United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued April 13, 2000 Decided June 6, 2000
No. 99-1316
Omnipoint Corporation,
Petitioner
v.
Federal Communications Commission and
United States of America,
Respondents
On Petition for Review of an Order of the
Federal Communications Commission
Mark J. O'Conner argued the cause for the petitioner.
Mark J. Tauber and Donna N. Lampert were on brief.
Stanley R. Scheiner, Counsel, Federal Communications
Commission, argued the cause for the respondents. Christo-
pher J. Wright, General Counsel, Daniel M. Armstrong,
Associate General Counsel, James M. Carr, Counsel, Federal
Communications Commission, and Joel I. Klein, Assistant
Attorney General, and Andrea Limmer, and Catherine G.
O'Sullivan, Attorneys, United States Department of Justice,
were on brief. John E. Ingle, Deputy Associate General
Counsel, Federal Communications Commission, entered an
appearance.
Before: Edwards, Chief Judge, Henderson and Rogers,
Circuit Judges.
Opinion for the court filed by Circuit Judge Henderson.
Karen LeCraft Henderson, Circuit Judge: On September
17, 1996 the Federal Communications Commission (FCC or
Commission) granted Omnipoint Corporation (Omnipoint)
eighteen broadband personal communications services (PCS)
licenses for C Block spectrum which it won at auction.
Because Omnipoint was a qualifying "small business" the
FCC financed ninety per cent of Omnipoint's auction bid at a
7% interest rate "based on the rate for ten-year U.S. Trea-
sury obligations applicable on the date the license is granted."
47 C.F.R. s 24.711(b)(3). Omnipoint requested a waiver of
the 7% interest rate calculated under section 24.711(b)(3),
arguing that it contravened the FCC's policy of setting inter-
est rates "no higher than the government's cost of money,"
which was then 6.5%. In re Implementation of Section 309(j)
of the Communications Act--Competitive Bidding, Second
Report and Order, 9 F.C.C.R. 2348, 2390 (1994). The FCC's
Bureau of Wireless Communications (Bureau) first denied
Omnipoint's waiver request, a decision the Commission ulti-
mately affirmed, finding that strict adherence to section
24.711(b)(3) did not frustrate its underlying policy or unduly
burden Omnipoint contrary to the public interest. We deny
Omnipoint's petition for review of the FCC's waiver denial.
I.
In 1993 the United States Congress authorized the FCC to
allocate spectrum by auction and directed it to promulgate
rules "to ensure that small businesses ... are given the
opportunity to participate in the provision of spectrum-based
services." 47 U.S.C. s 309(j)(4)(D). In setting up the small
business preference, the FCC identified "two broad, basic ...
policy goals: promoting economic growth and enhancing ac-
cess to telecommunications service offerings for consumers,
producers, and new entrants." Second Report and Order, 9
F.C.C.R. at 2349. The FCC intended its rules to foster
economic growth by ensuring "that small businesses ... are
given the opportunity to participate in both the competitive
bidding process and the provision of spectrum-based ser-
vices." Id. at 2388. It promulgated section 24.711(b)(3),
establishing the interest rate for small business auction win-
ners "based on the rate of the U.S. Treasury obligations (with
maturities closest to the duration of the license term) at the
time of licensing." Id. at 2410 (codified at 47 C.F.R.
s 24.711(b)(3)). In promulgating section 24.711(b)(3) the
FCC stated:
Finally, we also agree with those commenters that sug-
gest that interest on installments should be charged at a
rate no higher than the government's cost of money. We
recognize that, in addition to providing a source of fi-
nancing that might not otherwise be available to small
entities, we should impose interest in a manner that is
designed to provide significant financial assistance to
small businesses. Accordingly, in order to ensure that
this government financing results in significant capital
cost savings to small businesses, we will impose interest
on installment payments equal to the rate for U.S. Trea-
sury obligations of maturity equal to the license term.
This rate is generally lower than the prime lending rate
established by private banks.
Id. at 2390-91.1 The FCC consistently applied the Treasury
note rate in assigning installment payment interest rates.
