Telesat Canada v. FCC

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 16, 2021 Decided June 4, 2021

No. 20-1234

TELESAT CANADA, ET AL.,

PETITIONERS

v.

FEDERAL COMMUNICATIONS COMMISSION AND UNITED

STATES OF AMERICA,

RESPONDENTS

On Petition for Review of an Order

of the Federal Communications Commission

W. Kenneth Ferree argued the cause for petitioners. With

him on the briefs were Henry Goldberg, Joseph A. Godles,

Carlos M. Nalda, Bruce Henoch, David S. Keir, and Brennan

Price.

Pamela L. Smith, Counsel, Federal Communications

Commission, argued the cause for respondents. With her on

the brief were Michael F. Murray, Deputy Assistant Attorney

General, U.S. Department of Justice, Robert B. Nicholson and

Matthew C. Mandelberg, Attorneys, Thomas M. Johnson, Jr.,

General Counsel, Federal Communications Commission,

Ashley S. Boizelle, Deputy General Counsel, and Jacob M.

Lewis, Associate General Counsel. Richard K. Welch, Deputy

2

Associate General Counsel, Federal Communications

Commission, entered an appearance.

Before: TATEL, Circuit Judge, and SILBERMAN and

SENTELLE, Senior Circuit Judges.

Opinion for the Court filed by Senior Circuit Judge

SILBERMAN.

SILBERMAN, Senior Circuit Judge: This case deals with the

question whether the FCC can charge foreign satellite operators

with U.S. market access the same regulatory fees that their

American licensed competitive counterparts pay. The FCC,

reversing a long-held position, concluded by rule that the

foreign satellite operators (Petitioners) must pay these fees. We

deny the petition for review.

I

Congress, in 1993, amended the Communications Act to

require the Commission to assess and collect regulatory fees to

recover the costs of its various activities. 1 Congress set an

initial schedule of fees that apply “until amended by the

Commission.” “Space stations” (i.e., satellites) were included

in the schedule but there were blanket exceptions for

“governmental entities or nonprofit entities” and for “amateur

radio operator[s].”

Initially, the Commission limited regulatory fees to those

entities licensed by the Commission—which did not (and does

1

Omnibus Budget Reconciliation Act of 1993, Pub. L. No. 103-

66, § 6003, 107 Stat 312, 397 (1993) (codified at 47 U.S.C. § 159

(1994)).

3

not) include foreign-licensed satellites. 2 The Commission

relied on a passage incorporated into the Conference Report for

the 1993 Act—on which Petitioners now rely—which states:

The Committee intends that fees in this

category be assessed on operators of

U.S. facilities, consistent with FCC

jurisdiction. Therefore, these fees will

apply only to space stations directly

licensed by the Commission under Title

III of the Communications Act. Fees will

not be applied to space stations operated

by international organizations subject to

the International Organizations

3

Immunities Act.

The Commission consistently reasserted this view until

2013, when it expressed doubts on “whether regulatory fees

should be assessed on non-U.S. licensed space station operators

providing service in the United States.” The FCC invited

comment on its previous conclusion whether “the regulatory

fee category for space stations . . . covers only Title III license

2

Assessment and Collection of Regulatory Fees for Fiscal Year

1995, Report and Order, 10 FCC Rcd. 13512, 13549–51 (1995).

Cable television services, which are not licensed by the FCC, were

also charged regulatory fees.

3

H.R. Rep. No. 207, 102d Cong., 1st Sess. 26 (1991) (emphasis

added). The Conference Report incorporates by reference this

language from the House Committee Report. H. Conf. Rep. No. 213,

103d Cong., 1st Sess. 499 (1993) (“To the extent applicable, the

appropriate provisions of the House Report (H.R. 102-207) are

incorporated herein by reference.”).

4

holders.” 4 But the Commission declined to decide the issue,

stating additional time was needed for further consideration.

In 2018, as part of the so-called Ray Baum’s Act, Congress

again amended Section 9 of the Communications Act.5

Congress changed the Commission’s authority to adjust the fee

schedule based on the number of “units” (that is, satellites)

subject to the payment of fees rather than either the number of

units or licensees. 6 It also added the power to adjust fees based

on factors “reasonably related to the benefits provided to the

payor of the fee by the Commission’s activities.” 7 And another

fee exemption was added for “noncommercial radio station[s]

or noncommercial television station[s].” 8

In 2019, the Commission again sought “comment on

whether [the Commission] should or must assess regulatory

fees on non-U.S. licensed space stations serving the United

States under section 9.” 9 The FCC recognized that it previously

4

Notice of Proposed Rulemaking, 28 FCC Rcd. 7790, 7809

¶ 49 (2013).

