United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 13, 2005 Decided October 28, 2005
No. 04-1248
ICO GLOBAL COMMUNICATIONS (HOLDINGS) LIMITED,
ET AL.,
APPELLANTS
v.
FEDERAL COMMUNICATIONS COMMISSION,
APPELLEE
Appeal of an Order of the
Federal Communications Commission
Seth M. Galanter argued the cause for appellant. With
him on the briefs were Robert A. Mazer, James H. Bailey, and
Phuong N. Pham.
Stewart A. Block, Counsel, Federal Communications
Commission, argued the cause for appellee. With him on the
brief were Austin C. Schlick, Acting General Counsel, and
Daniel M. Armstrong, Associate General Counsel. John A.
Rogovin, Counsel, entered an appearance.
Before: RANDOLPH and ROGERS, Circuit Judges, and
WILLIAMS, Senior Circuit Judge.
2
Opinion for the Court filed by Senior Circuit Judge
WILLIAMS.
WILLIAMS, Senior Circuit Judge: Appellants ICO Global
Communications (Holdings) Ltd., 1 Constellation
Communications Holdings, Inc., and Mobile Communications
Holdings, Inc. are licensees who had been authorized by the
FCC to provide mobile satellite services using the 2 GHz
frequency band. They seek review of a Federal
Communications Commission order finding that Constellation
and Mobile had not satisfied the first of several “milestone”
requirements on which their licenses had been conditioned.
See In the Matter of Joint Application for Review of
Constellation Communications Holdings, Inc., et al., 19 FCC
Rcd 11,631 (2004) (“Constellation/Mobile Order”).
Appellants argue that Constellation and Mobile had in fact
satisfied the first milestone requirement by entering a set of
satellite-sharing agreements with ICO and that the FCC’s
rejection of the agreements was inconsistent with the relevant
precedent. We disagree.
* * *
The Commission imposes its milestone requirements on
spectrum licensees in order to “ensure speedy delivery of
service to the public” and to “prevent warehousing of valuable
1
We follow the lead of the FCC and refer to both ICO
Services Ltd. and its parent, ICO Global Communications
(Holding) Ltd., as simply “ICO.” See In the Matter of Joint
Application for Review of Constellation Communications
Holdings, Inc., et al., 19 FCC Rcd 11,631, 11,638 n.48
(2004). The latter is the named party in this case, but the FCC
issued a 2 GHz license to the former.
3
orbital locations and spectrum.” See In the Matter of the
Establishment of Policies and Service Rules for the Mobile
Satellite Service in the 2 GHz Band, 15 FCC Rcd 16,127,
16,177, ¶ 106 (2000) (“2 GHz MSS Order”). It sees
“warehousing” not only as impeding prompt service delivery
but also as allowing a licensee to “block[] entry by other
entities willing and able to proceed immediately with the
construction and launch of their satellite systems.”
Constellation/Mobile Order, 19 FCC Rcd at 11,632-33, ¶ 2.
Appellants don’t question these policy judgments.
To meet the first milestone, licensees must enter into
“non-contingent” satellite-manufacturing contracts within one
year of receiving their licenses. 2 GHz MSS Order, 15 FCC
Rcd at 16,177, ¶ 106. Meeting this first milestone is
particularly important, says the FCC, because “it provides an
early objective indication of whether a licensee is committed
to proceeding with implementation of its proposal.”
Constellation/Mobile Order, 19 FCC Rcd at 11,635, ¶ 7. The
FCC uses additional milestones to assess further progress in
constructing and launching satellites. See 2 GHz MSS Order,
15 FCC Rcd at 16,177, ¶ 106. It enforces the milestone
requirements by canceling licenses automatically if licensees
fail to comply. Id.
In July 2001 the FCC granted licenses for mobile satellite
service in the 2 GHz band to eight firms including ICO,
Constellation, and Mobile. ICO then entered into a satellite-
construction contract with Boeing Satellite Systems
International, Inc., and in February 2003 the FCC announced
that ICO had passed the first milestone. 2 GHz MSS Systems
in Compliance with First Milestone Requirement, 18 FCC
Rcd 1732 (2003).
