Benkelman Tele Co v. FCC

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 16, 2000 Decided July 28, 2000

No. 97-1245

Benkelman Telephone Company, et al.,
Petitioners

v.

Federal Communications Commission and
United States of America,
Respondents

Nationwide Paging, Inc., et al.,
Intervenors

 No. 97-1294

Metamora Telephone Company,
Petitioner

v.

Federal Communications Commission and
United States of America,
Respondents

No. 99-1247

Advanced Paging, Inc, et al.,
Petitioners

v.

Federal Communications Commission and
United States of America,
Respondents

No. 99-1251

Advanced Paging, Inc., et al.,
Petitioners

v.

Federal Communications Commission and
United States of America,
Respondents

 No. 99-1331

Robert L. Wagner, et al.,
Petitioners

v.

Federal Communications Commission and
United States of America,
Respondents

No. 99-1337

Personal Communications Industry Association,
Petitioner

v.

Federal Communications Commission and
United States of America,
Respondents

On Petitions for Review of Orders of the
Federal Communications Commission

Carl W. Northrop argued the cause for the petitioners and
intervenors. Timothy E. Welch, Kenneth E. Hardman, John
D. Pellegrin, Frederick M. Joyce, Kenneth D. Patrich and
Robert L. Hoggarth were on brief. Ray M. Senkowski, Chris-
tine M. Crowe and David A. Gross entered appearances.

Roberta L. Cook, Counsel, Federal Communications Com-
mission, argued the cause for the respondents. Christopher J.
Wright, General Counsel, John E. Ingle, Deputy Associate
General Counsel, Federal Communications Commission, Joel

I. Klein, Assistant Attorney General, United States Depart-
ment of Justice, and Robert B. Nicholson and Andrea Lim-
mer, Attorneys, United States Department of Justice, were
on brief. Daniel M. Armstrong, Associate General Counsel,
and Gregory M. Christopher, Counsel, Federal Communica-
tions Commission, entered appearances.

Before: Williams, Sentelle and Henderson, Circuit
Judges.

Opinion for the court filed by Circuit Judge Henderson.

Karen LeCraft Henderson, Circuit Judge: The petitioners
challenge a Federal Communications Commission (FCC) rule-
making that established a geographic area licensing regime
for common carrier paging and 929 MHz private carrier
paging licenses1 and a competitive bidding procedure for
mutually exclusive2 applications filed thereunder. See In re
Revision of Part 22 and Part 90 of the Comm'n's Rules to
Facilitate Future Dev. of Paging Sys., Second Report and
Order and Further Notice of Proposed Rulemaking, 12
F.C.C.R. 2732 (1997) (Second R&O); In re Revision of Part
22 and Part 90 of the Comm'n's Rules to Facilitate Future
Dev. of Paging Sys., Memorandum Opinion and Order on
Reconsideration and Third Report and Order, 14 F.C.C.R.
10,030 (1999) (Third R&O). The petitioners and intervenors
contend the FCC lacked statutory authority under 47 U.S.C.
s 309(j) to auction the new geographic paging licenses, that
the FCC arbitrarily failed to require that geographic licen-
sees provide notice of construction to neighboring incumbent

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1 Common carrier paging licensees "gain[ ] the exclusive use of
the licensed frequency within their protected service area." PSWF
Corp. v. FCC, 108 F.3d 354, 355 (D.C. Cir. 1997). Private carrier
paging licensees, on the other hand, "ha[ve] to share their allotted
frequency with other such licensees operating in the same geo-
graphic area." Id.

2 Applications are considered "mutually exclusive" if only one can
be granted because they seek the same license or different licenses
that would interfere with each other. See Lakeshore Broadcasting,
Inc. v. FCC, 199 F.3d 468, 470 (D.C. Cir. 1999) (citing Ashbacker
Radio Corp. v. FCC, 326 U.S. 327, 333 (1945)).

licensees and that the algorithm the FCC used to identify
pending mutually exclusive applications violates the Paper-
work Reduction Act of 1995 (PRA), 44 U.S.C. ss 3501 et seq.
For the reasons set out below we reject each of these
arguments and deny the petitions for review.

I.

