweighed by Commission disagrees with AT&T’s nationwide service providers may have the benefits to post-auction competition assertion that implementation of this less incentive to offer high quality of facilitating access by multiple bidders proposed change is necessary to avoid services.’’ Accordingly, the Commission to reserved spectrum. In balancing the an opportunity for manipulative bidding adopts a cap of 20 megahertz for smaller competing factors identified in Section by reserve-eligible bidders because PEAs where 30 megahertz of reserve 309(j), the Commission believes it is those bidders could bid for unreserved spectrum is available. The Commission important to take account of concerns blocks instead of reserved blocks even defines smaller PEAs as those with a about the degree of competitive mobile when the reserved price is lower. In population of 500,000 or less, which voice and broadband service in rural rejecting claims by certain bidders that corresponds to PEAs 118–416, areas, as well as the important AT&T could engage in strategic bidding excluding PEA 412 (Puerto Rico). The contributions that rural service behavior, the Commission adopts population density of PEAs with providers can offer in promoting such procedures that will not allow bidders population of 500,000 or less correlates competitive service and incentives for to switch demand away from a category more closely with that of rural areas as increased deployment in these more in a PEA except when there is excess previously defined by the Commission. rural areas. In addition, the Commission demand and the price is rising. These The average population density of PEAs disagrees with DISH’s assertion that procedures limit the ability of reserve- with a population greater than 500,000 restricting reserve-eligible bidders to eligible bidders to shift from reserved to is 333 pops/square mile, whereas the acquiring a maximum of 20 megahertz unreserved blocks in a given PEA and average population density for the of spectrum within a single PEA could thereby narrow the circumstances under smaller PEAs is 76 pops/square mile. unnecessarily limit the network and which the bidding strategies suggested The Commission observes that 76 pops/ business strategies of reserve-eligible by AT&T would be possible. They also square mile roughly corresponds with participants. While the Commission discourage these strategies by limiting the 100 pops/square mile approach it caps the amount of reserved spectrum the ability of a reserve-eligible bidder to takes in defining rural areas. Geographic that any entity can acquire in order to return to reserved blocks without area and population data can be found extend the benefits of the reserve to driving up the prices of those blocks. on the Commission’s Web site. In multiple providers in smaller PEAs, a Moreover, AT&T’s approach could addition, the Commission notes that this reserve-eligible bidder has an reduce competition for non-reserved threshold provides an objective and opportunity to acquire more than 20 spectrum by reserve-eligible bidders, easily administrable delineation megahertz of 600 MHz spectrum by contrary to its goal of encouraging between larger urban and smaller rural bidding on unreserved licenses. competitive bidding for non-reserved PEAs and one that provides consistency Accordingly, the Commission adopts a blocks as well as reserved blocks. The with the definition it already will be 20 megahertz cap in the smaller PEAs Commission is not persuaded that applying in this auction for other nationwide on the amount of reserved additional safeguards are necessary to purposes. This threshold also identifies spectrum that an individual bidder can prevent strategic behavior by reserve- ‘‘where rural service providers are most win in the forward auction in those eligible bidders once the spectrum likely to offer service’’. By adopting the PEAs where the spectrum reserve is set reserve is triggered. cap of 20 megahertz on reserve at 30 megahertz when the final stage 3. Acceptable Bid Amounts spectrum in the smaller PEAs, the rule is satisfied. 181. The Commission also declines to Commission promotes the a. Opening Bids adopt U.S. Cellular’s proposal of a dissemination of licenses among a wide special round after the spectrum reserve 183. The Commission will set variety of applicants, and avoid the trigger is met that would provide minimum opening bids at $5,000 per excessive concentration of licenses. In reserve-eligible bidders prior notice and bidding unit for all spectrum blocks addition, the cap prevents any single the opportunity to shift their demand offered in the forward auction, reserve-eligible bidder from foreclosing for reserved blocks to compensate for regardless of category. At the beginning other reserve-eligible bidders from any difference between actual demand of the clock phase of the forward obtaining reserve spectrum in the on the maximum spectrum reserve. U.S. auction in the initial stage, a bidder will significant number of smaller PEAs Cellular has not demonstrated how this indicate how many blocks in a generic where this is a potential risk. Thus, the special round could be implemented license category in a PEA it demands at Commission finds that the cap of 20 without undercutting its auction design the minimum opening bid price. The megahertz on reserve spectrum will goals by adding undue complexity and Application Procedures PN will set help ensure that multiple service reducing the speed of the auction. In forth the minimum opening bid amount providers have access to low-band addition, the Commission is making for the 5+5 megahertz generic blocks for spectrum, and promote ‘‘the rapid significantly more information available each PEA in the forward auction, deployment of new wireless broadband to forward auction bidders, including calculated according to these technologies to all Americans, including information indicating how close procedures. those residing in rural areas.’’ forward auction revenues are to 184. The Commission finds there is 180. In response to concerns raised by satisfying the final stage rule. no need to discount minimum opening AT&T and DISH that adopting a cap 182. Finally, the Commission rejects bids for blocks in Category 2. Because could decrease competition in the AT&T’s contention that a change to its its minimum opening bids serve bidding for reserved spectrum, the bidding procedures is necessary to primarily as a starting point for bidding, Commission first notes that it is avoid strategic behavior by reserve- not as estimates of final prices, there is adopting a cap of 20 megahertz in the eligible bidders. In particular, AT&T no need to base them upon the extent smaller PEAs only, and thus, to the contends that, once the spectrum to which a spectrum block may be extent those concerns are valid, there reserve is triggered, reserve-eligible impaired (i.e., which category a block

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falls into—Category 1 or 2). Further, to all categories in all PEAs, increments system will not permit a bidder to place winning bidders will receive an may be changed during the auction on inconsistent bids for blocks in a impairment-based discount off the final a PEA-by-PEA or category-by-category category in a PEA during a round. For clock phase price for licenses that are basis as stages and rounds continue. example, a bidder cannot indicate that subject to impairments, regardless of This discretion provides a tool to ensure it wishes to decrease its demand at a whether they are Category 1 or Category that price increases over a broad range low intra-round price and then, in the 2 licenses. of markets remain relatively balanced. same round, indicate that it wishes to 185. A minimum opening bid amount The Commission finds that setting the increase its demand for blocks in the of $5,000 per bidding unit should, as increment in a round in the range of one same category in a PEA at a higher intra- intended, help to accelerate the to 15 percent, beginning with five round price. competitive bidding process. Basing percent, will allow the auction system 190. Intra-round bids will be optional; minimum opening prices on the number to manage the auction at a reasonable a bidder may choose to express its of bidding units associated with blocks pace, offering appropriate price choices demands only at the clock prices. The in a particular PEA serves to incorporate to bidders. decision to permit intra-round bidding past pricing information into the 188. After each round, the system will will allow the auction system to use calculation of minimum opening prices. announce a clock price for the next relatively large clock increments, By setting higher minimum opening round, which will be the highest price thereby speeding the forward auction, prices in markets that have historically to which a bidder can respond during without running the risk that a jump in commanded relatively higher prices, the the round. In this clock auction, a the clock price will overshoot the Commission expects to reduce the bidder will be required to confirm its market clearing price—the point at number of rounds it will take for demands in every round, although it which demand for blocks equals the demand to equal supply in those will not need to bid at a higher price. available supply. The more complicated markets. Moreover, incorporating the Unlike in an SMR auction, there are no bid processing in the reverse auction, results from Auction 97 will ensure that provisional winners in the forward involving multiple bidding options and minimum opening prices reflect relative auction. For each category in each PEA, feasibility checking, means that value differences that bidders have the clock price will be higher than the allowing intra-round bidding would placed on different geographic areas previous round’s price by the fixed unduly slow the progress of the reverse most recently. Its experience in past percentage increment. For example, if auction, as well as making participation spectrum license auctions indicates that the price for the first round is $10, and more complicated for reverse auction this will be an effective tool for the price increment is 20 percent, the bidders. accelerating the competitive bidding clock price for second round will be 4. Reducing Demand, Bid Types, and process, a particularly important goal $12. As long as total demand for blocks Bid Processing for the incentive auction given the in a category exceeds the supply of interdependency between the reverse blocks, the percentage increment will be 191. A forward auction participant and forward auctions. added to the clock price from the prior will bid by indicating a quantity of 186. Its approach is consistent with round. If demand drops to equal supply blocks in a PEA it demands at a price, Section 309(j) of the Communications in a round, then the clock price for the indicating that it is willing to pay that Act, as amended, which calls for next round will be set by adding the price for the specified quantity. A prescribed methods of establishing percentage increment to the price bidder cannot demand more blocks in a minimum opening bid amounts when (potentially an intra-round bid price) at category than the supply of available FCC licenses are subject to auction, which demand became equal to supply. blocks. A bidder can express its unless the Commission determines that If demand is equal to or less than supply demands at the clock price or at an a minimum opening bid amount is not at the minimum opening price, the intra-round price, and bid quantities can in the public interest. This approach is increment will be added to the represent an increase or a decrease over also consistent with the precedent of its minimum opening price. Further, if at the bidder’s previous demands for AWS–3 auction procedures, where the the beginning of a round supply exceeds blocks in a category. Under the Commission set the minimum opening demand and during the round demand procedures the Commission adopts, the bid amount at twice the upfront increases to equal supply, then the auction system will treat bids as payment for each license. increment will be added to the requests; the bid processing procedures it adopts, however, will ensure that a b. Clock Increments beginning of round price, which may be the minimum opening price. bidder will never win a block at a price 187. The Commission adopts its higher than it indicates it is willing to proposal to set clock prices for a c. Intra-Round Bids pay. Bids generally must be consistent subsequent bidding round by adding a 189. The Commission adopts its with rules on bidding eligibility. fixed percentage to the previous round’s proposed procedures to permit a bidder Accordingly, bids to increase demand price, but modify the range to be to make intra-round bids by indicating will be applied subject to the bidder broader than the range of five to 15 a point between the previous round’s having sufficient bidding eligibility as percent the Commission proposed. The price and the new clock price at which measured by the number of bidding Commission will use an increment of its demand for blocks in a category units associated with the blocks a between one percent and 15 percent to changes. The previous round’s price bidder demands. If a bid would reduce provide additional flexibility to offer may be the clock price for the previous the quantity of blocks a bidder demands appropriate prices to bidders. Further, round or, if there was not excess in a category in a PEA, the auction the Commission sets the initial demand, the minimum opening bid or system will apply the reduction only if increment at five percent. This initial the price at which demand equaled the reduction will not result in aggregate increment is consistent with AT&T’s supply. In placing an intra-round bid, a demand falling below the available suggestion to use increments at the bidder will indicate a specific price, and supply of licenses. This restriction bottom of the proposed increment range. a quantity of blocks it demands if the ensures that the final stage rule, once While the Commission anticipates price for blocks in the category should met, will continue to be satisfied. applying the same percentage increment increase beyond that price. The auction Absent such a restriction, blocks with

