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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 17, 2003 Decided November 21, 2003
Nos. 02–1208, 02–1269
SIOUX VALLEY RURAL TELEVISION, INC., ET AL.,
PETITIONERS,
v.
FEDERAL COMMUNICATIONS COMMISSION AND
UNITED STATES OF AMERICA,
RESPONDENTS.
On Petitions for Review of an Order of the
Federal Communications Commission
Richard S. Myers argued the cause for petitioners.
Stewart A. Block, Counsel, Federal Communications Com-
mission (‘‘FCC’’), argued the cause for respondents. With
him on the brief were Jane E. Mago, General Counsel, FCC,
and John E. Ingle, Deputy Associate General Counsel, FCC,
R. Hewitt Pate, Acting Assistant Attorney General, U.S.
Bills of costs must be filed within 14 days after entry of judgment.
The court looks with disfavor upon motions to file bills of costs out
of time.
2
Department of Justice, and Robert B. Nicholson and Robert
Wiggers, Attorneys, U.S. Department of Justice.
Before: HENDERSON, TATEL, and ROBERTS, Circuit Judges.
Opinion for the Court filed by Circuit Judge ROBERTS.
ROBERTS, Circuit Judge: On July 28 and 29, 1994, the
Federal Communications Commission auctioned licenses for a
slender band of spectrum known as the Interactive Video and
Data Services (IVDS) spectrum (Auction No. 2). The IVDS
spectrum consists of two 500 kilohertz channels — 218.0–
218.5 MHz and 218.5–219.0 MHz — and Auction No. 2
distributed one license for each channel in 297 Metropolitan
Statistical Areas (MSAs) — a total of 594 licenses. The
petitioners were among Auction No. 2’s 178 winning bidders.
Petitioners seek review of a final order of the FCC that:
(1) eliminated a 25 percent bidding credit for businesses
owned by women or members of racial minorities; (2) estab-
lished and retroactively applied a substantially similar bidding
credit to licensees that qualified as small businesses; and (3)
offered various options for licensees to restructure their
outstanding financial obligations to the Commission. See In
re Amendment of Part 95 of the Commission’s Rules to
Provide Regulatory Flexibility in the 218–219 MHz Service,
15 F.C.C.R. 1497 (1999) (Restructuring Order). Petitioners
contend that the Restructuring Order unlawfully limited the
bidding credit to small business licensees. Petitioner Celtro-
nix also argues that the Commission arbitrarily rejected
Celtronix’s proposed restructuring options. We conclude that
the Restructuring Order was a lawful and reasonable exercise
of the Commission’s authority over spectrum auctions, and
accordingly deny the petitions for review.
I.
The Omnibus Budget Reconciliation Act of 1993, Pub. L.
No. 103–66, 107 Stat. 312, amended the Communications Act
to require the Commission to distribute spectrum licenses
‘‘through a system of competitive bidding.’’ See id. at
3
§ 6002(a), 107 Stat. 388 (codified as amended at 47 U.S.C.
§ 309(j)(1)). Congress further required that the Commission,
in designing competitive bidding processes, ‘‘ensure that small
businesses, rural telephone companies, and businesses owned
by members of minority groups and women are given the
opportunity to participate in the provision of spectrum-based
services, and, for such purposes, consider the use ofTTTbid-
ding preferencesTTTT’’ Id., 107 Stat. 389 (codified at 47
U.S.C. § 309(j)(4)(D)). Responding to this mandate, the
Commission established — for Auction No. 2 — a 25 percent
bidding credit for businesses owned by women or minorities1
that could be applied to one license in each MSA. See In re
Implementation of Section 309(j) of the Communications
Act — Competitive Bidding, 9 F.C.C.R. 2330, 2336 ¶ 36 (1994)
(Auction No. 2 Rules); 47 C.F.R. § 95.816(d)(1) (1994).2 The
bidding credit operated to reduce the amount a winning
bidder owed the Commission by 25 percent.
The Commission also sought to assist small businesses by
allowing winning small business bidders3 to make a 20 per-
cent down payment and to pay the remaining 80 percent in
installments over the five-year term of the license. See
Auction No. 2 Rules, 9 F.C.C.R. at 2336 ¶ 36; 47 C.F.R.
§ 95.816(d)(3) (1994). Small businesses owned by women or
1 To qualify, women or minorities had to own and control at least
50.1 percent of outstanding shares and voting rights. See 47 C.F.R.
§ 1.2110(b)(2) (1994).
2 Under the procedures established by the Commission, the two
IVDS licenses in each market were auctioned simultaneously. The
two highest bidders were then awarded the two licenses, with the
high bidder given its choice of channels. See Auction No. 2 Rules,
9 F.C.C.R. at 2332 ¶ 13. Because the minority/female bidding
credit was available only for one license in each MSA, if both
winning bidders were owned by women or minorities, only the high
bidder received the bidding credit. Id. at 2336 ¶ 39 & n.65.