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1 In 1995 the FCC amended section 24.711(b)(3) to provide for an
interest rate "based on the rate for ten-year U.S. Treasury obli-
gations applicable on the date the license is granted." See Race
and Gender Based Provisions for Auctioning C Block Broadband
Personal Communications Services Licenses, 60 Fed. Reg. 37,786,
37,796 (1995) (codified at 47 C.F.R. s 24.711(b)(3)). The amended
See In re Implementation of Section 309(j) of the Communi-
cations Act--Competitive Bidding, Fifth Report and Order, 9
F.C.C.R. 5532, 5592-93 (1994) ("Interest will accrue at the
Treasury note rate."); In re Implementation of Section 309(j)
of the Communications Act--Competitive Bidding, Sixth Re-
port and Order, 11 F.C.C.R. 136, 156-59 (1995), aff'd, Omni-
point Corp. v. FCC, 78 F.3d 620 (D.C. Cir. 1996) (Interest will
be charged "at a rate equal to ten-year U.S. Treasury obli-
gations applicable on the date the license is granted.").
On September 17, 1996, after auction, the FCC granted
Omnipoint eighteen broadband PCS licenses for C Block
spectrum. As a qualifying small business Omnipoint was
eligible for government-sponsored financing of ninety per
cent of its winning bid obligation and a favorable interest rate
on its debt. See Second Report and Order, 9 F.C.C.R. at
2389-90; 47 C.F.R. s 24.711(b). At the time the "rate for
ten-year U.S. Treasury obligations" was 7%, set by the
August 1996 United States Treasury auction. As both sides
agree, however, the August 1996 Treasury auction was "un-
usual." In re Requests for Waiver of Section 24.711(b)(3) of
the Comm'n's Rules Establishing the Interest Rate on In-
stallment Payments for C Block PCS Licensees, Memoran-
dum Opinion and Order, 14 F.C.C.R. 9298, 9302 (1999).
Treasury auctions for ten-year notes are typically held in
February, May, August and November of each year using a
competitive bidding methodology.2 In 1996, however, for the
__________
version applies to Omnipoint. After a 1998 amendment not relevant
here, section 24.711(b)(3) now provides for an interest rate based on
the ten-year Treasury note "plus 2.5 percent." Competitive Bid-
ding Process, 63 Fed. Reg. 2315, 2349 (1998) (codified at 47 C.F.R.
s 24.711(b)(3)).
2 The Treasury auctions ten-year notes by accepting investors'
written bids specifying the lowest asking yield and moving upward
until it raises a targeted amount of money. Each auction estab-
lishes a yield and a coupon rate. Treasury regulations define
"yield" as the "annualized rate of return to maturity on a note or
bond expressed as a percentage." 31 C.F.R. s 356.2. The coupon
rate, which a ten-year note bears, is "set at a 1/8 of one percent
first time since 1980, the Treasury Department auctioned ten-
year notes in July and then reopened the July auction in
August. As a result, the August notes bore the coupon rate
of 7% from the July auction even though the rate in fact
reflected neither the August auction results, nor August
market conditions nor the government's actual cost of mon-
ey--a yield of 6.535%. Instead, the bidders in the August
auction paid a premium for the ten-year notes. According to
Omnipoint, had the Treasury Department instead issued a
new security in August, "the average auction yield of 6.535%
would have dictated a coupon rate of 6.5% on the new
security." John Friel Decl. 2 (Dec. 11, 1996). On December
16, 1996 Omnipoint filed a request for waiver of section
24.711(b)(3), claiming that, because of the August auction's
"unusual circumstances," the FCC's use of the 7% coupon
rate contravened both its policy of setting interest rates at no
more than the government's cost of money and the public
interest. Omnipoint requested that the FCC instead apply a
6.5% interest rate based on the August auction's weighted
yield. The Bureau denied Omnipoint's waiver request and
the FCC, on June 2, 1999, affirmed the Bureau's denial.
Omnipoint then timely petitioned for review.
II.
The FCC interpreted "rate" as used in section 24.711(b)(3)
as the coupon rate and therefore applied the August auction's
7% coupon rate for ten-year notes to Omnipoint's installment
payments.3 See Memorandum Opinion and Order, 14
F.C.C.R. at 9303. Omnipoint contends that the FCC arbi-
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increment" which is "closest to, but not above, par when evaluated
at the weighted-average yield of awards to successful competitive
bidders." Id. s 356.20(b).
