NTCH, Inc. v. Federal Communications Commission

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 9, 2016 Decided November 15, 2016

No. 15-1145

NTCH, INC.,
APPELLANT

v.

FEDERAL COMMUNICATIONS COMMISSION,
APPELLEE

VERIZON,
INTERVENOR

On Appeal of Orders of the
Federal Communications Commission

Donald J. Evans argued the cause for appellant. With him
on the briefs was Ashley Ludlow.

Maureen K. Flood, Counsel, Federal Communications
Commission, argued the cause for appellee. With her on the
brief were Jonathan B. Sallet, General Counsel, David M.
Gossett, Deputy General Counsel, and Jacob M. Lewis,
Associate General Counsel. Richard K. Welch, Deputy
Associate General Counsel, entered an appearance.
 2
Catherine E. Stetson argued the cause for intervenor. With
her on the brief were Mary Helen Wimberly, William H.
Johnson, and Katharine R. Saunders.

Before: PILLARD, Circuit Judge, and EDWARDS and
RANDOLPH, Senior Circuit Judges.

Opinion for the Court filed by Senior Circuit Judge
EDWARDS.

EDWARDS, Senior Circuit Judge: This appeal involves
challenges to two orders – referred to herein as the
“Memorandum Order” and the “Reconsideration Order” –
issued by the Federal Communications Commission (“FCC” or
“Commission”). In these orders, the Commission approved the
transfer of radio spectrum licenses to Verizon Wireless
(“Verizon”), a national telecommunications company, granted
Verizon forbearance from a statutory provision, and refused to
initiate proceedings to revoke other licenses held by Verizon.
Appellant NTCH, Inc., a company that provides wireless phone
and internet services, challenges these orders. Verizon has
intervened in support of the FCC.

The FCC administers the Communications Act of 1934 (the
“Act”). 47 U.S.C. §§ 151 et. seq. As part of its duties, the
Commission oversees the assignment and sale of radio spectrum
licenses. 47 U.S.C. § 310(d). “Spectrum” is “[t]he range of
electromagnetic radio frequencies used in the transmission of
sound, data, and television,” and is crucial to cell phone
companies. See GLOSSARY OF TELECOMMUNICATIONS TERMS,
https://www.fcc.gov/general/glossary-telecommunications-terms
(last visited Oct. 18, 2016). Section 310 of the Act limits who
may hold spectrum licenses, and bars or restricts ownership for
companies with certain levels of foreign control. In 2012, the
 3
Commission issued a “Forbearance Order” detailing when and
how it would refrain from applying section 310(b)(3).

In late 2011, a number of companies seeking to sell
spectrum licenses petitioned the FCC to approve the transfer of
their licenses to Verizon. The Commission sought public
comment on these applications, eventually grouping them
together for consideration. In the Memorandum Order, the
agency approved a “Spectrum Assignment,” authorizing a series
of license assignments between various entities, with the
greatest share going to Verizon. The agency found that the
Spectrum Assignment promised significant public interest
benefits, but also threatened some detriments. However, the
Commission determined that the potential harms could be offset,
and approved the arrangement subject to several conditions.
Because Verizon was then governed by section 310(b)(3), the
Commission also granted Verizon prospective forbearance from
that subsection.

NTCH petitioned for reconsideration and claimed, for the
first time, that Verizon had illegally obtained hundreds of
spectrum licenses between 2000 and 2012 in violation of section
310(b)(3). NTCH argued that the Commission had unlawfully
granted retroactive forbearance under section 310(b)(3) to cover
this up, and that proceedings to revoke those licenses must be
initiated. NTCH also claimed that the FCC had failed to follow
its own standards in granting Verizon prospective forbearance.
The FCC rejected all of these claims in the Reconsideration
Order.

NTCH now appeals to overturn the FCC’s orders. It asserts
that the FCC unlawfully granted Verizon retroactive
forbearance, that the agency should be required to initiate show
cause license revocation proceedings against Verizon, and that
the agency’s grant of prospective section 310(b)(3) forbearance
 4
violated its own procedures. Additionally, NTCH argues that the
Commission’s approval of the Spectrum Assignment should be
overturned because it is not in the public interest.