3To qualify as a small business, the entity had to have less than
$6 million net worth and $2 million annual net profit each of the
previous two years. See Implementation of Competitive Bidding,
59 Fed. Reg. 22,980–01, 22,989 (May 4, 1994) (amending 47 C.F.R.
§ 1.2110(b)(1)).
4
minorities were allowed to take advantage of both the minori-
ty/female bidding credit and the installment payment plan.
See Auction No. 2 Rules, 9 F.C.C.R. at 2337–39 ¶¶ 43–47, 53–
54; FCC Auction No. 2 Bidder Information Package —
Procedures, Terms and Conditions 10, available at http:
//wireless.fcc.gov/auctions/02/releases/2 Procedures.pdf (last
visited Nov. 21, 2003).
Of the 178 winning bidders, 164 qualified as small busi-
nesses; those small businesses won 557 of the 594 available
licenses. See FCC Auction No. 2 Results, available
at http://wireless.fcc.gov/auctions/02/charts/2market.xls (last
visited Nov. 21, 2003). One hundred and four winning bid-
ders qualified for the minority/female bidding credit and
those businesses accumulated 291 licenses — nearly half of
the available total. Id. Every winning bidder who qualified
for the minority/female bidding credit also qualified for the
small business installment payment option. See Restructur-
ing Order, 15 F.C.C.R. at 1534 ¶ 61. The Auction No. 2
experiences of certain petitioners illustrate the operation of
the different payment options:
1. Sioux Valley Rural Television was the high bidder in
the Rapid City, South Dakota MSA with a bid of $27,000.
See FCC Auction No. 2 Results. Because it was neither a
small business nor owned by women or minorities, Sioux
Valley could not employ either the minority/female bidding
credit or the installment payment option. The next high
bidder in the market, Media Ventures, bid $26,000 and was
awarded the second license. Id. Media Ventures, however,
satisfied the minority/female ownership and small business
requirements, and so the Commission reduced Media Ven-
tures’s obligation by 25 percent — to $19,500 — and allowed
it to pay that amount on a five-year installment plan. Id.
2. Having bid $200,000, Self Communications, Inc. was the
second-highest bidder for the Gary, Indiana MSA. Id. Like
Sioux Valley, Self Communications was not minority- or fe-
male-owned and did not qualify as a small business, and
therefore it owed the full amount of its bid upon receipt of the
license. Id. By contrast, the high bidder for the market,
5
Skytouch Communications, Inc. ($225,000), received a minori-
ty/female bidding credit, and thus owed the Commission only
$168,750 for the license — an amount which Skytouch, as a
small business, was allowed to pay in installments. Id.
3. Celtronix Telemetry (then doing business as Communi-
ty Teleplay, Inc.) was the second-highest bidder for the
Norfolk, Virginia market, having offered $850,000. Id.
While Celtronix did not receive the benefit of a minority/fe-
male bidding credit, as a small business it was permitted to
make a 20 percent down payment ($170,000) and to pay the
remaining 80 percent of its bid ($680,000) in installments over
the five-year term of the license. Id.
* * *
After the results of Auction No. 2 were announced, another
winning bidder, Graceba Total Communications, Inc., peti-
tioned the Commission for reconsideration, arguing that the
Commission’s auction procedures had artificially inflated the
prices of the IVDS licenses. While that petition was pending
before the Commission, the Supreme Court decided Adarand
Constructors, Inc. v. Pena, 515 U.S. 200 (1995), and held that
racial classifications in federal government contracts were
subject to strict scrutiny. Id. at 235. The following term,
the Court held that gender-based classifications in govern-
ment programs must be justified by an ‘‘exceedingly persua-
sive justification.’’ United States v. Virginia, 518 U.S. 515,
531 (1996) (VMI). Immediately after Adarand, Graceba filed
a second petition for reconsideration arguing that the Com-
mission’s minority/female bidding credit was unconstitutional
and requesting that the Commission grant it the same 25
percent bidding credit. See Restructuring Order, 15
F.C.C.R. at 1503 ¶ 9.
Finding that Graceba’s constitutional argument had not
been timely raised, the Commission denied both of Graceba’s
petitions. See In re Interactive Video & Data Service (IVDS)
Licenses — Various Requests by Auction Winners, 11
F.C.C.R. 1282, 1285 ¶ 23 (1995). On Graceba’s petition for
review, we vacated that order and remanded for consideration
6
of Graceba’s constitutional arguments. Graceba Total Com-
munications, Inc. v. FCC, 115 F.3d 1038, 1041–42 (D.C. Cir.
1997). In so doing, we noted that Graceba’s case raised not
only constitutional arguments, but also ‘‘fact-specific, policy-
laden concerns’’ such as ‘‘questions about the finality of FCC
licenses, [and] fairness to auction participants,’’ resolution of
which ‘‘would benefit from the agency’s expertise.’’ Id. at
1042.