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bids that were counted toward meeting given category in a PEA. Because all-or- demand fell to equal supply at a the reserve price could later become nothing and switch bids are optional, a previous, lower price. Alternatively, unsold, leaving revenue below the bidder can choose not to submit such demand could fall to equal supply at the necessary minimum. For this reason, bids. The Commission finds that the bid same price point, in the case of ties, and because the Commission agrees types and associated processing which are broken pseudo-randomly. with T-Mobile that the restriction procedures it adopts will provide Further, in the case where fewer blocks provides ‘‘a meaningful safeguard bidders with the flexibility they need to are demanded than are available at the against anticompetitive or predatory modify their demands as the bidding minimum opening bid price, the price auction behavior,’’ the Commission progresses while ensuring that the will remain at the minimum opening finds that the benefits of the restriction reserve price conditions, once satisfied, bid. In that case, the bidder that placed outweigh concerns, expressed by AT&T, will continue to be satisfied. the simple bid will still demand its about a potential exposure risk to unreduced quantity at a price it a. Simple Bids bidders. Moreover, the Commission indicated it would accept. In sum, a agrees with T-Mobile that AT&T 194. A simple bid indicates a desired simple bid requesting a reduction will overstates the significance of an quantity of a product at a price. If it is either be fully applied, partially applied exposure problem. Further in this not possible for the auction system to with the price stopping at the bid price, regard, the Commission declines apply the simple bid in its entirety, a or not applied but with the stopped AT&T’s recommendation to allow simple bid may be applied partially. A price below the bid price. bidders a limited number of simple bid requesting a reduction in 197. In the event that a bid is not withdrawals to mitigate an exposure demand will be applied in full if there applied, or not fully applied, the problem. is sufficient excess demand for blocks in auction system will maintain the 192. The Commission also adopts its the category. That is, the auction system unapplied demands in a queue, proposal to process bids in order of will apply the reduction provided that prioritized by price point, should price point after a round ends, where there is sufficient aggregate demand at subsequent changes in aggregate the price point represents the the bid price to allow the reduction to demand or a bidder’s eligibility later percentage of the bidding interval for be applied without the total demands of make it possible to apply the bid. Bids the round. For example, if the price for all bidders falling below available are only held in the queue during the the previous round is $5,000 and the supply in the category. If there is some processing of bids for a single round. new clock price is $6,000, a price of excess demand, but not enough to grant For example, if a bidder’s reduction $5,100 will correspond to the 10 percent the full requested reduction, the auction request is only partially applied because price point, since it is 10 percent of the system will partially apply the aggregate demand is insufficient, but bidding interval between $5,000 and reduction, thereby reducing the bidder’s another bidder requests an increase in $6,000. Considering bids in increasing demand by fewer than the requested demand at a higher price point, it may order of price point allows the auction number of blocks. A simple bid then be possible to fully apply the bid system to determine an ascending requesting an increase in demand will reduction request that was only partially processing order when prices in be applied in full as long as the bidder applied earlier in the bid processing for different PEAs may be at very different has sufficient bidding eligibility, the round and held in the queue. And absolute levels. Once a round ends, the measured by the total number of if a bidder’s request to increase demand auction system will process bids in bidding units associated with the blocks is not applied or not fully applied ascending order of price point, the bidder demands in that round, at the because the bidder has insufficient considering first intra-round bids in time the bid is processed. If the bidder bidding eligibility at that price point, order of price point and then bids at the does not have sufficient eligibility, the and its request to reduce demand in clock price. The system will consider auction system will apply the increase another category is later applied at a bids at the lowest price point for all to the extent possible given the bidder’s higher price point, freeing bidding categories in all PEAs, then look at bids available bidding eligibility. eligibility, the system may then be able at the next price point in all areas, and 195. Formally, to the auction system, to fully apply the increase. so on. Importantly, for a given category a simple bid to reduce demand at an b. All-or-Nothing Bids in a given PEA, the uniform price for all intra-round price indicates that a bidder of the blocks in the category will stop is willing to pay up to the intra-round 198. An all-or-nothing bid also increasing when aggregate demand no bid price for a quantity of blocks that is indicates a desired quantity of blocks at longer exceeds the available supply. If unchanged from its previously a price but differs from a simple bid in no further bids are placed, the final demanded quantity. At the intra-round that it will not be applied partially. clock phase price for the category will bid price, the bidder is willing to accept Hence, an all-or-nothing bid is useful if be the stopped price. the unchanged quantity, the changed the bidder wants the bid to be 193. In order to give bidders more quantity, or any quantity in-between. At implemented fully or not at all. An all- flexibility in managing their demands in a price above the intra-round bid up to or-nothing bid requesting a reduction in certain situations, the Commission the clock price for the round, the bidder demand will be applied only if there is adopts its proposal to allow bidders to is willing to accept the changed quantity sufficient excess demand at that price make two additional types of bids in indicated by the intra-round bid. point to apply the full reduction. If not, addition to the ‘‘simple’’ bids 196. Because the auction system will the auction system will not apply the mentioned below: ‘‘all-or-nothing’’ bids process bids in increasing order of price bid, and will move on to consider bids and ‘‘switch’’ bids. These additional bid point and the uniform price for blocks at higher price points. The uniform types will enable bidders to indicate in a category stops increasing when price for the category may continue to that they want a bid to be implemented demand falls to equal supply, a bidder increase as long as there is excess fully or not at all or that they wish to placing a simple bid for a reduction that demand. The bidder will still demand switch demand from one license is partially applied will not pay a price its unreduced quantity, at a price which category to another at a certain price. In above its bid price for its unreduced may increase up to the round’s clock a given round, a bidder may place at quantity. If a requested reduction cannot price. This is in contrast to a simple bid most one of the three bid types for a be applied at all, it must be the case that that may be partially applied, and

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which, hence, stops the price from into the forward auction because of the 205. The activity rule will be satisfied increasing if it cannot be fully applied. additional complexity such procedures when a bidder has bidding activity on Thus, in making an all-or-nothing bid would introduce into the auction. blocks with bidding units that total at that requests a reduction, the bidder Further, consistent with its proposal in least 95 percent of its current eligibility affirmatively indicates that it will accept the Auction 1000 Comment PN, the in the round. If the activity rule is met, the round’s clock price for its Commission declines to adopt an then the bidder’s eligibility will not unreduced demand if the bid cannot be alternative to package bidding under change in the next round. Failure to fully applied at the bid price. which it would create an aggregation of maintain the requisite activity level will 199. A bidder making an all-or- the largest PEAs in advance of the result in a reduction in the bidder’s nothing bid that requests a reduction auction. The Commission is not eligibility, possibly curtailing or may add a ‘‘backstop’’ to the bid that persuaded that creating a bidding eliminating the bidder’s ability to place would allow the bid to be applied aggregation will serve its goal of additional bids in the auction. A partially at a higher price, as long as the encouraging entry by a broad range of bidder’s activity level will reflect its bidder makes only a single all-or- potential wireless service providers. In demands as applied by the auction nothing bid for the category in the PEA particular, several commenters share its system during bid processing. Thus, if a in the round. The auction system will concern that the alternative aggregation bidder requests a reduction in the allow a backstop bid only if a bidder approach the Commission sought quantity of blocks it demands in a submits a single all-or-nothing bid for comment on would discourage small or category, but the auction system does the category because bid processing regional entities with an interest in only not apply the requested reduction could become excessively complex if a subset of the PEAs in the aggregation because demand for the category would bidders submit multiple all-or-nothing from participating in the forward fall below the available supply, the bids with backstops. The backstop will auction. Further, larger carriers may bidder’s activity will reflect its ensure that the price for the category have interests in only some of the unreduced demand. cannot go higher than the specified largest PEAs, or may wish to acquire a 206. While the record supports an higher price if the all-or-nothing bid is different number of licenses in different activity rule that requires significant not applied. The backstop is essentially large PEAs, thus making an FCC defined bidder participation, some commenters a simple bid that may be applied bidding aggregation undesirable for argue that the proposed 92–98 percent partially, thereby stopping the price them, also. Therefore, the Commission threshold is too aggressive, will from increasing further. declines to adopt a bidding aggregation disadvantage smaller carriers, and may 200. An all-or-nothing bid that and will instead permit bidders to bid limit a bidder’s ability to move its bids requests an increase in demand will be for blocks in any or all of the individual between markets. Commenters propose applied only if the bidder has sufficient PEAs. bidding eligibility for the full increase at setting the threshold at 80 percent and the price point of the bid. If an all-or- 6. Bidding Eligibility and Activity Rule only increasing it during later stages of nothing bid requesting an increase or 203. In order to ensure that the the auction. The Commission finds that decrease in demand is not applied, it auction moves quickly and to promote the 95 percent threshold it adopts is will be held in the processing queue in a sound price discovery process, bidders appropriate for the clock phase of the case it should later become possible to will be required to maintain a forward auction. Although the apply it. minimum, high level of activity in each Commission has sometimes used an 80 round of the auction in order to percent activity requirement in c. Switch Bids maintain bidding eligibility. The simultaneous multiple round (SMR) 201. To place a switch bid, the bidder Commission will use upfront payments auctions, having an activity requirement will indicate a desired quantity of to determine initial (maximum) significantly below 100 percent in the blocks in the category in which it eligibility, the maximum number of clock phase of the forward auction wishes to reduce its demand at a given blocks as measured by their associated would create uncertainty with respect to price point, and will identify another bidding units a bidder demands at the the exact level of bidder demand, category in the same PEA that it wishes start of the auction. Bidding eligibility interfering with the basic clock price- to switch into at the price point. While will be reduced as the auction setting and winner determination processing the bid, the auction system progresses if a bidder does not meet the mechanism, providing less helpful will apply as much of the requested activity requirement. price-discovery information to bidders, reduction as possible considering excess 204. Specifically, bidders must be and unduly prolonging the bidding demand, and then will apply an active on at least 95 percent of their process. As bidders plan their bidding increase in the bidder’s demand in the bidding eligibility in all regular clock strategies, they need accurate other category by the same number of rounds to maintain their bidding information about relative prices and blocks. Because all blocks in a PEA, eligibility. An activity rule requires the level of excess demand in different regardless of category, will have the bidders to bid actively throughout the markets, and if significant bidding same number of associated bidding auction to maintain bidding eligibility, eligibility is held back, the available units, the eligibility freed up by the rather than wait until late in the auction price and demand information will be reduction portion of a switch bid will before participating. In the forward less reliable. At the same time, the always cover the corresponding increase auction, the activity rule will provide an Commission recognizes that some in demand. The unapplied portion of a incentive for bidders to participate in flexibility will be helpful for bidders switch bid will be held in the each round of the auction. However, the choosing between two categories of processing queue in case it can be activity requirement may be further generic licenses across as many as 416 applied later in the round’s bid altered (by, for example, establishing a PEAs. The Commission finds that the 95 processing. 98 or 100 percent threshold) before and/ percent threshold it adopts will satisfy or during the auction as circumstances the requirements of the clock auction 5. No Bidding Aggregation warrant. Any changes to the activity format and ensure that accurate price 202. The Commission will not requirement will be announced via the discovery information is available for incorporate package bidding procedures auction system. bidders, while also providing bidders

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with adequate flexibility. Further, based addressed in the Auction 1000 BIA in its spectrum resources. Although on its experience with prior spectrum Procedures Public Notice. The final prices from Auction 97 (AWS–3) license auctions, the Commission Commission addressed elsewhere were not yet available at the time the expects that the activity rule it adopts challenges to the use of the final stage Auction 1000 Comment PN was will foster an appropriate bidding pace rule in connection with establishing the released, the general price level in that and ensure that each stage of the spectrum reserve. Specifically, the auction was already apparent and the forward auction closes within a Commission adopts the proposed $1.25 Commission considered it in proposing reasonable period of time. average price and 70 megahertz licensed the $1.25 benchmark. 207. For these same reasons, the spectrum clearing benchmarks, as well 212. The auction system will Commission does not provide for as the proposed method to evaluate determine whether the price benchmark activity rule waivers to preserve a whether the final stage rule criteria have is satisfied based on the average prices bidder’s eligibility in the forward been satisfied. The Commission adopts for Category 1 spectrum blocks in the 40 auction. In previous FCC SMR auctions, a modified version of the procedures it high-demand markets. The high- when a bidder’s eligibility in the current proposed for triggering an extended demand markets include PEAs 1–40. round was below a required minimum round in order to limit the size of the PEAs are numbered in decreasing order level, the bidder was able to preserve its shortfall that an extended round will of population, except that PEAs in the current level of eligibility with a limited attempt to close. states are ranked before those in the number of activity rule waivers. Several territories and protectorates. commenters support the use of such a. First Component Accordingly, PEAs 1–40 are the 40 most waivers in the forward auction. 210. The Commission adopts a $1.25 populous PEAs within the 50 states. Allowing such waivers, however, would average price and 70 megahertz licensed Had territories not been ranked after the cause the same problems that the spectrum benchmark, as well as its states, Puerto Rico would have been Commission is concerned about with proposed procedures for evaluating included in the most populous group. respect to the activity requirement. whether the first component of the final Commenters agree that it is unnecessary Thus, the auction system will require stage rule has been satisfied. The to evaluate the final stage rule based on bidders to reconfirm their bids in every forward auction spectrum benchmark of all of the PEAs, although some round and will not provide bidders with 70 megahertz of licenses corresponds to commenters propose focusing instead activity rule waivers. a spectrum clearing target of 84 on the top 25 largest markets. Since the 208. While acknowledging that a megahertz. Hence, the first component, purpose of the average price benchmark clock auction format weighs against which aims to ensure that winning bids is to establish a reserve price that activity rule waivers, U.S. Cellular is for forward auction licenses reflect appropriately balances the concerned that, in their absence, bidders competitive prices, will be satisfied if, Commission’s goals, not to predict will need more time to adjust their for a given stage of the auction: (1) The ultimate spectrum values, it declined to bidding strategies in order to maintain clearing target is at or below 70 broaden its focus to all markets because their bidding eligibility before the first megahertz and the benchmark average that would fail to promote a faster round following an increase to the price per MHz-pop for Category 1 blocks auction. While reducing the number of activity requirement and after that in high-demand PEAs in the forward markets evaluated for purposes of the round, if bidding surges ensue. CTIA is auction is at least $1.25 per MHz-pop; final stage rule might ‘‘promote an even concerned that bidders may never have or (2) The clearing target is above 70 faster auction,’’ the Commission is not time to establish a comfort level with megahertz and the total proceeds persuaded that the clock prices for the the auction system, and asks the associated with all licenses in the top 25 largest markets would ‘‘serve as Commission to ensure bidders are forward auction exceed the product of a ‘good leading indicator of final auction comfortable before moving to higher the price benchmark of $1.25 per MHz- revenues’ to the same extent as the activity levels. As is typical in its pop, the forward auction spectrum prices in the top 40 PEAs.’’ In addition, spectrum license auctions, these benchmark of 70 megahertz, and the limiting consideration of bids to concerns will be considered in setting total number of pops associated with the Category 1 blocks will be more the bidding schedule and determining Category 1 blocks in high-demand PEAs. consistent with the price benchmark whether to move to higher activity 211. Based on its review of the record derived from past auctions, which did levels as the clock phase portion of the and past auction experience, the not include licenses impaired in a forward auction progresses. Commission finds that the proposed manner comparable to Category 2 $1.25 average per MHz-pop benchmark licenses. Moreover, in evaluating 7. Final Stage Rule price balances the statutory objective of whether the price benchmark is 209. The Commission adopts seeking to recover ‘‘a portion’’ of the satisfied, the auction system will rely on procedures to implement the final stage value of the spectrum for the public gross bids, rather than bids net of rule, which establishes reserve price with the goal of a successful incentive individual bidders’ bidding credits or conditions that, when met, will auction that allows market forces to any adjustments for impairments. determine that bidding in the incentive determine the highest and best use of 213. The 70 megahertz licensed auction will end with the current stage spectrum. A number of commenters spectrum benchmark the Commission and clearing target. The Commission supported a benchmark price of $1.25. adopts corresponds with the spectrum recently reaffirmed the adoption of the The Commission disagrees with recovery scenario in which an 84 first component as a part of the final commenters who argue that $1.25 is megahertz clearing target is selected and stage rule. Accordingly, to the extent either too low or too high. While recent licenses for 70 megahertz of spectrum commenters repeat prior challenges to auction results may suggest that final are offered in the forward auction. that component, those arguments have forward auction prices ultimately will Incorporating a spectrum benchmark been answered. To the extent they seek be higher, the benchmark price is not a into the final stage rule’s first reconsideration of the rule’s adoption predictor of final auction prices, but component ‘‘recognizes that if the on other grounds, those arguments rather a reserve price or ‘‘floor,’’ incentive auction repurposes a should have been made in a petition for consistent with the Commission’s relatively large amount of spectrum for reconsideration and need not be obligation to protect the public interest flexible uses, per-unit market prices