We reject NTCH’s claims. The FCC’s decision not to
initiate proceedings to revoke Verizon’s licenses is not subject
to judicial review. Furthermore, any questions about the licenses
Verizon obtained before the Spectrum Assignment are not
properly before the court. NTCH’s challenge to the FCC’s grant
of prospective forbearance is moot because no foreign entity
now has any ownership of Verizon. Finally, the Commission’s
determination that the Spectrum Assignment was in the public
interest was reasonable and therefore survives arbitrary and
capricious review.

I. Background

A. Section 310(b) and Verizon’s Ownership Structure

Section 310 places restrictions on who may own radio
licenses, including spectrum licenses. At issue in this case are
sections 310(b)(3) and (b)(4). These provisions state that

No broadcast or common carrier . . . license shall be
granted to or held by—

(3) any corporation of which more than one-fifth of
the capital stock is owned of record or voted by
aliens or their representatives or by a foreign
government or representative thereof or by any
corporation organized under the laws of a foreign
country;

(4) any corporation directly or indirectly controlled
by any other corporation of which more than one-
 5
fourth of the capital stock is owned of record or
voted by aliens, their representatives, or by a
foreign government or representative thereof, or by
any corporation organized under the laws of a
foreign country, if the Commission finds that the
public interest will be served by the refusal or
revocation of such license.

47 U.S.C. § 310(b)(3), (4).

The Commission has interpreted section 310(b)(3) to bar
possession of a radio spectrum license by an entity in which
aliens hold more than a twenty-percent interest, including
indirectly through an intervening, U.S.-organized entity that
itself does not own more than fifty-percent of that licensee.
Request for Declaratory Ruling Concerning the Citizenship
Requirements of Sections 310(b)(3) and (4) of the Commc’ns Act
of 1934, as amended, 103 F.C.C. 2d 511, 520–22 ¶¶ 16–19
(1985). Section 310(b)(4) bars possession of spectrum licenses
where aliens hold more than twenty-five percent interest in a
U.S.-organized entity that does control a licensee, but only if the
Commission determines that refusing ownership would serve the
public interest. 47 U.S.C. § 310(b)(4). In 2012, the Commission
issued an order detailing the circumstances in which it would
forbear from applying section 310(b)(3), and the procedures it
would follow in doing so. In the Matter of Review of Foreign
Ownership Policies for Common Carrier and Aeronautical
Radio Licensees Under Section 310(b)(4) of the Commc’ns Act
of 1934, as Amended, 27 FCC Rcd. 9832 (2012).

In 2000, the FCC granted Bell Atlantic (Verizon’s
predecessor-in-interest) and Vodafone (a foreign company)
permission to jointly assign their wireless licenses to Cellco, a
U.S.-organized company that does business under the name
“Verizon Wireless.” In re Applications of Vodafone AirTouch,
 6
PLC and Bell Atlantic Corp., 15 FCC Rcd. 16507 (2000).
Vodafone initially owned a controlling share in Verizon.
Consequently, the FCC evaluated Verizon’s eligibility to hold
licenses under § 310(b)(4).

At some point after this, however, Vodafone’s ownership of
Verizon became non-controlling. At that point, Verizon’s
eligibility to own spectrum licenses should have shifted from
being governed by section 310(b)(4) to being controlled by
section 310(b)(3)’s absolute prohibition. But between 2000 and
2012, when the Commission granted Verizon forbearance,
Verizon obtained a significant number of licenses. In 2014,
Verizon bought out Vodafone’s interest. As a result, Verizon is
now wholly owned by a domestic corporation, and no part of
section 310(b) applies to it.

B. The Spectrum Assignment and NTCH’s Challenge

In late 2011, the Commission received a number of
applications from companies seeking to assign spectrum licenses
to Verizon. These transfers would have resulted in Verizon
significantly increasing its spectrum holdings in markets across
the country. The Commission sought and received public
comment on these proposals, and consolidated them for its
consideration. NTCH opposed the transfers, asserting that it
would harm the public interest.