4
Shortly before Constellation’s and Mobile’s deadlines for
meeting the first milestone, those firms entered a set of
satellite-sharing agreements with ICO.2 Under the satellite-
sharing agreements, Constellation and Mobile agreed to
purchase title to channels on ICO’s satellites. Constellation
and Mobile would gain access to those channels once they
became available for commercial services and would use
them to provide independent services to their customers. In re
Applications of Mobile Communications Holdings, Inc. and
ICO Global Communications (Holdings) Ltd., 18 FCC Rcd
2
Constellation and Mobile also entered into a set of
stock-purchase agreements with ICO. Under these
agreements, ICO would purchase all of Constellation’s and
Mobile’s stock in a two step process and would receive their
licenses in exchange. If the stock-purchase agreements had
received the requisite FCC approval and been consummated,
they would have superseded the sharing agreements. See In
re Applications of Mobile Communications Holdings, Inc. and
ICO Global Communications (Holdings) Ltd. for Transfer of
Control, 18 FCC Rcd 1094, 1096 ¶¶ 5-6 (Int’l Bureau 2003).
Our opinion will not address the stock-purchase
agreements because appellants rely only on the sharing
agreements to argue that they satisfied the first milestone
requirement. Appellants’ opening brief does suggest that had
the Commission first—and favorably—addressed the
proposed license transfers contained in the stock-purchase
agreements, Constellation and Mobile would have been
credited with the Boeing contract and thus would have passed
the first milestone. See Br. for Appellants 27-28. But we can
find no claim for such a sequencing in their applications for
Commission review, and as a result we don’t consider this
contention. See 47 U.S.C. § 405(a).
5
1094, 1095, ¶ 4 (Int’l Bureau 2003) (“Int’l Bureau Order”).
Constellation and Mobile argued that they satisfied the first
milestone requirement by executing the sharing agreements
with ICO. Affidavit Accompanying Letter from Robert A.
Mazer, Counsel for Constellation Communications Holdings,
Inc., to Marlene H. Dortch, Secretary, FCC (July 29, 2002);
Declaration Accompanying Letter from Tom Davidson,
Counsel for Mobile Communications Holdings, Inc., to
Marlene H. Dortch, Secretary, FCC (July 29, 2002).
The FCC’s International Bureau determined that
Constellation’s and Mobile’s agreements with ICO did not
constitute non-contingent satellite-construction contracts and
declared their licenses null and void for failure to satisfy the
first milestone requirement. Int’l Bureau Order, 18 FCC Rcd
at 1103, ¶ 24. The FCC affirmed the International Bureau’s
conclusion regarding the first milestone, see
Constellation/Mobile Order, 19 FCC Rcd at 11,640, ¶ 18, and
rejected appellants’ argument that the FCC’s precedents
provided insufficient notice of the limits that the FCC was
placing on the use of sharing agreements to meet milestone
requirements, id. at 11,646-48 ¶¶ 32-36. The FCC also
affirmed the International Bureau’s denial of a waiver request,
id. at 11,648-49 ¶ 39 and rejected the argument that it had
violated 47 U.S.C. § 312 by failing to provide appellants a
hearing before canceling their licenses, id. at 11,650 ¶ 42.
Appellants contest each of these four aspects of the FCC’s
decision, and we address them in turn.
* * *
Under the Administrative Procedure Act we are to uphold
the FCC’s order unless it is “arbitrary, capricious, an abuse of
6
discretion, or otherwise not in accordance with law.”
5 U.S.C. § 706(2)(a).
In evaluating whether appellants’ satellite-sharing
agreements satisfied the first milestone requirement, the FCC
invoked its earlier order, In re Applications of Tempo
Enterprises, Inc. et al., 1 FCC Rcd 20 (1986). There, the FCC
articulated a number of factors that it believed showed that the
satellite licensee had successfully met the first milestone:
There is a contract, signed by both parties, which
contains no unresolved contingencies which could
preclude substantial construction of the satellites. . . .
