Cellnet Communications, Inc. v. F.C.C.

• Decision Date: 07 July 1998
• Docket Number: No. 96-4022,96-4022
• Citation: 149 F.3d 429
• Parties: 12 Communications Reg. (P&F) 1191 CELLNET COMMUNICATIONS, INC., Petitioner, Telecommunications Resellers Association, Intervenor, v. FEDERAL COMMUNICATIONS COMMISSION; United States of America, Respondents, Airtouch Communications, Inc.; Rural Telecommunications Group; GTE Service Corporation, Intervenors.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 429

149 F.3d 429

12 Communications Reg. (P&F) 1191

CELLNET COMMUNICATIONS, INC., Petitioner Telecommunications Resellers Association, Intervenor, v. FEDERAL COMMUNICATIONS COMMISSION; United States of America, Respondents Airtouch Communications, Inc.; Rural Telecommunications Group; GTE Service Corporation, Intervenors.

No. 96-4022.

United States Court of Appeals Sixth Circuit.

Argued March 12, 1998.

Decided July 7, 1998.

Joel H. Levy (argued and briefed), Cohn & Marks, Washington, DC, for Cellnet Communications, Inc.

Charles C. Hunter, Hunter & Mow, for Telecommunications Resellers Ass'n.

John E. Ingle (briefed), William E. Kennard (briefed), Daniel M. Armstrong (briefed), Nancy L. Kiefer (argued and briefed), Office of the General Counsel, Federal Communications Commission, Washington, DC, for F.C.C.

Cathrine G. O'Sullivan (briefed), Nancy C. Garrison (briefed), U.S. Department of Justice, Antitrust Division, Washington, DC, Janet Reno, U.S. Atty. Gen., U.S. Dept. of Justice, Washington, DC, for U.S.

Kathleen M. Trafford, Porter, Wright, Morris & Arthur, Columbus, OH, for Airtouch Communications, Inc.

Caressa D. Bennet, Gregory W. Whiteaker, Bennet & Bennet, Washington, DC, for Rural Telecommunications.

Andre Lachance, Washington, DC, for GTE Service Corp.

George L. Lyon, Jr. (Briefed), Lukas, McGowan, Nace & Gutierrez, Chartered, Washington, DC, for Concus Communications, Inc..

Before: RYAN, COLE, and GILMAN, Circuit Judges.

OPINION

COLE, Circuit Judge.

The petitioner seeks review of a rule-making order in which the Federal Communications Commission ("FCC") extended its prohibition against restrictions on the resale of wireless mobile services, which had previously applied only to some cellular licensees, to certain other types of commercial mobile radio services providers. Resale involves buying services or facilities from facilities-based providers, the carriers who constructed and own the physical infrastructure involved in providing wireless services, and then reoffering communications services to the public for a profit. In the same order, the FCC included a sunset provision for this general prohibition against restrictions on resale at a date five years from the award of the last broadband personal communications licenses, so that the rule will no longer exist at that point for any category of wireless service.

The petitioner, Cellnet Communications, Inc. ("Cellnet"), a reseller of cellular services, challenges the sunsetting of the rule and urges us to reverse the FCC's order. The FCC defends its order by pointing to the developing competitive market of wireless services. The FCC contends that the rule may be properly sunsetted because the prohibition of resale restrictions will no longer be required to ensure some level of competition as competitive market forces will exist, thereby eliminating the need for the prohibition. The petitioner also complains about the adequacy of the FCC's public notice for the rule-making order.

Finally, the FCC contends that the amicus curiae to this appeal improperly presents a challenge to the FCC's decision not to impose resale obligations on narrowband personal communications services licensees. For the reasons that follow, we deny the petition for review.

BACKGROUND

In the mid-1970s, the FCC set aside radio frequencies for the development of cellular telephone service. See Connecticut Dep't of Public Utility Control v. FCC, 78 F.3d 842, 845 (2d Cir.1996). Initially, the FCC anticipated licensing one cellular telephone system in each community, which would be operated by the local telephone company. See National Ass'n of Regulatory Utility Comm'rs v. FCC, 525 F.2d 630, 636-37 (D.C.Cir.1976). In the 1980s, however, in order to service increased demand and promote competition, the FCC decided to increase the spectrum allocation and, in each market, to divide the allocated spectrum among two competing "facilities-based" cellular carriers. Public Utility Control, 73 F.3d at 845. The FCC thereby created a "duopolistic" market structure for the cellular industry. To encourage an extra measure of competition and to combat price discrimination, the FCC prohibited the facilities-based carriers, which are the carriers who constructed and own the physical infrastructure involved in providing services, from restricting resale of their cellular capacity. See id. (citing Cellnet Communication, Inc. v. FCC, 965 F.2d 1106, 1108 (D.C.Cir.1992)). Resale involves buying services or facilities from a facilities-based provider and then, after adding ancillary services or features, reoffering communications services to the public. For instance, a reseller might buy and package the wireless service with particular services and then sell the "package" to the public.

