FCC Seeks Comment on Competitive Bidding Procedures for Auction 103

(Upper 37 GHz, 39 GHz, and 47 GHz)

(AU Docket No. 19-59)

The Federal Communications Commission (“FCC” or “Commission”) has released a Public Notice seeking comment on competitive bidding procedures for the incentive auction of Upper Microwave Flexible Use (“UMFUS”) licenses in the Upper 37 GHz (37.6-38.6 GHz), 39 GHz (38.6-40 GHz), and 47 GHz (47.2-48.2 GHz) bands. The Commission intends to begin bidding in Auction 103 on December 10, 2019[1] and, similar to the 24 GHz Band auction (known as Auction 102), proposes to use an ascending clock auction format with a subsequent assignment phase. Depending on the outcome of the reconfiguration process of the 39 GHz band, the Commission may auction up to 3,400 megahertz in the three bands – a maximum of 2,400 megahertz in the Upper 37 GHz and 39 GHz bands, and a total of 1,000 megahertz in the 47 GHz band-for flexible use.  The Commission will offer 100 megahertz blocks of spectrum to be licensed by Partial Economic Area (“PEA”) service area.  These UMFUS licenses, along with the 28 GHz and 24 GHz band licenses, are considered to be a key component to fifth generation (“5G”) wireless networks.

Reconfiguration Process. In March 2019, the Commission, through the Wireless Telecommunications Bureau (the “Bureau”), announced it would take steps to reconfigure the 39 GHz band to prepare it for Auction 103.[2]  The Bureau froze applications for the 39 GHz band and gave incumbents of the 39 GHz band three options for transitioning existing 39 GHz licenses to new licenses: “(1) have its licenses modified based on the Commission’s proposed reconfiguration of its license holdings; (2) have its licenses modified based on an acceptable alternative reconfiguration that the incumbent proposes, provided that it satisfies certain specified conditions; or (3) commit to relinquish its licenses in exchange for an incentive payment and the ability to bid for new licenses [in Auction 103].”[3]  However, in the event an incumbent retains its partial PEA holding in a modified license, the Commission will not make the remaining white space available for auction. Once the initial commitments of the incumbents have been decided, the Commission will release a public notice announcing the specific licenses that will be available in the Upper 37 and 39 GHz bands for Auction 103.[4]

Description of Licenses.  In Auction 103, the Commission will auction 100 megahertz channel blocks to be licensed by PEA.  A licensee may provide any services permitted under a fixed or mobile allocation as set forth in Section 2.106 of the Commission’s rules.  As discussed above, the specific number of licenses to be auctioned will be determined based on the reconfiguration process.  If all incumbents relinquish their 39 GHz licenses, the Commission will offer 3,400 megahertz of spectrum, or 34 blocks in every PEA.  In the clock phase of Auction 103, bidders may bid on generic blocks in two categories-one for 37 GHz and 39 GHz, and one for 47 GHz-in each PEA.

Prohibition on Certain Communications.  As has been the case in previous spectrum auctions, the Commission proposes applying Section 1.2105(c)(1) of the Commission’s rules, which prohibits the communication of bids or bidding strategies after the short-form application has been filed.  An Auction 103 applicant would therefore be prohibited from discussing bids or bidding procedures with another Auction 103 applicant.  The Commission seeks comments on this proposal.

Bidding Credits.  Consistent with Auction 101 (28 GHz) and Auction 102, bidding credits will be available to eligible small businesses and rural service providers, and the Commission proposes to adopt the same bidding credit caps.  Businesses with average annual gross revenues that do not exceed $55 million for the preceding three years are eligible to receive a small business bidding credit of 15 percent, and businesses with average gross revenues that do not exceed $20 million for the preceding three years are eligible to receive a very small business bidding credit of 25 percent.   To be eligible for a rural service provider bidding credit of 15 percent on its winning bid, an applicant must be a service provider in the business of providing commercial communications services, have fewer than 250,000 combined wireless, wireline, broadband, and cable subscribers, and serve predominantly rural areas.

The Commission proposes a $25 million cap on the total amount of bidding credits that may be awarded to an eligible small business and a $10 million cap on the total amount of bidding credits that may be awarded to an eligible rural service provider.  In addition, to create parity among such bidders in less populated markets, the Commission proposes a $10 million cap on the total amount of bidding credits that any eligible small business may apply to winning licenses in markets with a population of 500,000 or less.  The Commission seeks comments on these proposals and also reminds all applicants of the prohibition against changes in ownership of the applicant that would constitute an assignment or transfer of control.  

Proposed Bidding Procedures. The Commission proposes using an ascending clock format with generic blocks for Auction 103, similar to Auction 102 and the forward auction portion of the Broadcast Incentive Auction, in which bidders indicate their demand for categories of generic license blocks in specific PEAs.  The clock phase will determine the winners of generic spectrum blocks and the amount of incentive payments due to those incumbent licensees in the 39 GHz band that opt to relinquish their spectrum.[5]  The second phase of Auction 103, the assignment phase, will allow winning bidders to bid for specific frequency blocks.

Consistent with other spectrum auctions, the Commission proposes requiring applicants to submit upfront payments which are refundable to establish eligibility to participate in Auction 103.  The Commission proposes a tiered approach for upfront payments under which amounts vary by market population.  Under this approach, generic blocks that fall within PEAs 1-50 will be based on $0.001 per weighted MHz/pop; for generic blocks in PEAs 51-100, upfront payments will be based on $0.0002 per weighted MHz/pop; and for all generic blocks, upfront payments will be based on $0.0001 per weighted MHz/pop.

If you have any questions, or would like to submit comments in this proceeding, please contact Dee Herman at dee@hermanwhiteaker.com, Clare Liedquist at cliedquist@hermanwhiteaker.com, or Molly O’Conor at moconor@hermanwhiteaker.com.  Comments are due May 15, 2019 and reply comments are due May 30, 2019.

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[1] Although the official date of Auction 103 has not been formally announced, Chairman Ajit Pai said the FCC intends to begin Auction 103 on December 10, 2019. Remarks of FCC Chairman Ajit Pai at 5G White House Event (April 12, 2019), https://docs.fcc.gov/public/attachments/DOC-356994A1.pdf.
[2] Notice of Initial 39 GHz Reconfiguration Procedures; Preparation for Incentive Auction of Upper Microwave Flexible Use Service Licenses in the 37 GHz, 39 GHz, and 47 GHz Bands (Auction 103); Order of Modification; 39 GHz License Transfer and Assignment Freeze, Public Notice, DA 19-196 (WTB/OEA Mar. 20, 2019) (Initial Reconfiguration Procedures Public Notice).
[3] See Initial Reconfiguration Procedures Public Notice, at 2.

[4] The FCC expects to release two future public notices with (1) updated data and procedures and (2) the proposed reconfigured holdings for the 39 GHz band.  The deadline of the initial commitment will be 60 days after the release of the proposed Reconfigured 39 GHz Incumbent Holdings Public Notice.  The major steps of the 39 GHz band reconfiguration process are discussed in the Initial Reconfiguration Procedures Public Notice.  See Initial Reconfiguration Procedures Public Notice,at 4-7. Comments to the Initial Reconfiguration Procedures Public Notice were due by April 15th and Reply comments are due by April 26th.

[5] Incentive payments will be determined by the final clock phase price for a generic block in Category M/N in that PEA times the fraction of its relinquished rights in that PEA, measured in MHz-pops.