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may be expected to decline consistent intends to update these costs no later evaluation, and the Commission finds with the increase in available supply.’’ than the commencement of bidding in that it is appropriate to adopt a In proposing this threshold for the the clock phase of the forward auction. conservative approach when ensuring spectrum benchmark, the Commission For the third element, the Commission that statutory requirements are met. explained that a 70 megahertz spectrum proposed that broadcaster relocation 217. The Commission will not make benchmark would repurpose the UHF costs be estimated at $1.75 billion, the adjustments for any Tribal lands spectrum between television channel 37 maximum amount that the Spectrum bidding credits in evaluating the second and the 700 MHz Band and would Act permits it to deposit in the TV component of the final stage rule. enable multiple bidders to obtain low- Broadcaster Relocation Fund. To be Instead, consistent with previous band spectrum, thereby promoting its prudent, the Commission will use that spectrum auctions, any subsequent competitive goals for the incentive estimate when calculating expenses for Tribal lands awards will be limited to auction. No commenters disagreed with the purposes of evaluating the costs available funds that exceed the relevant its proposal. The Commission is component of the final stage rule. The reserve price. This rule is applicable in, adopting the 70 MHz benchmark for the actual amount that will be needed to among others, ‘‘any auction with reserve specific purpose of establishing the final reimburse broadcasters from the TV price(s) in which the Commission stage rule. It should not be construed as Broadcaster Relocation Fund will not be specifies that the provision shall apply.’’ a target or projection for the amount of known until sometime after the auction. spectrum the Commission anticipates The Spectrum Act provides that the c. Evaluation Each Round clearing in the incentive auction. forward auction must generate proceeds 218. As long as the final stage rule has 214. For clearing targets higher than sufficient to meet the Commission’s not yet been met, the auction system 84 megahertz, the auction system will estimate of the total expenses, as will evaluate after each round of consider current auction proceeds for all opposed to the actual amount. While the forward auction bidding whether licenses in evaluating whether the first Commission concluded in the Incentive forward auction proceeds are sufficient component of the final stage rule is Auction R&O that the forward auction to satisfy the two components of the satisfied. Accordingly, for forward proceeds also must cover any Public final stage rule. In a new stage, the final auction stages in which more than 70 Safety Trust Fund amounts still needed stage rule will be evaluated after megahertz of licensed spectrum is to provide the funds for FirstNet bidding in the first clock round of the available in the forward auction, the specified in the Spectrum Act, proceeds forward auction is complete. The first component will be satisfied if from the recent H Block and AWS–3 auction system will make the needed current auction proceeds for all blocks— spectrum auctions are sufficient to fully calculations as part of the round results Category 1 and Category 2, in all PEAs— fund the $7 billion provided to FirstNet. processing in order to establish as soon exceed the proceeds generated by the Therefore, the procedures the as possible whether the incentive Category 1 blocks in the 40 high- Commission adopts need not include auction will conclude after forward demand PEAs at the benchmark price of any amounts to cover FirstNet expenses. $1.25 per MHz-pop and benchmark auction bidding ends at the current clearing target of 70 megahertz. On 216. The Commission adopts its clearing target. Data indicating the balance, when the clearing target is proposed approach to bidding credits progress of the auction in meeting the relatively high, the Commission finds and other discounts from clock phase various components of the final stage that the simplicity of comparing total prices for purposes of applying the rule will be made public after each auction proceeds for all blocks to the second component of the final stage round of the forward auction. rule. The auction system will consider benchmark proceeds, which is based d. Allocating Demand for Purposes of current total proceeds (for all PEAs and only on the high-demand PEAs, the Spectrum Reserve outweighs any concern for consistency both categories of blocks), net of any in including only some markets in both discounts based on impairments and 219. The Commission adopts its sides of this metric. Total auction small business bidding credits claimed proposed procedure to allocate demand proceeds information will be available by particular bidders on their short-form in order to initiate bidding for the to the public after each round, and the applications for Auction 1002. The spectrum reserve. At the time the final proceeds benchmark is a fixed number auction system will presume that the stage rule is met, Category 1 blocks in for each clearing target, making it very bidder with the largest bidding credit each PEA will be split into separate easy to evaluate whether this will win the quantity of blocks on reserved and unreserved categories, component of the final stage rule is which it is bidding and then proceed to with a separate price clock for each new satisfied. Moreover, in stages with the bidder with the next largest bidding category. In the first round following the higher clearing targets, the $1.25 credit and so on, until there are no more round in which the final stage rule is benchmark price is relaxed as long as blocks left. Moreover, since bidders will met, the clock price will be the same for overall revenues are sufficient; hence be bidding on generic blocks rather than reserved and unreserved Category 1 the tie to the high-demand PEAs is less specific licenses at the time the final blocks, but prices for the two categories important in this context. stage rule is evaluated, the auction may diverge in later rounds depending system will presume that bidders with upon the extent of excess demand in the b. Second Component—Cost Elements larger bidding credits will win blocks separate categories going forward. To 215. The Commission adopts its that are less impaired and thus, subject allocate the pre-‘‘split’’ demands of proposed procedures for implementing to less adjustment based on the extent bidders for Category 1 blocks into the the second component of the final stage of impairment. If the supply of blocks in reserved and unreserved categories, the rule. Bidding in the reverse auction will a category exceeds the aggregate auction system first will assign all determine the first cost element— demand in that category, the system will demand by non-reserve-eligible bidders winning bidder payments required for presume that any unsold blocks will be to the unreserved category, and then broadcasters. With respect to the second those that are least impaired. While this will assign demand by reserve-eligible element, the Commission’s relevant approach will likely underestimate net bidders to the reserved category up to administrative costs, it estimates these proceeds, it will not be possible to know the point where demand for reserved costs at $226 million. The Commission more exact amounts at the time of the blocks is equal to supply.

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220. Specifically, the auction system will be allowed to exceed the total demand markets. High-demand markets will first allocate demand for one block available supply in the category in the are PEAs 1–40. Since bidding in these to the reserved category for each PEA after the split. This is consistent markets generally serves as a leading reserve-eligible bidder in turn, then with the general rule that no bidder’s indicator of final auction proceeds, the demand for a second block, and so on demand for blocks in a category may Commission finds that basing the trigger until the total demands allocated to the exceed the total available supply in a on bidding for Category 1 blocks in the reserved category equal the supply of category. Thus, if the pre-split demand high-demand markets will be a reliable reserved blocks. The order of reserve- of a non-reserve-eligible bidder exceeds predictor of whether the final stage rule eligible bidders will be chosen pseudo- the supply of blocks in the unreserved can be satisfied in the current stage. The randomly. Thus, any excess demand category, the bidder’s demand for the auction system will not implement an will be for unreserved Category 1 unreserved blocks will be reduced to the extended round, however, if bidding blocks. The auction system will apply available supply. If, after the system activity has stopped for Category 1 the remaining demand of reserve- allocates the reserve-eligible bidders’ blocks in the high-demand markets but eligible bidders to unreserved Category demands to the reserved category, a the gap between current forward auction 1. The Commission adopts this reserve-eligible bidder’s remaining pre- proceeds (from all blocks in all PEAs) approach because allocating demands in split demand exceeds the total number and the amount needed to meet the final this way—as opposed to assigning all of blocks available in the unreserved stage rule exceeds 20 percent of current demand by reserve-eligible bidders to category, the bidder’s demand for the auction proceeds. Information on the reserved category—avoids the unreserved blocks will be reduced to the progress toward meeting the final stage possibility of excess supply of available supply. Non-reserve-eligible rule, including the shortfall, will be unreserved Category 1 blocks after the and reserve-eligible bidders will made public during the auction. Instead, split, which could result in unsold maintain the bidding eligibility the auction will move to a new stage licenses and lower revenues than when associated with any demand that cannot without an extended round. This the final stage rule was deemed to have be assigned to a category, and will be modification of its proposed procedures been met. As noted in the Auction 1000 able to use such bidding eligibility in addresses concerns that bidding Comment PN, this could occur if the other PEAs or in other categories in the dynamics and price discovery may be demands for Category 1 prior to the split next round. For example, assume the distorted if the auction system attempts came disproportionately from reserve- supply of Category 1 blocks in a PEA is to raise a large portion of auction eligible bidders. If all those demands seven. Prior to the split, reserve-eligible proceeds in a single round on only a were transferred to the reserved category bidder 1 (RE1) and non-reserve-eligible subset of the available blocks. after the split, demand for unreserved bidder 1 (NRE1) each demand seven 223. The Commission decline to Category 1 blocks could be less than the blocks, and two other reserve-eligible accept AT&T’s suggestion that an supply, even if demand exceeds supply bidders each demand one Category 1 extended round not be triggered until in the pre-split Category 1. Excess block. At the split, three Category 1 bidding has ended in all or almost all of supply cannot occur in the reserved blocks are reserved, leaving four the PEAs. AT&T’s suggested approach category because the actual number of unreserved blocks. NRE1’s demand for would undercut the purpose of the blocks that will be reserved in a PEA Category 1 blocks in the PEA will be extended round, which is to avoid running what may be a very large will not be greater than the number of reduced to four, and NRE1 will have number of bidding rounds before Category 1 licenses demanded by three blocks’ worth of excess eligibility ascertaining that the final stage rule reserve-eligible bidders at the time the to use in another PEA. Pursuant to the cannot be met in the current stage. auction reaches the spectrum reserve allocation method the Commission trigger. Avoiding such an outcome is an adopts, one block worth of RE1’s b. Extended Round Bidding Procedures important principle in designing the demand will be assigned to one reserved 224. The Commission adopts its forward auction. In the bidding rounds block, and the other two reserve-eligible proposed extended round bidding and that follow the implementation of the bidders’ demand will be assigned to the bid processing procedures, which are spectrum reserve, bidders will be able to other two reserved blocks, so that described in detail in Appendix G of the switch their bids between the separate demand in the reserved category equals Auction 1000 Comment PN. Under these categories of reserved Category 1, supply. Four blocks’ worth of RE1’s procedures, extended round bidding unreserved Category 1, and Category 2 remaining six blocks of demand will be will be conducted only for Category 1 blocks, consistent with its adopted assigned to the unreserved category, and blocks in high-demand markets, the bidding procedures. In this regard, RE1 will have two blocks’ worth of same set of licenses considered in contrary to AT&T’s suggestion, the excess eligibility to use in another PEA. triggering the extended round and procedure the Commission adopts for A reserve-eligible bidder that has its applying the first component of the final allocating demand at the time of the demands reduced can use the eligibility stage rule. Because bidding will have split will not prevent reserved spectrum to bid in the reserved category, if it stopped on these blocks, the currently prices from rising. In rounds after the wishes. winning bidders are very likely to split, reserve-eligible bidders may 8. Extended Round Procedures become the winning bidders when the switch to bidding for reserved blocks if clock phase ends and, hence, they will the price for unreserved blocks is rising a. Triggering an Extended Round have a strong incentive to try to ensure more quickly than the price of reserved 222. The Commission adopts the that the final stage rule can be met. blocks. The bidding procedures the procedures it proposed for triggering an Bidders in less settled markets may be Commission adopts for the forward extended round, with one modification. less inclined to accept their allocated auction will mitigate the risk that An extended round will be share of an extended round increment, reserve-eligible bidders can engage in implemented if the final stage rule is not which may in turn reduce the chances strategic bidding for non-reserved satisfied but bidding activity has that the extended round will meet the blocks. stopped—that is, if demand does not final stage rule. Moreover, asking 221. The Commission clarifies that no exceed the available supply—for participants that are bidding for the bidder’s demand for blocks in a category Category 1 blocks in the 40 high- most valuable licenses to accept an

