Committee for Effective Cellular Rules v. F.C.C., s. 93-1220

• Decision Date: 09 May 1995
• Docket Number: 93-1233,93-1222,Nos. 93-1220,s. 93-1220
• Citation: 53 F.3d 1309
• Parties: COMMITTEE FOR EFFECTIVE CELLULAR RULES, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents, BellSouth Corporation, et al., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1309

53 F.3d 1309

311 U.S.App.D.C. 345

COMMITTEE FOR EFFECTIVE CELLULAR RULES, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents BellSouth Corporation, et al., Intervenors.

Nos. 93-1220, 93-1222, 93-1233.

United States Court of Appeals District of Columbia Circuit.

Argued November 29, 1994.

Decided May 9, 1995.

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

Lewis J. Paper argued the cause, for petitioner Committee for Effective Cellular Rules.

William D. Silva argued the cause, for petitioners JAJ Cellular and McElroy Electronics Corp. With him on the briefs were Louis Gurman and Coleen M. Egan.

Roberta L. Cook, Counsel, F.C.C., argued the cause, for respondent. With her on the brief were William E. Kennard, General Counsel, Daniel M. Armstrong, Associate General Counsel, and John E. Ingle, Deputy Associate General Counsel, F.C.C., Anne K. Bingaman, Asst. Atty. Gen., Catherine G. O'Sullivan and Andrea Limmer, Attys., U.S. Dept. of Justice. Renee Licht, Counsel, F.C.C., entered an appearance.

Jim O. Llewellyn entered an appearance, for intervenor BellSouth Corp. Ray M. Senkowski entered an appearance, for intervenor McCaw Cellular Communications, Inc. Eliot J. Greenwald entered an appearance, for intervenor Syracuse Telephone Co. Leon T. Knauer entered an appearance, for intervenor US WEST NewVector Group, Inc.

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

Opinion for the Court filed by Circuit Judge TATEL.

TATEL, Circuit Judge:

Once again, we have before us a challenge to the Federal Communications Commission's regulations governing the licensing of cellular radio telephone service. In 1987, we sustained, in large part, the Commission's initial distribution of cellular licenses throughout the country. See Maxcell Telecom Plus, Inc. v. FCC, 815 F.2d 1551 (D.C.Cir.1987). Six years later, we directed the Commission to reinstate several applications for licenses to provide cellular service in areas that the existing licensees were not serving, i.e., the "unserved areas." See McElroy Electronics Corp. v. FCC, 990 F.2d 1351 (D.C.Cir.1993). The Commission had dismissed those applications because it had not yet established standards and procedures for awarding licenses for the unserved areas. The Commission has now established those standards and procedures through newly issued regulations. Among other things, these new regulations modify existing cellular licenses in a way that effectively increases the area covered by incumbent licensees, thus diminishing the area available to future licensees. It is the latter consequence--the shrinking of the unserved areas--that has triggered this challenge to the Commission's cellular radio telephone regulatory scheme.

Petitioner, the Committee for Effective Cellular Rules, is an organization whose members are interested in filing applications for licenses to provide cellular service in unserved areas. We find that the Committee has associational standing to pursue this appeal, but we deny its petition for review. The FCC did not act arbitrarily and capriciously when it amended its regulations through a notice-and-comment rulemaking, nor did it exceed its statutory authority when it implemented a global change to the technical requirements for cellular licenses, even though that change resulted in the modification of all existing cellular licenses and significantly reduced the unserved areas that petitioner's members are interested in serving. We do not reach the challenges raised in consolidated cases by McElroy Electronics Corporation and JAJ Cellular, the same petitioners to whom we granted relief in McElroy Electronics, because the issues that they raise here are not yet ripe for review.

I.

The Commission licensed the first wave of cellular radio telephone systems in 1981. It divided the nation into urban and rural geographic markets, referred to as "metropolitan statistical areas" ("MSAs") and "rural service areas" ("RSAs"). The Commission established competing cellular systems within each market by dividing the cellular spectrum into two frequency blocks, allocating one block to a wireline carrier, such as the local telephone company, and the other to a non-wireline carrier. The Commission distributed these initial licenses through a streamlined competitive "paper hearing" or a lottery, depending on the size of the market.

