Chadmoore Communications, Inc. v. F.C.C., 96-1061

• Decision Date: 06 August 1997
• Docket Number: No. 96-1061,96-1061
• Citation: 113 F.3d 235,324 U.S.App. D.C. 282
• Parties: , 8 Communications Reg. (P&F) 225 CHADMOORE COMMUNICATIONS, INC., Appellant v. FEDERAL COMMUNICATIONS COMMISSION, Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 235

113 F.3d 235

324 U.S.App.D.C. 282, 8 Communications Reg. (P&F) 225

CHADMOORE COMMUNICATIONS, INC., Appellant v. FEDERAL COMMUNICATIONS COMMISSION, Appellee.

No. 96-1061.

United States Court of Appeals, District of Columbia Circuit.

Argued Nov. 5, 1996.

Decided May 20, 1997

Rehearing Denied Aug. 6, 1997.

Appeal of an Order of the Federal Communications Commission.

Marjorie K. Conner, with whom Walter E. Steimel, Jr., was on the briefs, argued the cause for appellant.

C. Grey Pash, Jr., Counsel, Federal Communications Commission ("FCC"), with whom William E. Kennard, General Counsel, and Daniel M. Armstrong, Associate General Counsel, FCC, Washington, DC, were on the brief, argued the cause for appellee. John E. Ingle, Deputy Associate General Counsel, FCC, Washington, DC, entered an appearance.

Before SILBERMAN and HENDERSON, Circuit Judges, and BUCKLEY, Senior Circuit Judge.

Opinion for the court filed by Senior Circuit Judge BUCKLEY.

Separate concurring opinion filed by Circuit Judge SILBERMAN.

BUCKLEY, Senior Circuit Judge:

Chadmoore Communications, Inc. appeals the denial of its application for an "extended implementation period" of three years for the construction of a "wide-area specialized mobile radio" system. Because the Federal Communications Commission was entitled to take into account the adverse impact that the grant of the application would have had on a newly adopted policy governing the construction of such systems, we conclude that its denial of the application was neither arbitrary nor capricious.

I. BACKGROUND

Specialized mobile radio ("SMR") systems are commercially operated private communication systems that employ mobile transmitting and/or receiving stations. National Ass'n of Regulatory Util. Comm'rs v. FCC, 525 F.2d 630, 634 (D.C.Cir.1976). In the beginning, these systems were used primarily to provide highly localized services, such as the radio dispatching of police cars and taxicabs. Id. 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).

The Federal Communications Commission ("FCC" or "Commission") has allocated fourteen megahertz ("MHz") of spectrum in the 800 MHz band exclusively to SMR systems. This spectrum has been divided into 280 frequency channels, 200 of which are contained in a contiguous ten MHz block ("upper 200"). The remaining eighty channels are divided into eight non-contiguous blocks ("lower 80"). See Further Notice of Proposed Rule Making ("Further NPRM"), Docket 93-144, 10 F.C.C.R. 7970, 7974 (1994).

Originally, the FCC issued licenses by ascertaining whether an application satisfied certain criteria. See generally 47 C.F.R. § 90.621 (1995). Licensees of the 280 SMR-only channels were assigned either one or five channels at a time on a station-by-station basis. Further NPRM, 10 F.C.C.R. at 7975. As a general rule, stations operating on the same channel must be a minimum of seventy miles apart. 47 C.F.R. § 90.621(b). With the advent of new technologies, however, SMR service operators became interested in packaging large numbers of stations for the purpose of creating systems that could serve vast geographic areas. Because of the expense and complexity associated with the creation of these systems, the FCC modified its regulations to make applicants eligible for "extended implementation authority," which would extend the periods within which the applicants' wide-area systems would have to be completed. In the Matter of Amendment of Part 90 of the Commission's Rules Governing Extended Implementation Periods, Report and Order, 8 F.C.C.R. 3975 (1993). Whereas an SMR licensee was normally expected to complete the construction of a station within eight or twelve months, 47 C.F.R. §§ 90.155(a) and 90.631(f), the Commission would now allow a qualified applicant up to five years to complete construction of a system. Id. § 90.629.

In August 1993, Congress amended the Communications Act to create two categories of mobile service--commercial mobile radio service ("CMRS") and private mobile radio service; and it directed the Commission to implement these categories in its regulations and provide for comparable regulation of substantially similar CMRS systems. See 47 U.S.C. § 332. The FCC subsequently classified any wide-area SMR system offering interconnected service for profit, such as the one Chadmoore proposed, as a CMRS. Second Report and Order, GN Docket No. 93-252, 9 F.C.C.R. 1411, 1450-51 pp 88-93 (1994).