Before 1996 the FCC allocated licenses for common carrier
paging and exclusive private carrier paging service spectrum
under the traditional site-specific licensing scheme which
required a separate license for each paging transmitter site.
Each license application proposed a transmission frequency
and set out technical information on the proposed station,
including its potential for electrical interference with adjacent
stations. See 47 C.F.R. s 22.529 (1996); id. s 22.559. Once
an applicant filed, the FCC reviewed each site-specific appli-
cation preliminarily for formal compliance and issued public
notice of acceptance of filing. See id. s 22.120. Generally, if
an applicant's proposed service would overlap and interfere
with an incumbent licensee's transmission, the application was
denied. See id. s 22.537(a). When mutually exclusive site-
specific applications were filed, a single applicant was selected
by lottery. See id. s 22.131(c)(1).

In the challenged rulemaking the FCC replaced the site-
specific licensing process with a scheme of geographic licens-
es. The new scheme authorizes a licensee to operate a
transmitter anywhere within the licensed geographic area
without notice to the FCC of the transmitter's operation or of
its precise location. The geographic licensee must, however,
protect incumbent operators in the geographic area and
adjacent areas from harmful electrical interference. In order
to bid at a geographic license auction, an applicant must file
an FCC Form 175 (Short Form) either identifying individual
channels and markets it seeks or checking the "All" box,
which allows it to bid on any or all of the channels and
markets being auctioned. After filing the Short Form, but
before the auction, an applicant must submit an "upfront"
payment which "bear[s] a relation to the value of the licenses

to be awarded." Second R&O, 12 F.C.C.R. at 2794. A
successful bidder faces "automatic cancellation" of the license
if it does not either (1) "provide coverage to one-third of the
population within three years of the license grant, and to two-
thirds of the population within five years of the license grant"
or (2) "provide substantial service to the geographic license
area within five years of license grant." Id. at 2765.

In contemplation of the new geographic system, the FCC
imposed a filing freeze as of February 8, 1996. On February
19, 1997 the Commission released its Second Report and
Order outlining the auction procedures for the new geograph-
ic licenses and authorizing the Wireless Telecommunications
Bureau to dismiss all pending exclusive paging applications
and to either grant or dismiss all pending non-mutually
exclusive paging applications. On June 24, 1999 the FCC
issued its Third Report and Order affirming the geographic
licensing scheme but somewhat modifying its procedures. On
August 12, 1999 the FCC issued a public notice announcing
the relevant auction procedures for the geographic paging
licenses. See Auction of 929 MHz Paging Serv. Spectrum,
Public Notice (1999). Applicants for the licenses filed their
Short Forms on January 20, 2000 and deposited their upfront
payments on February 7, 2000. On February 24, 2000 the
FCC conducted the auction.

Six petitions for review of the FCC's rulemaking have been
filed at various points in the proceedings and have been
consolidated for consideration here.

II.

The petitioners, consisting of incumbent paging licensees
and a paging industry trade association (licensee petitioners)3

__________
3 The incumbent licensees are Benkelman Telephone Co., Freder-
ick W. Hiort dba B&B Beepers, Wauneta Telephone Co., Metamora
Telephone Co., Advanced Paging, Inc., Mark A. Apsley dba Pro-
gressive Paging, Capitol Radiotelephone Co., Inc. dba Capitol Pag-
ing, Express Message Corp., A. V. Lauttamus Communications, Inc.
and NEP, LLC dba Northeast Paging. The trade association is
Personal Communications Industry Association. For convenience,

and dismissed license applicants (applicant petitioners),4 chal-
lenge the FCC's new geographic licensing scheme on three
grounds. We address--and reject--each ground in turn.

A. Statutory Authority for License Auctions

The petitioning trade association and incumbent licensees,
joined by the intervenors,5 challenge the FCC's authority
under 47 U.S.C. s 309(j)(1) to require that existing licensees
bid at auction when they seek to "modify" their present
licenses. Section 309(j)(1) requires:

If, consistent with the obligations described in paragraph
(6)(E), mutually exclusive applications are accepted for
any initial license or construction permit, then, except as
provided in paragraph (2), the Commission shall grant
the license or permit to a qualified applicant through a
system of competitive bidding that meets the require-
ments of this subsection.

47 U.S.C. s 309(j)(1). Section 309(j)(6)(E), in turn, provides:
"Nothing in this subsection, or in the use of competitive
bidding, shall ... (E) be construed to relieve the Commission
of the obligation in the public interest to continue to use
engineering solutions, negotiation, threshold qualifications,
service regulations, and other means in order to avoid mutual
exclusivity in application and licensing proceedings;...." Id.
s 309(j)(6)(E). In determining the Commission's authority
under this statute, "the court reviews the FCC's interpreta-
tion of the Communications Act under the now-familiar stan-

__________
these petitioners or any subgroup of them will be identified as
"licensee petitioners."

4 These petitioners, whose applications, filed between November
15, 1995 and February 8, 1996, were dismissed without action
because the FCC considered them mutually exclusive, are Robert
L. Wagner, Melvia M. Woods, Robert Horn, John Piskor, Mo-
hammed Siddiqui and Lenard Travis.