On August 21, 2012, the Commission adopted its
Memorandum Order approving the Spectrum Assignment. In the
Matter of Applications of Cellco P’ship d/b/a Verizon Wireless
and SpectrumCo LLC and Cox TMI, LLC for Consent to Assign
AWS-1 Licenses, 27 FCC Rcd. 10698, 10699 ¶ 6 (2012). It
determined that the assignments of spectrum licenses to Verizon
would, overall, be in the public interest, so long as conditions
were imposed to mitigate potential threats to the public interest.
 7
These threats included the dangers of Verizon “warehousing”
the spectrum, thereby foreclosing competitor access and leaving
the spectrum unused. Id. at 10723–24 ¶ 68. The Commission
was also aware that the assignments might increase Verizon’s
market dominance and harm competition. Id. at 10711 ¶ 31. To
allay these concerns, Verizon committed to quickly develop and
make use of the spectrum it would receive, and agreed to
transfer a significant amount of spectrum to T-Mobile. Id. at
10743–44 ¶¶ 121–22.

The Commission also addressed the issue of “roaming.” All
wireless carriers are required to provide phone service to people
who are outside of their home markets. See Reexamination of
Roaming Obligations of Commercial Mobile Radio Serv.
Providers, 22 FCC Rcd. 15817, 15818 ¶ 1 (2007). To achieve
this, providers must negotiate deals with one another in order to
ensure continuous service to customers. The Commission does
not set the prices that carriers may charge each other for this
service, however.

In the Memorandum Order, the FCC acknowledged that
small carriers had, in the past, experienced difficulty negotiating
roaming arrangements with Verizon, and that the transfer would
further enlarge a national telecommunications company that has
“little incentive” to negotiate favorable roaming deals with
smaller competitors. 27 FCC Rcd. at 10730 ¶ 84, 10742–43 ¶
120. To address this problem, the FCC required Verizon to
agree to comply for five years with a newly adopted rule
requiring carriers to offer roaming arrangements on
commercially reasonable terms and conditions, even if that rule
was overturned on appeal. Id. at 10743 ¶ 121. Finally, because
Verizon would have been barred from holding licenses under
section 310(b)(3), the Commission granted it forbearance from
that section.
 8
NTCH petitioned for reconsideration on September 24,
2012. It asserted, for the first time, that the Commission had
impermissibly allowed Verizon to acquire and retain hundreds
of licenses between 2000 and 2012, in violation of section
310(b)(3). NTCH thus pressed for the agency to initiate an
investigation into Verizon’s license acquisition and ownership.
NTCH also claimed that the FCC had improperly granted
retroactive forbearance to Verizon in an attempt to rectify the
licensing mistakes made between 2000 and 2012. Finally,
NTCH claimed that the FCC failed to follow its own procedures
in granting prospective forbearance.

Two and a half years later, the Commission issued its
Reconsideration Order denying NTCH’s claims. In the Matter of
Applications of Cellco P’ship d/b/a Verizon Wireless and
SpectrumCo LLC and Cox TMI, LLC for Consent To Assign
AWS-1 Licenses, 30 FCC Rcd. 3953 (2015). The Commission
held that it had followed its own forbearance procedures, and
that the issue was moot in any event because Verizon had
bought out Vodafone’s ownership interest in 2014. Id. at 3954 ¶
4, 3956–57 ¶¶ 10–11. In the alternative, the Commission held
that the licenses obtained by Verizon prior to the Memorandum
Order were not at issue, and that NTCH had not demonstrated
why its argument regarding Verizon’s ineligibility to obtain
those licenses could not have been raised sooner. Id. at 3957 ¶
12. Finally, the FCC declined to initiate show cause revocation
proceedings against Verizon. Id. at 3957–58 ¶ 13.

NTCH now appeals from the Memorandum Order and the
Reconsideration Order, advancing three claims. First, NTCH
contends that, because the FCC granted Verizon hundreds of
spectrum licenses in violation of section 310(b)(3), and
unlawfully granted Verizon retroactive forbearance to justify
these prior illegal actions, the Commission should institute
revocation proceedings. Second, NTCH asserts that the FCC
 9
violated its own procedures in granting Verizon prospective
forbearance, which must be reversed. Finally, NTCH argues that
the FCC’s approval of the Spectrum Assignment was not in the
public interest and, therefore, must be undone.