5

Ray Baum’s Act of 2018, Pub. L. No. 115-141, 132 Stat. 348

Division P, Title I, § 102 (2018) (codified at 47 U.S.C. § 159).

6

Compare 47 U.S.C. § 159(b)(2)(A) (1994), with 47 U.S.C.

§ 159(c)(1)(A) (2018).

7

Compare 47 U.S.C. § 159(b)(2)–(3) (1994), with 47 U.S.C.

§ 159(d) (2018).

8

Compare 47 U.S.C. § 159(h) (1994), with 47 U.S.C. § 159(e)

(2018).

9

Notice of Proposed Rulemaking, 34 FCC Rcd. 8189, 8213

¶¶ 62–65 (2019) (hereinafter, “Notice”).

5

declined to assess fees on non-U.S. licensed space stations.

However, it noted that in 2013 it had started to reevaluate that

position.

The FCC “observe[d]” that the Ray Baum’s Act “requires

the Commission to consider increases and decreases in the

‘number of units’ subject to payment of regulatory fees, but

does not state ‘licensees,’” and that language appears equally

applicable to the U.S.- and foreign-licensed satellites. The

Commission noted that foreign-licensed space stations that

serve U.S. customers benefit in the same manner as their U.S.-

licensed competitors. Considering these benefits, the FCC

asked whether it was fair or equitable to maintain the

exemption.

In the Order (actually a rule) before us, the Commission

concluded it could adopt regulatory fees for non-U.S. licensed

space stations with U.S. market access. 10 The Commission did

not rely on the Ray Baum’s Act’s use of the term units rather

than licensees. Instead, the Commission reasoned that the

statutory text did not foreclose its reading, since the statute

contemplates fees that reflect “benefits provided to the payor

of the fee by the Commission’s activities.” Order ¶ 10 (quoting

47 U.S.C. § 159(d)). And, although the text includes some

explicit exemptions from regulatory fees, none exempt non-

U.S. licensed space stations with U.S. market access. Id.

The Commission thought, based on policy considerations,

it should impose regulatory fees on non-U.S. licensed space

stations that have been granted access to the U.S. market. Id.

¶¶ 19–27. Foreign-licensed satellite operators must petition the

FCC to access the U.S. market. The FCC explained that it

10

Report and Order, 35 FCC Rcd. 4976, 4980–81 ¶ 10 (2020)

(hereinafter, “Order”); see also id. ¶¶ 9–34.

6

devotes significant resources to processing the growing

number of such petitions. Foreign-licensed satellites benefit

from the Commission’s oversight and regulation in the same

manner as U.S. licensed satellites. Id. ¶ 21. And processing a

petition for market access, according to the Commission,

“requires evaluation of the same legal and technical

information as required of U.S. licensed applicants.” Id. The

current exemption “places the burden of regulatory fees . . .

solely on the shoulders of U.S. licensees.” Id. ¶ 26. Therefore,

assessing the same regulatory fees on foreign-licensed space

stations with market access would better reflect the benefits

received by these operators and promote regulatory parity. Id.

The Commission frankly acknowledged its previous

position that foreign-licensed space stations were exempt based

on the Conference Report but concluded that the Report was

not relevant. The Commission explained that commercial

foreign-licensed satellites with general U.S. market access did

not exist until 1997. Id. ¶ 15. Only then did the Commission

adopt a formal process “for granting market access to non-U.S.

licensed space stations.” Id. ¶ 16. Therefore, the Report

actually focused on Intelsat and Inmarsat—two “treaty-based

international governmental organizations,” that provided most

satellite services to the U.S. market at that time. Id. ¶ 15–16.

The market has since changed: Intelsat and Inmarsat are no

longer international governmental organizations, but

commercial enterprises, and there are many foreign-licensed

satellite operators—including Petitioners—that compete with

U.S.-licensed satellite operators in the U.S. market. Id. ¶ 17.

II

Petitioners’ primary argument is based not on the text of

the Communications Act, but rather the Conference Report,

which, as we noted, explicitly states that “fees will apply only

7

to space stations directly licensed by the Commission.” But the

statute, as will be recalled, provides a general guide to the FCC

that it should charge regulatory fees to those who benefit from

its regulations. It is undeniable that foreign satellites and their

operators that serve the United States do benefit from the

Commission’s regulation in much the same way as their U.S.-

licensed counterparts. The Commission creates a fair and safe

environment for all U.S. market participants by, among other

things, minimizing the risks of radio interference and

mitigating the danger of orbital debris. Order ¶ 21. The

Commission reviews petitions for market access by foreign-

licensed satellites to ensure legal and compliance with this

carefully coordinated system. Id.