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extended round increment will not pose together are sufficient to meet the final Commission adopts generally will an unreasonable burden, since proceeds stage rule. This point may not reduce the supply of blocks in a PEA by for comparable licenses typically necessarily correspond to a price-point one block, the Commission finds that account for a very large fraction of at which an intra-round bid is allowing a single extended round revenues in other spectrum auctions. submitted. Hence, prices in high- reduction to be applied will not unduly This is especially so given the demand PEAs where there is an intra- risk creating unsold licenses. Commission’s decision to limit the round bid will stop increasing when bid 9. Stopping Procedures circumstances in which the extended processing reaches the price point of the round will be implemented to ensure first requested reduction if the final 229. The auction system will employ that the shortfall in proceeds is not too stage rule has not yet been met. In high- a simultaneous stopping rule for the large. Therefore, the Commission demand PEAs without a reduction clock phase of the forward auction in declines to adopt AT&T’s suggestion to request, prices will stop at the price the final stage. Specifically, if the final include all available licenses in the point at which the final stage rule is stage rule has been met (with or without extended round bidding. met. an extended round), the clock phase of 225. Under the procedures the 227. If the final stage rule is met in the bidding will end for all categories of Commission adopts, the auction system extended round, the uniform price licenses following the first round in will set an extended round clock price applying to all Category 1 blocks in each which there is no excess demand in any increment for Category 1 blocks in each high-demand market will increase only category in any PEA. Forward auction high-demand PEA that is 33 percent as much as needed to meet the final bidders that are still expressing demand larger than the increment required to stage rule. Regular clock rounds will for a category of a PEA at the time the satisfy the final stage rule. The same resume with the spectrum reserve in stopping rule is met will become the percentage increment will be applied to place, and clock rounds will continue as winning bidders, and will be assigned Category 1 blocks in each high-demand long as there is excess demand in any specific frequencies in the assignment PEA, such that the additional proceeds category in any PEA. In PEAs where phase. over all the areas would equal 133 there was extended round bidding, B. Assignment Phase percent of the amount needed to meet clock prices for Category 1 blocks in the the shortfall. High-demand PEAs where first new clock round will be based on 230. The assignment phase will there is excess supply will not be the extended round stopped price. determine which frequency-specific included in extended round bidding. Where there was no extended round licenses will be won by the winning This required amount will be the bidding—that is, for Category 2 blocks bidders of generic blocks during the amount needed to meet the first or and Category 1 blocks in non-high- clock phase. In the assignment phase, second components of the rule, demand PEAs—clock prices in the next winning bidders will have the whichever is greater. Setting the clock clock round will be based on prices opportunity to bid for preferred price 33 percent higher than the from the last regular clock round. combinations of frequency-specific minimum amount necessary to meet the However, even if in the extended round licenses. A bidder can assign a price reserve price will enable the extended the price stopped in a PEA at an intra- using a sealed bid to one or more round to satisfy the rule even if a market round price point at which a bidder possible frequency assignments for clearing price in some PEAs is less than requested a reduction, the reduction which it wishes to express a preference, proportional to the full gap in proceeds, will not be applied to the bidder’s consistent with its winning bids for by permitting bidders in markets with demands, since applying the reduction generic blocks in the clock phase. For higher market clearing prices to make would result in excess supply. The instance, if a bidder won two Category up for the difference in needed bidder will still demand the quantity it 1 blocks and one Category 2 block in the proceeds. demanded going into the extended clock phase, then it will only be offered 226. A bidder in the extended round round, but at the stopped price. the option of bidding for frequency will be permitted to accept the clock 228. If the final stage rule cannot be assignments with exactly two Category price for the blocks it demands or to met in the extended round, the current 1 licenses and one Category 2 license. submit an intra-round bid that requests stage of the auction will end and a new The bid prices will represent a a reduction of one block at a price lower stage will begin. In PEAs where there maximum payment that the bidder is than the clock price. Only bidders that was extended round bidding, clock willing to pay for the frequency-specific demanded blocks in the previous round prices for the first round of the forward license assignment, in addition to the in the category may bid in the extended auction in a new stage will be based on final price established in the clock round. A bidder will not be able to the extended round stopped price in phase for the generic blocks, which may request an increase in demand in the PEAs where a reduction was requested, be subject to an impairment discount. extended round. The auction system and on the extended round clock price The procedures the Commission will consider bids in all PEAs for which if no reduction was requested. If there establishes will determine the optimal there is extended round bidding in was no extended round bidding, i.e., for assignment of licenses within each PEA increasing order of price point (and Category 2 blocks and Category 1 blocks by first considering a series of spectral random number in the case of ties). A in non-high-demand PEAs, clock prices contiguity objectives and then, if there quasi-random number will be associated in the new stage will be based on the are multiple arrangements that meet the with each bid as it is submitted. At the last regular clock round. In contrast to contiguity objectives, determine lowest price point at which the auction the case where the final stage rule is assignments based on bid amount in the system encounters an intra-round bid in met, if a bidder requested a reduction assignment phase. As a simple example, a given PEA, the uniform price applying that stopped the price in the extended assume four identical blocks are to Category 1 blocks in that PEA will round, the auction system will apply available in a PEA, and two bidders won stop increasing. The auction system will that reduction to the bidder’s demands two blocks each in the clock phase, and stop processing bids if it reaches a point going into the next stage. Since a bidder each was presented with bidding where the total additional proceeds can request a reduction of at most one options for contiguous blocks AB and associated with the extended round block in the extended round, and the CD. One bidder bid 10 for AB and 0 for prices in the high-demand PEAs stage transition procedures the CD, the other bidder bid 12 for AB and

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0 for CD in the assignment phase. The consisting of possible configurations of market bidding credit cap (i.e., those auction system will assign AB to the frequency-specific licenses on which it PEAs with a population of 500,000 or second bidder, and CD to the first can bid in each PEA in which it holds less, which corresponds to PEAs 118– bidder. winning clock phase bids, as U.S. 416, excluding PEA 412); or (c) All in 231. The Commission generally Cellular proposed. These bidding the same REAG and are subject to the adopts the assignment round procedures options will be consistent with the small market bidding credit cap; (2) proposed in the Auction 1000 Comment bidder’s clock phase winnings and Each PEA in the group has the exact PN, except that in response to concerns information. The auction system may, in same number of blocks, all of which are expressed by commenters the some cases, offer a bidder assignment Category 1 blocks and are zero percent Commission will not group PEAs when bidding options that include impaired; and (3) Each PEA in the group any of the licenses are at all impaired. combinations that are not possible for has the same mix of clock phase This modified approach to grouping the bidder to win, given the winnings of winners and winnings. For example, in PEAs will ensure that bidders can other bidders, in order to avoid all PEAs in the group there are five express divergent frequency preferences disclosing too much information about Category 1 blocks with zero percent for impaired licenses across geographic the winning bids of other bidders. In impairment. Bidder A won one block in areas. other cases, if there is only one possible each of the PEAs in the group. Bidder 1. Availability of Auction-Related assignment in a PEA given a bidder’s B won one block in each of the PEAs, Information to Bidders winnings (for example, if a bidder won and Bidder C won three blocks in each the only available Category 2 block and of the PEAs 232. Prior to commencement of no Category 1 blocks), the bidder may 237. These requirements will assure bidding in the assignment phase, the not be offered a bidding option but will that in any grouping, assignment round auction system will inform all winning be assigned to that option by the auction bidders will be presented with a set of bidders from the clock phase of the system. Providing such information will PEAs with blocks with the same extent to which contiguous blocks facilitate participation in the assignment characteristics, which should reduce feasibly may be assigned in every PEA. phase, particularly for smaller bidders uncertainty and simplify bidding for all This applies to all blocks in the PEA with fewer resources to expend on bidders. No PEAs will be grouped in the irrespective of whether they are in analysis, by limiting the number of assignment phase if any of the blocks Category 1 or Category 2, reserved or frequency configurations on which they are considered impaired. That is, all unreserved, or are impaired to varying need to consider for the assignment blocks will be considered 0 percent extents. More specifically, the auction phase. impaired. The Commission’s modified system will provide information with 234. The auction system will provide approach addresses concerns raised by respect to each PEA on whether, clock phase winning bidders with the commenters, including Sprint, U.S. consistent with the contiguity information as soon as possible and Cellular, and others, that the approach objectives: (1) It is possible to assign announce a schedule of assignment the Commission proposed might not contiguous blocks to all winning phase rounds that will commence give bidders sufficient flexibility to bidders in the clock phase, or, if not, beginning no less than five business express preferences for assignments in (2a) that it is possible to assign at least cases where PEAs with licenses in the two contiguous blocks to all winning days later. While CTIA advocates at least 10 days between the provision of same category are impaired differently bidders of two or more blocks in the but are grouped together for bidding. clock phase, or (2b) that it is not detailed information and the possible to assign at least two commencement of the assignment b. Intra-PEA Contiguity Objectives contiguous blocks to all winning phase, the Commission finds that five 238. The auction system will use an bidders of two or more blocks in the days will be sufficient for bidders to optimization process to determine for clock phase. The auction system will prepare given the information that will each PEA or PEA group various possible determine the potential for contiguous be made available to facilitate bidding configurations of frequency-specific frequency assignments, as well as the in the assignment phase. licenses consistent with the pattern of assignment phase bidding options 235. When an assignment round winning bidders and block categories provided to each bidder, based on the concludes, the auction system also will from the clock phase. More specifically, availability of frequency-specific advise the bidders in each PEA of their the auction system will apply the licenses corresponding to Category 1 own payments and assignments. following contiguity objectives, taking and Category 2 blocks in the PEA (or 2. Structure of the Assignment Phase into account both Category 1 and group of PEAs), and the contiguity Category 2 blocks: (1) For bidders that a. Grouping of PEAs objectives that are possible given the win multiple blocks, maximize the particular mix of bidders and the 236. The Commission adopts its number of bidders that are assigned at categories of their clock phase winning. proposed requirements for grouping least two contiguous blocks; (2) for This information will enable a bidder to PEAs for assignment phase bidding bidders that win multiple blocks, assess the likelihood of being assigned purposes, with an additional minimize the number of blocks that are contiguous blocks, and the extent to requirement in response to concerns non-contiguous to any of the bidder’s which contiguity may be possible across expressed by commenters regarding other blocks; (3) maximize the number PEAs. Providing such information about bidding for licenses with impairments. of bidders that are assigned only all PEAs to all winning bidders, rather Specifically, the auction system will contiguous blocks; and (4) maximize the than only to winners in each specific group together PEAs in a single number of pairs of unsold blocks that PEA, averts the risk that winning assignment round only if all of the are contiguous as long as the bidders in a large number of PEAs will following three conditions are met: (1) impairment of blocks to winning gain an undue advantage over others. The PEAs are one of the following: (a) bidders does not increase. These 233. In addition to the foregoing All high-demand (PEAs 1–40), objectives are consistent with comments information, the auction system will regardless of Regional Economic Area indicating that carriers place significant provide to each assignment phase Grouping (REAG); (b) All in the same value on spectrally contiguous bidder a menu of bidding options REAG and not subject to the small spectrum, as well as some commenters’