II. Analysis

A. Standard of Review

The Commission’s orders are subject to reversal if they are
arbitrary and capricious. 5 U.S.C. § 706(2)(A). To survive
arbitrary and capricious review, an agency must “examine the
relevant data and articulate a satisfactory explanation for its
action including a rational connection between the facts found
and the choice made.” Motor Vehicle Mfrs. Ass’n v. State Farm
Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) (internal quotes and
citation removed). A court may not “substitute its judgment for
that of the agency,” but must instead evaluate whether the
agency’s decision considered relevant factors and whether it
reflects a clear error of judgment. Id.

B. The Commission’s Refusal to Initiate Revocation
Proceedings and its Alleged Grant of Retroactive
Forbearance Are Not Reviewable

NTCH claims that the FCC should have initiated
proceedings to revoke all of Verizon’s licenses issued since
2000 because they were allegedly obtained in violation of
section 310(b)(3). It also claims that the Commission unlawfully
granted Verizon retroactive forbearance from section 310(b)(3)
in order to validate and rectify this mistake. We address these
allegations together because the requested remedy is the same:
that the Commission be ordered to initiate show cause
revocation proceedings against Verizon under 47 U.S.C. § 312.
 10
We reject NTCH’s demand for two reasons. First, the
Commission’s decision not to initiate revocation proceedings is
discretionary and thus unreviewable. Although there is a “basic
presumption of judicial review” of agency action, Abbott Labs.
v. Gardner, 387 U.S. 136, 140 (1967), section 701(a)(2) of the
Administrative Procedure Act (“APA”) bars judicial review of
agency actions that are “committed to agency discretion by
law,” 5 U.S.C. § 701(a)(2). In Heckler v. Chaney, 470 U.S. 821,
831 (1985), the Court made it clear “that an agency’s decision
not to prosecute or enforce, whether through civil or criminal
process, is a decision generally committed to an agency’s
absolute discretion.” The Court then went on to hold that “an
agency’s decision not to take enforcement action should be
presumed immune from judicial review under § 701(a)(2).” Id.
at 832.

The Commission’s decision not to initiate revocation
proceedings “was equivalent to a decision not to commence an
enforcement action” and, thus, presumptively unreviewable.
Drake v. F.A.A., 291 F.3d 59, 70 (D.C. Cir. 2002). Issuing a
show cause order is the first step towards addressing a violation
of section 310(b). See 47 U.S.C. § 312(a)(2), (c). The FCC’s
refusal to do so was thus a decision not to pursue an
enforcement action under the Act, and is presumed
unreviewable. See Chaney, 470 U.S. at 831–32.

This conclusion is reinforced by the terms of the Act.
Section 312(a) provides, in seven instances, that “[t]he
Commission may revoke any station license.” 47 U.S.C.
§ 312(a) (emphasis added). Generally, “[w]hen a statute uses a
permissive term such as ‘may’ rather than a mandatory term
such as ‘shall,’ this choice of language suggests that Congress
intends to confer some discretion on the agency.” Dickson v.
Sec’y of Defense, 68 F.3d 1396, 1401 (D.C. Cir. 1995). The
simple point here is that the Act “provides the agency broad
 11
discretion in enforcement decisions,” N.Y. State Dep’t of Law v.
FCC, 984 F.2d 1209, 1215 (D.C. Cir. 1993), and requires the
conclusion that the FCC’s decision here is not reviewable. See
Starr v. FCC, No. 96-1295, 1997 WL 362730, at *1 (D.C. Cir.
May 20, 1997) (per curiam) (stating that enforcement decisions
under 47 U.S.C. § 312(a) are committed to agency discretion by
law).

NTCH attempts to rebut this presumption of
unreviewability, but its arguments fail. NTCH asserts that
section 312(a) of the Act provides manageable standards by
which to evaluate any Commission action taken pursuant to its
authority to initiate show cause proceedings. This argument
misses the point. Merely because the statute indicates situations
with respect to which the agency may take enforcement actions
does not mean that the agency must act in all such situations.
Section 312(a) merely states that for each of the cited situations
the Commission “may” act to revoke a license, clearly leaving
the ultimate decision to the Commission’s discretion. Nothing in
the statute requires the agency to initiate an enforcement action.

