165 F.3d 965 (D.C. Cir. 1999), 97-1459, Fresno Mobile Radio, Inc. v. F.C.C.

Docket Nº:97-1459, 97-1460, 97-1536 and 97-1611.
Citation:165 F.3d 965
Party Name:(P&F) 1287 FRESNO MOBILE RADIO, INC., et al., Petitioners, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents. Nextel Communications, Inc., Intervenor.
Case Date:February 05, 1999
Court:United States Courts of Appeals, Court of Appeals for the District of Columbia Circuit

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165 F.3d 965 (D.C. Cir. 1999)

(P&F) 1287

FRESNO MOBILE RADIO, INC., et al., Petitioners,



America, Respondents.

Nextel Communications, Inc., Intervenor.

Nos. 97-1459, 97-1460, 97-1536 and 97-1611.

United States Court of Appeals, District of Columbia Circuit

February 5, 1999

Argued Oct. 16, 1998.

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On Petitions for Review of Orders of the Federal Communications Commission.

Frederick M. Joyce argued the cause for petitioners Fresno Mobile Radio, et al., and SMR WON. With him on the briefs were Christine McLaughlin and Robert H. Schwaniger, Jr. Dennis C. Brown entered an appearance.

Thomas P. Steindler argued the cause for petitioner Southern Company. With him on the briefs were Carole C. Harris and Christine M. Gill.

Roberta L. Cook, Counsel, Federal Communications Commission, argued the cause for respondents. With her on the brief were Joel I. Klein, Assistant Attorney General, U.S. Department of Justice, Catherine G. O'Sullivan and Marion L. Jetton, Attorneys, Christopher J. Wright, General Counsel, Federal Communications Commission, and John E. Ingle, Deputy Associate General Counsel. Mark S. Popofsky, Attorney, U.S. Department of Justice, and Daniel M. Armstrong, Associate General Counsel, Federal Communications Commission, entered appearances.

Robert S. Foosaner, Michael D. Hays and Michael Kovaka were on the brief for intervenor Nextel Communications, Inc. David E. Mills entered an appearance.

Before: EDWARDS, Chief Judge, WILLIAMS and GINSBURG, Circuit Judges.

Opinion for the Court filed by Circuit Judge GINSBURG.

GINSBURG, Circuit Judge:

Before us are petitions for review of two Federal Communications Commission rules creating a new class of radio spectrum licenses for bandwidth in the 800 MHz range. Petitioner Southern Company, which holds numerous licenses in that range, asserts that the rules violate a recently-enacted statute that requires the agency to treat all similarly situated commercial licensees comparably. Petitioners Fresno Mobile Radio, et al., and SMR WON, a trade association of incumbent licensees in the 800 MHz range contend that the Commission, among other things, exceeded its statutory authority when it decided to distribute the new licenses by auction, failed

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adequately to protect the interests of small businesses in setting the rules for the auction, and unlawfully modified existing licenses without holding evidentiary hearings. Nextel Communications, Inc., which purchased the great majority of the licenses awarded thus far under the new rules, has intervened in support of the Commission.

We hold that the Commission failed adequately to explain its disparate treatment of incumbent and new licensees, and therefore grant Southern's petition for review. We reject each of the other petitioners' arguments, however, and conclude that the agency acted within its discretion in deciding to allocate the new licenses by auction and otherwise proceeding as it did.

I. Background

In 1974 the Commission created the Specialized Mobile Radio service. SMR licensees use bandwidth in the 800 MHz and 900 MHz ranges to provide "land mobile communications services" on a commercial basis. 47 C.F.R. § 90.7. Until recently the vast majority of SMR licensees provided local dispatch services for taxis, ambulances, and the like. In the last few years, however, an increasing number of SMR licensees have begun to use their spectrum for more ambitious purposes--in particular, the provision of cellular telephone and data transmission services over a wide area.

At first these licensees faced a difficult regulatory environment. For example, the Commission separately licensed each individual transmitter and small group of channels; that made it expensive and time-consuming for a licensee that wanted to provide cellular telephone, data transmission, or other services to get authorization for the large number of transmitters and channels required for those services. They were also hampered because most of the SMR bandwidth had already been licensed. Furthermore, the Commission's "build out" rule, which obligated the SMR licensee to complete its facility within one year of receiving its license, weighed particularly upon any licensee trying to build a wide area system.

The agency began to respond to these problems in 1993. First, it extended the time for an SMR licensee to build a wide-area broadcasting system to as much as five years. Next, it proposed to offer large blocks of bandwidth and coverage of a large geographic area in a single license. See 8 F.C.C.R. 3950 p 7 (1993).

Meanwhile, in August, 1993 the Congress amended § 332 of the Communications Act of 1934 to require the Commission to classify all mobile radio services as either "commercial" or "private." 47 U.S.C. § 332(c). As to certain services that had been considered private under the prior definition but now would be classified as commercial, the Commission was required to promulgate "technical requirements that are comparable to the technical requirements that apply to licensees that are providers of substantially similar [commercial] services." Pub.L. No. 103-66, § 6002(d)(3)(B), 107 Stat. 312 (1993). To fulfill this mandate, the Commission began a new proceeding in which it concluded that SMR licensees offering for-profit interconnected services--i.e. those involving both radio and landline telephone communications--are "substantially similar" to cellular telephone and Personal Communication Service (PCS) providers, and should therefore be subject to comparable regulatory regimes.

In order to put SMR on a footing more nearly equal to those of other licensees, the Commission then adopted a system for the upper 200 channels of the SMR bandwidth pursuant to which it would auction off licenses for each of 175 newly-designated "Economic Areas." Each EA license would include a large block of spectrum for the entire geographic area, thereby making...

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