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arguments that prioritizing inter-PEA or PEA group with the greatest number sequencing procedures it adopts will contiguity, as opposed to contiguity of weighted-pops. Bidding will continue lead to a lack of interoperability as a within PEAs, could disadvantage certain in descending order of weighted-pops result of larger carriers establishing carriers and create opportunities for until specific frequencies have been consistent footprints in one section of discriminatory conduct. assigned in all the high-demand PEAs. the 600 MHz Band, leading equipment 239. The contiguity objectives will be Once frequencies have been assigned for manufacturers to tailor equipment only applied in the order specified, so that the high-demand PEAs, the auction to those frequencies, and note moreover the second objective will only be system will conduct a series of that its rules require interoperability applied to possible assignments that assignment rounds for the non-high- throughout the 600 MHz Band. The fully satisfy the first objective, the third demand PEAs within each of the six Incentive Auction R&O adopted a strong objective will only apply to assignments REAGs, again in descending order of interoperability rule that requires that that fully satisfy the first two objectives, weighted-pops. The Commission expect any user equipment certified to operate and so on. As a result, the fourth that the auction system will run the in any portion of the 600 MHz Band objective regarding unsold blocks will assignment rounds for non-high- must be capable of operating, using the not adversely affect the assignment of demand PEAs associated with different same technology that the licensee has contiguous blocks as determined by the REAGs in parallel. However, an elected to use, throughout the entire 600 first three objectives. The Commission alternative schedule for the REAG MHz Band. adopts the fourth objective, in addition rounds, of which bidders will be given d. Bidding and Bid Processing to the three objectives it proposed in the ample notice, may be necessary in the Auction 1000 Comment PN, in order to event that running multiple rounds in 244. Once bids have been submitted, ensure that, if the auction system must parallel is deemed too complicated for the auction system will perform an choose between an assignment in which bidders, the auction managers, or the optimization to select as the winning any unsold blocks are contiguous or auction system. Within each REAG, the license assignment that configuration, separated, the system will choose the assignment rounds would be conducted consistent with the continuity objectives contiguous assignment, thus one PEA or PEA group at a time, and the options provided to bidders in maximizing the value of blocks retained sequentially. advance, for which bidders indicate the by the FCC. 242. The Commission is not greatest willingness to pay. Ties, if any, 240. The Commission declines to persuaded by arguments that larger will be broken by including pseudo- adopt CCA’s proposal for the auction bidders would derive a significant random numbers in the optimization. system to assign the winning bidder of advantage from being able to participate Bidding in an assignment round is a single license in a PEA the least in assignment rounds that are voluntary. If a bidder chooses not to bid impaired license block before assigning sequenced earlier in the assignment in an assignment round, the auction any others. The Commission disagrees phase process, and hence, the system will assign a zero bid to each of with the premise of CCA’s proposal that Commission declines to adopt the the bidder’s available options, or to any the first three objectives uniformly favor commenters’ proposal to randomly option for which the bidder does not multi-license or multi-market winning sequence the assignment rounds to submit a bid. Bidders that choose not to bidders and harm carriers that purchase avoid any timing advantage. The bid in an assignment round will be only one license in a PEA. The Commission finds that the information assigned licenses consistent with their contiguity objectives will be applied it will provide—on bidders’ own winnings in the clock phase of the without regard to the level of bidding options and on the potential for auction and the contiguity objectives. impairment and therefore will not favor contiguous assignments in each PEA— The Commission declines to implement any bidder or type of bidder. The will minimize any ‘‘early mover’’ the suggestion that the auction system Commission also declines to adopt U.S. informational advantage. In addition, process assignment round bids by Cellular’s proposal for an additional the second-pricing procedures will looking separately at the high bids on objective which minimizes the simplify bidding strategy for bidders, various licenses, since bids will be used difference in the average level of mitigating any potential advantage from to select a single configuration of license impairment of the same-category bidding ‘‘experience’’ in the assignment assignments and the licenses with the license(s) assigned to any two bidders. phase. highest bids may not be in the same Since bidders may value impairments 243. The Commission also rejects the configuration. differently, the Commission prefers to assumption that earlier bidding for 245. Under the assignment phase allow bidders to indicate their own frequency assignments in the high- bidding procedures the Commission frequency preferences through their demand markets will enable winners of adopts, winners of either reserved or bidding in the assignment phase. blocks in those markets to establish unreserved Category 1 blocks will be consistent frequency ‘‘footprints’’ that able to bid for the available frequencies c. Sequencing of Assignment Phase they will later pay a premium to extend, in Category 1, and the auction system Bidding thereby disadvantaging bidders with will assign specific frequencies without 241. The Commission adopts its fewer resources to spend in the regard to the reserve-eligible status of proposal to sequence bidding on PEAs assignment phase. The intra-area the bidder. In other words, the auction or PEA groups in the assignment phase contiguity objectives will limit bidders’ system will not differentiate in the based on total weighted-pops, beginning abilities to establish consistent assignment rounds between reserved with the high-demand PEAs and then frequency footprints across PEAs. and unreserved spectrum blocks. moving to non-high- demand PEAs by Because the auction system will only Subsequent to making frequency REAG. For assignment phase bidding, allow bids for license combinations that assignments in the assignment phase, in assignment rounds for the PEAs in the satisfy those contiguity objectives, it is order to determine final license prices, six smaller REAGs will be sequenced unlikely that a single bidder will have the auction system will determine with one of the six continental REAGs. the opportunity to bid for and win a which license or licenses are deemed as Under this approach, clock phase consistent footprint in all areas in which reserved, if a bidder wins both reserved winning bidders of blocks in the high- it won blocks. Consequently, the and unreserved Category 1 blocks in a demand PEAs will first bid on the PEA Commission is not persuaded that the single PEA or PEA group. Consistent

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with the record, the procedures the express the intensity of preferences for Accordingly, the Commission is not Commission adopts will prioritize the particular licenses, which the points- persuaded that clock phase revenues assignment of contiguous blocks within based approaches generally do not. This will be significantly suppressed by the PEAs in order to promote efficient will lead to potentially more effective use of competitive bidding procedures utilization of the 600 MHz Band. use of the spectrum than would a in the assignment phase. Differentiating between reserved and random assignment mechanism. 248. The Commission also disagrees unreserved blocks would undermine 247. In addition, the Commission with arguments that a competitive this objective by making it more finds that competitive bidding will bidding-based approach to the difficult to assign frequency-contiguous provide a greater incentive for sincere assignment phase will disadvantage spectrum blocks to winners of blocks in bidding—since real resources will be at smaller carriers. First, the assignment an area, particularly if a bidder wins stake—than would a system of ‘‘draft phase structure will level the both reserved and unreserved blocks. pick’’ preferences or points based competitive playing field: The auction Further, the Commission is not bidding, as also suggested by system will prioritize assigning persuaded that differentiating is commenters. The Commission further contiguous frequency blocks within necessary to ensure fulfillment of its rejects arguments that the competitive each PEA before taking bids, without competitive goals for the auction, bidding-based approach it adopts to the regard to whether potential bidders (the especially since all reserved blocks will assignment phase will depress revenues winning bidders in the clock phase) are be Category 1, and therefore relatively in the clock phase, potentially causing nationwide carriers or regional entities, reserve-eligible or not, and without substitutable. Accordingly, the the auction to move to a lower clearing taking into account the extent of Commission declines to assign reserved target because the final stage rule cannot impairment within a bidding category. and non-reserved licenses separately be met. In other spectrum auctions By prioritizing intra-area contiguity of during the assignment rounds. around the world in which similar licenses, the assignment phase structure 246. The Commission declines to assignment phase designs have been will protect all bidders equally from adopt an assignment approach that used, the revenues in the assignment discontiguous frequency assignments, would rely on random or quasi-random phase have averaged less than 0.5 even if a bidder does not submit an distribution of licenses, or other non- percent of the total auction revenues. assignment round bid. Second, smaller For example, assignment phase monetary bidding for frequency carriers are as likely as larger ones to be preferences, as some commenters revenues were 1.15 percent of total able to benefit from expressing suggest. The Commission also declines auction revenues in the 2013 UK 4G assignment phase preferences. Indeed, to adopt the alternative approach Auction. In the 2013 Australian Digital because the networks of smaller carriers advocated by U.S. Cellular and others, Dividend Auction, while the auction may be less flexible than those of the under which the auction system would data was not released in full, an upper nationwide carriers, the ability to bid for take into account preferences for bound of 0.19 percent can be calculated frequency-specific preferences may be contiguous blocks within an area and using available public data for all the more important for smaller then randomly determine the remaining assignment phase revenues as a carriers. Moreover, because the frequency assignment. The Commission percentage of total auction revenues. contiguity objectives will seek to assign determined in the Incentive Auction Assignment phase revenues were less two contiguous blocks to each winner R&O that the use of competitive bidding than 0.01 percent of total auction before trying to assign any winner three procedures would promote the revenues in the Canadian 700 MHz or more contiguous blocks, they are efficiency of the assignment process, Auction. On the contrary, bidders may likely to benefit carriers that win fewer and allow more confident bidding for bid more aggressively in the clock phase than three blocks within a PEA over generic licenses in the clock phase of because they know that they will later carriers that win more. Third, the forward auction, by facilitating the have an opportunity to bid for a designated entity bidding credits will assignment of specific frequencies to the strongly-held frequency preference in apply to assignment phase payments, highest-valuing users. Accordingly, the the assignment phase. In addition, given giving smaller carriers that qualify as Commission rejected an administrative, its projections that the initial clearing designated entities a price advantage random or quasi-random process. target procedure will result in a very over larger carriers in assignment phase Nevertheless, these commenters assert high proportion of Category 1 blocks bidding. that using competitive bidding will give with minimal or no impairment, and its 249. Moreover, under the competitive an advantage to nationwide carriers in decision to make detailed impairment bidding-based procedure the obtaining the least impaired blocks in a information available to bidders prior to Commission adopts, bidding strategies category, leaving less desirable blocks the commencement of bidding in the will be easier than more complex and for the smaller and regional carriers. clock phase of the forward auction, unfamiliar procedures advocated by They argue further that bidding in the bidders generally are unlikely to hold some commenters. For example, the assignment phase is likely to depress back their clock phase bids in order to ‘‘serial priority-assessment algorithm’’ revenue in the clock phase. The be able to secure the least impaired approach advocated by T-Mobile and Commission reaffirms that giving licenses in the assignment phase. In U.S. Cellular would require a bidder to bidders the opportunity to bid monetary most PEAs, the Commission expects understand a new bidding mechanism amounts for specific frequency that there will be insufficient in which the optimal bidding strategy is preferences in the assignment phase, impairment or variety in the degree to not clear and depends on what strategy which they will not be able to express which licenses are impaired to warrant it expects others to play. Choosing in the bidding for generic blocks in the such action. The discount on clock selection order randomly and enforcing clock phase, will allow the auction phase prices for any license rotations among bidders, as advocated system to take bidder interests into impairments also will help account for by T-Mobile and U.S. Cellular, would account in assigning frequency-specific variation in value due to impairment, result in a less efficient assignment than licenses. Moreover, the Commission minimizing the incentive to limit clock if bidders can express preferences using agrees that a monetary bidding-based phase bids to the value of the most monetary bids, which also allow for assignment round will allow bidders to impaired generic block in a category. varying intensity of preferences. In

