BellSouth Corp. v. F.C.C., Nos. 97-1630

CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)
Writing for the CourtROGERS
Citation162 F.3d 1215
Parties, 14 Communications Reg. (P&F) 1069 BELLSOUTH CORPORATION and BellSouth Wireless, Inc., Appellants, v. FEDERAL COMMUNICATIONS COMMISSION, and United States of America, Appellees. U S West, Inc. and Rural Telecommunications Group, Intervenors.
Decision Date08 January 1999
Docket NumberNos. 97-1630,97-1631

Page 1215

162 F.3d 1215
333 U.S.App.D.C. 308, 14 Communications Reg.
(P&F) 1069
BELLSOUTH CORPORATION and BellSouth Wireless, Inc., Appellants,
v.
FEDERAL COMMUNICATIONS COMMISSION, and United States of
America, Appellees.
U S West, Inc. and Rural Telecommunications Group, Intervenors.
Nos. 97-1630, 97-1631.
United States Court of Appeals,
District of Columbia Circuit.
Argued Sept. 24, 1998.
Decided Jan. 8, 1999.

L. Andrew Tollin argued the cause for appellants/petitioners. With him on the briefs were Michael Deuel Sullivan, Robert G. Kirk, Craig E. Gilmore, William B. Barfield, M. Robert Sutherland, Jim O. Llewellyn and David G. Frolio.

Jeffrey H. Dygert, Counsel, Federal Communications Commission, argued the cause for appellee. With him on the brief were Joel I. Klein, Assistant Attorney General, U.S. Department of Justice, Catherine G. O'Sullivan and Andrea Limmer, Attorneys, Christopher J. Wright, General Counsel, Federal Communications Commission, and Daniel M. Armstrong, Associate General Counsel. John E. Ingle, Deputy Associate General Counsel, and Joel Marcus, Counsel, entered appearances.

Before: EDWARDS, Chief Judge, ROGERS and TATEL, Circuit Judges.

Opinion for the Court filed by Circuit Judge ROGERS.

ROGERS, Circuit Judge:

In 1994, the Federal Communications Commission established a 45 MHz spectrum cap on commercial mobile radio services ("CMRS") that limited the total amount of cellular, broadband personal communication service ("PCS"), and specialized mobile radio

Page 1218

("SMR") spectrum that a given entity could accumulate. See 9 F.C.C.R. 7988, 7999, para. 16. Because BellSouth 1 had an ownership interest in RAM Mobile Data USA, L.P., a holder of SMR licenses, BellSouth's combined CMRS spectrum holdings prevented it from acquiring two 10 MHz PCS licenses in certain markets without exceeding the cap. See Request for Waiver at 1-4. BellSouth requested a waiver of the spectrum cap as well as reconsideration of the rule on the grounds that the cap was designed to ensure competition in voice transmission and should apply only to "covered" SMR spectrum (i.e., SMR spectrum that is interconnected with the public switched network and devoted to real-time, two-way switched voice service). The Commission denied both requests. On appeal, BellSouth contends that the Commission's action was arbitrary because the cap is overbroad and virtually unwaivable. We deny the petition for review and affirm the Commission's denial of the waiver request.

I.

CMRS encompasses different types of spectrum put to a variety of uses. It includes all mobile services commercially offered to the public that are connected to the telephone network, such as cellular phone service, paging, mobile data, mobile satellite, and other wireless services. See generally Second Report & Order, 9 F.C.C.R. 1411, 1422-42, paras. 30-70 (1994). CMRS is composed of cellular, PCS, and SMR spectrum. Within each of these categories, spectrum is described as narrowband (using less than 5 MHz of spectrum) and broadband (using more than 5 MHz of spectrum). The narrowband/broadband distinction rests in part on whether it is possible to accumulate enough spectrum to provide voice communication. Entities can use CMRS spectrum to provide voice-to-voice service, such as cellular phone or dispatch service, as well as data-only service, such as paging.

In 1994, the Commission adopted changes to the technical, operational, and licensing rules "to establish regulatory symmetry among similar mobile services." Third Report & Order, 9 F.C.C.R. 7988, 7992, para. 1 (1994). These changes included imposition of a 45 MHz cap on the total amount of cellular, PCS, and SMR spectrum an entity could have in any geographic area. Id. at 7999, para. 16. The Commission justified the cap "as a minimally intrusive means of ensuring that the mobile communications marketplace remains competitive and retains incentives for efficiency and innovation." Id. at 8100, para. 238; see also id. at 8104, para. 248. The spectrum cap would prevent entities from accumulating spectrum and thereby "precluding entry by other service providers." Id. at 8101, para. 240. Rejecting a "case-by-case" approach, the Commission described the cap as a "bright line test" that would provide certainty and ease the Commission's "administrative burden." Id. at 8104-05, para. 250.