NTCH also points to two prior Commission decisions that it
argues require the Commission to initiate revocation
proceedings here. In the Matter of Mario Loredo, 11 FCC Rcd.
18010 (1996); In the Matter of KOZN FM Stereo 99, Ltd., 59
Rad. Reg. 2d (P & F) 628 (1986). But these decisions do not
rebut the conclusion that the FCC has full discretion to decide
whether to initiate revocation proceedings. Instead, they are
merely examples of occasions when the FCC has invoked its
enforcement authority.

In summary, the Commission’s decision not to initiate
revocation proceedings against Verizon was committed to the
agency’s discretion, and NTCH has not rebutted the presumption
of unreviewability. Chaney, 470 U.S. 821.
 12

NTCH’s claims contesting the FCC’s refusal to initiate
revocation proceedings and its alleged grant of retroactive
forbearance also fail because the matter of Verizon’s previously-
obtained licenses is not properly before the court. The licenses
already held by Verizon were not at issue in the FCC’s
proceedings below. NTCH did not contest Verizon’s eligibility
to hold the licenses until it filed a Petition for Reconsideration.
And NTCH’s claims regarding these licenses are rooted in two
innocuous sentences in the Memorandum Order, in which the
Commission stated:

We note that our action today removes any
uncertainty as to whether the current foreign
ownership of Verizon Wireless, as a common carrier
licensee, complies with our foreign ownership
policies. We find that Verizon Wireless is qualified
under the foreign ownership provisions of Section
310(b) of the Communications Act to hold, in its own
right, its current common carrier licenses and the
common carrier licenses it is being assigned in the
applications being approved today.

27 FCC Rcd. at 10766–67 ¶ 177.

The forgoing statement is dicta, however, entirely
unnecessary to the Commission’s resolution of the issues that
were before it and resolved by the Memorandum Order. It is
certainly apparent that the Memorandum Order had the effect of
putting to rest any uncertainty about the legality of Verizon’s
existing licenses; but this did not mean that the legality of the
licenses was an issue in the Spectrum Assignment proceeding.
See US West v. FCC, 778 F.2d 23, 27–28 (D.C. Cir. 1985)
(dismissing appeal to FCC order where challenged language was
dicta).
 13

In short, we dismiss NTCH’s revocation and retroactive
forbearance claims because the Commission’s refusal to initiate
show cause revocation proceedings is unreviewable under
Chaney. Furthermore, any licenses held by Verizon prior to the
Spectrum Assignment were not the subject of the proceedings
below, and so NTCH’s challenge is not properly before us.

C. NTCH’s Prospective Forbearance Challenge is Moot

NTCH asserts that the Commission’s grant of section
310(b)(3) forbearance to Verizon must be overturned because
the agency failed to follow its own procedures. We dismiss this
claim because it has been mooted by intervening events.

Federal courts are authorized to adjudicate only “actual,
ongoing controversies” that are within the jurisdiction of the
court. Honig v. Doe, 484 U.S. 305, 317 (1988). A live
controversy must exist at all stages of judicial review, not only
when a complaint is filed. See Friends of the Earth v. Laidlaw
Env. Servs., 528 U.S. 167 (2000). “If events outrun the
controversy such that the court can grant no meaningful relief,
the [claim] must be dismissed as moot.” McBryde v. Comm. to
Review Circuit Council Conduct & Disability Orders of the
Judicial Conference of the U.S., 264 F.3d 52, 55 (D.C. Cir.
2001). That is exactly what has happened with NTCH’s claim
that the Commission’s grant of section 310(b)(3) forbearance
violated its own procedural requirements.

As discussed above, section 310(b)(3) bars entities in which
aliens have more than a 20% indirect, non-controlling interest
from owning spectrum licenses. At the time of the
Memorandum Order, Vodafone had a 45% ownership interest in
Verizon, and so Verizon’s authority to hold radio licenses was
governed by section 310(b)(3). In 2014, however, Verizon
 14
bought out Vodafone’s interest. Verizon is now wholly owned
by a domestic company, and so there is no longer any alien
ownership issue.

As a result, the court “can grant no meaningful relief” to
NTCH. Id. at 55. Even if we were to find that the Commission
violated its own procedures and wrongly granted Verizon
forbearance, there would be no consequences whatsoever. On
remand, the agency could not re-evaluate the question of
forbearance because section 310 no longer applies to Verizon.