Meanwhile, the IVDS spectrum was turning out to be an
idea whose time had not yet come. The function initially
envisioned for the spectrum — interactive television — was
no longer seen as a commercially viable enterprise. See
Restructuring Order, 15 F.C.C.R. at 1506 ¶ 13. In 1996, less
than two years after Auction No. 2, a coalition of IVDS
licensees sought relief from their financial obligations to the
Commission, including an extension of the license term (and a
concomitant extension of the installment payment amortiza-
tion schedule) from five to ten years, along with grace periods
from payments. See In re Amendment of Part 95 of the
Commission’s Rules to Provide Regulatory Flexibility in the
218–219 MHz Service, 13 F.C.C.R. 19,064, 19,081 ¶¶ 28–29
(1998). In response, the Commission effectively suspended
payment obligations for licensees not already in default, id. at
19,072–73 ¶¶ 12–13, and issued a notice of proposed rulemak-
ing to examine possibilities for restructuring the licensees’
financial obligations to the Commission, id. at 19,080–96
¶¶ 28–57. At that time, the Commission also dropped the
IVDS moniker and eponymously renamed the sliver of spec-
trum the ‘‘218–219 MHz Service.’’ Id. at 19,075 ¶ 16. The
name change, however, could not disguise the fact that ‘‘the
deployment of the 218–219 MHz Service had not been suc-
cessfulTTTT [W]ith a few, limited exceptions, licensees had
still been unable to offer services.’’ Restructuring Order, 15
F.C.C.R. at 1505 ¶ 13.
The Restructuring Order
Responding to both the continuing dormancy of the 218–
219 MHz spectrum and this court’s Graceba remand, the
Commission released its Restructuring Order in September
7
1999. See 15 F.C.C.R. at 1497. In the Restructuring Order,
the Commission took several steps to mitigate the financial
distress of the 218–219 MHz small business licensees with
outstanding installment payment obligations to the Commis-
sion. First, the Commission extended the term of the 218–
219 MHz licenses from five to ten years. See id. at 1517 ¶ 31.
The Commission also provided those small business licensees
not then in default with three options to restructure their
installment payments to the Commission — resumption, am-
nesty, or prepayment. See id. at 1518–29 ¶¶ 33–54. Under
the ‘‘resumption’’ option, the licensee would resume install-
ment payments, reamortized over the new ten-year license
term. See id. at 1522–25 ¶¶ 40–45. The ‘‘amnesty’’ option
allowed a licensee to return to the Commission one or more of
the licenses it had been awarded. In return, the Commission
would extinguish any debt associated with that license and
refund any installment payments previously made, except for
the 20 percent down payment. See id. at 1525–27 ¶¶ 46–50.
Finally, under the ‘‘prepayment’’ option, a licensee could
retain a license by paying in full the outstanding balance on
that license, using — as part of the prepayment — 85 percent
of the down payments on licenses surrendered under the
amnesty option. See id. at 1528–29 ¶¶ 51–53.
The Commission also restructured its bidding credit system
in response to this court’s remand in Graceba and comments
from numerous licensees arguing that the minority/female
bidding credit ran afoul of the Supreme Court’s recent deci-
sions in Adarand and VMI. See id. at 1531–32 ¶¶ 57, 59.
The commenting licensees — not minority- or female-
owned — argued that they, too, were entitled to a 25 percent
bidding credit, retroactively applied. See id. at 1532 ¶ 59. In
its Restructuring Order, the Commission acknowledged that
the administrative record on ownership of telecommunications
facilities ‘‘would not adequately support the race- and gender-
based provisions of the TTT competitive bidding rules under a
strict scrutiny standard.’’ Id. at 1533 ¶ 60. The Commission
thus sought to craft a ‘‘remedy responsive to [the] commen-
ters.’’ Id.
8
The Commission decided to ‘‘eliminate from our rules the
minority- and women-owned business bidding credits and TTT
simultaneously grant credits of commensurate size to all
winning small business bidders in [Auction No. 2].’’ Id. This
new 25 percent bidding credit for small businesses was called
the ‘‘Remedial Bidding Credit’’ (RBC). Id. at 1533 ¶ 61. The
Commission noted that while it had revoked the bidding
credit previously given to minority- and female-owned busi-
nesses, those businesses would suffer ‘‘no known negative
impactTTTbecause all such bidders also met the small busi-
ness qualifications,’’ and therefore would be awarded the
substantially identical RBC. Id. at 1534 ¶ 61. The Commis-
sion concluded that this course — eliminating the unconstitu-
tional bidding credit, then establishing a similar but race- and
gender-neutral credit — ‘‘strikes a proper balance’’ between
the need to cure the bidding credit system of constitutional
defects, on the one hand, and auction policy concerns such as
‘‘the need to avoid any major disruptions to the operations of
existing 218–219 MHz Service providers,’’ ‘‘the importance of
finality as a principle in the granting of licenses,’’ and ‘‘fair-
ness to auction participants,’’ on the other. Id. at 1534 ¶ 63.
