Opposition Brief — Celcom Communications Corp. of Pennsylvania v. Federal Communications Commission

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No. 86-830 SpANiOL, JR.

Iu the Supreme Court of the United States

OCTOBER TERM, 1986

CELCOM COMMUNICATIONS CORPORATION

OF PENNSYLVANIA, PETITIONER

v-

FEDERAL COMMUNICATIONS COMMISSION, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

MEMORANDUM FOR THE

FEDERAL COMMUNICATIONS COMMISSION

IN OPPOSITION

CHARLES FRIED

Solicitor General

Department of Justice

Washington, D.C. 205380

(202) 633-2217

DANIEL M. ARMSTRONG

Associate General Counsel

Federal Communications Commission

Washington, D.C. 20554

(202) 632-7112

TABLE OF AUTHORITIES

Cases:

Celcom Communications Corp. v. FCC, 787 F.2d

ee a as RG eran vasa senatncegemaeeas

Celcom Communications Corp., In re, FCC 86-

Me ne asks haeeigen

Cellular Communications Systems, 86 F.C.C.2d

469 (1981), modified, 89 F.C.C.2d 58, further

modified, 90 F.C.5.2d 571 (1982), petition for

review dismissed, No. 82-1526 (D.C. Cir. Mar.

RE RRR Ii aR RESALE HERE tn CSAP

Cellular Lottery Rulemaking, 98 F.C.C.2d 175

(1984), modified, 101 F.C.C.2d 577, further

modified, 50 Fed. Reg. 51522 (1985), petition

for review pending sub nom. Mazcell Telecom

Plus, Inc. v. FCC, No. 85-1322 (D.C. Cir.)........

MCI Cellular Telephone Co. v. FCC, 738 F.2d

Me Ce Mr NE ois raced tenn ncennecnonenes

National Association of Regulatory Utility Com-

missioners V. FCC, 525 F.2d 630 (D.C. Cir.),

cert. denied, 425 U.S. 922 (1976)

errr reer rere reer rer

(1)

2,7

Iu the Supreme Court of the United States

OCTOBER TERM, 1986

No. 86-830

CELCOM COMMUNICATIONS CORPORATION

OF PENNSYLVANIA, PETITIONER

De

FEDERAL COMMUNICATIONS COMMISSION, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

MEMORANDUM FOR THE

FEDERAL COMMUNICATIONS COMMISSION

IN OPPOSITION

Petitioner, an unsuccessful applicant for a license

to operate a cellular telephone system in Philadelphia,

challenges the court of appeals’ per curiam decision

affirming the Federal Communications Commission’s

denial of the license. Petitioner challenges the court’s

holding that one of petitioner’s arguments was un-

timely and argues that the court erroneously declined

to consider petitioner’s challenge to the application

in this case of the regulations that governed the li-

cense proceeding.

1. a. In May 1981, respondent Federal Commu-

nications Commission established by regulation a

comparative hearing process to consider competing

(1)

2

applicants for licenses to operate “non-wireline”’ cel-

lular telephone systems. Cellular Communications

Systems, 86 F.C.C.2d 469 (1981), modified, 89 F.C.C.

2d 58, further modified, 90 F.C.C.2d 571 (1982),

petition for review dismissed, No. 82-1526 (D.C.

Cir. Mar. 3, 1983). The Commission rejected the

alternative of selection by lottery, though it recog-

nized that experience might show that a lottery

method might have advantages. 86 F.C.C.2d at 498-

499. In order to make cellular telephone service

available to the public as rapidly as possible, the

Commission adopted streamlined procedures for the

top thirty metropolitan areas. Id. at 498-501.

The licensing process for the top thirty markets

began in June 1982 and moved ahead rapidly. In

May 1984, the Commission concluded—based on its

experience with these hearings, the large number of

applicants for licenses in the smaller markets, the

need to expedite licensing, and the burdens of com-

ynarative hearings—that licensees should be selected

by lottery for markets other than the top thirty.