The changing nature of the market was key to determining the scope of the cap. The Commission first observed that services provided on the CMRS spectrum were converging. See id. at 8020, para. 56. The Commission explained that the various mobile services shared the common purpose of servicing customers who "need to communicate electronically on a real-time basis (or virtually real-time basis) while they are 'on the move.' " Id. at 8021, para. 58. Technological innovation influenced market trends that would allow various CMRS licensees to compete. The Commission observed that voice communication providers had the capacity to provide data services and that data service providers had the option, with reconfiguration and accumulation of spectrum, to provide voice services. See id. at 8026-35, paras. 69-77. The Commission concluded that "trends in the CMRS marketplace ... illustrate a strong potential for further competition among all CMRS services." Id. at 8035, para. 77.

In defining the scope of the cap's coverage, the Commission decided to exclude all terrestrial narrowband radio services. See id. at 8111, para. 267. Because it was "highly

Page 1219

unlikely that one entity could ever accumulate as much as 5 MHz in any given geographic market" and other regulatory safeguards existed, the Commission concluded that "there is little risk that an entity could use narrowband allocations to exert undue market power over CMRS as a whole." Id. The Commission also excluded Mobile Satellite Service ("MSS") from the cap, in view of the differences between satellite and terrestrial service, capacity, and spectrum use that "mak[e] it unreasonable to equate relative spectrum usage for purposes of determining a spectrum aggregation limit." Id. at 8112, para. 269. By contrast, while acknowledging some merit to the view that SMR spectrum is not currently equivalent to cellular or broadband PCS spectrum, the Commission concluded that SMR would be subject to spectrum aggregation limits. To take account of the unique nature of SMR spectrum, each licensee would be attributed a maximum of 10 MHz of SMR spectrum, regardless of how much spectrum above 10 MHz it actually held, because 10 MHz constituted the largest attainable block of contiguous SMR spectrum. See id. at 8113-14, para. 275. The Commission specifically recognized that "small" SMR providers, i.e. entities with under 5 MHz of attributable SMR spectrum, would be subject to the cap. It viewed this result as acceptable because these entities were still eligible for up to 40 MHz of broadband PCS spectrum, and able to acquire both a 30 MHz and a 10 MHz PCS license in the same geographic area. See id. at 8114, para. 275; 8109, para. 263. The Commission also placed all SMR channels under the cap, and rejected the view that 900 channel SMR should be excluded due to its small spectrum and narrow channel bandwidth, explaining that "high quality mobile telephone service can be provided on 900 MHz SMR channels and there is the possibility of aggregating up to 5 MHz of spectrum in this band, [so] there seems no compelling reason to exclude those channels." Id. at 8116, para. 280.

The Commission reconsidered the cap following a remand from the United States Court of Appeals for the Sixth Circuit, in a case in which the 45 MHz cap itself was not at issue but the attribution and eligibility rules were. See Cincinnati Bell Tel. Co. v. FCC, 69 F.3d 752 (6th Cir.1995). 2 In response to the court's holding that the attribution rule was arbitrary because the Commission had failed to present any support for its common sense predictive judgment about market behavior, see 69 F.3d at 761, the Commission did two things, see Report & Order, 11 F.C.C.R. 7824 (1996). First, it eliminated the spectrum-specific caps, 3 observing that most commentators considered the 45 MHz cap adequate to avoid concentration and entry barriers. See id. at 7865, para. 87. Second, it conducted a Herfindahl-Hirschman Index analysis to determine what level of concentration of ownership would result in an undesirable level of competition. See id. at 7869-73, paras. 94-102. Concluding that a spectrum cap was needed to avoid "excessive concentration of licenses" and to promote competition in the CMRS marketplace, id. at 7869, para. 94, the Commission considered various hypothetical market structures for mobile two-way voice communications service in the same geographic area. 4 It determined that the 45 MHz cap

Page 1220

would do the trick--guard against high concentration in the market, prevent licensees from gaining too great a competitive advantage over new entrants, and further the goal of diversity. See id. at 7873-74, paras. 101-02. The Commission noted that divestiture, see id. at 7876, para. 107, and eventually disaggregation and geographic partitioning, see id. at 7873, para. 100, would be available to allow an entity to bid on blocks of PCS spectrum as they became available.

Shortly thereafter, BellSouth Wireless requested a waiver of the spectrum aggregation limit. 5 Explaining that RAM Mobile (an entity in which it holds a 49% ownership interest) had a number of 900 MHz SMR licenses, BellSouth pledged that with those licenses RAM provided data-only services and "does not offer now and does not intend in the future to offer real time, two-way switched voice service given the architecture of its network and the telecommunications market segments it has targeted." The spectrum cap would prevent BellSouth from bidding on two 10 MHz packages of PCS spectrum because its .5 MHz (or less) of SMR would take it over the...