To foster the rapid expansion of cellular service, the Commission created a simple and flexible regulatory system. Within any individual MSA or RSA, an applicant established the boundaries of its system by drawing the area it proposed to serve on a map of the market area. This delineated area, referred to as the Cellular Geographic Service Area ("CGSA"), was identified simply as the area "defined by the applicant as the area intended to be served." 47 C.F.R. Sec. 22.903(a) (1987). Once a cellular system was licensed, FCC rules protected its signal within the CGSA from electrical interference from the signals of other cellular systems. See id. Sec. 22.903(b) (1987). With respect to MSAs, the Commission required only that each CGSA cover a minimum of 75% of the market and that the carrier provide reliable service to at least 75% of the territory within the CGSA that it proposed to serve. See id. The "reliability" of cellular service depends upon the strength of the radio signal, measured in terms of what are known as "dBus." The strength of the signal declines as the distance from the transmitter increases. In order to predict which areas of the CGSA would receive reliable service, the Commission instructed licensees to calculate their coverage according to a "39 dBu contour." This contour reflected the Commission's judgment regarding the point at which a cellular signal became too weak to provide reliable service. See id. Secs. 22.903(c), 22.504 (1987). We sustained this general regulatory scheme in Maxcell Telecom Plus, 815 F.2d at 1556.

Consistent with its policy of encouraging the rapid and efficient expansion of cellular service, the Commission adopted new regulations in 1987 which permitted initial licensees to offer service to unserved areas in their markets without competition for five years after the grant of the first construction permit in each MSA. See Amendment of Commission's Rules for Rural Cellular Service, 2 F.C.C.R. 2306, 2308-09 (1987); 47 C.F.R. Sec. 22.31(a)(1)(i) (1987). According to this so-called "five year fill-in policy," the Commission would not permit third parties to file applications for unserved areas until the five year period expired. See 47 C.F.R. Sec. 22.31(a)(1)(i). This policy generally worked as the Commission anticipated: existing licensees expanded their systems by building more cell sites, thus providing service over a broader area. Cellular licensees continued to calculate the served areas on the basis of the 39 dBu contour.

In the early 1990s, the Commission entered the second phase of its effort to facilitate nationwide cellular service. In a rulemaking proceeding, it sought to identify the areas that remained without cellular service and to establish rules for awarding a second wave of cellular licenses for unserved areas. See Amendment of Part 22 of the Commission's Rules to Provide for Filing and Processing of Applications for Unserved Areas in the Cellular Service and to Modify Other Cellular Rules, Notice of Proposed Rule Making, 5 F.C.C.R. 1044, 1044, 1047-49 (1990). Recognizing that some existing licensees were probably not serving their entire CGSA--as we note above, the Commission had only required coverage of 75% of the CGSA--the Commission also proposed modifying existing CGSAs to make them coterminous with the 39 dBu contour, thereby limiting the incumbent's license to the area that it actually served. Id. at 1047.

After a period of notice and comment, the FCC issued its First Report and Order, defining an "unserved area," subject to a second wave of licensing, as an area outside an existing CGSA. See Amendment of Part 22, First Report and Order and Memorandum Opinion and Order on Reconsideration, 6 F.C.C.R. 6185, 6200-01 (1991). Because of virtually unanimous objection from commenters, the Commission did not redefine CGSAs as coterminous with a 39 dBu contour, as it had originally proposed. According to the commenters, the formula used to generate the 39 dBu contour calculated reliable signal strength based on outdated equipment and technological standards. See Amendment to Part 22, Further Notice of Proposed Rulemaking, 6 F.C.C.R. 6158, 6158 (1991); Amendment to Part 22, Second Report and Order, 7 F.C.C.R. 2449, 2452 n. 11 (1992). And most important for this case, the commenters argued that the 39 dBu contour underestimated the areas receiving reliable cellular service, claiming that a contour based on a weaker signal--that is, a contour further from the transmitter--would more accurately identify the areas receiving reliable service. Further Notice of Proposed Rulemaking, 6 F.C.C.R. at 6158.

The Commission responded to these concerns with a Further Notice of Proposed Rulemaking, inviting comments regarding a new method for determining the boundaries of CGSAs according to a lower signal strength. Id. at 6158-59. In the Second Report and Order that followed, the Commission adopted a new method for determining the CGSA of existing cellular license holders. It replaced the earlier system, in which the licensee delineated its own service area, with a mathematical formula that defined the CGSA in terms of areas actually receiving cellular service, and it lowered the required signal strength from 39 dBus to 32 dBus. Second Report and Order, 7 F.C.C.R. at 2452-54. According to the Commission, the application of this revised approach would be simple, objective and consistent. Id. at 2450; see 47 C.F.R. Sec. 22.903(a) (1992). In order to avoid operating with two methods for determining...