Moreover, the Act as amended explicitly excludes from

regulatory fees only four categories: (1) government entities,

(2) non-profit entities, (3) amateur operators and (4) non-

commercial radio and TV stations. Petitioners do not fit into

these exceptions.

To be sure, as Petitioners emphasize, there are a number

of other “entities” which gain the benefit of FCC regulations—

such as TV networks, internet service providers, and

consumers—that are not charged regulatory fees. Petitioners

argue that makes the statute “ambiguous” with regard to which

beneficiaries may be charged regulatory fees. Therefore, one

must go to the legislative history (the Conference Report) to

reconcile the ambiguity (or, to put it more accurately, to fill the

statutory “gap”—the failure to specify whether non-licensee

beneficiaries may be charged fees, see Chevron, U.S.A., Inc. v.

Nat. Res. Def. Council, Inc., 467 U.S. 837, 843 (1984)).

Petitioners argue that the Conference Report explains that, at

least for satellites, only those that are licensed by the

Commission may be charged regulatory fees.

8

The problem with Petitioners’ argument is the Report

reads as a freestanding statement—it is not directed to any

particular statutory language. As we have said in a previous

case, “there is no obvious hook” in the text of the statute on

which to hang any exemption or other limitation found in the

Report. PanAmSat Corp. v. FCC, 198 F.3d 890, 895 (D.C. Cir.

1999). 11 And the Report cannot be said to clarify the term

“space station” as used in the fee schedule (assuming its

ambiguity), because the Report addresses the applicability of

fees rather than providing a definition. Although we

sometimes—cautiously—look at legislative history to guide

interpretation of ambiguous statutory language, it has to be

history that can be said to be directed to the ambiguity in a

statute. That is not true here.

Even if one looks to the Conference Report, we think it is

hardly pellucid. The second sentence, on which Petitioners

rely—“Therefore, these [regulatory] fees will apply only to

space stations directly licensed by the Commission”—can be

interpreted in connection with the third sentence— “Fees will

not be applied to space stations operated by international

organizations subject to the International Organizations

Immunities Act.” The third sentence can be read as an

explanation of the second sentence. In other words, the entities

excluded by the second sentence are specifically identified in

the third. Otherwise, the third sentence would be surplusage.

11

In PanAmSat, the FCC had concluded, erroneously we

thought, that Comsat (an American company involved in launching

international satellites) was legally entitled to an exception because

of the Conference Report. We remanded to the FCC to reconsider

their position without regard to the Conference Report. 198 F.3d at

895.

9

This reading supports the Commission’s policy

determination. As it stressed, there was a “very different

marketplace and regulatory environment” at the time of the

Conference Report. It was focused on intergovernmental—not

foreign-licensed—satellites. Order ¶¶ 15–17. At that time,

foreign-licensed space station operators only had a “very

limited provision of service[s]” and even that depended “upon

a showing that existing U.S. domestic satellite capacity was

inadequate to satisfy specific service requirements.” Id.

Approval for this limited market access was obtained on a

“case-by-case” basis after “bilateral, government to

government” discussions. Order ¶ 17. It was only after 1997

that foreign-licensed space stations could provide general

commercial services in the United States. 12 When the

Conference Report was written, the relevant category of

satellites—foreign-licensed commercial satellites with general

U.S. market access—simply didn’t exist. Thus, Congress was

unlikely to have contemplated the type of satellites at issue in

this case.

Petitioners make much of the fact that some foreign-

licensed satellites were serving the U.S. market prior to the

Conference Report. But as the Commission notes and

Petitioners do not dispute—such services were limited in scope

and ad hoc until 1997. So the Commission reasonably

concludes that Congress was not focused on foreign-licensed

satellites.

Still, Petitioners argue that even if the Commission’s

reading would have been legitimate if announced initially, its

contrary reading had been ratified by Congress both implicitly

and explicitly. Between 1993 and the 2018 Ray Baum’s Act,

12

DISCO II Order, 12 FCC Rcd. 24094 (1997); 47 C.F.R.

§ 25.137.

10

Congress repeatedly had the opportunity to address Section 9

fees through its annual budget process, but never questioned

the FCC’s conclusion that its Section 9 authority is

coterminous with its Title III licensing authority. Thus,

according to Petitioners, this case fits within the proposition

that “the practical construction given to an act of Congress,

fairly susceptible of different constructions, by those charged

with the duty of executing it is entitled to great respect and, if

acted upon for a number of years, will not be disturbed except

for cogent reasons.” Udall v. Tallman, 380 U.S. 1, 18 (1965)

(quoting McLaren v. Fleischer, 256 U.S. 477, 481 (1921)).