NTCH asserts that the “voluntary cessation” exception to
mootness applies, but that exception has no play in this case.

As a general rule, a defendant's “voluntary cessation
of allegedly illegal conduct does not deprive [a court]
of power to hear and determine the case.” Cty. of Los
Angeles v. Davis, 440 U.S. 625, 631 (1979).
Voluntary cessation will only moot a case if “there is
no reasonable expectation . . . that the alleged
violation will recur” and “interim relief or events have
completely and irrevocably eradicated the effects of
the alleged violation.” Id.

EDWARDS, ELLIOTT, & LEVY, FEDERAL STANDARDS OF
REVIEW—REVIEW OF DISTRICT COURT DECISIONS AND AGENCY
ACTIONS 135 (2d ed. 2013).

The act of “voluntary cessation” to which NTCH points is
Verizon’s purchase of Vodafone’s ownership interest, but
NTCH is challenging the FCC’s grant of forbearance to
Verizon. The FCC did not “voluntarily” terminate that grant.
Rather, Verizon’s intervening action nullified the FCC’s
forbearance determination. This situation does not give rise to
the voluntary cessation exception to mootness. See Am. Bar
 15
Ass’n v. FTC, 636 F.3d 641, 648 (D.C. Cir. 2011) (no voluntary
cessation where intervening legislation nullified challenged
policy statement, because the agency had not acted voluntarily).

D. The Commission’s Approval of the Spectrum Assignment
Was Not Arbitrary and Capricious

1. NTCH has standing to challenge the Spectrum
Assignment.

As an initial matter, Verizon argues that NTCH does not
have standing to challenge the FCC’s approval of the Spectrum
Assignment. We disagree. “To satisfy the requirements of
Article III standing in a case challenging government action,
[NTCH] must allege an injury in fact that is fairly traceable to
the challenged government action, and it must be likely, as
opposed to merely speculative, that the injury will be redressed
by a favorable decision.” Nat’l Wrestling Coaches Ass’n v.
Dep’t of Educ., 366 F.3d 930, 937 (D.C. Cir. 2004) (internal
quotes and citation removed). NTCH has satisfied these
requirements.

NTCH contends that the Spectrum Assignment will foster
an anticompetitive telecommunications environment because it
grants Verizon a vast swath of spectrum to the potential
detriment of smaller competitors. NTCH asserts, for example,
that under the Spectrum Assignment, it will be more difficult for
it to negotiate reasonable roaming arrangements because
Verizon holds a disproportionate share of market power. These
plausible allegations suffice to show injury to achieve standing
under Article III. Indeed, the FCC acknowledged these potential
dangers to competition in its Memorandum Order. 27 FCC Rcd.
at 10730 ¶ 84, 10742–43 ¶ 120.
 16
NTCH’s asserted injury is also causally related to the
Commission’s approval of the Spectrum Assignment because
that decision granted Verizon a significant amount of spectrum
in a large number of markets. Finally, redressability is satisfied
because a decision reversing the Commission’s approval of the
Spectrum Assignment would likely lead to Verizon holding
fewer spectrum licenses, or the FCC imposing new conditions
on the Spectrum Assignment. A party need not demonstrate with
certainty that its injury will be redressed, and standing is not
defeated by the possibility that an agency might ultimately wield
its discretion in a way that does not fix a party’s alleged injury.
FEC v. Akins, 524 U.S. 11, 25 (1998).

Because NTCH has articulated an injury that is traceable to
the Commission’s order and might be redressed by a favorable
decision from the court, it has met the requirements of Article
III so as to achieve standing to challenge the Spectrum
Assignment.

2. The FCC’s approval of the Spectrum Assignment
survives arbitrary and capricious review.

NTCH’s argument that the Spectrum Assignment must be
reversed because it is arbitrary and capricious lacks merit. The
agency acted reasonably, fairly considered the evidence and
arguments before it, and adequately explained its rationale. We
therefore reject NTCH’s challenge.