3 Omnipoint contends that the FCC arbitrarily interpreted "rate"
as the coupon rate instead of the yield. Such an argument,
however, is beyond the scope of a waiver request. See WAIT
Radio v. FCC, 418 F.2d 1153, 1158 (D.C. Cir. 1969) ("The very
essence of waiver is the assumed validity of the general rule, and
also the applicant's violation unless waiver is granted.").
trarily and capriciously denied its waiver request, ignoring
the required "hard look" standard. BellSouth Corp. v. FCC,
162 F.3d 1215, 1224-25 (D.C. Cir. 1999) (Waiver requests "are
not subject to perfunctory treatment, but must be given a
hard look.") (quotation omitted). According to the FCC
waiver rule:
The Commission may grant a request for waiver if it is
shown that:
(i) The underlying purpose of the rule(s) would not be
served or would be frustrated by application to the
instant case and that a grant of the requested waiver
would be in the public interest; or
(ii) In view of the unique or unusual factual circum-
stances of the instant case, application of the rule(s)
would be inequitable, unduly burdensome or contrary to
the public interest, or the applicant has no reasonable
alternative.
47 C.F.R. s 1.925(b)(3). Omnipoint assumes a "heavy" bur-
den because "an agency's refusal to grant a waiver will not be
overturned unless the agency's reasons are so insubstantial as
to render that denial an abuse of discretion." Mountain
Solutions, Ltd., Inc. v. FCC, 197 F.3d 512, 517 (D.C. Cir.
1999) (quotations omitted). Furthermore, "the agency's strict
construction of a general rule in the face of waiver requests is
insufficient evidence of an abuse of discretion." Id. (citing
BellSouth, 162 F.3d at 1225).
Omnipoint argues that section 24.711(b)(3)'s underlying
purpose is to provide financing to C Block licensees at a rate
"no higher than the government's cost of money." The
record, however, does not support Omnipoint's "restricted
view of the Commission's goals and purposes." BellSouth,
162 F.3d at 1224. The FCC initially articulated its purpose
as "promoting economic growth and enhancing access to
telecommunications service offerings for consumers, produc-
ers, and new entrants." Second Report and Order, 9
F.C.C.R. at 2348. To that end the FCC allowed a small
business licensee to pay for its licenses in installment pay-
ments over the license term. See 47 C.F.R. s 24.711(b). The
FCC also "agree[d] with those commenters that suggest that
interest on installments should be charged at a rate no higher
than the government's cost of money." Second Report and
Order, 9 F.C.C.R. at 2390. But the FCC stopped short of
committing itself and ultimately retreated from the notion
that its purpose was to provide an interest rate no higher
than the government's cost of money. Instead, the FCC
considered section 24.711(b)(3) to represent "an identifiable
benchmark" for interest rates. Memorandum Order and
Opinion, 14 F.C.C.R. at 9303 ("The Commission has recog-
nized that Treasury auctions provide an identifiable bench-
mark on which to base interest rates for installment pay-
ments, but may not always reflect the government's cost of
money.") (citing Amendment of Part 1 of the Comm'n's
Rules--Competitive Bidding Proceeding, Order, Memoran-
dum Opinion and Order and Notice of Proposed Rulemaking,
12 F.C.C.R. 5686, 5709 (1997)). The FCC clarified that "[t]he
policy behind our installment payment plan was to facilitate
small business participation in our auction process by, among
other things, application of the low interest rates used in the
Treasury auctions." Id.; see also Second Report and Order,
9 F.C.C.R. at 2390-91 (FCC intended to provide financing "in
a manner that is designed to provide significant financial
assistance" at rates "generally lower than the prime lending
rate established by private banks."). The 7% interest rate,
while higher than the government's cost of money in August
1996, was nevertheless significantly lower than the 11.625%
interest rate private banks were then charging. See Memo-
randum Opinion and Order, 14 F.C.C.R. at 9303 n.39. We
conclude that the FCC reasonably determined that strict
adherence to section 24.711(b)(3) did not frustrate its underly-
ing purpose to provide interest rates lower than those of
private banks.
Additionally, Omnipoint failed to show that its "unusual
factual circumstances" made the application of section
24.711(b)(3) to its installment payments inequitable or con-
trary to the public interest. Although the August 1996
Treasury auction was unusual, Omnipoint claims that its
additional $6 million dollar cost (over ten years) resulting
from the 0.5% interest rate difference harms the public
interest. Omnipoint cannot satisfy the public interest re-
quirement, however, merely by "equat[ing] its own business
interest with the public interest." BellSouth, 162 F.3d at
1225. We conclude that the FCC did not abuse its discretion
in denying Omnipoint's request for a waiver from section
24.711(b)(3) in that it reasonably determined that "the Bureau
gave [Omnipoint's] waiver request a 'hard look' " and that
Omnipoint did not show how a waiver would serve the public
interest. Id. Accordingly, Omnipoint's petition for review of
the FCC's waiver denial is
Denied.