Reverse Auction (Auction 1001) Initial Commitment Workshop March 11, 2016

Nothing herein is intended to supersede any provision of the Commission's rules or public notices. These slides should not be used as a substitute for a prospective applicant's review of the Commission's relevant orders, rules, and public notices. Applicants must familiarize themselves thoroughly and remain current with the Commission's rules relating to the Incentive Auction, application and auction procedures, and the procedures, terms and conditions contained in auction public notices. All examples use fictional information, are for illustrative purposes only, and are not predictions or advice. Disclaimer

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Goals of Today’s Workshop Familiarize applicants with the steps that will take place between now and the start of bidding in the clock phase Describe the options that an applicant may select for its initial commitment Walk through the initial commitment bidding software to prepare applicants to make an initial commitment Explain how the options an applicant commits to will affect whether it will bid in the first round of the clock phase, and if so, what option the applicant will bid for in that round Overview of the bidding hierarchy in the reverse auction clock phase and brief preview of the clock phase bidding software

Getting to the Initial Commitments Second Confidential Status Letter Sent to the contact listed in the applicant’s FCC Form 177 Requires delivery signature Contains application status and a status for each station If the application is deemed complete, an applicant may make an initial commitment for each station that is also deemed complete For the purposes of this presentation a participating station is a station selected on an applicant’s Form 177 that is deemed complete and thus the applicant is eligible to make an initial commitment for that station RSA tokens will be included with the second confidential status letter Receive Second Confidential Status Letter

Getting to the Initial Commitments Initial Commitment Preview Period Begins 10:00 AM Eastern Time (ET) on Thursday, March 24 and continues until the initial commitment window opens on March 28 The preview period provides applicants the opportunity to ensure they can log in to the Auction System prior to making their initial commitments Receive Second Confidential Status Letter Make an Initial Commitment

Getting to Initial Commitments Make an Initial Commitment Initial Commitment Window Begin making initial commitments at 10:00 AM ET on Monday, March 28 Initial Commitment Deadline Commitments must be made prior to 6:00 PM ET on Tuesday, March 29 Late commitments will not be accepted An applicant that fails to commit to an initial relinquishment option for a given station will not be qualified to bid in the clock phase of the auction for that station Receive Second Confidential Status Letter

Relinquishment Options and Band Capacity Go off-air (Unlimited) Relinquishment Options Three relinquishment options: Go off-air (unlimited capacity) Move to Low-VHF (limited capacity) Move to High-VHF (limited capacity) Move to High-VHF Move to Low-VHF

What is an Initial Commitment? Initial Commitment: irrevocable commitment to relinquish the relevant spectrum usage rights for a station in exchange for the opening price for that option  An applicant whose Form 177 has been deemed complete in the Second Confidential Status Letter may make an initial commitment—and only for stations that were deemed complete

Go off-air (Unlimited) Relinquishment Options Move to Low-VHF Move to High-VHF Clock Phase Initial Options Low-VHF Band Pre-Auction Bands and Stations High-VHF Band UHF Band

Go off-air (Unlimited) Relinquishment Options Move to Low-VHF Move to High-VHF Clock Phase Initial Options Low-VHF Band Pre-Auction Bands and Stations High-VHF Band UHF Band Stations with Commitments Every broadcast station participating in the auction must be assigned to an initial option before the clock phase can begin: Go off-Air Move to Low-VHF Move to High-VHF Or be designated to remain broadcasting in its pre-auction band along with non- participating stations

Go off-air (Unlimited) Relinquishment Options Move to Low-VHF Move to High-VHF Commitment Options Available to UHF Stations UHF stations — an applicant that selected all of the available options on its Form 177 can commit to: Go off-air (unlimited capacity) Move to Low-VHF (limited capacity) Move to High-VHF (limited capacity) Low-VHF Band Pre-Auction Bands and Stations High-VHF Band UHF Band

Go off-air (Unlimited) Relinquishment Options Move to Low-VHF Move to High-VHF High-VHF stations — an applicant that selected all of the available options on its Form 177 can commit to: Go off-air (unlimited capacity) Move to Low-VHF (limited capacity) Commitment Options Available to High-VHF Stations Low-VHF Band Pre-Auction Bands and Stations High-VHF Band UHF Band

Go off-air (Unlimited) Relinquishment Options Move to Low-VHF Move to High-VHF Low-VHF stations — an applicant that selected all of the available options on its Form 177 can commit to: Go off-air (unlimited capacity) Commitment Options Available to Low-VHF Stations Low-VHF Band Pre-Auction Bands and Stations High-VHF Band UHF Band

