Bachow Commun. v. Fed. Commun. Comm'n, s. 99-1346

• Citation: 237 F.3d 683
• Decision Date: 06 February 2001
• Docket Number: 99-1364,99-1360,99-1392,99-1362,99-1363,Nos. 99-1346,99-1393,99-1365,99-1394,99-1361,99-1347,99-1391,s. 99-1346
• Parties: (D.C. Cir. 2001) Bachow Communications, Inc., et al., Appellants/Petitioners v. Federal Communications Commission and United States of America, Appellees/Respondents Columbia Millimeter Communications, L.P., et al., Intervenors & 99-1533
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

Page 683

237 F.3d 683 (D.C. Cir. 2001)

Bachow Communications, Inc., et al., Appellants/Petitioners v. Federal Communications Commission and United States of America, Appellees/Respondents

Columbia Millimeter Communications, L.P., et al., Intervenors

Nos. 99-1346, 99-1347, 99-1360, 99-1361, 99-1362, 99-1363, 99-1364, 99-1365, 99-1391, 99-1392, 99-1393, 99-1394 & 99-1533

United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued December 1, 2000

Decided February 6, 2001

On Appeals From and Petitions for Review of Orders of the Federal Communications Commission

Robert L. Corn-Revere argued the cause for appellants/petitioners. With him on the briefs were Catherine E. Stetson, Walter H. Sonnenfeldt, Robert J. Keller, Thomas J. Dougherty, Jr., Christa M. Parker, Louis Gurman, and E. Ashton Johnston. Doane F. Kiechel III entered an appearance.

Pamela L. Smith, Counsel, Federal Communications Commission, argued the cause for appellees/respondents. With her on the briefs were Christopher J. Wright, General Counsel, Daniel M. Armstrong, Associate General Counsel, Joel I. Klein, Assistant Attorney General, U.S. Department of Justice, Robert B. Nicholson and Andrea Limmer, Attorneys. Roberta L. Cook, Counsel, entered an appearance for appellee Federal Communications Commission.

Before: Edwards, Chief Judge, Sentelle and Randolph, Circuit Judges.

Opinion for the Court filed by Circuit Judge Randolph.

Randolph, Circuit Judge:

The issues in these consolidated cases center on the Federal Communications Commission's conversion of its system for awarding licenses in the 39 GHz (gigahertz) band from a comparative application process to a public auction. The 39 GHz band, comprising the 38.6 to 40.0 GHz frequencies on the electromagnetic spectrum, appears to have attracted little commercial interest until the mid-1990s, when newly developed technology became available. Until late 1995, the Commission processed non-mutually exclusive applications (that is, applications having no competition for the same frequency and territory),¹ but resolved mutually exclusive applications by holding a comparative hearing.

Increased commercial interest in the 39 GHz band rendered the comparative application system impracticable. From January to November 1995 alone, the Commission received more than 2,100 applications for licenses. In late 1994 the Commission also received a telecommunications industry association petition for rulemaking. In response to the petition and the growing number of applications, the Commission considered changing its method of allocating licenses and eventually adopted a competitive bidding system.

The Commission commenced the transition on November 13, 1995, by imposing, without notice and opportunity for comment, an application freeze. See 11 F.C.C.R. 1156 (Nov. 13, 1995). In the course of two Notices of Proposed Rulemaking and two reconsideration orders issued between December 1995 and July 1999, the Commission implemented interim licensing procedures and disposed of applications still pending under the comparative application system. It dismissed without prejudice applications that were not filed at least 30 days before the November 13, 1995, freeze date, or, in Commission parlance, that were not "ripe." It also dismissed "ripe" applications--those filed at least 30 days before the freeze date--that were mutually exclusive with other applications on the freeze date and whose mutual exclusivity had not been resolved by amendment or voluntary dismissal by December 15, 1995, the cut-off date for amendments. See 11 F.C.C.R. 4930 (Dec. 15, 1995); 12 F.C.C.R. 2910 (Jan. 17, 1997); 12 F.C.C.R. 18,600 (Nov. 3, 1997); 14 F.C.C.R. 12,428 (July 29, 1999). Conversely, the Commission processed applications filed at least 30 days before November 13, 1995, and that were not mutually exclusive on that date or that had their mutual exclusivity resolved by amendment or voluntary dismissal by December 15, 1995.²

I.

The private parties--the appellants and petitioners--object to the Commission's dismissal of their pending applications, to the 30-day ripeness period, and to the amendment cut-off. They do not contest the application freeze itself or the Commission's adoption of a competitive bidding system.