The FCC then began to amend its existing regulations to treat SMR and CMRS systems alike; and in its Further NPRM, the FCC initiated a rulemaking to implement a framework for licensing SMRs that would facilitate development of wide-area, multi-channel SMR systems in competition with cellular and broadband personal communications services systems. The notice observed that the FCC was relying increasingly on competitive bidding for the licensing of new SMR services. Further NPRM, 10 F.C.C.R. at 8006-07. It also proposed two changes with respect to extended implementation authority: first, the Commission would "no longer permit extended implementation unders 90.629 on the 'lower 80' channels." Id. at 7996; second, it proposed to add the following as subsection (e) to section 90.629: "SMR Systems licensed after August 9, 1994 will not be eligible for extended implementation periods under this section." Id. at 8029. Finally, the notice asked

commenters to discuss whether existing licensees with extended implementation periods should be given that full period to construct their systems; or, in the alternative, if they should be given some shorter period unless they submit a detailed showing that construction to date is consistent with their original implementation plan.

Id. at 7997. No provision was made for the filing of reply comments.

On June 16, 1995, seven months after the issuance of the November 1994 notice, Chadmoore Communications, Inc. ("CCI") filed an application, pursuant to section 90.629, for an extended implementation period of three years within which to complete the construction of a wide-area SMR system comprised of 2,312 stations throughout twenty-six states, extending from the southeastern U.S. through the upper Midwest. Fourteen of these were for stations in the "lower 80." CCI asserted that its application met the requirements of section 90.629 and that the grant of its request would be consistent with the FCC's precedent, would promote competition for the entire SMR industry, and would not disturb the pool of facilities available for the Commission's proposed competitive bidding proposals.

The FCC staff sought comments on whether the request should be granted. See Public Notice, DA 95-1613 (July 19, 1995) ("Public Notice"). The commenters uniformly opposed the application, arguing that CCI had had sufficient time to construct its stations and that, in some instances, its construction deadlines had already been extended by more than a year. Although the Public Notice did not provide for the filing of a response by CCI, on September 12, 1995, CCI moved for the acceptance of "reply comments" that it submitted with its motion. The FCC did not rule on the motion, nor did it consider CCI's reply in its subsequent decision to deny its application.

On December 15, 1995, the FCC issued a final rule establishing new criteria for the grant of wide-area SMR licenses ("final rule"). First Report and Order, Eighth Report and Order, and Second Further Notice of Proposed Rule Making ("December 15, 1995 Order" ), 11 F.C.C.R. 1463 (1995). Among other things, it provided for the award of licenses, via competitive bidding, for blocks of channels within 175 geographic areas called "economic areas" ("EAs"). See id. at 1468 n. 3, 1483-84, 1489-90, 1540.

The final rule did not adopt either of the changes proposed in Further NPRM with respect to extended implementation authority. Instead, it added a revised subsection 90.629(e) which provides, in pertinent part, that "[a]s of [March 18, 1996], Specialized Mobile Radio systems are not eligible for extended implementation periods under this section." December 15, 1995 Order, 11 F.C.C.R. at 1634, 1646 (emphasis added); see also The Future Development of SMR Systems in the 800 MHz Frequency Band, 61 Fed.Reg. 6138, 6157 (1996) (to be codified at 47 C.F.R. pt. 90). The FCC explained that it had initially established extended implementation authority for SMR service providers in order to facilitate construction of wide-area systems, but that it now believed that extended implementation authority was no longer appropriate because its new licensing plan would accomplish the same result in a more uniform and expeditious fashion. In fact, the agency expressed concern that

both existing and future grants of extended implementation authority would be contrary to the underlying goals of [the new licensing plan]. Specifically, [the Commission] believe[d] that allowing licensees to retain extended implementation authority of up to five years after [its] adoption of the wide-area licensing approach detailed in [its] First Report and Order would impinge upon the construction requirements imposed on EA licensees. For example, within three years of license grant, EA licensees are required to fulfill their construction requirements, which are based on population coverage and channel usage, regardless of incumbent presence. If certain channels remain unconstructed but authorized to an [sic] another entity for this three-year period, the EA licensee is estopped not only from utilizing the channel(s) directly but also from acquiring it from the holder of the authorization due to [the FCC's] prohibition against the transfer of unconstructed facilities.

December...