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combination with the ‘‘second-pricing’’ C. Final Winning Bid Amounts finds that this rule is clear and simple approach, the procedures the 251. The Commission adopts the to implement, and will result in Commission adopts will allow bidders procedures proposed in the Auction assigning contiguous reserved licenses to follow a clear and familiar strategy: 1000 Comment PN for determining final in cases where a bidder wins multiple Bid the incremental value of a specific forward auction prices, on which it reserved blocks as well as unreserved assignment option, knowing that the received no feedback from commenters. blocks, which a random assignment payment will be equal to or less than The final price that a winning bidder mechanism will not necessarily do. that bid amount. For example, assume a must pay for a license it wins in the VII. Transition, if Necessary, to Any bidder’s three possible assignments are assignment phase will be the final clock Subsequent Stage AB, BC, and CD. All that the bidder phase price for the category of license it 253. If a stage of the auction ends needs to do is determine a valuation for won within a given PEA, adjusted by without satisfying the final stage rule, AB, BC, and CD. Assume these the percentage of any impairment to the the auction system will begin a new valuations are $120 million, $110 frequency block, plus any assignment stage of the auction using a lower million, and $100 million, respectively, phase payment, all reduced by any clearing target. The reverse auction will and the final clock phase price for A, B, designated entity bidding credit. be conducted for the applicable clearing 252. The Commission clarifies that, in and C was $100 million. The bidder target followed by the forward auction. the event a bidder wins both Category would assign a value of $0 to its lowest The auction system will announce the priority assignment, CD, and submit a 1 reserved and unreserved blocks in the new clearing target to bidders, as well bid of $10 million for BC and $20 same PEA in the clock phase, in as a bidding schedule for the reverse million for AB. The bidder’s valuation determining final payments, the auction auction. A new stage of the reverse system will deem as reserved that block would not depend on guesses about auction will begin not sooner than five or blocks that will yield the bidder the others’ bids. business days after the conclusion of the lowest price, taking into account the prior stage of the forward auction. CTIA e. Assignment Phase Payment final clock phase price for the category requests that the Commission allow at Calculations and the impairment discount. The least two weeks between auction stages. blocks that are deemed reserved will The Commission concludes that five 250. The Commission adopts the carry the restrictions on transferability, business days will provide the auction procedures it proposed to calculate the consistent with the conditions on system with adequate time to conduct a assignment phase payment (above the reserved spectrum established in the clearing target optimization and provide discounted final clock phase price) a Mobile Spectrum Holdings R&O. This forward auction bidders with bidder will pay for a frequency-specific approach will maximize the impairment impairment information for the new license using a generalized ‘‘second discount. For example, assume that in stage of the auction. While forward price’’ approach. The final clock phase the clock phase a bidder won one auction bidders need time to analyze price of an impaired license will be unreserved Category 1 block and one new impairment data, the Commission discounted by an amount proportional reserved Category 1 block in a PEA. The notes that such bidders will have that to the extent of impairment. Under this assignment phase procedures information for the entirety of the stage approach, the auction system will determined that the bidder would be of the reverse auction. Additionally, at calculate a payment amount that, if the assigned blocks E and F, where block E a lower clearing target, there generally winning bidder had bid that amount, is two percent impaired and block F is will be fewer impairing stations for would have been just sufficient to result zero percent impaired. The assignment forward auction bidders to consider. in the bidder receiving the same phase payment is determined to be The Commission concludes that bidders winning frequency-specific license $100. If the final clock phase prices will have sufficient time to process new assignment. This pricing approach is a were $1,000 for reserved blocks and impairment information and version of a Vickrey-Clarke-Groves $1,200 for unreserved blocks, then the E commenters have not provided it with mechanism. This payment will be less block would be deemed unreserved and a compelling reason to delay the start of than or equal to the amount the bidder the F block would be deemed reserved. a subsequent stage of the reverse auction indicates in its bid that it is willing to Conversely, if the final clock phase by an additional week. Reverse and pay for the assignment. The prices were $1,200 for reserved blocks forward auction bidding in subsequent and $1,000 for unreserved blocks, then Commission find that this approach will stages will carry-over from the prior the E block would be deemed reserved simplify bidding strategies for bidders stage—the prices will continue to and the F block would be deemed by giving them an incentive to bid what descend in the reverse auction and unreserved. In either event, the bidder’s continue to rise in the forward. they consider to be full value for the final payment amount for blocks EF, assignment: If the assignment is assuming it has no designated entity A. Selecting a New Clearing Target selected, they will pay no more than bidding credit, will be calculated as 254. The clearing target for any would have been necessary to ensure follows: {1,000 + 1,200*0.98} + {100} = subsequent stage of the auction that the assignment won. While U.S. $2,276. If, for example, the bidder is generally will be the next lowest Cellular indicates that inexperience eligible for a designated entity bidding clearing target in the 600 MHz Band with a second-pricing approach may credit, its total payment will be reduced Plan. As with the initial clearing target, still lead bidders to ‘‘overbid,’’ the by the amount of the bidding credit, prior to bidding in a new stage, the Commission is confident that as bidders subject to any cap. In the event that the auction system will make public the consider seriously their bidding reserved and unreserved blocks have the new clearing target. In the Auction 1000 strategies, this incentive will become same final clock phase prices or the Comment PN, the Commission also apparent to them. Appendix H from the blocks are equally impaired, blocks will sought comment on the alternative of Auction 1000 Comment PN includes a be designated as reserved in descending skipping clearing targets when moving detailed explanation of the procedures order of frequency. While ties in FCC to a new stage. CTIA and EOBC both the Commission will use to determine auctions are traditionally broken argue against skipping any clearing the assignment round payment. pseudo-randomly, the Commission targets as the auction advances to

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subsequent stages. CTIA is concerned auction in any subsequent stages. In the the price decrement. Specifically, the that if the Commission skips a clearing beginning of a new stage, the auction auction system will increase the price target it could unknowingly bypass an system will re-evaluate the bidding decrement only for the next round so as opportunity to clear additional status of each station that was ‘‘frozen— to meet the highest catch up point of a spectrum. The Commission generally provisionally winning’’ in the prior station that is pending catch up. This agrees. Therefore, in any subsequent stage of the reverse auction in light of change will be announced to bidders stage, the clearing target determination the reduced clearing target, notifying immediately prior to adjusting the procedure will be applied for the next every such station of its new status, and decrement. Once the base clock price lowest clearing target. It may be resetting the base clock price. descends to that point, such bidders necessary to skip the 108 MHz clearing 257. The auction system will reset the will see their station’s bidding status target to better harmonize our band plan base clock price to the highest ‘‘catch up change to ‘‘bidding in the current with Canada or Mexico. Under this point’’ of all newly-active stations. round’’ if the station has a feasible procedure, the current assignment of Active stations are all participating channel assignment, or ‘‘frozen— participating stations to relinquishment stations that have not exited or become currently infeasible’’ if the station is a options from the reverse auction will provisional winners. At the start of the VHF station and does not currently have not change. The optimization tool will new stage, each provisional winner from a feasible channel assignment. Bidders determine a new provisional television the prior stage will have its status who are asked to bid in a new stage will assignment plan for the UHF band using reevaluated to take account of the new be able to bid using the bidding the same objectives as in the initial clearing target. In a subsequent stage, procedures including requesting to clearing target optimization, taking into the auction system will inform newly- switch to another bid option if their account the additional channel in the active stations that they will be returned station is eligible to do so. Any stations TV band and any participating stations to the active status of ‘‘bidding in that exited in a prior stage will retain that have dropped out of the auction in current round,’’ ‘‘frozen—currently that status and will not resume bidding. the previous stage. As part of this infeasible,’’ or ‘‘frozen—pending catch process, the optimization procedure up,’’ whichever the case may be, at the C. Forward Auction Bidding may modify the provisional assignment beginning of the reverse auction in the 1. License Inventory by Category and of stations to the 600 MHz Band from new stage. For each newly-active PEA the prior stage in order to minimize station, its catch up point will be the impaired weighted-pops and carry out base clock price at the time that the 259. In the forward auction in a the other objectives the Commission station became provisionally winning in subsequent stage, the number of adopts. Prior to the start of the reverse a previous stage. In the first round of the spectrum blocks available in each PEA auction in a new stage, the auction new stage, the newly-active station(s) will generally be reduced by one. The system will provide forward auction with the highest catch up point will number of Category 1 and Category 2 bidders with the same impairment and become either ‘‘bidding in the current licenses available in a given PEA may other information as will be provided to round’’ (applicable to UHF or VHF increase or decrease, however, because bidders in the initial stage. Based on the stations) or ‘‘frozen—currently the clearing target determination new provisional television channel infeasible’’ (applicable only to VHF procedure between stages may change assignment plan, the nationwide stations), while all newly-active stations the assignment of television stations to impaired weighted-pops will be with lower catch up points will become the 600 MHz Band, altering the extent calculated on a 2x2 cell level. The one- ‘‘frozen—pending catch up.’’ The and location of impairments in the block-equivalent nationwide standard auction system will inform reverse available blocks. Prior to the start of the for impairments will then be applied. In auction bidders of their bidding status forward auction in a new stage, the the event that the new plan does not after each round of the auction and at auction system will inform forward meet the standard, the process will be the start of a new stage. Bidders that auction bidders of the new band plan, repeated at the next lowest clearing have a station that is ‘‘frozen—pending including the number of blocks that will target until a plan is identified that catch up’’ or ‘‘frozen—currently be available in each category in each meets the one-block-equivalent infeasible’’ may place proxy bid PEA, and the same types of impairment impairment standard. The Commission instructions, if they so choose, in information provided prior to the initial anticipates that only in rare situations accordance with the reverse auction stage of the auction. The auction system would the process result in moving bidding procedures. will not evaluate whether the final stage down more than one clearing target. 258. The base clock price will rule has been satisfied until after 255. In Attachment A to the Auction descend from the reset price (i.e., the bidding in the first clock round of the 1000 Bidding Procedures Public Notice, highest catch up point of newly-active forward auction in a subsequent stage is the Commission provides a description stations). The auction system will complete. calculate new price offers for bidding of how its computer model will apply a. Bidder Demands and Bidding stations using the descending clock the between-stages clearing target Eligibility determination procedure the pricing procedures. Bidders with a Commission adopts on a step-by-step newly-active station that is ‘‘frozen— 260. The auction system will initiate basis. An updated version of Appendix pending catch up’’ will not resume bidding in the forward auction in any C to the Auction 1000 Comment PN bidding in the current round until the subsequent stage based on bidder setting forth the technical details and base clock price falls below the station’s demands and bidder eligibility from the formulas associated with this procedure catch up point and its status changes. In end of the previous stage. If a new stage will be included with the appendices to order to avoid rounds in which no does not follow an extended round the Application Procedures PN. bidders are able to submit bids, if in any because the shortfall to meet the final round there would be no stations that stage rule was too large, bidder demands B. Reverse Auction Bidding have the status ‘‘bidding in the current and eligibility at the start of the first 256. The Commission adopts its round’’ but there are stations that round of the forward auction in the new proposals for resuming bidding and remain ‘‘frozen—pending catch up,’’ the stage will be equal to those accepted by setting clock prices in the reverse auction system will temporarily adjust the auction system at the end of the last