Petitions for Reconsideration
Several licensees (including some of the petitioners here) —
calling themselves the Ad Hoc Coalition (the Coalition) —
sought reconsideration of the Restructuring Order, alleging
that the Commission’s expressed desire that the RBC have no
‘‘negative impact’’ on recipients of the earlier minority/female
bidding credit evinced an unconstitutional motive to perpetu-
ate a race- and gender-based preference. The petitioning
licensees demanded that the 25 percent bidding credit be
extended to all 218–219 MHz licensees, regardless of size.
Celtronix filed a separate petition for reconsideration chal-
lenging the Restructuring Order’s installment payment re-
structuring options. Celtronix asked the Commission to add
a fourth restructuring option — disaggregation — whereby a
licensee could divide a 500 kHz license in half, retaining a
license for 250 kHz, while surrendering the other half. Un-
der this proposal, the licensee’s down payment on the surren-
9
dered portion of the spectrum, rather than being forfeited to
the Commission, would be credited to pay down the obligation
on the retained portion. Celtronix also asked that the Com-
mission refund down payments to licensees who select the
amnesty option, arguing that the Commission’s policy of
retaining the down payments was arbitrarily inconsistent with
the policy of allowing licensees selecting the prepayment
option to allocate 85 percent of the down payments on their
surrendered licenses to outstanding obligations on retained
licenses.
The Commission rejected the arguments of the Coalition
and Celtronix. See In re Amendment of Part 95 of the
Commission’s Rules to Provide Regulatory Flexibility in the
218–219 MHz Service, 15 F.C.C.R. 25,020 (2000) (Second
Order on Reconsideration).4 The Commission concluded that
the facially neutral RBC did not implicate either Adarand or
VMI, and was not otherwise motivated by unlawful discrimi-
nation. Id. at 25,038–42 ¶¶ 40–47. The Commission observed
that petitioners’ constitutional arguments were premised on
the incorrect notion that the RBC was implemented to reme-
dy race and gender discrimination in Auction No. 2. Id. at
25,041 ¶ 44. The Commission emphasized that the restruc-
turing of the bidding credit regime was, in reality, a two-step
process: First, to ameliorate the constitutional concerns
raised in the Graceba remand, the Commission eliminated the
minority/female bidding credit. Then, because the elimina-
tion of that bidding credit (the equivalent of an abrupt 33
percent price hike) would cause severe disruption among the
104 licensees who had enjoyed the credit, the Commission
chose to ‘‘afford all small businesses an after the fact bidding
credit.’’ Id. In effect, the Commission ‘‘leveled the [minori-
ty/female] bidding credit benefit upward’’ to include all small
businesses. Id. The RBC ‘‘fulfilled [the FCC’s] statutory
4 The Commission had released its First Order on Reconsidera-
tion more than a year earlier, sua sponte, in order to correct an
error — not relevant to these proceedings — in the Restructuring
Order’s discussion of the amnesty option. See In re Amendment of
Part 95 of the Commission’s Rules to Provide Regulatory Flexibili-
ty in the 218–219 MHz Service, 14 F.C.C.R. 21,078 (1999).
10
mandate of encouraging participation of entrepreneurs, rural
telephone companies, and businesses owned by members of
minority groups and women,’’ and ‘‘solved a multi-faceted and
complex set of regulatory issues.’’ Id. The Commission thus
rejected the petitioners’ demand that the credit be extended
to cover all winning bidders regardless of size. Id.
The Commission also rejected Celtronix’s ‘‘disaggregation’’
proposal. See id. at 25,028–29 ¶¶ 17–20. While the Commis-
sion acknowledged that Celtronix would be able to provide
service on a disaggregated 250 kHz block of spectrum, other
licensees had expressed doubt that ‘‘channel blocks smaller
than 500 kHz are practical for innovative uses.’’ Id. at 25,029
¶ 19. The Commission also took note of the claim of several
licensees that the existing 500 kHz blocks were themselves
too small for commercially viable services. Id. at 25,029 ¶ 18.
These comments led the Commission to doubt ‘‘that service
will be developed in the portion of a channel block that would
remain after a licensee elects disaggregation as a restructur-
ing option,’’ or that the market otherwise ‘‘would support the
auction of disaggregated spectrum blocks in the 218–219 MHz
Service.’’ Id. at 25,029 ¶¶ 19–20.
Finally, the Commission declined to adopt Celtronix’s pro-
posal that licensees selecting the amnesty restructuring op-
tion be refunded their down payments. The Commission
noted that allowing down payments on surrendered licenses
to be allocated to retained licenses under the prepayment
option served ‘‘the public interest benefit of speeding service
to the public.’’ Id. at 25,030 ¶ 23. The Commission found no
‘‘adequate counterbalancing public interest benefit’’ to Celtro-
nix’s refund proposal, concluding instead that Celtronix’s
proposal ‘‘would undermine the integrity of the auction pro-
cess by relieving participants of even the most basic obli-
gation of their participation.’’ Id.