Terminology of the Initial Commitment Initial Commitment Preferred Option: the relinquishment option that an applicant would most prefer to be assigned to at the beginning of round 1 of the clock phase  An applicant must commit to a preferred option in order to become qualified to bid for that station in the reverse auction clock phase Initial Commitment Fallback Option: a relinquishment option that an applicant would like the auction system to consider assigning the station to if the system cannot accommodate its preferred option  Applicable if an applicant selects moving to a VHF band as its preferred option for a station  The system only considers a fallback option for a station if an applicant’s preferred option cannot be accommodated Initial Option: the relinquishment option assigned to a station at the start of the reverse auction clock phase  The initial option will always be a one of the station’s initial commitments—whether it is the preferred or a fallback option, if applicable

Example of Preferred and Fallback Options

Fallback Example of Preferred and Fallback Options Preferred Off- Air Move to Low- VHF Move to High- VHF Low-VHF Band High-VHF Band UHF Band x x Go off-air (Unlimited) Relinquishment Options Move to Low-VHF Move to High-VHF Pre-Auction Bands and Stations

Accessing the Auction System The Auction System will be available for preview at 10:00 AM ET on March 24, 2016 Once available, applicants can access the system by clicking on the link on the home page

Logging in to the System Authorized bidders log in to the system using the username indicated in their confidential status letter Upon first log in, a user will be prompted to set a PIN for their RSA tokens (not shown — see User Guide) Users should contact Technical Support if they encounter issues logging in to the system

Navigating the Auction System On every screen, the system will also display: Name and FRN of the applicant Current stage (“Initial Commitment”) Current time and date, and Countdown timer During the preview period, the timer will count down until the initial commitment window opens Once the initial commitment window opens, the timer will count down until the window closes Users navigate to different screens in the system by clicking on links in the left-hand navigation bar There are 3 screens available: Make Commitment Messages Station Info At any time, users can lock their screen or log out

Initial Commitment Preview Period Users may access the system during the Preview Period, starting at 10:00 AM ET on March 24, 2016 Users will be able to access the Messages and Station Info screens The Make Commitment screen will become available when the Initial Commitment window opens at 10:00 AM ET on March 28, 2016

Viewing Announcements & Sending Messages On the Messages screen, users may view announcements and send messages to the FCC Users can send a message by clicking on the Compose New Message button Users will see an unread message count notification next to the Messages navigation link on every screen

Viewing Station Information The information on the Station Info screen does not change throughout the reverse auction Each station deemed complete will appear on this screen For each station, each relinquishment option selected and its associated opening price will also be displayed

Making an Initial Commitment Users may submit initial commitments on the Make Commitment screen while the window is open For each station, a user can choose its preferred bid option from a dropdown menu A user can select any option that the applicant selected on Form 177, or choose to decline to commit to an option

Making an Initial Commitment Once a user has chosen its preferred bid option for a station, it must click the Submit button to commit For each station, the system will provide an indication of whether a commitment has been submitted Users should print a copy of this screen once commitments have been submitted for all stations

Modifying a Submitted Commitment While the window is open, a user may modify a commitment for a station by clicking on the Change button When modifying a commitment, a user will be able to select a new preferred option from the dropdown menu After choosing a new preferred option, a user must submit any changes

Making a Fallback Option Selection A user who chooses Move to Low-VHF or Move to High-VHF as its preferred option for a station must indicate a fallback selection Applicants that selected only one option on the Form 177 will not have fallback options The system will consider a station’s fallback options only if it is unable to accommodate the preferred option

Making a Fallback Option Selection Users may commit to one or both bid options as fallbacks Applicants that selected only two options on the Form 177 will only have one option as a fallback Alternatively, users may decline to commit to any fallback option A user asked to make a fallback selection must make a selection before it can submit its bid

Making an Initial Commitment (multiple stations) Users with multiple stations will see all stations on a single screen Users submit each commitment individually for each station The top of the screen displays a count of stations for which no commitment has been submitted

Making an Initial Commitment (available options) A user is only permitted to select from the bid options the applicant selected on its Form 177 For stations with a pre- auction band of Low- VHF or High-VHF, fewer options are applicable If choosing a preferred option that requires a fallback selection, the user must check at least one fallback selection in order to submit

Making an Initial Commitment (confirmation) The system will display a confirmation message at the top of the screen once a user has submitted commitments for all of its stations Users should print a copy of this screen as a confirmation that commitments were submitted After the Initial Commitment window closes, the system will become unavailable