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55 practice notes
  • Humane Soc'y of U.S. v. Jewell, Civil Action No. 13–186 BAH
    • United States
    • United States District Courts. United States District Court (Columbia)
    • December 19, 2014
    ...[the court] must undo its action.” Cnty. of Los Angeles v. Shalala, 192 F.3d 1005, 1021 (D.C.Cir.1999) (quoting BellSouth Corp. v. FCC, 162 F.3d 1215, 1222 (D.C.Cir.1999) ); see Select Specialty Hosp. – Bloomington, Inc. v. Burwell, 757 F.3d 308, 312 (D.C.Cir.2014) (“[T]here are cases where......
  • Cmty. Health Sys., Inc. v. Burwell, Civil Action No. 14–1432 (BAH)
    • United States
    • U.S. District Court — District of Columbia
    • July 7, 2015
    ...[the court] must undo its action.’ " Cnty. of Los Angeles v. Shalala, 192 F.3d 1005, 1021 (D.C.Cir.1999) (quoting BellSouth Corp. v. FCC, 162 F.3d 1215, 1222 (D.C.Cir.1999) ); see Select Specialty Hosp. – Bloomington, Inc. v. Burwell, 757 F.3d 308, 312 (D.C.Cir.2014) (noting that when " ‘an......
  • Jifry v. F.A.A., No. 03-1085.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • June 11, 2004
    ...Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 2866, 77 L.Ed.2d 443 (1983)). In BellSouth Corp. v. FCC, 162 F.3d 1215, 1221 (D.C.Cir.1999), the court observed that "[w]hen ... an agency is obliged to make policy judgments where no factual certainties exist o......
  • Koi Nation of N. Cal. v. U.S. Dep't of the Interior, Civil Action No. 17-1718 (BAH)
    • United States
    • United States District Courts. United States District Court (Columbia)
    • January 16, 2019
    ...[the court] must undo its action." Cty. of L.A. v. Shalala, 192 F.3d 1005, 1021 (D.C. Cir. 1999) (quoting BellSouth Corp. v. FCC , 162 F.3d 1215, 1222 (D.C. Cir. 1999) ); see also Select Specialty Hosp.-Bloomington, Inc. v. Burwell , 757 F.3d 308, 312 (D.C. Cir. 2014) (noting that when "an ......
  • Request a trial to view additional results
55 cases
  • Humane Soc'y of U.S. v. Jewell, Civil Action No. 13–186 BAH
    • United States
    • United States District Courts. United States District Court (Columbia)
    • December 19, 2014
    ...[the court] must undo its action.” Cnty. of Los Angeles v. Shalala, 192 F.3d 1005, 1021 (D.C.Cir.1999) (quoting BellSouth Corp. v. FCC, 162 F.3d 1215, 1222 (D.C.Cir.1999) ); see Select Specialty Hosp. – Bloomington, Inc. v. Burwell, 757 F.3d 308, 312 (D.C.Cir.2014) (“[T]here are cases where......
  • Cmty. Health Sys., Inc. v. Burwell, Civil Action No. 14–1432 (BAH)
    • United States
    • U.S. District Court — District of Columbia
    • July 7, 2015
    ...[the court] must undo its action.’ " Cnty. of Los Angeles v. Shalala, 192 F.3d 1005, 1021 (D.C.Cir.1999) (quoting BellSouth Corp. v. FCC, 162 F.3d 1215, 1222 (D.C.Cir.1999) ); see Select Specialty Hosp. – Bloomington, Inc. v. Burwell, 757 F.3d 308, 312 (D.C.Cir.2014) (noting that when " ‘an......
  • Jifry v. F.A.A., No. 03-1085.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • June 11, 2004
    ...Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 2866, 77 L.Ed.2d 443 (1983)). In BellSouth Corp. v. FCC, 162 F.3d 1215, 1221 (D.C.Cir.1999), the court observed that "[w]hen ... an agency is obliged to make policy judgments where no factual certainties exist o......
  • Koi Nation of N. Cal. v. U.S. Dep't of the Interior, Civil Action No. 17-1718 (BAH)
    • United States
    • United States District Courts. United States District Court (Columbia)
    • January 16, 2019
    ...[the court] must undo its action." Cty. of L.A. v. Shalala, 192 F.3d 1005, 1021 (D.C. Cir. 1999) (quoting BellSouth Corp. v. FCC , 162 F.3d 1215, 1222 (D.C. Cir. 1999) ); see also Select Specialty Hosp.-Bloomington, Inc. v. Burwell , 757 F.3d 308, 312 (D.C. Cir. 2014) (noting that when "an ......
  • Request a trial to view additional results

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