MobileTel, Inc. v. F.C.C., 96-1327

• Decision Date: 29 April 1997
• Docket Number: No. 96-1327,96-1327
• Citation: 107 F.3d 888
• Parties: MOBILETEL, INC., Appellant, v. FEDERAL COMMUNICATIONS COMMISSION, Appellee. Columbia Cellular, Inc. and BellSouth Mobility Inc., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 888

107 F.3d 888

323 U.S.App.D.C. 255

MOBILETEL, INC., Appellant, v. FEDERAL COMMUNICATIONS COMMISSION, Appellee Columbia Cellular, Inc. and BellSouth Mobility Inc., Intervenors.

No. 96-1327.

United States Court of Appeals District of Columbia Circuit.

Argued Jan. 31, 1997.

Decided March 7, 1997.

Order Denying Rehearing April 29, 1997.

[323 U.S.App.D.C. 257] Appeal of an Order of the Federal Communications Commission.

Bruce D. Sokler, Washington, DC, argued the cause for appellant, with whom Howard J. Symons and James A. Kirkland were on the briefs.

Joel Marcus, Counsel, Federal Communications Commission, Washington, DC, argued the cause for appellee, with whom William E. Kennard, General Counsel, Daniel M. Armstrong, Associate General Counsel, John E. Ingle, Deputy Associate General Counsel, and Roberta L. Cook, Counsel, were on the brief.

Kenneth E. Hardman, L. Andrew Tollin and Michael Deuel Sullivan, Washington, DC, were on the joint brief for intervenors Columbia Cellular, Inc. and BellSouth Mobility Inc. David G. Frolio, Jim O. Llewellyn, Robert G. Kirk, Walter H. Alford and William B. Barfield entered appearances.

Before: EDWARDS, Chief Judge, WALD and SENTELLE, Circuit Judges.

Opinion for the Court filed by Circuit Judge WALD.

WALD, Circuit Judge:

On August 14, 1996, the Federal Communications Commission ("the Commission") released an order dismissing the application of MobileTel, Inc. ("MobileTel") to provide cellular service in two Rural Service Areas ("RSAs") in Louisiana using frequencies reserved for applicants that already provide "public landline message telephone service,"

[323 U.S.App.D.C. 258] 47 C.F.R. § 22.902(b) (1988), in those areas. See In re Applications of MobileTel, Inc., FCC 96-345, 1996 WL 459977 (F.C.C.) (August 14, 1996). The Commission concluded that MobileTel was ineligible for the reserved frequencies in these RSAs because the company provided telephone service to customers in these areas only by means of radio links, and the regulation making the provision of "public landline message telephone service" a condition of eligibility excluded companies serving customers only by means of radio links. MobileTel appealed the Commission's order to this court. We affirm.

I. BACKGROUND

The Commission established rules to govern the implementation of cellular communications service in 1981. See Cellular Communications Systems, 86 F.C.C. 2d 469 (1981), modified, 89 F.C.C. 2d 58 (1982), further modified, 90 F.C.C. 2d 571 (1982), petition for review dismissed, United States v. FCC, No. 82-1526 (D.C.Cir.1984). To promote competition in cellular markets, the Commission divided the radio spectrum into two frequency blocks, ensuring that two cellular systems would compete in each market. See id. at 487-93. In making its initial allocation of cellular frequencies, the Commission made the "Block A" frequencies in each market available to "[c]ommon carriers not also engaged in the business of affording public landline message telephone service," 47 C.F.R. § 22.902(b) (emphasis added), and reserved the "Block B" frequencies for common carriers that were engaged directly or indirectly in the provision of "public landline message telephone service." Id. The Commission eliminated this system of separate allocations for landline and non-landline applicants in 1994. See Revision of Part 22 of the Commission's Rules, 9 FCC Rcd 6513 (1994).

