FCC Seeks Comments for First Auction of Toll-Free Numbers

May 16, 2019 | by Andrew Regitsky

FCC Seeks Comments for First Auction of Toll-Free Numbers

Industry comments are due on June 3, 2019 in FCC Docket 19-41 regarding the competitive bidding process that should be used in the upcoming auction of toll-free numbers for the 833 code. The auction will make available 17,636 numbers in that code for which there have been multiple competing requests. Traditionally, toll free numbers have been assigned on a first-come, first served basis: However, the Commission intends for this auction to be an experiment in using competitive bidding as a potentially better way to assign toll free numbers equitably and efficiently.

In 2018, the Commission released its Toll-Free Assignment Modernization Order, which allowed it greater flexibility and permitted alternative approaches to assigning numbers, including through the competitive bidding process. In that Order, the agency decided to make the first auction include numbers in the 833 code that were requested by two or more Responsible Organizations (“RespOrgs”) during the 833 pre code process.

The Commission defines a RespOrg as an entity chosen by a toll-free subscriber to manage and administer the appropriate records in the toll-free Service Management System for the toll-free subscriber. Participation in the auction will also be allowed for potential subscribers who may wish to participate directly.

After it receives comments, the Commission will release a public notice establishing the final application and bidding procedures for the 833 auction, including the dates and deadlines by which potential bidders must meet the requirements necessary to qualify to bid. Somos, the Toll-Free Numbering Administrator, will then implement the actual procedures the auction will use and will act as the auctioneer. Somos’ duties will include:

accepting applications to participate in the bidding; accepting upfront payments; determining which applicants are qualified to bid; accepting and processing the bids; announcing the winning bidders; and accepting final payments. (FCC Public Notice, released May 10, 2019, at para. 4)

To ensure an efficient and fair administration of the competitive bidding process, the Commission seeks comment on the following proposed procedures:

  • Requiring each applicant in the 833-auction to certify that (1) if it is bidding on its own behalf, it is also not participating in the auction through another entity, and/or if it is bidding on behalf of potential subscribers that it is not aware that the potential subscriber(s) are participating through another applicant; and (2) it, or any commonly-controlled entity, is not submitting multiple applications in the 833 auction;
  • Prohibiting each applicant in the 833 auction from cooperating or collaborating with any other applicant with respect to its own, one another’s, or any other competing applicant’s bids or bidding strategies;
  • Prohibiting certain agreements between applicants in the 833 auction, and certain auction-related agreements among RespOrgs even where only one of the RespOrgs is an applicant in the 833 auction;
  • Requiring applicants to first acquire an “Auction ID” from Somos, which will verify the potential applicant’s identity, and if any entity cannot be verified through the Somos verification process, it must then participate through a RespOrg;
  • Determining the winning bidder on tied bids for a toll-free number, using a pseudo-random number assigned to each bid.

The Commission has concluded that the 833 auction will be conducted as a single round, sealed-bid auction, in which bidders submit their bids for individual numbers simultaneously, with the winning bid for each number determined solely by bids for that number, independent of the bids for any other number. In addition, the Commission also proposes to use a Vickery auction, in which the amount paid by the winning bidder is determined by the second highest bid.

Therefore, in the 833 Auction, the winning bidder for each 833 number will be the bidder with the highest bid and will pay the second-highest bid amount for that number. In the event that a toll- free number receives only one bid, we propose that the toll-free number will be awarded to the bidder placing the sole bid. Consistent with a Vickery auction, we further propose that the bidder in that case would acquire the right to use the number and not be required to pay anything because there was no second-highest bid. (Id., paras. 38-39.).

The Commission proposes to utilize limited information during the auction process. Specifically:

the Commission proposes to not make public until after bidding has closed: (1) the numbers that an applicant selects for bidding in its auction application, (2) the amount of any upfront payment made by or on behalf of an applicant for the 833 Auction, (3) any applicant’s bidding eligibility, and (4) any other bidding-related information that might reveal the identity of the bidder placing a bid. (Id., at para. 41).

In his May 10, 2019 Statement in support of the 833-auction, FCC Chairman Ajit Pai used a great analogy for why toll-free numbers should be assigned to those who want them most:

In the second season of Seinfeld, Elaine is tired of waiting for one of the few tables at a popular Chinese restaurant to open up. She laments, “It’s not fair that people are seated first-come, first-served. It should be based on who’s hungriest.” While Elaine’s idea may not have taken off in the realm of Chinese cuisine, here at the FCC, we’ve recognized that first-come, first-served may not be the best way to allocate scarce resources, such as toll-free numbers. That’s why we decided last year to experiment with allowing numbers in the recently-opened 833 toll free code to be assigned through an auction. The 833 Auction will make available over 17,000 numbers for which there have been competing requests. It will let us see whether competitive bidding is an equitable and efficient way to distribute toll free numbers, which should be useful as we assign toll free numbers in the future.