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regular clock round in the previous extent of impairments, the auction amount of spectrum cleared in the stage. system will accept requests to reduce incentive auction. Moreover, the 261. If the forward auction in a new demand for Category 2 blocks in the first procedures the Commission adopts to stage follows an extended round in round of the forward auction in a prevent an extended round if the which the final stage rule was not met, subsequent stage, even if the reduction needed shortfall to satisfy the final stage bidder demands will be based on will result in demand falling below rule is too large will limit the extent to bidding in the extended round for supply for that category. Bidder which clock prices can increase from license categories in PEAs that eligibility in a subsequent stage will be stage to stage, mitigating T-Mobile’s participated in the extended round, and based on the bidder’s bidding activity at concern that a failed extended round on demands from the last regular clock the end of the previous stage. A bidder will set ‘‘an artificially inflated price round for license categories and PEAs will begin the first round of the forward floor for subsequent stages’’ of the that did not participate. More auction in the new stage with its auction, potentially leading to reduced specifically, for categories of blocks for eligibility reset based on bidding in the bidder demands and fewer blocks in the which all bidders indicate that they are extended round for licenses for which spectrum reserve. The pricing willing to accept the full extended there was bidding in the extended procedures the Commission adopts will round price increment, bidder demands round, and for other licenses on bidding provide a smooth transition between will carry over from the extended in the last regular clock round. stages and sound incentives for round. For categories for which a straightforward bidding in the forward b. Clock Price reduction was accepted, bidder auction in any subsequent stages. demands from the start of the extended 263. The auction system will initiate round will carry over to the new stage forward auction bidding in any VIII. Final Television Channel for all but the bidder whose requested subsequent stage based on prices from Assignment Plan Selection Procedure reduction was accepted. Under the the end of the previous stage. The price 265. Once the forward auction procedures the Commission adopts for increment in the first round of the satisfies the final stage rule, no processing extended round bids when forward auction in the next stage will be additional stages will be required: At the final stage rule is not met, the added to the last clock price from the that time it will be possible to finalize auction system will process a demand previous stage, or to the intra-round the provisional television channel reduction of up to one block per ‘‘high- price at which a reduction that brought assignment plan for the remaining demand’’ PEA. In some cases the supply demand down to equal supply was television bands using the optimization of Category 1 blocks in a PEA may not processed. If an extended round was procedures. The satisfaction of the final decrease in a subsequent stage in spite held, for blocks not subject to extended stage rule will be publicly announced. of the lower clearing target because the round bidding (i.e., Category 2 blocks The final television channel assignment clearing target selection procedure and blocks in non-high-demand PEAs) plan will not be released until after the could reduce impairments to licenses in clock prices for the first round in the close of the forward auction. The a PEA sufficiently that one or more new stage will be based on prices from mathematical formulas for blocks previously considered Category 2 the round preceding the extended implementing the final television will be considered Category 1 in the round. For categories subject to channel assignment selection procedure new stage, so that even with a lower extended round bidding, the increment will be set forth in an appendix to the total number of blocks, the number of will be added to the extended round Application Procedures PN. The results Category 1 blocks will not decrease. The clock price if no reduction was of the final television channel Commission anticipates that, in such requested in the category, or the lowest assignment plan selection procedure cases, bidders previously demanding a price at which a reduction was will be announced by the Media and Category 2 block, the supply of which requested. If the new stage is triggered Wireless Telecommunications Bureaus will be reduced disproportionately, are without an extended round because the in the Channel Reassignment Public likely to shift to bid on the Category 1 shortfall in proceeds was sufficiently Notice after the completion of the blocks, so that demand for the Category large, these procedures are equivalent to reverse and forward auctions. 1 blocks will at least equal supply. That setting clock prices for the first round of 266. The final television channel bidder’s demand will reflect the the new stage as if it were a new round assignment plan will include a channel reduction, consistent with its extended in the previous stage. assignment for each eligible full power round bid processing procedures. For 264. The Commission disagrees with and Class A television station that will blocks that are not included in bidding T-Mobile’s assertion that forward remain on the air post-auction; i.e., in the extended round, bidder demands auction clock prices in a subsequent those that did not participate in the that were accepted at the end of the last stage should reflect the reduction in reverse auction, those that participated regular clock round of the previous payments to provisionally winning but exited the bidding, and those that stage will carry over to the beginning of reverse auction bidders and relocation successfully bid to voluntarily relocate the next stage. If supply exceeds expenses resulting from a lower clearing to a different TV band. With the demand in a category because a bidder target. Nor is the Commission persuaded exception of any stations that were on a Category 2 block chose to reduce to set clock prices in a new stage that assigned to channels in the 600 MHz its demand, taking advantage of the are just sufficient to satisfy the final Band in the final stage of the auction, all exception to the rule that reductions stage rule for the reduced spectrum provisional television channel will not be applied if aggregate demand clearing target. The Commission agrees assignments will be subject to change in will fall below supply, the clock price with AT&T that rolling back prices the final television channel assignment for the second round of the new stage between stages may provide an plan. The channel assignments of will be also based on the price from the incentive for undesirable bidding stations provisionally assigned to the last round in the previous stage (when behavior because bidders may hold back 600 MHz Band in the final stage of the supply did not exceed demand). on bidding, knowing ‘‘that prices could auction will not change in the final 262. In recognition that bidder be lower in the next round if they allow television channel assignment plan. demand for Category 2 blocks in a PEA the auction to fail at the current clearing This approach provides needed may be reduced based on changes to the targets,’’ which would reduce the certainty for the auction outcome by

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ensuring that impairments to forward incur relocation expenses eligible for final television channel assignment plan auction licenses will not change as a reimbursement from the Fund, the first optimization that would seek to result of the final television channel objective will help to ensure the Fund’s minimize this issue. assignment optimization procedure. sufficiency. Additionally, by reducing 271. In order to implement the second Every final channel assignment will be the number of stations that must change objective, the final television channel required to satisfy the constraints channels, the first objective will speed assignment plan selection procedure adopted in the Incentive Auction R&O the post-auction transition process for will minimize the maximum amount of to fulfill the statutory mandate that the other stations and minimize disruption aggregate new interference that any Commission make all reasonable efforts for stations and viewers alike. Finally, single station could receive. In the to preserve each station’s coverage area the first objective will avoid terrain Auction 1000 Comment PN the and population served. losses (and potentially viewer losses) Commission proposed the alternative of 267. The auction system will use that could result from channel changes minimizing the number of stations that optimization techniques to determine a due to signal propagation differences on receive aggregate new interference final television channel assignment different frequencies, consistent with its above one percent; however, using that plan. In addition to satisfying the statutory mandate to make all procedure could possibly result in constraints adopted in the Incentive reasonable efforts to preserve the significantly higher interference levels Auction R&O, the final television coverage area and population served of for some stations with minimal benefit. channel assignment plan selection eligible broadcast television licensees. In order to minimize the maximum procedure will take into account the 269. The first objective will constrain amount of aggregate new interference following objectives, listed in order of the additional objectives; however, the that any single station could receive, the priority: (1) Maximizing the number of Commission adopts its proposal to procedure will determine each station’s channel ‘‘stays,’’ or stations assigned to allow the optimization procedure to predicted aggregate new interference. their pre-auction channels instead of choose a final television channel The optimization procedure will use being assigned to new channels; (2) assignment plan in which the number of pairwise constraints to calculate minimizing the maximum aggregate stations that are assigned to their pre- aggregate new interference, which will new interference experienced by any auction channels is within 95 percent of result in some double counting of station; (3) avoiding reassignment of the number found in the first objective. interference. This provides a stations with high anticipated relocation The Commission adopts this percentage conservative approach to calculating costs; and (4) prioritizing assignments to in order to allow some flexibility to aggregate new interference, making it channel 5 in the Low-VHF band and off achieve greater benefit in the second possible that the amount of interference of channel 14 in the UHF band. The and third objectives while still will be less than predicted. It will then procedure will first optimize for the first capturing the benefits of the first determine an assignment plan that objective. It will then optimize for the objective by mostly restricting the minimizes the maximum aggregate new second objective, which will be assignments to maintain the maximum interference that any station will constrained by the results of the number of stays. However, the fourth receive. This approach to minimizing optimization for the first objective. The objective will constrain the number of aggregate new interference will help to procedure will then optimize for the stations that are assigned to their pre- ensure that no station will receive a third objective, which will be auction channel to be at least as many disproportionately high amount of new constrained by the results for the first as found in the third optimization. interference. To the extent that any and second objectives. Finally, the 270. The second objective of stations are predicted to receive new procedure will optimize for the fourth minimizing the maximum aggregate interference greater than one percent in objective, which will be constrained by new interference that any station will the final TV channel assignment plan the results for the first three objectives. incur furthers its statutory obligation to despite the application of the secondary The procedure will select a final make all reasonable efforts to preserve objective, the Commission noted in the television channel assignment plan that eligible stations’ population served, and ISIX Order that stations may seek a satisfies the constraints adopted in the fulfills its commitment in the ISIX remedy through the post-auction Incentive Auction R&O and best fulfills Order, 79 FR 76903, December 23, 2014, facilities modification processes. The the objectives. The final television to take aggregate new interference into Commission received only one channel assignment plan will be subject account when establishing the final comment directly addressing this to international coordination with channel assignments. In the Incentive objective, and it concluded that the Canada and Mexico. Auction R&O, the Commission approach it adopts to implementing it 268. The first objective of maximizing determined that it would permit will best meet its commitment to the number of stations assigned to their channel assignments that would not minimize aggregate new interference pre-auction channels will promote a increase pairwise interference— while being the most fair to stations number of important goals. First, it will interference from any one station to overall. help to reduce the total cost of another station—by more than 0.5 272. The third objective of avoiding reimbursing broadcasters and others for percent. In response to concerns that reassignment of stations with high the reasonable costs associated with this approach could result in stations anticipated relocation costs will further repacking. Several commenters have experiencing new interference of more its efforts to minimize total relocation expressed concerns regarding the than 0.5 percent on an aggregate basis, costs. This objective is consistent with sufficiency of the $1.75 billion in the TV in the ISIX Order the Commission its goals of ensuring the sufficiency of Broadcaster Relocation Fund that explained that, based on staff analysis, the $1.75 billion TV Broadcaster Congress made available for reimbursing few stations were likely to experience Relocation Fund and disbursing the the reasonable relocation expenses of new interference above one percent and Fund as fairly and efficiently as broadcasters and MVPDs. By that any such interference was unlikely possible. minimizing the number of stations that to exceed two percent. In order to 273. In determining how to estimate will be required to move off their pre- address the exceptional cases, the relocation costs for purposes of applying auction channels and, therefore, Commission stated that it would the third objective, the Commission minimizing the number of stations that include an optimization objective in the adopts a categorical approach, rather

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than a station-by-station approach. Such or radio entities; and (4) a station will this Supplemental Final Regulatory an approach better serves the public encounter known extraordinary Flexibility Analysis (SFRFA) of the interest by simplifying the circumstances if they need to change possible significant economic impact on determination and minimizing channels. Examples of some of the more small entities by the procedures and administration burdens. In the Auction complicated station sites are described policies contained in the Auction 1000 1000 Comment PN, the Commission in the Widelity report. These weights Bidding Procedures Public Notice and proposed to determine costs for are meant to reflect relative difficulty the SFRFA. when comparing two stations and are purposes of applying this objective by A. Need for, and Objectives of, Public not intended to capture all of the unique using publicly available data, such as Notice the data compiled for the Media Bureau circumstances potentially encountered by Widelity, Inc. or the data provided by by each station; however, they provide 277. The Auction 1000 Bidding broadcasters in the Form 381 Pre- a simple and non-burdensome means of Procedures Public Notice determines Auction Technical Certification. More estimating relocation costs accurately procedures necessary to carry out the specifically, the Commission adopts an enough to avoid the most costly and broadcast television spectrum incentive approach under which each station will difficult relocations. Should auction and resolves issues raised in the be assigned a weight based on a number Commission staff determine based on Auction 1000 Comment PN released of characteristics that generally make a additional information that December 17, 2014. In the Auction 1000 station more costly to relocate to a consideration of additional factors could Comment PN, the Commission sought different channel. A higher number will result in cost savings in keeping with its comment on the proposals for indicate that a station’s channel change overall goals of minimizing the expense conducting the broadcast television is more difficult to implement, and and disruption to broadcasters during incentive auction, including proposed therefore, generally more costly. Also, the repacking process, the Commission procedures for the forward auction, the generally, these more difficult and delegates authority to the Media Bureau reverse auction, and integration of the costly moves will take the greatest to modify the approach it adopts to take reverse and forward auctions, that amount of time. Minimizing them will into account such factors and direct the would implement rules previously help speed the post-auction transition Media Bureau to publicly announce the proposed in the Incentive Auction process, thus further minimizing the final approach that will be used by the Notice of Proposed Rulemaking potential for service disruptions. The final television channel assignment (Incentive Auction NPRM), 77 FR 69933, November 21, 2012, and adopted in the optimization software will use the optimization procedure to minimize Incentive Auction R&O. In part, the categorical weights to choose a final relocation expenses. Auction 1000 Bidding Procedures Public television channel assignment plan that 275. Finally, the fourth objective will Notice also resolves pending petitions minimizes relocation costs by avoiding seek to assign as many stations as for reconsideration of the Mobile highly-weighted reassignments. possible that voluntarily move to the Low-VHF band—or that must be Spectrum Holdings R&O. 274. A channel change for a full reassigned to new channels in that band 278. Previously, as required by the power station will generally be more to accommodate such moves—to RFA, the Commission prepared an costly than for a Class A station, and channel 5. The Commission adopts this Initial Regulatory Flexibility Analysis channel changes for stations in the top objective in response to the suggestions (IRFA) in connection with the Incentive 30 DMAs will generally be more costly of several commenters that interest in Auction NPRM and a Final Regulatory than stations in the remaining DMAs. bidding to move to the Low-VHF band Flexibility Analysis (FRFA) in Accordingly, the Commission will use would be increased if winning bidders connection with the Incentive Auction the following categorical or ‘‘base’’ could be assigned to as high a channel R&O. Likewise, the Commission’s weights: a weight of five for full power in that band as possible. These Mobile Spectrum Holdings NPRM, 77 stations in the top 30 DMAs; a weight commenters assert that the technical FR 61330, October 9, 2012, included an of three for full power stations in all characteristics of higher VHF channels Initial Regulatory Flexibility Analysis other DMAs; and a weight of one for are generally better than those of lower (MSH IRFA) and its Mobile Spectrum Class A stations. The Commission used VHF channels. The Commission Holdings R&O included a Final the Widelity Report Case Studies as a concluded that their suggestion has Regulatory Flexibility Analysis (MSH basis for these relative values. The merit. Additionally, the fourth objective FRFA). Commission used Case Study 1 for Full will seek to assign stations in the UHF 279. Following the release of the Power Top 30 DMAs: cost is band to a channel other than channel 14 Auction 1000 Comment PN, a approximately $2.5 million, Case Study in order to avoid coordination Supplemental Public Notice, 80 FR 2 for Full Power not Top 30: cost is challenges with private land mobile 4816, Jan. 29, 2015, sought comment on approximately $1.5 million, Case Study radio systems (PLMRS). Because the how the proposals in the Auction 1000 3 for Class A stations: cost is Commission concludes that this Comment PN could affect either the approximately $0.5 million. In order to objective should not be applied at the IRFA or the FRFA. This SFRFA, take account of considerations that will expense of the objectives, the fourth addresses the effect, to the extent there likely add significant costs to relocation, objective will be constrained by the is any, of the Auction 1000 Bidding the Commission will also add one to a second and third objectives and fully Procedures Public Notice station’s base weight for each of the constrain the number of stations determinations have on the IRFA and following factors: (1) An antenna on a assigned to their pre-auction band to be FRFA. tower taller than 1000 feet, because at least as many as found after the third 280. As noted in the Supplemental work on such a tower requires a objective. Public Notice, the proposals in the specialized crew; (2) a tower in areas Auction 1000 Comment PN did not with significant ice and wind threat, IX. Supplemental Final Regulatory change any of the matters described in because such towers may need Flexibility Act Analysis the IRFA or FRFA. More specifically, improvements to satisfy ‘‘Rev. G’’ 276. As required by the Regulatory the IRFA and FRFA set forth the need structural standards; (3) collocation on a Flexibility Act of 1980, as amended for and objective of the Commission’s tower with four or more other television (RFA), the Commission has prepared rules for the broadcast spectrum