The Commission reserved the Block B frequencies for companies already providing landline service because it wanted to take advantage of the technical expertise and knowledge of local markets that AT&T and other experienced providers of basic local telephone service had accumulated through years of providing local service. See Cellular Communications Systems, 86 FCC 2d at 488-89 ("Given AT&T's distinctive technical capabilities, and its operation in most major markets, we are left with little doubt that only AT&T is in a position today to place cellular systems in operation around the country in the immediate future."). The Commission also hoped in this way to minimize the number of applications competing for the Block B frequencies in each market. Although in previous license distributions it had allowed providers of landline service to qualify for landline set-aside frequencies in any market, see In re Application of Bonduel Telephone Co., 68 FCC 2d 497 (1978), the Commission deliberately abandoned the Bonduel approach in creating the Block B cellular landline set-aside, deciding instead to permit landline companies to apply for cellular frequencies only in the markets in which they were already providing landline service. See Cellular Communications Systems, 86 FCC 2d at 490 n.56. In this way the Commission hoped to guarantee that in all but a few markets, only one wireline carrier would be eligible for the Block B frequencies, which would eliminate the delay caused by the often drawn-out comparative hearings required for dealing with mutually-exclusive applications under Ashbacker Radio Corp. v. FCC, 326 U.S. 327, 66 S.Ct. 148, 90 L.Ed. 108 (1945). The Commission also expected that rapid approval of the local landline company's application for the Block B frequencies in a market would give competing applicants for the Block A frequencies in that market an incentive to reach a settlement agreement, to prevent the company operating in the Block B frequencies from getting a head start. See Cellular Communications Systems, 86 FCC 2d at 490-91. Except where they threaten its goal of preserving competition, the Commission generally favors measures that streamline the license distribution process--for example by encouraging settlement agreements between competing applicants--in light of its statutory mandate "to make available, so far as possible, to all the people of the United States a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges...." 47 U.S.C. § 151. When the Commission replaced the comparative hearing system with a lottery system in 1983, it expressly declined to discontinue the set-aside for landline companies operating in the relevant market, despite arguments that the abandonment of the comparative hearing system eliminated the need for set-asides designed to streamline the selection process. See Cellular Lottery Rulemaking, 98 FCC 2d 175 (1984), modified, Cellular Lottery Reconsideration Order, 101 FCC 2d 577 (1985), affirmed in pertinent part, Maxcell Telecom Plus, Inc. v. FCC, 815 F.2d 1551 (D.C.Cir.1987). The Commission defended the retention of the landline set-aside on the ground that it continued to promote important goals, notwithstanding the switch to a lottery system. See id. at 192-98. First, the set-aside protected local landline telephone companies from being shut out of their local cellular markets. Were they to be shut out of the local cellular market, these companies would lose customers to the local providers of cellular service, especially in rural areas where the cost of providing landline service is high; eventually the local companies could be forced out of business by their cellular competitors. See id. at 194-95. Individuals served by these small local telephone companies would then be left without telephone service, an outcome which would conflict with the Commission's objective of achieving universal telephone service. Second, the Commission believed that the separate allocation system lent the cellular markets a structure which would foment healthy competition, since the two types of communications carriers would draw upon their respective "traditions of service" to compete for customers. See id. at 196. Third, the set-aside continued to encourage settlement agreements by limiting the number of competing applications, and settlement agreements were still (despite the obviation of comparative hearings by the introduction of a lottery system) thought to serve the public interest by creating synergies between heterogeneous companies and minimizing the administrative burden, delay, and expense involved in dealing with petitions challenging cellular frequency allocations. See id. at 196-97. Fourth, eliminating the set-aside would be unfair to the local telephone companies, because they had previously been precluded by the terms of the set-aside from competing for Block B frequencies in areas where they did not provide landline service. See id. at 197.

In October of 1988, MobileTel--an affiliate of Lafourche Telephone Company, Inc. ("Lafourche")--applied for Block B cellular frequencies in the St. James and Plaquemines RSAs in swampy areas on the gulf coast of Louisiana. Competing applications for the St. James RSA were filed by BellSouth Mobility, Inc. ("BellSouth") and Columbia Cellular, Inc. ("Columbia"), and BellSouth also filed a competing application for the Plaquemines RSA. Columbia's (undisputed) claim of eligibility as a "[c]ommon carrier[ ] engaged directly or indirectly in the business of affording public landline message telephone service" in the St. James RSA was based on its affiliation with Reserve Telephone Company, a small, independent, rural telephone company operating a wireline ¹ local telephone service in the St. James RSA. MobileTel's claim of eligibility was based on its affiliation with Lafourche, which operated wireline local telephone service outside of the St. James and Plaquemines RSAs, and which had recently instituted local service to one customer inside each of these RSAs using Basic Exchange Telecommunications Radio Service ("BETRS") in place of wireline technology. BETRS is an alternative to wireline technology that is used to connect individual customers' telephones to the service provider's central office; instead of wires, BETRS connects customers to central offices by means of radio transmissions. Where the terrain between the central office and individual customers is rugged (in this case,...