5 The intervenors include AirTouch Paging, Arch Communications
Group, Inc., Metrocall, Inc., Nationwide Paging, Inc. and Power-
Page, Inc.

dard set forth in Chevron U.S.A. Inc. v. Natural Resources
Defense Council, Inc., 467 U.S. 837, 842-843, 104 S.Ct. 2778,
81 L.Ed.2d 694 (1984), by which the court considers 'whether
Congress has directly spoken to the precise question at issue,'
id. at 842, and if it has not, 'whether the agency's answer is
based on a permissible construction of the statute.' Id. at
843." Community Television, Inc. v. FCC, Nos. 98-1106 et
al., slip op. at 5 (D.C. Cir. 2000). We conclude that, while the
cited statutory language is ambiguous, the Commission has
reasonably construed it to authorize the challenged auctions.

The petitioners first argue modified licenses are not "ini-
tial" licenses for which section 309(j)(1) authorizes competitive
bidding. In order for a license to be considered initial under
section 309(j)(1), "a newly issued license must differ in some
significant way from the license it displaces." Fresno Mobile
Radio, Inc. v. FCC, 165 F.3d 965, 970 (D.C. Cir. 1999). In
Fresno we noted that "nothing in the text of [section 309(j)]
forecloses [the FCC] from considering a license 'initial' if it is
the first awarded for a particular frequency under a new
licensing scheme, that is, one involving a different set of
rights and obligations for the licensee." Id. The FCC
reasonably treated the incumbent licensees' applications for
modification under the new geographic system as applications
for "initial" licenses under such a "new licensing scheme."
The petitioners note that the two licensing schemes
provide the same paging service on the same frequencies,
basically provide fill-in sites and maintain the same licensee buildout
requirements. Nevertheless, they themselves acknowledge,
as they must, that the geographic license scheme has wrought
34fundamental alterations to the paging industry's market
structure and licensing schemes.34 Petitioners' Br. 30. Under
the geographic scheme non-incumbents can compete for the
available spectrum, however much remains, on equal footing
with incumbents and successful applicants have far greater
freedom in selecting transmitter locations; yet at the same time
new licensees assume much more responsibility for researching site
locations to protect incumbents from interference. Given the new
scheme's 34fundamental34 alterations, we hold the FCC reasonably
treated modification applications by incumbents as 34initial34
applications within the meaning of section 309(j)(1).

The petitioners also assert the FCC shirked its duty under
section 309(j)(6)(E) to affirmatively avoid mutual exclusivity
by adopting the new licensing scheme, which necessarily
causes a high rate of mutual exclusivity at certain frequen-
cies, and by creating "phantom" or "artificial" mutual exclu-
sivity through the "All" box option and the "substantial
service" alternative. We reject this argument for substantial-
ly the same reason we rejected a similar argument raised in
DIRECTV v. FCC, 110 F.3d 816, 827-28 (D.C. Cir. 1997). In
DIRECTV the petitioners contended that "the Commission
lacked authority to adopt an auction rule under s 309(j)
because it did not first make sufficient efforts, while still
using the [previous] approach to the assignment of licenses, to
avoid mutual exclusivity among their applications."
DIRECTV, 110 F.3d at 828. We concluded, however:

Once the Commission had abandoned [its previous] meth-
odology--for sufficient reasons, as we have seen--it was
faced with mutually exclusive applications. Nothing in
s 309(j)(6)(E) requires the FCC to adhere to a policy it
deems outmoded "in order to avoid mutual exclusivity in
... licensing proceedings"; rather, that provision in-
structs the agency, in order to avoid mutual exclusivity,
to take certain steps, such as the use of an engineering
solution, within the framework of existing policies.