A. Dismissal of Applications

Once the Commission decided to adopt new licensing rules for the 39 GHz band, it had to choose the effective date of the rules and dispose of applications still pending under the old regime. As appellants see it, the Commission's decision to dismiss all pending mutually exclusive applications was arbitrary and capricious. Naturally, they hoped to avoid having to start the application process all over again in a public auction. We have, however, recognized the Commission's authority to change license allocation procedures midstream. See Maxcell Telecom Plus, Inc. v. FCC, 815 F.2d 1551 (D.C. Cir. 1987) (upholding change from comparative application system to lottery); DIRECTV, Inc. v. FCC, 110 F.3d 816 (D.C. Cir. 1997) (upholding change from pro rata distribution policy to competitive bidding).

In deciding to dismiss applications that either did not satisfy the 30-day ripeness requirement or were mutually exclusive, the Commission balanced the need to implement the new regulatory regime against the effect of upsetting the expectations of appellants and others. We perceive no error in its resolution of these opposing interests. The Commission reasonably feared that processing mutually exclusive applications under an antiquated and burdensome comparative application system would diminish the efficiency gains expected from competitive bidding. See 12 F.C.C.R. at 18,642.

In appellants' view, their side of the balance weighs much heavier because they obtained rights against prospective competitors who were foreclosed from applying by the Commission's cut-off rules. Under rules existing when appellants filed, public notice of the filing of the first application for a given license triggered a 60-day filing window; that is, competing applicants had to file within 60 days of the public notice or lose their right to file. See 47 C.F.R. § 21.31(b)(2)(i) (1995).³ Several applicants for 39 GHz licenses filed more than 60 days before the freeze order, yet saw their applications dismissed because of mutual exclusivity. Upon reaching the sixtieth day following public notice of the first application but before the freeze order, the filing rule theoretically should have closed the application pool to competing filers, protecting these applications from additional competition. Appellants complain that the application freeze and subsequent dismissal of pending mutually exclusive applications defeated the cut-off rule by permitting people who would have been closed out of applicant pools in the comparative application system to bid for the same licenses in the public auction.⁴ In their words, "the Commission's decision effectively required pending mutually exclusive applicants to bid against new applicants filing years after the established cut-off dates." Brief for Appellants at 58.

Appellants claim that McElroy Electronics Corp. v. FCC, 86 F.3d 248 (D.C. Cir. 1996), renders the Commission's actions arbitrary. See Brief for Appellants at 57-60. In McElroy, we recognized that "as against latecomers, timely filers who have diligently complied with the Commission's requirements have an equitable interest in enforcement of the cut-off rules." 86 F.3d at 257. That equitable interest arose in circumstances not present here. The appellants in McElroy filed cellular applications even though the Commission had not yet formulated rules for those licenses. See id. at 250. The Commission dismissed the applications as premature and later established a one-day filing window. On the filing date, which was approximately five years after the appellants had filed, 517 applicants filed for the Los Angeles licenses and 494 filed for the Minneapolis licenses. See id. at 251. The first time McElroy came to this court, we ordered the Commission to reinstate, nunc pro tunc, the applications previously dismissed as premature. See McElroy Elec. Corp. v. FCC, 990 F.2d 1351 (D.C. Cir. 1993). The Commission then decided that the reinstated applicants would have to enter a lottery with those who filed under the later one-day window, reasoning that the public notices announcing appellants' applications did not establish a deadline for competing applications. See 86 F.3d at 252. We reversed, citing the Commission's "notice and cut-off procedure under which the applications at issue ... were filed, [wherein] competing applicants were entitled to participate in a comparative hearing or lottery only if they filed their applications within 'sixty (60) days after the date of the public notice listing the first of the conflicting applications as accepted for filing'." Id. at 253. The issue was "whether the public notices gave sufficient notice of [the Commission's acceptance of appellants' applications for filing] to cut off third parties' rights." Id. We found the public notice sufficient to trigger the 60-day cut-off period. See id. at 257.

McElroy stands for the proposition that the Commission must follow its own rules. See, e.g., Reuters Ltd. v. FCC, 781 F.2d 946, 950 (D.C. Cir. 1986). It does not create some generalized right to exclude competitors. The "equitable interest" in McElroy was the applicants' interest in the Commission enforcing its filing and notice rules, not an interest in preventing the Commission from changing them. As we have recognized before, the Commission may make midstream rule adjustments, even though it disrupts expectations and alters the competitive balance among applicants. See Maxcell, 815 F.2d 1551; DIRECTV, 110 F.3d 816.

Moreover, any interest in enforcement of cut-off rules is just that--an interest, not a vested right: "timely applicants have no 'vested right against challenge from...