The Coalition filed a second petition for reconsideration,
reprising its arguments that the RBC maintained the uncon-
stitutional race and gender preferences animating the earlier
minority/female bidding credit. The Coalition also launched a
new attack on the RBC, arguing that it violated the notice-
11
and-comment provisions of the Administrative Procedure Act,
5 U.S.C. § 553(b)(3), (c). In its Third Order on Reconsidera-
tion, the Commission rejected these arguments. See In re
Amendment of Part 95 of the Commission’s Rules to Provide
Regulatory Flexibility in the 218–219 MHz Service, 17
F.C.C.R. 8520, 8525–28 ¶¶ 14–20 (2002) (Third Order on
Reconsideration). The Commission dismissed as repetitious
the Coalition’s arguments concerning the constitutionality of
the RBC. See id. at 8525–26 ¶¶ 15–17. As for the Coalition’s
notice-and-comment argument, the Commission concluded
that it had not been made with sufficient particularity in the
Coalition’s first petition for reconsideration to merit the Com-
mission’s attention at that time, and was accordingly untimely
when presented in the second petition. Id. at 8526 ¶ 18.
Finding that no public interest would be served by the review
of the Coalition’s untimely argument, the Commission dis-
missed it as well. Id. at 8527–28 ¶ 20.
Petitioners timely filed petitions for review of the Commis-
sion’s Restructuring Order, and they were consolidated for
purposes of appeal.
II.
Under the Administrative Procedure Act, our review of
agency action is highly deferential; we will affirm agency
action unless it is ‘‘arbitrary, capricious, an abuse of discre-
tion, or otherwise not in accordance with law.’’ 5 U.S.C.
§ 706(2)(A). Under this highly deferential standard, we do
not ‘‘substitute [our] judgment for that of the agency.’’ Mo-
tor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co.,
463 U.S. 29, 43 (1983). Rather, we will leave an agency
decision undisturbed as long as it ‘‘examine[s] the relevant
data and articulate[s] a satisfactory explanation for its action
including a ‘rational connection between the facts found and
the choice made.’ ’’ Id. (quoting Burlington Truck Lines,
Inc. v. United States, 371 U.S. 156, 168 (1962)).
The arguments raised in the petitions for review fall into
two broad categories: challenges to the lawfulness of the
12
RBC and Celtronix’s challenges to the restructuring options
offered by the Commission. We will address each in turn.
A.
Remedial Bidding Credit
Petitioners level two main charges at the RBC: first, that
the RBC’s limitation to small businesses is unconstitutional
and is otherwise arbitrary and capricious; and second, that
the Commission’s adoption of the RBC in the Restructuring
Order violated the notice-and-comment requirements of the
APA. We conclude that both contentions are meritless.
1. Lawfulness of Remedial Bidding Credit
Petitioners claim that the Commission acted unlawfully
when it limited the RBC to small businesses and rejected
petitioners’ proposal that the RBC be extended to all winning
bidders regardless of size. Petitioners make three indepen-
dent sub-arguments in support of this conclusion.
a. Discriminatory Intent
Petitioners maintain that the RBC, its facial neutrality
notwithstanding, was impermissibly motivated by consider-
ations of race and gender discrimination and thus is unconsti-
tutional. In Hunt v. Cromartie, 526 U.S. 541 (1999), the
Supreme Court held that strict scrutiny could be applied to a
facially neutral law, but ‘‘only if it can be proved that the law
was motivated by a racial purpose or object, or if it is
unexplainable on grounds other than race.’’ Id. at 546 (inter-
nal quotation marks and citations omitted). To discern the
intent underlying an agency action, we look to ‘‘the historical
background of the decision,’’ ‘‘the specific sequence of events
leading up to the challenged decision,’’ and any ‘‘departures
from the normal procedural sequence.’’ Omnipoint Corp. v.
FCC, 78 F.3d 620, 634 (D.C. Cir. 1996) (quoting Arlington
Heights v. Metropolitan Hous. Dev. Corp., 429 U.S. 252, 265
(1997) (internal quotation marks and alterations omitted)).
To support their allegation that the RBC is merely a
continuation of the unconstitutional minority/female bidding
13
credit, petitioners point to the Commission’s observation that
the RBC would not negatively impact recipients of the minor-
ity/female bidding credit, because all of them also qualified as
small businesses. See Restructuring Order, 15 F.C.C.R. at
1534 ¶ 61. Petitioners argue that this statement demon-
strates that the Commission was actually concerned with
perpetuating race- and gender-based preferences, rather than
assisting small businesses. We rejected a substantially iden-
tical argument in the context of another FCC spectrum
auction, stating that the Commission’s consideration of ‘‘the
effect a rule change would have on minority- and women-
owned businesses does not evince its discriminatory intent.’’
Omnipoint, 78 F.3d at 634. That would seem to go some
distance toward foreclosing petitioners’ claim of discriminato-
ry intent here.