Cellular Lottery Rulemaking, 98 F.C.C.2d 175

(1984), modified, 101 F.C.C.2d 577, further modified,

50 Fed. Reg. 51522 (1985), petition for review pend-

ing sub nom. Maxcell Telecom Plus, Inc. v. FCC, No.

85-1322 (D.C. Cir. filed June 3, 1985). The Commis-

sion retained the comparative hearing process for the

top thirty markets because, the process having come

so far, the savings from using a lottery were insuf-

ficient to warrant abandonment of the comparative

process. 98 F.C.C.2d at 179 n.12; see Celcom Com-

munications Corp. v. FCC, 787 F.2d 609, 612 (D.C.

Cir. 1986) (Pet. App. 55a-56a).

b. The proceeding at issue in this petition began

on June 7, 1982, when competing applications for the

non-wireline license in Philadelphia (one of the top

3

thirty metropolitan areas) were filed by petitioner,

by respondent Automatic Wide Area Cellular Sys-

tems, Inc. (AWACS), and by three other com-

panies that have not sought review. On January 21,

1983, a hearing was scheduled, and the issues for

hearing were designated. Rebuttal papers were filed

in March; hearings were held in late April and early

May; and post-hearing briefs were filed in June 1983.

The administrative law judge released his decision

(the Initial Decision), awarding the license to

AWAGCS, in September 1983. That decision was af-

firmed, with modifications, by the full Commission

in a decision released January 8, 1985. Pet. App.

8a-40a. The Commission denied reconsideration in a

decision released August 22, 1985. Jd. at 41a-49a.

c. Among the arguments petitioner made to the full

Commission was one concerning the relations of

AWACS’ three owners—LIN Cellular Communica-

tions (LIN), which owned 51%; Metromedia, Inc

(Metromedia), which owned 25%; and _ Radio

Broadcasting Company (RBC), which owned 24%.

RBC played a major role in the Philadelphia paging

(“beeper”) market; and LIN had pending before the

FCC an application to enter that market. At the

time the cellular license applications were filed, as

AWACY’ application disclosed, Metromedia and RBC

had agreed that Metromedia would acquire RBC. If

LIN’s paging application and the Metromedia-RBC

combination were both approved, the result would be

that Metromedia and LIN would be cooperating as

co-owners of AWACS while competing in the paging

market.

The Commission approved Metromedia’s acquisi-

tion of RBC in a decision released February 11, 1983

—less than one month after the Philadelphia cellular

4

proceeding had been designated for hearing. Peti-

tioner, although allegedly concerned about the poten-

tial for anticompetitive effects in the paging market

of allowing Metromenia and LIN to cooperate in the

cellular market, did not raise those concerns in its

rebuttal papers (March 1983), at the hearings

(April and May), in its post-hearing briefs (June),

or in its Exceptions or Reply Exceptions seeking re-

view of the September 1983 Initial Decision before

the full Commission. On January 3, 1984, more than

ten months after the Commission approved Metro-

media’s acquisition of RBC, petitioner raised this

challenge to the AWACS license award in a motion

to reopen the proceeding. The Commission rejected

petitioner’s request to reopen the record because,

inter alia, it was untimely (Pet. App. 38a).’

d. In the court of appeals, petitioner challenged

the FCC denial of its license applicationg on numer-

ous grounds. The court affirmed the Commission

ruling in a brief per curi ecision. Pet. App. la-

6a. The court rejected all but two of the challenges,

without additional discussion, as already having

been resolved in other cellular telephone cases, in-

cluding Celcom Communications Corp. v. FCC, supra,

or as “otherwise * * * without merit” (Pet. App. 3a).

The court also rejected petitioner’s extensive argu-

ments, which are not »ressed in this Court, challeng-

ing the FCC’s reliance on AWACS’ market study in

concluding that A‘VACS was svperior to its competi-

1The Commission noted that petitioner was well aware of

the relationship between Metromedia and LIN at the time the

FCC approved the acquisition, “but [petitioner] did not ob-

ject to the Metromedia acquisition. [Petitioner’s] objection

here is both late and filed in the improper forum” (Pet. App.

