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.