Petitioners nevertheless attempt to distinguish our Omni-
point decision on the basis that the Restructuring Order
applied the RBC retroactively whereas, in Omnipoint, the
change in bidding credit rules occurred before the auction
had taken place. This, say petitioners, demonstrates that the
RBC — unlike the bidding credit in Omnipoint — could not
have been motivated by the congressional mandate to encour-
age participation of small businesses in spectrum auctions;
not even the FCC could, in 1999, have encouraged partic-
ipation in an auction that had occurred in 1994. Supposedly
having put the lie to the Commission’s stated purpose, peti-
tioners maintain that the RBC is unexplainable on any
ground other than race. We disagree.
First, Congress did not require only that the Commission
encourage small business participation in spectrum auctions.
See 47 U.S.C. § 309(j)(4)(D). Congress also charged the
Commission with the mandate of ‘‘disseminating licenses
among a wide variety of applicants, including small busi-
nesses.’’ Id. at § 309(j)(3)(B) (emphasis added). While the
petitioners are surely correct that the RBC could not, five
years after the fact, possibly encourage participation in Auc-
tion No. 2, it certainly could (and did) encourage the dissemi-
nation of licenses to small businesses by lowering the finan-
cial burden on those favored licensees. In any event, the
RBC is readily explainable on other race-neutral grounds,
14
including ‘‘finality as a principle in the granting of licenses,’’
‘‘fairness to auction participants’’ who had in good faith relied
upon the existence of the bidding credit in constructing their
business models, and the need ‘‘to avoid major disruptions to
the affected service.’’ See Restructuring Order, 15 F.C.C.R.
at 1534–35 ¶ 63. Similarly, the Commission’s decision to limit
the RBC to small businesses is explainable on the race-
neutral ground that the Commission (quite naturally) wanted,
consistent with the Commission’s other statutorily defined
objectives, to retain as much of the proceeds from Auction
No. 2 as possible. See 47 U.S.C. § 309(j)(3)(C) (directing the
Commission to ‘‘recover[ ] for the public TTT a portion of the
value of the public spectrum resource’’). By contrast, other
than the Commission’s observation of the effects of the Re-
structuring Order on recipients of the minority/female bid-
ding credit, petitioners have put forth no evidence to indicate
that the RBC was intended to manifest racial or gender
preferences. Petitioners have thus failed to meet their bur-
den of showing that the RBC was motivated by a racial
purpose or is unexplainable except on the basis of race.
b. Constitutionally Insufficient Remedy
Petitioners next argue that the RBC is a ‘‘Constitutionally
Insufficient Remedy’’ (Pet. Br. 23) for the race and gender
discrimination that infected Auction No. 2. Specifically, peti-
tioners claim that the RBC is inadequate because it fails to
account for the time value of money lost to white-male-owned
small business licensees for the period between Auction No. 2
and the payment of the RBC refunds. Petitioners assert that
to pass constitutional muster, a remedy ‘‘must be designed as
nearly as possible ‘to restore the victims of discriminatory
conduct to the position they would have occupied in the
absence of such conduct.’ ’’ Milliken v. Bradley, 433 U.S.
267, 280 (1977) (quoting Milliken v. Bradley, 418 U.S. 717,
746 (1974)). From that case (which concerned a federal
court’s school desegregation order) petitioners reason that
the Commission must pay interest to those licensees who
benefitted from the RBC but not the original minority/female
bidding credit.
15
This argument also fails. First, we are precluded from
reviewing any claim for the payment of interest because
petitioners failed to present this demand to the Commission
in a petition for reconsideration. See 47 U.S.C. § 405; AT&T
Corp. v. FCC, 317 F.3d 227, 235 (D.C. Cir. 2002) (court lacks
jurisdiction to review an argument not previously presented
to Commission).5
Second, petitioners’ focus on the RBC is misplaced; to the
extent that they construe the RBC as a remedy for discrimi-
nation in Auction No. 2, they err. The Commission’s remedy
for the unlawful discrimination was simply to ‘‘eliminate from
[its] rules the minority- and women-owned business bidding
credits.’’ Restructuring Order, 15 F.C.C.R. at 1533 ¶ 60. It
was only after the Commission had eliminated those credits
that it established the race- and gender-neutral RBC, crafted
not to remedy discrimination but rather to address the ‘‘mul-
ti-faceted and complex set of regulatory issues’’ created by
the elimination of the minority/female bidding credit, Second
Order on Reconsideration, 15 F.C.C.R. at 25,041 ¶ 44. Once
the Commission had eliminated the minority/female bidding
credit, every Auction No. 2 licensee owed the full amount of
its winning bid. At that time, petitioners occupied precisely
the position (relative to favored minority- and female-owned
licensees) they would have occupied absent the discriminatory
5 Petitioners argue that their demand for interest was fairly
presented in the Coalition’s second petition for reconsideration. We
cannot agree. Nowhere in that petition does the Coalition mention
interest, let alone specifically demand that interest be paid. See
Second Petition for Reconsideration of Ad Hoc Coalition, at 9
(‘‘[L]icensees that received the race/gender credit in the 1994
auctionTTTreceived that credit and the benefits thereof over 6 years
before the non-preferred class of winning licensees in the same
auction. The non-preferred class, unlike the preferred class, has
not had the use of the money represented by the RBC for over 6
years. As adopted, the RBC continues to discriminateTTTT’’). Such
an ‘‘incomplete’’ presentation of an issue does not suffice to place a
matter before the Commission such that it has been ‘‘afforded a fair
opportunity’’ to pass on the argument. Time Warner Entm’t Co. v.