But, as the Commission correctly observes, Congressional

silence does not imply acquiescence absent additional

indications of ratification. See Boys Markets, Inc. v. Retail

Clerks Union, Local 770, 398 U.S. 235, 241–42 (1970). Even

an undisputed 25-year-old agency interpretation does not

graduate into a statute through mere Congressional inaction.

See Cape Cod Hospital v. Sebelius, 630 F.3d 203, 214 (D.C.

Cir. 2011).

Petitioners’ claim that the Ray Baum’s Act explicitly

ratified the Commission’s policy is also wide of the mark.

Petitioners contend that Congress reenacted the Section 9 fee

schedule, including the “space station” category which the

Commission long interpreted to exclude foreign-licensed

satellites. This, Petitioners assert, triggers the rule that the

reenactment of a statute presumptively adopts the

Commission’s prior interpretation. See Alexander v. Sandoval,

478 U.S. 833, 846 (1986) (“[W]hen Congress revisits a statute

giving rise to a longstanding administrative interpretation

without pertinent change, the congressional failure to revise or

repeal the agency’s interpretation is persuasive evidence that

the interpretation is the one intended by Congress.”) (internal

quotation omitted).

11

The Commission persuasively responds that Congress’

reenactment of the fee schedule does not fit the Sandoval test.

The Ray Baum’s Act merely provided that the regulatory fees

established under Section 9 of the Communications Act “shall

remain in effect . . . until such time as the Commission adjusts

or amends such fee under subsection (c) or (d) . . . .” 13 Rather

than endorsing the Commission’s prior interpretation of

Section 9, the Act notes that the Commission retains flexibility

to adjust or amend regulatory fees—which the Commission

then did in the Order. Id. ¶ 34 (noting the Order is an

amendment to the fee schedule under Section 9(d)); see also 47

U.S.C. § 159(d).

The Ray Baum’s Act’s other changes to Section 9 support

this conclusion. As we noted, Congress made clear that the

Commission’s regulatory fee schedule should take account of

“the benefits provided to the payor of the fee by the

Commission’s activities.” 47 U.S.C. § 159(d). This suggests

benefits—not licenses—should be the touchstone for whether

it is reasonable for the FCC to collect regulatory fees. And—

critically—Congress added a category of entities to the list of

those statutorily exempt from regulatory fees, 47 U.S.C.

§ 159(e)(1)(C) (noncommercial radio and television stations),

but did not add an exemption for foreign-licensed space

stations with U.S. market access.

* * *

Petitioners’ alternative argument is that the Commission’s

Notice was defective because it failed to specify the relevant

legal theory that supported the Order. The Order was an

improper surprise that avoided pertinent commentary because

the Notice was directed to the Ray Baum’s Act. That, according

13

Pub. L. 115-141, Division P, Title I, § 102(d)(2), 132 Stat.

1086 (2018).

12

to Petitioners, was the only legal basis suggested that would

authorize the Commission’s volte face.

First, we note that the Commission met the APA’s

requirement in § 553(b)(2) by referencing the relevant legal

authority. It clearly identified the basic governing statute as

well as the Communications Act and its 2018 amendment. See

Nat’l Tour Brokers Ass’n v. United States, 591 F.2d 896, 900

(D.C. Cir. 1978). A notice need not explicate a rule’s final legal

theory. See, e.g., Koretoff v. Vilsack, 707 F.3d 394, 398 (D.C.

Cir. 2013) (holding that even final rules need not

comprehensively explain relevant legal theories).

Turning to the logical outgrowth test, “we ask ourselves,

would a reasonable member of the regulated class . . .

anticipate” the general aspects of the rule. Allina Health Servs.

v. Sebelius, 746 F.3d 1102, 1107, 1109 (D.C. Cir. 2014). The

Commission certainly foreshadowed that it was reaching,

indeed had been repeatedly reaching, for a legal theory that

would justify switching its initial position that the statute

precluded charging foreign satellites fees. After all, the Notice

specifically asked whether the Commission “should or must

assess regulatory fees on non-U.S. licensed space stations

serving the United States” and even referenced the

Commission’s 2013 and 2014 requests for comment on the

issue.

* * *

In sum, Petitioners have not shown that the Commission

unreasonably interpreted Section 9 of the Communications Act

13

or provided inadequate notice of the Order. We therefore deny

the petition. 14

So ordered.

14

In addition to the foregoing arguments, Petitioners have made

a number of other and subsidiary arguments which we have

considered and reject without written opinion.