38a).

5

tors in its assessment of anticipated demand. Id. at

3a-5a. Finally, the court affirmed the FCC’s refusal,

on timeliness grounds, to hear petitioner’s allegation

of anticompetitive potential inherent in the Metro-

media-RBC combination. Jd. at 5a-6a, 7a.

2. The decision of the court of appeals is correct

and does not conflict with any decision of this Court

or of any court of appeals. Moreover, although four

appeals from cellular licensing decisions are pending

in the District of Columbia Circuit, the FCC has

completed all cellular comparative hearings, and the

court’s ruling therefore is unlikely to affect the fu-

ture selection of cellular licensees or other FCC pro-

ceedings. Accordingly, there is no basis for further

review.

a. Petitioner first argues (Pet. 12-16) that the

court of appeals erred in holding untimely petition-

er’s January 1984 motion to reopen the administra-

tive proceeding for consideration of the anticompeti-

tive effects that the Metromedia-RBC combination

might have in the paging market. Petitioner con-

tends that its motion was timely because Metro-

media’s acquisition of RBC was not actually con-

summated until early December 1983. Petitioner

cites no judicial support for this contention, how-

ever, and the court of appeals correctly rejected it.

Metromedia’s proposed acquisition of RBC was

well known to petitioner from the outset of the cellu-

lar proceeding. The AWACS application in June

1982 described the proposed combination, and the

LIN application to enter the paging market was a

matter of public record throughout the proceeding

below. Thus, petitioner could have, and should have,

raised the issue no later than in its rebuttal papers

filed prior to the hearing. Even if we assume, how-

ever, that petitioner might be excused from raising

6

the anticompetitive-effects issue until the FCC decided

whether to approve the Metromedia-RBC transac-

tion, petitioner’s challenge was still inexcusably late.

The Commission’s approval was announced in Febru-

ary 1983. Yet petitioner remained silent for more

than ten months, saying nothing until after the ad-

verse Initial Decision. Petitioner inexcusably failed

to raise the issue in its rebuttal papers, at the admin-

istrative hearing, in its post-hearing briefs, or even

in its Exceptions and Reply Exceptions to the ad-

ministrative law judge’s decision.

Nothing about the actual consummation of the

Metromedia-RBC acquisition altered the issues peti-

tioner wanted the FCC to explore in the cellular

comparative hearing—the potential anticompetitive

effects in the paging market of allowing two com-

petitors in that market to operate a joint venture in

the cellular market. First, only RBC (and _ not

Metromedia) was active in the paging market, and

LIN and RBC were joint stockholders in AWACS

from the start; thus, the alleged threat to competi-

tion existed even prior to Metromedia’s acquisition

of RBC. In any event,™as far as the petition re-

veals, all the facts relevant to the inquiry into com-

petition in the paging market were known prior to

consummation of the purchase. Finally, even if the

closing of the deal raised some new issues, the ques-

tion of anticompetitive potential in the paging mar-

ket was clearly ripe for consideration prior to the

closing: once the proposed acquisition was announced,

and certainly after it was approved by the FCC, a

full exploration of petitioner’s concerns about com-

petition in the paging market was possible.

There was especially strong reason to insist on

prompt raising of relevant issues in this cellular com-

parative proceeding. Cellular radio is a new form of

7

mobile communications that makes it possible to meet

a greatly increasing demand for mobile telephone

service. See National Association of Regulatory Util-

ity Commissioners v. FCC, 525 F.2d 630, 634-639

(D.C. Cir.), cert. denied, 425 U.S. 992 (1976).

Recognizing that “it is high time to move cellular

telephone services from the FCC’s regulatory process

to the marketplace” (MCI Cellular Telephone Co. v.

