U.S. Air Waves v. Fed. Commun. Comm'n
| Decision Date | 21 November 2000 |
| Docket Number | 98-1266 |
| Parties | U.S. Air Waves, Inc.,Petitioner v. Federal Communications Commission and United States of America, Respondents Next Wave Telecom Inc., et al., IntervenorsConsolidated with 98-1267 United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
On Petitions for Review of Orders of the Federal Communications Commission
Robert A. Long, Jr. argued the cause for petitioners. With him on the briefs was Andrew J. Heimert.
Stanley R. Scheiner, Counsel, Federal Communications Commission, argued the cause for respondents. With him on the brief were Christopher J. Wright, General Counsel, Daniel M. Armstrong, Associate General Counsel, Joel I. Klein, Assistant Attorney General, U.S. Department of Justice, Catherine G. O'Sullivan, and Andrea Limmer, Attorneys. John E. Ingle, Deputy Associate General Counsel, and James M. Carr, Counsel, Federal Communications Commission, entered appearances.
Ian Heath Gershengorn argued the cause for intervenor Next Wave Telecom Inc. With him on the brief was Donald B. Verrilli, Jr. David A. LaFuria and Thomas Gutierrez entered appearances.
Before: Edwards, Chief Judge, Ginsburg and Tatel, Circuit Judges.
Opinion for the court filed by Circuit Judge Ginsburg.
Before us are petitions for review of two rule making orders of the Federal Communications Commission. The orders changed the financial terms applicable to companies that purchased licenses to provide personal communications services (PCS) at an auction in which bidding was limited to small businesses and entrepreneurs. See Amendment of the Commission's Rules Regarding Installment Payment Financing for [PCS] Licensees, Second Report and Order and Further Notice of Proposed Rule Making, 12 F.C.C.R. 16,436 (1997) (Restructuring Order); and Amendment of the Commission's Rules Regarding Installment Payment Financing for [PCS] Licensees, Order on Reconsideration of the Second Report and Order, 13 F.C.C.R. 8345 (1998) (Reconsideration Order). Petitioners U.S. Airwaves, Inc. (hereinafter Airwaves) and Sprint Spectrum L.P. characterize the rules as a benefit given retroactively to incumbent licensees, to the detriment of losing bidders in the spectrum auction and of competitors in the PCS industry, and therefore as unauthorized, unreasonable, and arbitrary and capricious. Intervenor Next Wave Inc., a successful bidder in the original auction, supports the new rules; it also maintains that neither petitioner has standing to challenge them.
We hold that Airwaves, as a disappointed bidder in the original auction, does have standing to petition for review of the new rules; we therefore do not reach the question whether Sprint Spectrum L.P. also has standing. We hold further that, although the changes to the Commission's financing rules are indeed retroactive, the Commission had adequate reasons for adopting them, and that it reasonably balanced competing goals and acted within its statutory authority.
Broadband PCS are a type of mobile telephone technology. See Omni-point Corp. v. FCC, 78 F.3d 620, 626 (D.C. Cir. 1996). In order to provide PCS a company must get from the Commission a license to use a portion of the electromagnetic spectrum. In 1994 the Commission decided to distribute such licenses through a system of competitive bidding, pursuant to 47 U.S.C. s 309(j)(1). See Implementation of Section 309(j) of the Communications Act--Competitive Bidding, Second Report and Order, 9 F.C.C.R. 2348, pp 54-58 (1994) (2d R&O). The Commission designated a portion of the spectrum for the provision of PCS and divided that portion into six blocks, which it labeled A through F. In keeping with its statutory mandate to "ensure that small businesses ... are given the opportunity to participate" in spectrum auctions, 47 U.S.C. s 309(j)(4)(D), the Commission limited the bidding for "C-block" spectrum to entrepreneurs and small companies. See Restructuring Order at p 8; cf. Omni-point, 78 F.3d at 626 (upholding the limitation). The Commission offered small businesses bidding for C-block licenses an "installment payment plan" under which they could pay 10% down and the balance "over a period of ten years, with interest only paid for the first six years and interest and principal for the remaining four." Restructuring Order at p 8.