FCC, 144 F.3d 75, 79 (D.C. Cir. 1998).
16
conduct — owing 100% of their winning bids. The Commis-
sion thus adequately remedied the unconstitutional discrimi-
nation in Auction No. 2.
c. Arbitrary and Capricious Agency Action
Leaving the realm of constitutional law, petitioners argue
that the Commission’s decision to limit the RBC to small
business licensees is arbitrary and capricious. The Commis-
sion’s obvious answer to this charge was that ‘‘Congress ha[d]
not directed [the Commission] to take special steps to ensure
the participation of large companies,’’ id.; the relevant por-
tions of the Communications Act express a preference for
small businesses. See id.; 47 U.S.C. § 309(j)(3)(B). Peti-
tioners advance two counter-arguments, each seeking to un-
dermine the notion that the RBC actually is intended to serve
the congressional objective of assisting small business to
obtain spectrum licenses.
First, petitioners argue that the retroactive application of
the RBC could not possibly encourage small businesses to
participate in Auction No. 2, held in 1994. As discussed
above, though, the RBC did encourage the dissemination of
licenses to small businesses by easing the financial burdens
on those entities and this directly serves the objective set out
by Congress. See id.
Petitioners next contend that because the RBC applied to
licensees who surrendered their licenses under the amnesty
option, the RBC could not truly have been concerned with
disseminating spectrum licenses to small businesses. Even
assuming that this lack of narrow tailoring could be sufficient
to strike the RBC, this argument seems to be based on a
mistaken premise. The Commission did not award a bidding
credit to licensees after they had surrendered their licenses.
Licensees were not required to select a restructuring option
until February 29, 2000 — more than five months after the
release of the Restructuring Order. See Restructuring Or-
der, 15 F.C.C.R. at 1529 n.178.6 Small business licensees
6
The Restructuring Order specifies that the deadline for election
of a restructuring option was the last day of the third month
17
thus had several months after receipt of their RBC to consid-
er whether to retain a license under the resumption or
prepayment restructuring options or to surrender the license
under the amnesty option. While some RBC recipients did
eventually decide to call it a day and surrender their licenses
under the amnesty option (including petitioner Celtronix),
providing the RBC to all small business licensees gave each
the best opportunity to survive and to provide service to the
public. Because the RBC is thus rationally connected to the
congressional objective of disseminating licenses to small
businesses, we have little difficulty affirming the Commis-
sion’s decision to limit the application of the RBC to congres-
sionally favored small business licensees.
2. Notice-and-Comment Challenge
Petitioners next maintain that the Commission failed to
comply with the notice-and-comment requirements of the
APA, 5 U.S.C. §§ 553(b)(3), (c), when it established the RBC
in the Restructuring Order. See Third Order on Reconsider-
ation, 17 F.C.C.R. at 8526–28 ¶¶ 18–20. We conclude that the
Commission did not abuse its discretion in dismissing this
challenge as untimely. See id.
The FCC’s rules require that petitions for reconsideration
be filed within 30 days of public notice of the action to be
reconsidered, and provide that untimely petitions will not be
considered except by leave of the Commission. See 47 C.F.R.
§ 1.429(d) (2000). The rules also require a petitioner to state
with particularity the basis for reconsideration. See id.
§ 1.429(c). Here, the Coalition’s timely first petition for
reconsideration mentioned the notice-and-comment require-
ments of the APA only in passing. Opening their argument
that the RBC failed to remedy the constitutional problems
with the minority/female bidding credit, the Coalition wrote:
‘‘The FCC’s conversion of the race/gender credit to a small
business credit, aside from its dubious lawfulness under the
following the month in which the Restructuring Order was publish-
ed in the Federal Register, November 1999. See 64 Fed. Reg.
59656–01 (Nov. 3, 1999) (publishing Restructuring Order).
18
Administrative Procedure Act (APA), which requires notice-
and-comment proceedings for the adoption of new rules, does
not resolve the constitutional issue.’’ First Petition for Re-
consideration of Ad Hoc Coalition, at 5. This ambiguous
reference to ‘‘dubious lawfulness’’ does not amount to an
argument stated with the particularity required by the Com-
mission’s rules. Innuendo en passant is not enough to catch
the Commission’s eye. We have held that the Commission
‘‘need not sift pleadings and documents to identify arguments
that are not stated with clarity by a petitioner.’’ Bartholdi
Cable Co. v. FCC, 114 F.3d 274, 279 (D.C. Cir. 1997) (internal
quotation marks and citation omitted). We see no reason to
place a more onerous requirement on the Commission now.