FCC, 738 F.2d 1322, 1328 (D.C. Cir. 1984)), the

Commission adopted special expedited hearing proce-

dures for choosing among mutually exclusive cellu-

lar applicants. Cellular Communications Systems,

86 F.C.C.2d at 498-501. Petitioner’s ‘‘wait-and-see”’

strategy with respect to raising its concerns about

the Metromedia-RBC acquisition, if accepted by the

Commission, would have further delayed introduc-

tion of a competitive nonwireline cellular system in

Philadelphia. In these circumstances, petitioner’s

waiting for the consummation of the Metromedia-

RBC combination is nothing more than an excuse for

having attempted to interject a new issue into a com-

parative proceeding that was not going its way, and

the court of appeals’ rejection of this effort as un-

timely was correct.

In any event, a remand to the Commission to con-

sider the effects on competition in the Philadelphia

paging market of the AWACS license award would

now be pointless. LIN has divested itself of any in-

terest (including its Commission license) in the pag-

ing market in the Northeast Corridor, which includes

Philadelphia. See In re Celcom Communications

Corp., FCC 86-423 (Oct. 16, 1986), slip op. 4 n.31.

Thus, LIN is no longer even a potential competitor of

Metromedia, and petitioner’s challenge is moot.

b. Petitioner also argues (Pet. 16-25) that the

court of appeals erroneously refused to consider its

8

challenge to the application of the comparative cri-

teria in this proceeding. This argument simply mis-

characterizes the court’s ruling.

Petitioner does not challenge the validity of the

regulations that established the criteria that were to

govern the licensing proceedings (Pet. 17). Rather,

petitioner challenges the license decision here as not

consistent with the public interest because the regu-

latory criteria have allegedly been “eroded” by the

Commission (ibid.). The petition appears to iden-

tify—and in the court of appeals petitioner identi-

fied—only two ways in which this erosion has alleg-

edly occurred: since promulgation of the compara-

tive criteria, petitioner argues, the Commission has

(i) decided not to hold licensees to the plans they

submit in the licensing process and (ii) effectively

confessed the irrationality of the comparative cri-

teria, as evidenced by the Commission’s adoption of a

lottery method for awarding licenses in markets

other than the top thirty.

These arguments, however, are precisely what the

court of appeals rejected on the merits in Celcom

Communications Corp. v. FCC, 787 F.2d at 611-612

(Pet. App. 54a-56a) (the Atlanta case). The court

there held that the Commission had not departed

from the original regulatory criteria governing post-

award alteration of licensees’ plans (787 F.2d at 612

(Pet. App. 55a) )—so that this argument is really a

challenge to the original criteria, a challenge peti-

tioner here disavows. The court also held that the

Commission’s adoption of a lottery selection process

merely reflected a new weighing of the costs and

benefits of a comparative hearing process, not an

abandonment of the belief that the hearing process

was capable of “identifying the best applicant in the

larger markets” (ibid. (Pet. App. 56a) ).

9

As petitioner acknowledges, the court of appeals’

rejection of its challenge to the application of the

comparative criteria in this proceeding was included

in the court’s simple statement that “[m]ost of the

arguments made by [petitioner] * * * focus on is-

sues that have already been resolved in previous cel-

lular telephone appeals or are otherwise without

merit” (Pet. App. 3a). The court cited the Atlanta

case in this reference to previous decisions (Pet. App.

8a n.1). Because the argument petitioner makes is

precisely the same as the argument made and re-

jected on the merits in the Atlante case, it is clear

that the court of appeals’ citation of the Atlanta case

here was a rejection of the argument once again on

the merits. In any event, even if the court did not

intend to include this challenge among those already

“resolved in previous cellular telephone appeals,” this

challenge falls within the remaining group expressly

found “without merit.” Accordingly, there is no

basis for petitioner’s contention that the court of ap-

peals refused to consider the claim on the merits.

It is therefore respectfully submitted that the pe-

tition for a writ of certiorari should be denied.

CHARLES FRIED

Solicitor General

DANIEL M. ARMSTRONG

Associate General Counsel

Federal Communications Commission

JANUARY 1987

wv. &. GOVERNMENT reintiNG Office, 1907 161463 40101