Northeast Cellular Telephone Co., L.P. v. F.C.C., s. 89-1206
| Decision Date | 09 May 1990 |
| Docket Number | 89-1214,Nos. 89-1206,s. 89-1206 |
| Citation | 897 F.2d 1164 |
| Parties | NORTHEAST CELLULAR TELEPHONE COMPANY, L.P., et al., Petitioners, v. FEDERAL COMMUNICATIONS COMMISSION, Respondent. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Alan Y. Naftalin, Washington, D.C., with whom Robert M. Connolly, Louisville, Ky., was on the brief, for petitioner, Northeast Cellular Telephone, L.P., in No. 89-1206. Harold J. Carroll and Susan D. Baer, Boston, Mass., were on the brief, for petitioner, Saco River Cellular, Inc., in No. 89-1214.
Roberta L. Cook, Atty., F.C.C., Washington, D.C., with whom Robert L. Pettit, Gen. Counsel, and Daniel M. Armstrong, Associate Gen. Counsel, F.C.C., Washington, D.C., were on the brief, for respondent.
Michael B. Barr, Bruce D. Peterson, Washington, D.C., and John S. Parks, were on the brief, for intervenor, Portland Cellular Partnership.
Before MIKVA, EDWARDS and SILBERMAN, Circuit Judges.
Opinion for the Court filed by Circuit Judge MIKVA.
This case presents a procedural challenge to an FCC order granting a license to a cellular radio lottery winner, Portland Cellular Partnership ("Port Cell"). The losers in that lottery, Northeast Cellular Telephone Co. ("Northeast") and Saco River Cellular, Inc. ("Saco River"), claim that the FCC arbitrarily and capriciously waived the requirement that lottery winners establish their financial qualifications within 30 days of having been selected. We hold that the FCC's waiver decision was arbitrary and capricious because it was not based on any rational waiver policy as required by our decision in WAIT Radio v. FCC, 418 F.2d 1153 (D.C.Cir.1969). Indeed, given the record in this case, we cannot imagine any standard that would have justified a waiver of the filing of Port Cell's financial qualifications. Accordingly, we vacate the waiver and remand the case to the agency.
In 1986, the FCC held a lottery for a license to operate cellular radio service in Portland, Maine. Five applicants entered the lottery: Northeast, Saco River, NYNEX Mobile Communications Company ("NYNEX Mobile"), Community Services Telephone Co. ("Community Services"), and Seacoast Cellular, Inc. ("Seacoast"). Seacoast was tentatively selected as the licensee, with Saco River picked as runner-up.
As a result of a settlement agreement, Seacoast substituted for its own application the application of Portland Cellular Partnership ("Port Cell") which consisted of itself (42% interest), NYNEX Mobile (48% interest) and Community Service (10% interest). Port Cell's ownership has since been divided equally among NYNEX, Seacoast, and Lewiston-Auburn Cellular.
Under FCC rules, Port Cell was required within 30 days of selection to submit evidence of its financial qualifications to operate the system. Cellular Further Lottery Reconsideration Order, 59 Pike and Fischer Rad.Reg.2d 407 (1985). Those rules require the lottery winner to present evidence that the lender has (1) committed to provide all necessary financing; (2) identified sufficient unencumbered funds; (3) assessed the applicant's creditworthiness; and (4) dictated the essential terms of the loan. 47 C.F.R. Sec. 22.917(b)(1)(i) (1986). If the selected applicant fails to satisfy these requirements, the applicant is disqualified and the second-place applicant is substituted as the tentative lottery selectee. 59 Pike and Fischer Rad.Reg. at 413.
On July 24, Port Cell tendered a letter of credit from NYNEX Credit Company ("NYNEX Credit") in satisfaction of the financial qualifications requirement and a balance sheet that estimated Port Cell's costs of construction and operation at $2.8 million. The letter of credit confirmed that NYNEX was "prepared to make available to [Port Cell] a total credit package of $3 million." The letter, however, did not include any evidence that NYNEX Credit had assessed Port Cell's creditworthiness or agreed to any terms or conditions of the financing arrangement.
Saco River and Northeast (the only remaining lottery participants) petitioned the Commission to deny Port Cell's application on two grounds. First, they claimed that Port Cell had failed to demonstrate its financial qualifications because the NYNEX letter did not establish that the credit package was guaranteed, that the essential terms were set, that NYNEX had assessed Port Cell's creditworthiness, or that NYNEX had sufficient capital. Second, they asserted that the FCC had prejudiced their settlement opportunities by permitting two co-owned applicants--Seacoast and Community Service--to remain in the same lottery.
These claims were denied by the Mobile Services Division of the Commission ("MSD"). Portland Cellular Partnership, 2 FCC Rcd 5586 (1987). Saco River and Northeast filed petitions for review with the FCC, which the Commission also denied. Portland Cellular Partnership, 4 FCC Rcd 2050 (1989). The Commission found that even though Port Cell had failed to comply with the FCC rules with respect to financial qualifications, the Commission would waive those qualifications because strict enforcement was not in the public interest. The Commission found that based on its prior dealings with NYNEX Credit, it was confident that NYNEX met all of the necessary qualifications. It determined that strict compliance would not serve any interest, and would only result in unnecessary delay. The Commission also rejected the cross-ownership claim.
Northeast and Saco River have appealed both the waiver and cross-ownership decisions. Because we find that the case must be remanded on the basis of the waiver decision, we need not reach the cross-ownership issue.
There is no question here that Port Cell has failed to comply strictly with regulations requiring that it demonstrate its financial qualifications. The FCC concluded that the NYNEX letter was defective under Sec. 22.917(b)(1)(i) because it did not contain the terms of the loan or state that NYNEX had assessed the creditworthiness of the loan applicant. 4 FCC Rcd at 2050. The Commission nevertheless concluded that there was good cause to waive the specific requirements of the rule because the Commission knew from its "lengthly [sic] experience" with NYNEX Mobile and from "materials on file in other [FCC] proceedings" that Port Cell was financially capable of constructing and operating its proposed cellular system. Id. at 2051.
Apparently, the Commission concluded that because of the relationship between NYNEX Credit and NYNEX Mobile, NYNEX Mobile's role as a general partner in Port Cell, and NYNEX Mobile's proven interest in participating in the cellular industry, it was not unreasonable to assume that the funds were available for Port Cell's venture. From this, the Commission would have the court infer that the FCC's familiarity with...
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