Setting the Initial Clearing Target Initial commitments from participating stations as well as the list of non-participating stations to be repacked are input to the optimization software used to set the initial clearing target The output of the optimization software is an assignment of stations to initial relinquishment options and provisional channels The optimization software is run for each band plan scenario The highest band plan with an assignment that meets the Commission’s near nationwide standard for impairments will be the initial clearing target Make an Initial Commitment Auction System Sets Initial Clearing Target and Assigns Initial Options Receive Second Confidential Status Letter

Getting to the Reverse Auction Clock Phase Assigning Initial Options Participating stations whose initial commitments can be accommodated will be assigned an initial option Non-participating stations, stations that are not needed, and stations whose initial commitments cannot be accommodated will be designated to be repacked in their pre- auction bands and assigned a final channel at the conclusion of the Incentive Auction A station is not needed if the optimization software determines that the station will always have a feasible channel in its pre-auction band at the initial clearing target or any subsequent clearing target Make an Initial Commitment Auction System Sets Initial Clearing Target and Assigns Initial Options Receive Second Confidential Status Letter

Example: Assigning Initial Options

Go off-air (Unlimited) Relinquishment Options Move to Low-VHF Move to High-VHF Fallback Example: Assigning Initial Options Preferred Go off- air Move to Low- VHF Move to High- VHF Low-VHF Band High-VHF Band UHF Band x x Pre-Auction Bands and Stations

Assigning Initial Options - Goals Minimize the number of participating stations that will not be assigned an initial option i.e., will not participate in the auction Remember that going off-air can always be accommodated Assign participating stations their preferred options as much as possible If a participating station must be assigned to a fallback option, assign to go off-air if selected as a fallback This provides stations with the greatest flexibility to later switch to other relinquishment options selected on Form 177 Fallback Preferred Go off- air Move to Low- VHF Move to High- VHF x x

Go off-air (Unlimited) Relinquishment Options Move to Low-VHF Move to High-VHF Fallback Example: Assigning Initial Options Preferred Go off- air Move to Low- VHF Move to High- VHF Low-VHF Band High-VHF Band UHF Band x x Pre-Auction Bands and Stations

Possible Outcomes of the Initial Commitments* Order of priority when the optimization software determines initial options At least one option can always be accommodated Preferred OptionPossible Fallback Options Go off-air N/AGo off-airYes Move to Low-VHF Go off-air (1)Move to Low-VHF (2)Go off-air Yes Go off-air, Move to High-VHF (1)Move to Low-VHF (2)Go off-air Yes Move to High-VHF (1)Move to Low-VHF (2)Move to High-VHF (3)Repack in Pre-Auction Band No Decline fallback options (1)Move to Low-VHF (2)Repack in Pre-Auction Band No Move to High-VHF Go off-air (1)Move to High-VHF (2)Go off-air Yes Go off-air, Move to Low-VHF (1)Move to High-VHF (2)Go off-air Yes Move to Low-VHF (1)Move to High-VHF (2)Move to Low-VHF (3)Repack in Pre-Auction Band No Decline fallback options (1)Move to High-VHF (2)Repack in Pre-Auction Band No * Applicable for stations that are needed in the auction.

Initial Commitment Outcomes Summary If a participating station is needed in the auction and selects go off-air as either its preferred option or a fallback option, it will be in the auction If a participating station is needed in the auction and only selects moving to one of the VHF bands as its preferred option and declines to select fallback options or only selects moving to the other VHF band as a fallback option, it may be repacked in its pre-auction band and therefore may not be in the auction

Reverse Auction Clock Phase Part 1: Getting to the clock phase and a brief review of the bidding hierarchy Part 2: Preview of the bidding software

Getting to the Reverse Auction Clock Phase Final Confidential Status Letter Sent to each applicant permitted to make an initial commitment—i.e., an applicant with a complete application and at least one complete station Informs the applicant whether it has become qualified to bid in the reverse auction clock phase Stations can be deemed not qualified because (i) no initial commitment was made for that station, (ii) the system determined that the station is not needed, or (iii) the station was assigned to its pre-auction band in the initial assignment because its initial commitment could not be accommodated Make an Initial Commitment Receive Final Confidential Status Letter Auctions System Sets Initial Clearing Target and Assigns Initial Options Receive Second Confidential Status Letter

Getting to the Reverse Auction Clock Phase Mock Auction Prior to bidding in the reverse auction, qualified bidders will be given the opportunity to participate in a mock auction in order to familiarize themselves with the reverse auction bidding system More details about the mock auction will be provided in the Final Confidential Status Letter for qualified applicants Make an Initial Commitment Auctions System Sets Initial Clearing Target and Assigns Initial Options Mock Auction Receive Final Confidential Status Letter Receive Second Confidential Status Letter