Specific satellites and their design characteristics are
identified, and dates for the start and completion of
construction are specified. The payment terms and
schedule are described sufficiently to demonstrate the
parties’ investment/commitment to completion of the
system. While the payments are not evenly spread
through the contract term, the initial payments are
significant, and the majority of payments are due during
the middle phases, well before the end of the construction
period. The major milestones in the construction
schedule are provided, and with the payment schedule,
establish the certainty of the plan and the reasonableness
of its projection for timely completion.
Id. at 21, ¶ 7. Although appellants are correct that the FCC
gave no indication in Tempo itself that it intended the
decision to establish a general minimum standard, at least one
FCC order that preceded appellants’ actions here identified
Tempo as “articulat[ing] the basic foundation for
demonstrating compliance” with the first milestone
requirement (referred to there as the first component of the
7
due diligence requirement). See In re Applications of United
States Satellite Broadcasting Co. et al., 7 FCC Rcd 7247,
7250, ¶ 19 (1992) (“USSB”).
The key problem the FCC identified with the sharing
agreements is that they “did not commit either Constellation
or [Mobile] to implement[ing] the proposed satellite system
they were licensed to operate.” Constellation/Mobile Order,
19 FCC Rcd at 11,640, ¶ 19. While Constellation and Mobile
each paid a $1 million deposit to ICO, this amount
“comprised less than one-half of one percent of the total
purchase price specified in each contract.” Int’l Bureau
Order, 18 FCC Rcd at 1100, ¶ 17. Nor did the agreements
require any additional payments from Constellation and
Mobile until ICO’s satellites were launched, in sharp contrast
with the Tempo contract, where “the majority of payments
[were] due during the middle phases, well before the end of
the construction period.” Tempo, 1 FCC Rcd at 21, ¶ 7.
Even more problematic for appellants are the contractual
consequences of breaching the sharing agreements. If ICO
breached, the only penalty it would incur is the obligation to
refund Constellation’s and Mobile’s $1 million deposits. See
Constellation/Mobile Order, 19 FCC Rcd at 11,647-48, ¶ 36;
Int’l Bureau Order, 18 FCC Rcd at 1100 n.28. The sharing
agreements gave Constellation and Mobile no leverage to
ensure that Boeing completed construction of ICO’s satellite
system in a timely manner, and, even if Boeing did so, that
ICO would follow through with the transfer of channel
capacity.
Constellation’s and Mobile’s lack of financial
commitment to the transaction was thus nicely matched by
ICO’s. ICO was pretty much free to pull out at any time.
8
And if it did so at the end of satellite construction,
Constellation and Mobile would be back at square one, no
closer to providing mobile satellite services than they were on
the day the FCC issued their licenses. During that time, the
spectrum assigned to them would have been unavailable to
other entities including those willing and able to start
construction immediately. While ICO’s satellite-construction
contract evidently would have created enough new capacity
for three licensees, that circumstance would not have been the
result of Constellation’s or Mobile’s making any commitment
or any exertion whatsoever, and Commission policy focuses
not on satellite capacity in relation to overall demand, but on
individual licensees’ contribution to the development of
capacity.
* * *
Appellants also argue that they were deprived of their
licenses without due process because the FCC had failed to
provide advance notice either of its requirement that
commitment be demonstrated by making substantial
payments or of any ban on meeting the first milestone via a
satellite-sharing agreement. Under our cases there is no due
process violation if a regulated party acting in good faith is
“able to identify, with ascertainable certainty, the standards
with which the agency expects parties to conform.” Trinity
Broadcasting v. FCC, 211 F.3d 618, 628 (D.C. Cir. 2000)
(quoting General Electric Co. v. EPA, 53 F.3d 1324, 1329
(D.C. Cir. 1995)). As our discussion of Tempo and USSB
should make clear, appellants did receive adequate notice of
the financial commitment required. See also In re Advanced
Communications Corp., 11 FCC Rcd 3399, 3418-19, ¶ 50
(1995) (citing Advanced’s lack of financial commitment to
9
satellite construction as reason for denying its request for
milestone extension).