The FCC later created an exception to its cellular resale policy. In 1993, it decided that allowing a cellular carrier to deny resale capacity to a fully operational facilities-based competitor (defined as a carrier whose five-year build-out period has expired) would not violate certain statutory "reasonableness" standards. See In re Petitions for Rule Making Concerning Proposed Changes to the Commission's Cellular Resale Policies, 6 F.C.C.R. 1719, 1720-22 (1991) ("Cellular Resale NPRM and Order "), aff'd sub nom. Cellnet Communication, 965 F.2d 1106; see also 47 U.S.C. §§ 201(b), 202(a) (reasonableness standards).

As part of the Omnibus Budget Reconciliation Act of 1993 ("OBRA"), Pub.L. No. 103-66, 107 Stat. 312 (1993) (codified in relevant part at 47 U.S.C. § 332 (Supp. V 1993)), Congress amended the Communications Act of 1934 to dramatically revise the regulation of the wireless telecommunications industry, of which cellular telephone service is a part. Prior to 1993, the FCC had distinguished between common carrier service and private carrier service and had regulated the former to a much greater degree than the latter. Public Utility Control, 78 F.3d at 845. The 1993 OBRA amendments accomplished several changes. First, Congress amended the Communications Act to create two categories of mobile service: "commercial" and "private" mobile radio services (respectively, "CMRS" and "PMRS"). See Chadmoore Communications, Inc. v. FCC, 113 F.3d 235, 237 (D.C.Cir.1997). Congress directed the FCC to implement these categories in its regulations and provide for comparable regulation of substantially similar CMRS systems. Id. (citing 47 U.S.C. § 332). CMRS includes all mobile services operated for profit that solicit for subscribers and are interconnected with the public switched network, which is the traditional land-line telephone service. ¹ See 47 U.S.C. §§ 332(d)(1) & (2). PMRS includes all wireless services that do not meet the definition for CMRS. 47 U.S.C. § 332(d)(3). The OBRA amendments also furnished the FCC with the authority to auction licenses for use of the spectrum, see OBRA § 6002(a), 107 Stat. §§ 387-92, and required the FCC to issue licenses for personal communications services, 47 U.S.C. § 332(c)(1)(D).

In the order under review, the FCC extended the rule prohibiting restrictions on resale so that broadband personal communications services ("PCS") and certain wide-area specialized mobile radio ("SMR") carriers must also allow unrestricted resale of their services; the rule previously applied only to certain cellular providers. See 47 C.F.R. § 20.12(b) ²; 47 C.F.R. § 22.901(e) (former resale rule). SMR are commercially operated private communications systems that employ mobile transmitting and/or receiving stations. Chadmoore, 113 F.3d at 237. Such systems were originally used primarily to provide highly localized services, such as the radio dispatching of police cars and taxicabs. Id.; Cincinnati Bell Tel. Co. v. FCC, 69 F.3d 752, 756 (6th Cir.1995). In recent years, however, emerging SMR technologies have enabled licensees to offer their customers sophisticated voice and data transmission services over extensive areas (e.g., two-way acknowledgment paging, credit card authorization, automatic vehicle location, remote database access, and voice mail). Id. The FCC has allocated fourteen megahertz ("MHz") of spectrum ³ in the 800 MHz band exclusively to SMR systems. Chadmoore, 113 F.3d at 237. Allowing SMR providers to aggregate spectrum has enabled them to produce more sophisticated mobile communications services, see Cincinnati Bell, 69 F.3d at 756 & n. 1, and become a viable competitor with cellular technology. As explained below, SMR systems operate by digital technology, which appears to be technologically competitive with cellular technology's analog protocol.

The FCC has also designated a range of radio frequencies to be used in providing the new broadband PCS, another wireless communications technology that is expected to compete with existing wireless telephone services. See Omnipoint Corp. v. FCC, 78 F.3d 620, 626 (D.C.Cir.1996); Cincinnati Bell, 69 F.3d at 756. Like mobile satellite services, it is a technology with advantages that will allow it to compete effectively with cellular service providers. Its service relies on digital technology, rather than the analog data technique employed by cellular service providers. See Sprint Spectrum L.P. v. Jefferson County, 968 F.Supp. 1457, 1460 (N.D.Ala.1997). Most authorities agree that digital technology is an advance in communication and information-processing services. See, e.g., Western PCS II Corp. v. Extraterritorial Zoning Authority of the City and County of Santa Fe, 957 F.Supp. 1230, 1238 (D.N.M.1997). Broadband PCS is not alone in its reliance on this technology. The previously mentioned SMR services, the original "dispatch" service, also operates with digital technology and is another category of service subject to the prohibition's extension and sunsetting. Because those providers have been allowed to, as mentioned, aggregate spectrum, see n. 3 supra, they are now becoming able to provide services previously...