Appendix C to the Notice of Proposed Rulemaking
Supplement to Appendix C: Auctionomics/Power Auctions Option for Forward Auction (February 1, 2013)

We assume here that the License Categories offered for sale will include “generic” licenses for paired spectrum (e.g. 5MHz uplink and 5MHz downlink) in each of the 176 Economic Areas (EAs). These EAs are the same ones that have been described and used in some previous FCC auctions. Generic licenses provide a right to use a specified amount of uplink and downlink bandwidth, but not to particular frequencies. The eventual band plan may also include other License Categories. For example, it may include downlink-only licenses, or it may include impaired licenses in some EAs. Impaired licenses may arise in EAs where less than the targeted amount of spectrum can be cleared at the reserve price. Downlink-only or impaired licenses in each EA would be separate License Categories in the Forward Auction. The rules we propose can also be adapted to other kinds of License Categories.

After the Forward Auction, there would be a frequency assignment process that assigns each winning bidder to particular (possibly contiguous) frequency blocks. The assignment process is not described in this document.

For the purposes of describing bids in the Forward Auction, “quantity” refers to a number of generic licenses in a License Category. If a bidder reduces its quantity demanded by one unit, that means it demands one fewer license.

The Closing Rule will determine the quantities in each License Category that are ultimately supplied during the final rounds of the Forward Auction. Because the broadcasters’ willingness to sell their stations will depend on the prices offered, lower prices in the Forward Auction may result in a smaller quantity of licenses being ultimately supplied. Moreover, depending on decisions about the structure of the band plan, the quantities supplied may vary among EAs.

The proposed Forward Auction format is a multi-round clock auction. The auction relies on “intra-round” bidding that enables the bidding to proceed expeditiously in a discrete set of rounds, while giving the bidders flexibility to bid almost as if facing a series of very small price increases for the items in Excess Demand.

Under this approach, before each round, the FCC would announce an interval of prices that will be applicable to each License Category. Details of intra-round bidding are described below, but in overview, it proceeds as follows. During each round, each bidder may submit one or more bids. Each bid expresses changes in the quantities for each License Category that the bidder demands at a single “price point” in the announced interval. After each round, the FCC calculates the Aggregate Demand for licenses for each License Category and compares it to the Target Supply. If the Aggregate Demand exceeds the Target Supply, there is Excess Demand for that License Category. If there is Excess Demand for any License Category, then the prices for that License Category will be incremented in the next round; if there is Excess Demand for some License Categories but not for others, then the price for any License Category without Excess Demand is not incremented. If there is Excess Demand for any License Category, the auction proceeds to a next round and the process repeats.