Appellants are mistaken in characterizing the FCC’s
order as implementing a rule against reliance on satellite
sharing to meet the first milestone. The FCC properly
explained that it would accept sharing agreements where the
licensee can “demonstrate the same investment and
commitment to completing the satellite system construction
as if it were constructing the satellite system it was licensed
to operate.” Constellation/Mobile Order, 19 FCC Rcd at
11,650-51, ¶ 43. Thus, the cancellation of Constellation’s
and Mobile’s licenses did not violate due process
requirements.
* * *
Appellants also challenge the FCC’s denial of a waiver
of the first milestone requirement. While the FCC must
explain the reasons for its decision, see WAIT Radio v. FCC,
418 F.2d 1153, 1156 (D.C. Cir. 1969), our review is
“extremely limited; we vacate such denials only when ‘the
agency’s reasons are so insubstantial as to render that denial
an abuse of discretion.’” BDPCS, Inc. v. FCC, 351 F.3d
1177, 1181-82 (D.C. Cir. 2003) (citing Mountain Solutions,
Ltd. v. FCC, 197 F.3d 512, 517 (D.C. Cir. 1999)). “The FCC
may exercise its discretion to waive a rule where particular
facts would make strict compliance inconsistent with the
public interest.” Northeast Cellular Telephone Co. v. FCC,
897 F.2d 1164, 1166 (D.C. Cir. 1990) (quoting WAIT Radio,
418 F.2d at 1159). In the current case, the FCC affirmed the
International Bureau’s conclusion that granting a waiver
would be contrary to the public interest because it “would
establish a precedent that would undercut efforts to limit
10
warehousing of scarce orbit and spectrum resources.”
Constellation/Mobile Order, 19 FCC Rcd at 11,648, ¶ 38. On
the Commission’s unchallenged policy premises, that
conclusion is no abuse of discretion.
Appellants urge the court to evaluate the FCC’s denial in
light of its grant of a waiver to another 2 GHz licensee in TMI
Communications & Co., 19 FCC Rcd 12,603 (2004), which
the FCC released several days after its order in the current
case. The Commission makes two arguments against our
even considering TMI, but neither is persuasive. It first
invokes 47 U.S.C. § 405(a), which conditions judicial review
of an issue on the filing of a request for FCC reconsideration
unless the Commission has otherwise had an opportunity to
pass on the issue. Here the Commission did have an
opportunity to pass on the consistency of its waiver decision
with its decision in TMI: in fact, a dissenting Commissioner
expressed his preference for “granting a waiver as we did in
the related TMI case.” Constellation/Mobile Order, 19 FCC
Rcd at 11,653 (dissenting statement of Comm’r Copps). See
Office of Communication of United Church of Christ v. FCC,
465 F.2d 519, 523 (1972) (“It would be blindly ignoring the
realities of administrative decision-making to say that the
majority had no opportunity to consider the objections raised
by the dissenters . . . .”). Second, the Commission says that it
has no obligation to explain any inconsistency with TMI
because it issued TMI slightly after the present decision. But
we’ve held that the Commission may not refuse to explain
apparent inconsistencies in decisions issued “at virtually the
same time.” See Melody Music, Inc. v. FCC, 345 F.2d 730,
732-33 & n.4 (D.C. Cir. 1965). The record doesn’t explain
Commissioner Copps’s reference to a later decision, but we
note that the “adoption” date of TMI precedes the “release”
date for the present decision.