While the Coalition did make the notice-and-comment argu-
ment in its second petition for reconsideration, the argument
had not been raised to the Commission within 30 days of
public notice of the Restructuring Order, and so that argu-
ment was untimely. The question thus becomes whether the
Commission abused its discretion in refusing to grant the
Coalition leave to raise the untimely argument.
The Coalition’s second petition for reconsideration suggest-
ed no reason why the Commission ought to waive the untime-
liness objection, and indeed did not even specifically request
leave to file the untimely argument. On the other hand, the
Restructuring Order plainly indicates that the Commission
did consider comments from licensees (including petitioner
Celtronix) concerning the minority/female bidding credit and
how it ought to respond to this Court’s Graceba remand. See
Restructuring Order, 15 F.C.C.R. at 1532 ¶ 59 (‘‘[T]his Report
and Order addressesTTTcomments and reply comments that
raiseTTTconstitutional issues in this rulemaking.’’). Especially
considering that disfavored licensees evidently had an ade-
quate opportunity to comment on the minority/female bidding
credit, and that the Commission actually responded to their
comments, we can find no abuse of discretion in the Commis-
sion’s refusal to grant the Coalition leave to make the untime-
ly notice-and-comment argument. See, e.g., 21st Century
Telesis Joint Venture v. FCC, 318 F.3d 192, 199–200 (D.C.
Cir. 2003) (finding no abuse of discretion in the Commission’s
19
decision to not address untimely claims made in a second
petition for reconsideration when petitioner provided no ex-
planation why the argument could not have been timely
made).
B.
Celtronix’s Challenges to the Restructuring Options
Celtronix contends that the Commission arbitrarily refused
(1) to include Celtronix’s disaggregation proposal among the
allowed restructuring options; and (2) to refund any portion
of the down payment on licenses returned under the amnesty
option. These contentions, too, lack merit.
Celtronix argues that the Commission rejected its di-
saggregation proposal without considering evidence that com-
mercially viable services could be provided on disaggregated
250 kHz blocks of spectrum. This mischaracterizes the Com-
mission’s Second Order on Reconsideration. There, the
Commission acknowledged Celtronix’s claim that it was able
to provide service on just 250 kHz of spectrum. See Second
Order on Reconsideration, 15 F.C.C.R. at 25,028–29 ¶ 17.
The Commission, however, was persuaded by other commen-
ters who stated that even 500 kHz blocks might be too small
to support the development of innovative services. See id. at
25,029 ¶ 18. This led the Commission to doubt whether the
market would support a future auction of disaggregated 250
kHz blocks of spectrum surrendered by licensees. Id. at
25,029 ¶¶ 19–20. The Commission thus concluded that in the
absence of a ‘‘substantial record demonstrating a broad-based
need or desire’’ for 250 kHz blocks — a record Celtronix
never compiled — Celtronix’s proposal would not advance the
public interest. Id. at 25,029 ¶ 19. We can find no fault with
the Commission’s decision; the Commission considered the
relevant evidence and made a policy judgment concerning the
development of a nascent technology. Such decisions are well
within the purview of the responsible agency. See FCC v.
National Citizens Comm. for Broad., 436 U.S. 775, 813 (1978)
(‘‘a forecast of the direction in which future public interest
lies necessarily involves deductions based on the expert
20
knowledge of the agency’’ (quoting FPC v. Transcon. Gas
Pipe Line Corp., 365 U.S. 1, 29 (1961))); Time Warner
Entm’t Co. v. FCC, 240 F.3d 1126, 1133 (D.C. Cir. 2001)
(Commission is entitled to ‘‘appropriate deference to pre-
dictive judgments that necessarily involve the expertise and
experience of the agency’’).
Celtronix also claims that the Commission’s decision to not
refund down payments on licenses surrendered under the
amnesty option is arbitrary and capricious when considered in
light of its decision to allow, under the prepayment option, a
licensee to apply 85 percent of a down payment on a surren-
dered license to the outstanding obligation on a retained
license. We disagree. The Commission offered a cogent
rationale for this policy choice. Unlike the prepayment op-
tion, the refund of down payments under the amnesty option
would offer no ‘‘adequate counterbalancing public interest
benefit.’’ Second Order on Reconsideration, 15 F.C.C.R. at
25,030 ¶ 23. The Commission essentially would be relieving
amnesty licensees of all of the obligations of auction partic-
ipation gratis. By contrast, the Commission found that the
refund of down payments under the prepayment option was
justified by its tendency to promote the retention of licenses.
The Commission concluded that license retention would re-
dound to the public benefit because a current licensee could
provide service to the public under the retained license more
quickly than a new licensee who obtained the license at a
future auction. Id. at 25,030–31 ¶ 23. We will not disturb the
agency’s policy judgment. The maxim that we must not
substitute our judgment for that of the agency is ‘‘especially
true when the agency is called upon to weigh the costs and
benefits of alternative policies.’’ Center for Auto Safety v.
Peck, 751 F.2d 1336, 1342 (D.C. Cir. 1985) (Scalia, J.).
The petitions for review are denied.