Under section 310(d) of the Act, the Commission may
approve assignments of licenses upon finding that “the public
interest, convenience, and necessity will be served thereby.” 47
U.S.C. § 310(d). While the Act itself does not define how the
FCC should decide what is in the “public interest,” the Supreme
Court has stated “that Congress had granted the Commission
broad discretion in determining” this, so long as the agency’s
 17
determination “is based on consideration of permissible factors
and is otherwise reasonable.” FCC v. WNCN Listeners Guild,
450 U.S. 582, 594 (1981) (internal quotation marks and citation
omitted). To that end, we will uphold the Commission’s
application of the Act’s “public interest” standard unless we find
it to be arbitrary and capricious. Transp. Intelligence, Inc. v.
FCC, 336 F.3d 1058, 1064 (D.C. Cir. 2003). In making this
assessment, we “evaluate the agency’s rationale at the time of
decision.” Pension Benefit Guar. Corp. v. LTV Corp., 496 U.S.
633, 654 (1990).

The Memorandum Order reflects a reasonable consideration
of the evidence, arguments, and issues presented to the
Commission. Following its investigation of the issues, the
Commission found that approving the Spectrum Assignment
would benefit the public interest in a number of ways. Most
importantly, the Commission determined that the Spectrum
Assignment would enable the development of a large amount of
fallow spectrum.

SpectrumCo held the lion’s share of the licenses that were
transferred to Verizon. SpectrumCo was formed in 2006, and in
2007 it purchased a significant number of spectrum licenses.
The company never entered the telecommunications business,
however, and so its holdings had not been utilized in any way.
The Commission determined that the Spectrum Assignment
would provide “significant public interest benefits” by allowing
the development of this neglected resource. It also found that the
Spectrum Assignment would result in more efficient use of
existing spectrum holdings. This, in turn, would benefit both
carriers and consumers, as it would enable the companies
involved to expand and develop their networks and serve their
customers’ growing demands.
 18
As part of its analysis, however, the FCC identified three
potential risks. First, the agency was concerned that the
concentration of spectrum with Verizon would harm
competition. Second, the FCC was also concerned that Verizon
might warehouse the spectrum, leaving it unused and
foreclosing competitor access. Finally, the FCC determined that
the transfer might hurt smaller carriers, like NTCH, who are
dependent upon other companies to provide roaming capability.
The Commission observed that granting Verizon more spectrum
would further empower “a nationwide provider that has little
incentive” to negotiate roaming arrangements with “competitors
with less than national footprints.” 27 FCC Rcd. at 10730 ¶ 84.

To mitigate these potential harms, the Commission imposed
three conditions to its approval of the Spectrum Assignment. To
address the concern over spectrum concentration, the FCC
required Verizon to divest a significant number of licenses to T-
Mobile. In addition to limiting Verizon’s overall and location-
specific spectrum holdings, the Commission determined that this
would enable T-Mobile to develop its own technology and
infrastructure, enabling it to expand the coverage of its network.
Second, the Commission remedied the prospect of Verizon
hoarding the spectrum by requiring it to follow a timeline for the
spectrum’s rapid development and use.

Finally, the FCC addressed the issue of roaming in two
ways. It required Verizon to agree to abide by the agency’s then-
new data roaming rule requiring providers to offer roaming
arrangements on commercially reasonable terms. At the time of
the Memorandum Order, Verizon was challenging the legality of
the data roaming rule before this court. See Cellco P’ship v.
FCC, 700 F.3d 534 (D.C. Cir. 2012) (upholding the rule).
Verizon agreed to abide by it, however, even if it were
overturned on appeal. In addition, the FCC found that the
 19
transfer of spectrum to T-Mobile would eventually allow T-
Mobile to be a roaming alternative to Verizon.

After examining the evidence before it and imposing these
conditions, the Commission reasonably determined that the
Spectrum Assignment would, overall, serve the public interest.

In challenging the Commission’s approval of the Spectrum
Assignment, NTCH does not address the bulk of the
Commission’s analysis, instead focusing solely on the
Commission’s finding that the Spectrum Assignment could
further harm the ability of smaller carriers to obtain data
roaming agreements from Verizon. In claiming that the FCC did
nothing to ameliorate this problem, NTCH makes two primary
arguments.