11
On the merits, however, we find no inconsistency. To
satisfy the first milestone requirement, TMI, a Canadian
partnership holding both a Canadian license and a United
States “reservation of spectrum” in the 2GHz band, arranged
for satellite construction via a contract between TerreStar, a
corporation created and wholly owned by a partnership in
which TMI held a 40% share of equity and a quarter of the
voting rights, and Space Systems/Loral, a designer and
builder of satellites. The latter partnership brought
substantial U.S. financial resources into the
picture—resources that, the FCC says, could not have come
in via investment in TMI because of Canadian rules evidently
requiring at least 80% Canadian ownership of any Canadian
licensee. TMI, 19 FCC Rcd at 12,618, ¶ 40-41 & n.89. The
FCC evaluated the TerreStar-Loral contract’s provisions
regarding timing of construction and of payments and found
them satisfactory, TMI, 19 FCC Rcd at 12,610, ¶ 21, 12,618,
¶ 42, a conclusion with which appellants do not quarrel.
The problem, according to the FCC, was that while the
contents of the contract were adequate to meet the first
milestone, TMI itself was not a party and thus was not on the
hook financially to a degree that reflected the requisite
commitment to the timely completion of the project. The
FCC reached this conclusion even though “TMI appears to
stand to suffer some financial loss if the satellite is not
constructed as a result of its 40 percent ownership of
TerreStar’s parent company.” Id. at 12,619, ¶ 44. To cure
this problem the FCC attached a condition to its waiver: it
required TMI to “obligate itself to cover TerreStar’s future
satellite construction contract expenditures, by entering into a
guarantee or reimbursement agreement with TerreStar and/or
Loral, or by some similar arrangement.” Id. at 12,620, ¶ 45.
12
Not only did TMI come very close to meeting the Tempo
standard, but the gap between its commitment and that
normally required was due to a special legal obstacle, the
Canadian limit on non-Canadian investment in Canadian
licensees. The FCC concluded that in combination with the
condition attached to the waiver, these factors were enough to
support a waiver. Id. at 12,620, ¶ 47. Because each is absent
in the current case, there is no inconsistency with TMI and no
abuse of discretion.
* * *
Finally, appellants argue that because the FCC cancelled
Constellation’s and Mobile’s licenses without an order to
show cause and without an evidentiary hearing, it violated 47
U.S.C. § 312. Section 312(a) permits the Commission to
revoke a station license or construction permit for any of
seven enumerated reasons; section 312(c) then requires an
order to show cause and an evidentiary hearing before the
Commission “revok[es] a license or permit pursuant to
subsection (a).” Appellants do not argue that the
Commission’s cancellation order rested on any of seven
enumerated reasons. Rather, they argue that if the
cancellation order rests on any other reason, it lacks any
statutory foundation at all.
We are somewhat skeptical of appellants’ theory that
§ 312(a) establishes the exclusive means for termination of a
license or permit. Compare § 319(b), which provides that a
construction permit is to be “automatically forfeited” if a
station isn’t ready for operation within the time specified by
the Commission. In any event, assuming the applicability of
§ 312(c), a hearing is unnecessary where it would be pointless
because (for instance) the matter turns entirely on issues of
13
law and policy. See Citizens for Allegan County, Inc. v.
Federal Power Commission, 414 F.2d 1125, 1128 & n.5
(D.C. Cir. 1969) (holding that agency may permissibly omit a
hearing “where there is no dispute on the facts and the agency
proceeding involves only a question of law”); see also United
States v. Storer Broadcasting Co., 351 U.S. 192, 201-05
(1956); Wisconsin v. FERC, 104 F.3d 462, 467-68 (D.C. Cir.
1997). Appellants argue that a hearing would have offered
them an opportunity to cure any perceived noncompliance.
The purpose of a hearing under § 312(c) is not to offer
licensees an opportunity to take remedial measures, however,
but is explicitly for parties to “give evidence”—and
appellants proffer none. Thus we are confident that here §
312(c) required no procedures in addition to those the
Commission furnished.
***
Accordingly, the orders are
Affirmed.