Getting to the Reverse Auction Clock Phase Bid in Reverse Auction Clock Phase Each station that becomes qualified to bid in the clock phase will begin the clock phase bidding for its assigned initial option In round 1, a lower price will be offered to each station to relinquish its spectrum usage rights associated with its initial option unless the station is frozen Each station will also be given price offers for other relinquishment options, as applicable to that station Bid in Reverse Auction Clock Phase Mock Auction Make an Initial Commitment Auctions System Sets Initial Clearing Target and Assigns Initial Options Receive Final Confidential Status Letter Receive Second Confidential Status Letter

Where Does the Bidding Hierarchy Fit In? The bidding hierarchy only applies to bidding in the clock phase

Relinquishment Options and the Bidding Hierarchy Once a station is assigned an initial option, it can only switch to relinquishment options based on the bidding hierarchy and the options selected on Form 177 during the clock phase  A station will only be given price offers for relinquishment options selected on Form 177  If a relinquishment option is no longer available to a station because of the bidding hierarchy it will no longer be given price offers for that option (even if that option was selected on Form 177)

Example 1

Fallback Example 1 Preferred Go off- air Move to Low- VHF Move to High- VHF UHF Station - Selected all options on Form 177 Initial Commitment Preferred: Move to Low-VHF Fallbacks: Go Off-air, Move to High-VHF Go off-air (Unlimited) Relinquishment Options Move to Low-VHF Move to High-VHF

Example 1 – Move to Low-VHF Initial Option Scenario

Go off-air (Unlimited) Relinquishment Options Move to Low-VHF Move to High-VHF Example 1 – Move to Low-VHF Initial Option Scenario If the station is assigned Move to Low-VHF as its initial option At the start of the clock phase, the station will be given price offers to stay in Low-VHF or Move to High-VHF The station will not be given price offers to Go off-air during the clock phase due to the bidding hierarchy UHF Station - Selected all options on Form 177 Initial Commitment Preferred: Move to Low-VHF Fallbacks: Go Off-air, Move to High-VHF

Example 1 – Go Off-air Initial Option Scenario

Go off-air (Unlimited) Relinquishment Options Move to Low-VHF Move to High-VHF Example 1 – Go Off-air Initial Option Scenario If the station is assigned Go off-air as its initial option At the start of the clock phase, the station will be given price offers for all relinquishment options UHF Station - Selected all options on Form 177 Initial Commitment Preferred: Move to Low-VHF Fallbacks: Go Off-air, Move to High-VHF

Example 2

Fallback Example 2 Preferred Go off- air Move to Low- VHF Move to High- VHF UHF Station - Selected all options on Form 177 Initial Commitment Preferred: Move to High-VHF Fallbacks: Go Off-air, Move to Low-VHF Go off-air (Unlimited) Relinquishment Options Move to Low-VHF Move to High-VHF

Go off-air (Unlimited) Relinquishment Options Move to Low-VHF Move to High-VHF Example 2 Initial Option: Move to High-VHF During the clock phase, the station will not be able to select the Go off- air or Move to Low-VHF relinquishment options Consequently the station will only be given price offers to stay in High-VHF during the clock phase UHF Station – Selected all options on Form 177 Initial Commitment Preferred: Move to High-VHF Fallbacks: Go off-air, Move to Low-VHF

Example 3

Go off-air (Unlimited) Relinquishment Options Move to Low-VHF Move to High-VHF Example 3 UHF Station - Selected only Go Off-air on Form 177 Initial Commitment Preferred: Go Off-air Preferred Go off- air Move to Low- VHF Move to High- VHF

Go off-air (Unlimited) Relinquishment Options Move to Low-VHF Move to High-VHF Example 3 Initial Option: Go Off-air During the clock phase, the station will be given price offers for only the Go off-air option UHF Station - Selected only Go Off-air on Form 177 Initial Commitment Preferred: Go off-air

Contact Information FCC Auctions Hotline General Auction Questions Auction Process and Procedures (888) , option two; or (717) Hours of service: 8:00 a.m. – 5:30 p.m. ET, Monday through Friday Auctions and Spectrum Access Division, Wireless Telecommunications Bureau For general auction questions: For Auction 1001 (reverse) auction legal questions: Linda Sanderson at (717) Erin Griffith or Kathryn Hinton at (202) Technical Support Electronic Filing FCC Auction System (Hardware/Software Issues) (877) , option nine; or (202) (202) (TTY) Hours of service: 8:00 a.m. – 6:00 p.m. ET, Monday through Friday

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