Id. (quoting 47 U.S.C. s 309(j)(6)(E)). Similarly here, the
FCC reasonably abandoned the site-specific system in favor
of a geographic one, finding that "the public interest is better
served by licensing all remaining paging spectrum through a
geographic licensing scheme than by processing additional
site-specific licenses," Third R&O, 14 F.C.C.R. at 10,043,

while "it would not be in the public interest to implement
other licensing schemes or other processes that avoid mutual
exclusivity," id at 10,042. The Commission further reason-
ably found that both the "All" box option and the substantial
service alternative were necessary to effectively implement
the new scheme--the former to "give[ ] bidders the flexibility
to pursue back-up strategies in the event they are unable to
obtain their first choice of licenses" and the latter to encour-
age service to rural areas as required under section 309(j)(3).
Third R&O, 14 F.C.C.R. at 10,081-82. Having found the
policy changes in the public interest, the Commission was
authorized to implement them without regard to section
309(j)(6)(E) which imposes an obligation only to minimize
mutual exclusivity "in the public interest," 47 U.S.C.
s 309(j)(6)(E), and "within the framework of existing poli-
cies," DIRECTV, 110 F.3d at 828. Thus, the FCC's authority
to adopt the new licensing scheme was not foreclosed by its
section 309(j)(6)(E) obligation.6

B. Notice to Incumbent Licensees

Next, the licensee petitioners and two of the intervenors
contend that geographic licensees should be required under
the new system to provide advance notice of new construction
to adjacent site-specific licensees, in order to warn them of
potential interference, as they are required to do for adjacent
geographic licensees. See Second R&O, 12 F.C.C.R. at 2765
App. A, s 22.503(h). Site-specific incumbent licensees, how-
ever, do not share geographic licensees' need for such warn-
ing because the existing rules furnish interference protection
through requirements "that govern transmitter height and
power, distance between transmission stations, the licensee's
protected service area, and/or the field strength of the licen-
see's service and interfering signals." Second R&O, 12

__________
6 The petitioners also challenge the "substantial service" standard
as too vague to permit the FCC to provide notice to licensees of
license termination, as required under 5 U.S.C. s 558(c). We find
adequate notice is provided, however, in the review procedure the
FCC requires before automatic termination can occur. See Brief of
Respondents at 28.

F.C.C.R. at 2767.7 Geographic licensees, by contrast, enjoy no
similar protection from interference. Because of this distinc-
tion, we conclude the FCC reasonably accorded the two
groups different treatment.

C. PRA

Finally, the applicant petitioners and two intervenors claim
that the algorithm the FCC used to determine their applica-
tions should be dismissed for mutually exclusivity is a "collec-
tion of information" for which OMB approval was not ob-
tained as required by the PRA.8 We disagree and hold that
the algorithm is not a "collection of information" under the
PRA.9 The PRA defines "collection of information" as "ob-
taining, causing to be obtained, soliciting, or requiring the
disclosure to third parties or the public, of facts or opinions
by or for an agency." 44 U.S.C. s 3502(3)(A). To come
within this definition the algorithm must impose a "reporting
requirement" on applicants. See Saco River Cellular, Inc. v.
FCC, 133 F.3d 25, 33 (D.C. Cir. 1998). It does not. The
algorithm simply blocks applications that meet specific crite-
ria for mutual exclusivity. It is true, as the petitioners
assert, that "if an applicant is to ensure its basic acceptabili-

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7 In addition, geographic licensees are required to provide con-
struction information upon request. See 47 C.F.R. s 22.529(c).

8 PRA section 3507(a) provides that "[a]n agency shall not con-
duct or sponsor the collection of information unless in advance of
the adoption or revision of the collection of information ... the
agency has" submitted the proposed collection of information to the
OMB Director, "the [OMB] Director has approved the proposed
collection of information ...; and ... the agency has obtained from
the [OMB] Director a control number to be displayed upon the
collection of information." 44 U.S.C. s 3507(a).

9 The FCC contests our jurisdiction over the claims of those
applicant petitioners who did not file a petition for reconsideration
of the FCC's dismissal of their applications. See 47 U.S.C.
s 155(c)(7). The FCC concedes, however, that the court has juris-
diction over at least one of the petitions. See Brief of Respondents
at 32. The PRA issue is therefore squarely before the court.

ty," it must research in advance whether or not the license it
seeks meets the algorithm's criteria, Reply Brief at 24, but
the FCC does not require such research or that its results be
reported.10

For the foregoing reasons, the petitions for review are

Denied.

__________
10 The petitioners' alternative argument that the algorithm vio-
lates the Administrative Procedure Act, 5 U.S.C. s 553, because
promulgated without public notice and comment is waived because
the argument was raised for the first time in the petitioners' reply
brief. See Grant v. United States Air Force, 197 F.3d 539, 543
(D.C. Cir. 1999) ("[A]n argument first made in a reply brief comes
too late.") (citing Fraternal Order of Police v. United States, 173
F.3d 898, 902-03 (D.C. Cir. 1999)).