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incentive auction; the legal basis for 284. Nonetheless, in response to bidders.’’ The Commission finds the those rules; a description and estimate CCA’s submission of its arguments in arguments raised by CCA to be without of the number of small entities to which response to the Supplemental Public merit. the rules apply; a description of the Notice, this SFRFA summarizes those C. Steps Taken To Minimize the projected reporting, recordkeeping, and reasons to assure that the Commission Significant Economic Impact on Small other compliance requirements with has accounted properly for any Entities, and Significant Alternatives small entities and significant alternative particular impact on small businesses of Considered considered; and a statement that there those decisions. are no federal rules that may duplicate, 287. The Average Price Component of B. Summary of Significant Issues Raised overlap, or conflict with the rules. As the Final Stage Rule. The Commission by Public Comments in Response to the further noted in the Supplemental adopted the average price component of Supplemental Notice Public Notice, the request for comment the final stage rule in order to assure focused on how the proposals in the 285. The Average Price Component of that forward auction bidders pay Auction 1000 Comment PN might affect the Final Stage Rule. CCA contends that competitive prices for licenses, in ether the IRFA or the FRFA. the average price component of the final compliance with the Commission’s 281. One comment responded stage rule is ‘‘unnecessary, contrary to statutory mandate to recover for the specifically to the Supplemental Public the Commission’s stated purpose of the public a portion of the value of the Notice, filed by the Competitive Carriers spectrum reserve, and will negatively public spectrum resource. The cost Association (CCA). CCA does not assert affect smaller auction participants.’’ component of the final stage rule does that any of the matters already described Reversing the order in which the two not fulfill this mandate because the in the IRFA or the FRFA need to be components are presented and costs covered are not set in relation to changed in light of the proposals in the discussed by the Commission, CCA the value of the public spectrum Auction 1000 Comment PN. refers to the component of the final resource. Rather, the cost of paying Accordingly, the descriptions provided stage rule that is based on license prices existing licensees to relinquish in the IRFA and the FRFA are in the forward auction as the second spectrum usage rights based on existing incorporated herein without change. To component of the final stage. The broadcasting licenses to make spectrum the extent there is any variance and it Commission maintains consistency with available for new flexible use licenses, is necessary due to the use of the its prior discussions and refers to this is determined by other factors, such as average price component of the final instead as the first component. CCA the value of the existing usage rights. stage rule as part of the trigger for the argues that this component is Moreover, there is not a one-to-one spectrum reserve, the MSH IRFA and unnecessary because the cost relationship between the spectrum MSH FRFA likewise are incorporated component of the final stage rule is subject to the relinquished rights and herein without change. sufficient to assure that forward auction the spectrum covered by new licenses, 282. CCA contends, however, that bidders will pay competitive prices, that either on an individual license basis or three of its proposals require a ‘‘more it is contrary to the Commission’s collectively. Accordingly, despite CCA’s fulsome factual, policy, and legal purpose because it creates a risk that the contrary contention, the average price analysis [than was provided in the auction will not close, that it is contrary component serves a significant purpose FRFA] for these proposals for the agency to the purpose of the spectrum reserve not satisfied by the cost component. The to meet its requirements under the because it may result in a lower effects of the average price component Regulatory Flexibility Act.’’ The three spectrum amount of reserve spectrum, accordingly must be assessed against the proposals to which CCA refers are ‘‘(1) and that it harms small businesses public interest in achieving that the price per MHz-pop benchmark for because they are unable to influence purpose. determining whether the final stage rule whether it is met. 288. The average price component has been satisfied; (2) the upfront 286. Bidding Units Based on Price furthers the public interest in recovering payment amounts for the [forward] Weighted Population To Determine a portion of the value of the public auction; and (3) the minimum opening Forward Auction Upfront Payment spectrum resource. The attendant risk bid amounts for the [forward] auction.’’ Amounts and Minimum Opening Bids. that the average price component might 283. As a preliminary matter, the Although CCA describes the preclude achieving a given spectrum factual, policy and legal analyses Commission’s proposal to use clearing target is consistent with serving supporting these proposals, as well as population of license areas weighted by the public interest. All participants in its related decisions, have been the past auction prices as ‘‘an elegant means the forward auction, regardless of size, subject of discussion in the Incentive of accounting for the historical bear that risk. Alternatives that would Auction NPRM and the Incentive differences in prices between markets,’’ grant new licenses without recovering Auction R&O. These topics also have CCA ‘‘remains concerned, however, by the value pursuant to the Commission’s been discussed in the Auction 1000 certain outliers . . . resulting from the decision would be contrary to this Comment PN. Finally, after CCA filed Commission’s methodology.’’ CCA asks purpose. its comment in response to the for additional information regarding the 289. The link between the average Supplemental Public Notice, the creation of the price index, specifically price component of the final stage rule Commission also addressed the reasons ‘‘how results from past auctions for and the establishment of the spectrum for the final stage rule proposal and spectrum licensed in Economic Areas reserve is similar. Satisfying the final decision in the Second Order on and Cellular Market Areas were adapted stage rule before establishing the reserve Reconsideration and for all three for use with licenses to be offered based ensures that reserve-eligible bidders pay subjects in the Auction 1000 Bidding on PEAs.’’ Finally, ‘‘CCA objects to the significant prices for spectrum, that they Procedures Public Notice. More than Commission’s proposal to incorporate are paying the same price as other once, these discussions have addressed the final results from Auction 97 into bidders at the time that the final stage comments by CCA, often making the the price index for determining bidding rule is met, and that the final stage rule same substantive points that CCA makes units (and, therefore, upfront payments is met before the spectrum reserve is in response to the Supplemental Public and minimum opening bids), because implemented. Fundamentally, linking Notice. this exercise could prejudice smaller the reserve with satisfaction of the final

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stage rule ensures that reserve-eligible opening bids for each PEA. More proposed rules as a result of those bidders contribute ‘‘a fair share’’ of the specifically, the upfront payments and comments. The Chief Counsel did not final stage rule requirements, including the minimum opening bids are set on a file any comments in response to the ‘‘a portion’’ of the value of the spectrum dollar per bidding unit basis. The Auction 1000 Comment PN released for the public, given the average price bidding units reflect the population of December 17, 2014. component. Any alternative to using the the respective PEA, weighted by a price final stage rule as a trigger for the index set based on data from prior List of Subjects in 47 CFR Part 20 reserve would conflict with these goals. spectrum license auctions. The Commercial mobile services. 290. The Commission’s use of the procedure for determining the bidding Federal Communications Commission. average price in the top 40 by units, i.e., for weighting the relevant population Partial Economic Areas population based on price data from Marlene H. Dortch, (PEAs) is supported by the stated past auctions, is detailed in the Auction Secretary. purpose of the procedure, specifically to 1000 Bidding Procedures Public Notice. Final Rules facilitate a speedy auction by focusing 293. The price index attempts to on PEAs more likely to sooner reach capture the information about relative For the reasons discussed in the their final prices. An alternative that demand and value reflected in those preamble, the Federal Communications would consider the average price in prices. Any change in the relative index Commission amends 47 CFR part 20 as more areas would risk slowing down the for particular PEAs is the intended follows: auction and would require assessing an effect. Using price data from recently average price over areas for which past completed Auction 97 furthers the PART 20—COMMERCIAL MOBILE price data may not be as reliable as data Commission’s purpose of weighting SERVICES in the top 40 PEAs. CCA contends that population based on the demand from ■ smaller bidders may be less likely to bid bidders for licenses in past auctions. 1. The authority citation for part 20 in the top 40 PEAs, and therefore less There is no basis for an alternative that continues to read as follows: likely to directly influence whether the would be consistent with this purpose. Authority: 47 U.S.C. 151, 152(a), 154(i), average price component is met. ‘‘Outliers’’ in the data or differences in 157, 160, 201, 214, 222, 251(e), 301, 302, 303, Presuming, for the sake of argument, relative prices in different auctions, 303(b), 303(r), 307, 307(a), 309, 309(j)(3), 316, that this is true, that also means that whether Auction 97 or any other 316(a), 332, 615, 615a, 615b, 615c. such bidders may win licenses despite auction, are reasons to incorporate the ■ 2. Section 20.22 is amended by lower average prices in other PEAs. data, not reasons to selectively rejects removing paragraph (b)(4)(vii) and Smaller bidders that may have relatively some of it. adding paragraph (b)(5) to read as less influence over whether the average 294. Using population weighted by a follows: price component is met therefore benefit price index to set upfront payments and from the use of the top 40 PEAs to the minimum opening bids establishes the § 20.22 Rules governing mobile spectrum extent it enables them to win licenses relative amounts involved without holdings. with lower average prices. determining the final amounts. CCA * * * * * 291. At clearing targets that license does not offer any support for its (b) * * * more than 70 megahertz in the 600 contention that the amounts set by the (5) The following interests shall be MHz, the gross bids of all licenses will Commission’s decision are too high. attributable to holders, except to lessees be considered in determining whether Furthermore, contrary to CCA’s and sublessees for the purpose of the average price component is met, suggestion that upfront payments must qualifying to bid on reserved licenses rather than the average price in the top be made without knowledge of the offered in the Incentive Auction, 40 PEAs. In that case, bidders for areas amount of spectrum to be offered in the discussed in paragraph (c) of this other than the top 40 PEAs will forward auction, the Commission’s section, on the basis of status as a non- influence whether the average price decision provides that forward auction nationwide provider: component is satisfied. Moreover, the bidders will make upfront payments (i) Long-term de facto transfer leasing effective average price of licenses in only after the determination of the arrangements as defined in § 1.9003 of such circumstances will be lower than initial clearing target. this chapter and long-term spectrum that set for the top 40 PEAs, thereby D. Response to Comments by the Chief manager leasing arrangements as retaining the benefit of meeting lower Counsel for Advocacy of the Small average prices in areas outside the top identified in § 1.9020(e)(1)(ii) that 40 PEAs. Business Administration enable commercial use shall be 292. Bidding Units Based on Price 295. Pursuant to the Small Business attributable to lessees, lessors, Weighted Population To Determine Jobs Act of 2010, the Commission is sublessees, and sublessors for purposes Forward Auction Upfront Payment required to respond to any comments of this section. Amounts and Minimum Opening Bids. filed by the Chief Counsel for Advocacy (ii) [Reserved] The Commission uses bidding units to of the Small Business Administration * * * * * determine forward auction upfront (SBA), and to provide a detailed [FR Doc. 2015–25579 Filed 10–13–15; 8:45 am] payment amounts and minimum statement of any change made to the BILLING CODE 6712–01–P

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