First, NTCH claims that the data roaming rule had already
failed to compel Verizon to offer reasonable roaming rates, and
so it was irrational for the Commission to think that requiring
Verizon to abide by it would fix the problem. This is an unfair
criticism of the rule, however, which had only been in effect for
eleven months when the Commission approved the Spectrum
Assignment. See 76 Fed. Reg. 63561-01 (Oct. 13, 2011). We
“evaluate the agency’s rationale at the time of decision.”
Pension Benefit Guar. Corp., 496 U.S. at 654. At the time of
decision, it was too early to declare the rule ineffective,
especially considering that it was unclear whether the rule would
survive legal challenge. The terms of the rule are facially
reasonable and the underlying rationale for the rule makes sense.

NTCH next argues that Verizon’s divestment of spectrum to
T-Mobile could do nothing to resolve the problem because
companies that are able to roam on Verizon’s network are not
able to roam on T-Mobile’s network. The two are incompatible.
Specifically, T-Mobile uses the “Global System for Mobile
 20
Communications” (“GSM”) protocol, whereas Verizon (and
NTCH) use the “Code Division Multiple Access” (“CDMA”)
protocol. Therefore, according to NTCH, T-Mobile could not
serve as a roaming alternative for those carriers who had been
having difficulty negotiating agreements with Verizon.

This argument appears to raise a legitimate concern, but the
issue is not properly before us. Section 405(a) of the Act states
that the FCC must be “afforded [an] opportunity to pass” on all
arguments made to a court. 47 U.S.C. § 405(a). NTCH admits
that it did not explicitly raise with the FCC its argument about
the incompatibility of CDMA and GSM carriers. It is true that
our precedent construing section 405(a) does not require an
argument to be brought up with specificity, but only reasonably
“flagged” for the agency’s consideration. Time Warner Entm’t.
Co. v. FCC, 144 F.3d 75, 81 (D.C. Cir. 1998). The question here
is “whether a reasonable Commission necessarily would have
seen the question raised before us as part of the case presented
to it.” Id. We think not.

The closest that NTCH came to making the argument was
in its petition to deny the Spectrum Assignment. There, it
referred to Verizon’s dominance among CDMA operators,
discussed the difficulties faced by smaller CDMA carriers who
must roam with Verizon, and asserted that granting Verizon
more spectrum would worsen this situation. But these points
were only vague allusions to NTCH’s current argument and,
therefore, they do not serve to satisfy the requirements of section
405(a). The issue that NTCH now raises was never reasonably
flagged for the FCC because no reference was made to T-
Mobile in NTCH’s petition to deny the Spectrum Assignment.

This case does not involve a situation in which the issue
could not have been raised, see Action for Children’s Television
v. FCC, 906 F.2d 752, 755 (D.C. Cir. 1990); nor a situation in
 21
which it would have been futile to raise the issue, see All Am.
Cables & Radio, Inc. v. FCC, 736 F.2d 752, 761 (D.C. Cir.
1984); nor a situation in which the challenged action is “patently
in excess of [the agency’s] authority,” Washington Ass’n for
Television and Children v. FCC, 712 F.2d 677, 682 (D.C. Cir.
1983). Therefore, because NTCH did not raise the issue in its
petition to deny or in its petition for reconsideration, section
405(a) applies.

In summary, the Commission’s approval of the Spectrum
Assignment reflects a reasonable consideration of relevant
factors. NTCH believes that the FCC’s decision was not in the
public interest, and that the remedial actions it took to mitigate
the threatened public interest harms were inadequate. The
Commission, in its expert judgment, disagrees. It is well
understood that “[a]gency discretion is often at its ‘zenith’ when
the challenged action relates to the fashioning of remedies.”
Towns of Concord, Norwood & Wellesley, Mass. v. FERC, 955
F.2d 67, 76 (D.C. Cir. 1992) (quoting Niagara Mohawk Power
Corp. v. Fed. Power Comm’n, 379 F.2d 153, 159 (D.C. Cir.
1967)). For the reasons enumerated above, we cannot say that
the Commission’s findings and fashioned remedies are arbitrary
and capricious. Accordingly, we deny NTCH’s challenge.

III. Conclusion

For the reasons stated above, we reject the claims raised by
NTCH in the appeal.
So ordered.