Between May and July 1996 some 90 different bidders bought at auction 493 licenses--one for each "basic trading area" (BTA) in the nation--to use 30 MHz of spectrum for the provision of PCS. Their bids totaled $10.2 billion, a figure some observers attributed to irrational exuberance; on average, C-block licensees agreed to pay nearly three times per potential customer what the winning bidders in the A and B-block auctions had paid. See Restructuring Order at p 9 & n.11; Peter Spiegel, Hollow Victory, Forbes, Jan. 27, 1997, at 50.
Within nine months of the C-block auction, it became clear that a number of high bidders might not be able to make their scheduled payments. See Wireless Telecommunications Bureau Seeks Comment on Broadband PCS C and F Block Installment Payment Issues, Public Notice, 12 F.C.C.R. 21,015, 21,015 & n.4 (1997). In March, 1997 the Commission suspended the payment obligations of all C-block licensees pending a review of its installment payment terms. See Installment Payments for PCS Licenses, Order, 12 F.C.C.R. 17,325, p 2 (1997).
In October, 1997 the Commission issued the first of the two orders challenged in this case. That order ended the suspension of payments announced the previous March and offered a "menu" of new financing options to all C-block licensees. See Restructuring Order at pp 6, 25. Upon reconsideration the Commission retained the menu approach but altered several of the offerings in important particulars. See Reconsideration Order at pp 8-10. The revised scheme also permitted a licensee to select a different option for licenses it held in each "Major Trading Area" (MTA)--referring to the 51 geographic regions into which the Commission has divided the nation--so long as it applied the same option to all its licenses within each MTA. See Reconsideration Order at p 17. Upon the promulgation of the order on reconsideration, each licensee was required, in order to avoid default, to choose a menu option for each of its MTAs. See id. at p 23.
The menu offered each licensee four choices. First, the licensee could continue to make payments under the original terms of the auction. See Restructuring Order at p 6.
Second, the licensee could surrender all its licenses for a particular MTA and receive a "prepayment credit" in an amount equal to 70% of the down payments and 100% of any installment payments it had made on those licenses, as well as forgiveness of its debt on the returned licenses. The prepayment credit would be put toward payment for such other PCS licenses as the licensee continued to hold. The licensee could either provide additional funds in order to prepay all the licenses it retained in a given MTA or, were it to rely solely upon its prepayment credits, could prepay as many licenses as possible in a given MTA and surrender any remaining licenses to be auctioned anew. See Restructuring Order at p 64; Reconsideration Order at pp 38, 41-43.
Third, the licensee could elect to "dis-aggregate" each of its licenses within a given MTA, returning 15 MHz of spectrum to the Commission and retaining 15 MHz under license. The licensee's outstanding debt to the Commission with respect to returned spectrum would be forgiven. The licensee would also receive a credit equal to 40% of its down payments on the returned spectrum, which it could apply to the payments due on the retained spectrum. A licensee combining dis-aggregation and prepayment would receive a credit equal to 70% of its down payment for returned spectrum, which it could use to prepay the Commission either for the retained 15 MHz of the dis-aggregated licenses or for other PCS licenses it retained. See Restructuring Order at pp 38-39; Reconsideration Order pp 51, 54.
Finally, the licensee could simply surrender its licenses for a particular MTA and be forgiven its outstanding debt with respect to those licenses. A licensee electing this so-called "amnesty" option could either retain the right to rebid when its licenses were sold at auction again or forego the opportunity to rebid and receive a credit of 70% of its original down payment; it could apply that credit to payments due in connection with the prepayment or dis-aggregation of licenses that it retained in other MTAs. See Reconsideration Order at p 12.
The Commission states that in crafting this menu of options it "considered and balanced" several policy goals: maintaining the integrity of spectrum auctions; ensuring fairness to actual and prospective licensees; resolving all issues promptly; and complying with its statutory mandates to "[p]romot[e] economic opportunity and competition in the marketplace," and to "ensure 'that new and innovative technologies are readily accessible to the American people by avoiding excessive concentrations of licenses and by disseminating licenses among a wide variety of applicants, including small businesses.' " See Restructuring Order at p 2 (quoting 47 U.S.C. s 309(j)).
Airwaves and Sprint PCS contend that the Commission changed its original auction rules arbitrarily and capriciously and without statutory authority. After analyzing the petitioners' standing, we consider the Commission's claim that the new rules were foreshadowed in the original auction rules and therefore do not represent a significant change in policy. We then turn to the questions of arbitrariness and of statutory authority.
A.Do petitioners have standing?
The "irreducible constitutional minimum" for standing in an ...
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