Petition for Writ of Certiorari — Mobile Telecommunication Technologies Corp. v. Federal Communications Commission

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IN THE

Supreme Court of the United States

OCTOBER TERM, 1995

MOBILE TELECOMMUNICATION TECHNOLOGIES CORP.;

DESTINEER CORPORATION,

Petitioners,

Vv.

FEDERAL COMMUNICATIONS COMMISSION,

Respondent.

Petition for Writ of Certiorari to the

United States Court of Appeals

for the District of Columbia Circuit

PETITION FOR WRIT OF CERTIORARI

RICHARD E. WILEY *

R. MICHAEL SENKOWSKI

DANIEL E. TROY

BRYAN N. TRAMONT

WILEY, REIN & FIELDING

1776 K Street, N.W.

Washington, D.C. 20006

(202) 429-7000

Counsel for

Mobile Telecommunication

Technologies Corp.

Dated: June 20, 1996 * Counsel of Record

WILSON - Epgs PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

QUESTION PRESENTED

Did the Federal Communications Commiss.n (“FCC”

or “Commission” ) exceed its statutory authorsty by charg-

ing Mtel $33.3 million based on the ager«y's supposed

inherent authority under 47 U.S.C. § 154°:) (1994),

even though no part of the Communications Act author-

izes such a char,*, the Act expressly deline«tes the nar-

row circumstances under which the Commission can re-

quire payments from licensees, and no agency has ever

invoked its inherent, general authority to impose a mas-

sive payment of this kind?

(i)

PARTIES TO THE PROCEEDING

The petitioner is Mobile Telecommunication Tech-

nologies Corp. (“Mtel”), a publicly traded company en-

gaged in the business of telecommunications; Destineer

Corporation, previously known as “Nationwide Wireless

Network Corp.” is a privately held corporation in the

business of communications that is majority owned and

controlled by Mtel.

Mtel also has an interest in the following subsidiaries:

Mtel Paging, Inc.; SkyTel Corp.; Destineer Corporation;

United States Paging Corporation; Mtel Technologies,

Inc.; Mtel Maine, Inc.; Mtel International, Inc.; Mtel

Latin America, Inc.; Mtel Puerto Rico, Inc.; Mobile-

Comm Europe Inc.; Mtel Space Technologies Corpora-

tion; Mtel Space Technologies, L.P.; COM/NAV Realty

Corp.; Intelligent Investment Partners, Inc.; Mtel Ameri-

can Radiodetermination Corporation; Mtel Cellular, Inc.;

Mtel Digital Services, Inc.; Mtel Microwave, Inc.; Mtel

Service Corporation; Internet Cafe Inc.; Sky Telecom

Services Limited; Mtel China, Inc.; SkyTel (UK) Limited;

Mtel (UK) Limited; Mtel do Brasil Participagées Ltda.;

Mtel Argentina S.A.; Mtel Chile S.A.; Mtel Costa Rica

S.A.: Mtel del Ecuador S.A.; Telecomunicaciones Sky-

Tel S.A.; Comunicaciones Racotec; Mtel Colombia S.A.;

Radio Aviso S.A.; and Nubal S.A.

The Respondent is the Federal Communications Com-

mission.

Paging Network, Inc. and Cox Enterprises, Inc. inter-

vened in Mtel’s case (94-1552) before the United States

Court of Appeals for the District of Columbia Circuit.

BellSouth Corporation, BellSouth Telecommunications,

Inc., BellSouth Cellular Corporation, and Mobile Com-

munications Corporation of America (collectively, “Bell-

South”) were appellants in two consolidated cases (94-

1553 and 94-1518) before the United States Court of

Appeals for the District of Columbia Circuit. The court

of appeals denied BellSouth’s petition for review in those

cases and those mandates have issued.

TABLE OF CONTENTS

QUESTION PRESENTED ............-..-.02:-:000000+ Sb ea Cr es |

PARTIES TO THE PROCEEDING .............-.---------eceeeeee0-

TABLE OF AUTHORITIES ....................... salahicmdeaeiaineien

PETITION FOR WRIT OF CERTIORARI .....................

OPINIONS AND ORDERS BELOW ............ ROAAne Ltes ce

FEIT ascetic sawse teeta eksiihencdinrtoncipecbynesctanporeterebess

STATUTORY PROVISIONS INVOLVED ......................

STATEMENT OF THE CASE ...............-..00--eessecceeseenseeees

The Pioneer’s Preference Rules Do Not Contem-

plate Charging Licensees an Amount in Excess

of Nominal, Statutorily Prescribed Fees _.........

. The FCC Rewarded Mtel for Its Innovative

Service by Granting It a Pioneer’s Preference

Subject Only to Statutory Licensing Fees ..........

Following Congress’s Grant of Auction Author-

ity, the FCC Repeatedly Concluded Mtel Should

Not Be Required to Pay an Extraordinary

ELL aE Ts LO RE Nes oer CO

Following a Letter and Proposed Legislation

from an Influential Congressman, the FCC

Abruptly Reversed Course and Imposed an Un-

precedented Charge on Mtel ...................-........ as

. Congress Adopted a Statute Explicitly Granting

the Commission Fee Authority to Charge Cer-

tain Pioneers, But Not Mtel, Auction-Based

TABLE OF CONTENTS—Continued

Page

F. The Court of Appeals Invalidated the Payment

Requirement as Arbitrary and Capricious, But

Upheld the FCC’s Authority to Impose Such a

RRS SI SRO MORE BIO RL 10

REASONS FOR GRANTING THE WRIT ....................... 13

I. DUE TO THE SIMILARITY OF MANY AD-

MINISTRATIVE AGENCIES’ STATUTORY

SCHEMES, THE LOWER COURT'S DECI-

SION REPRESENTS A SWEEPING EXPAN-

SION OF AGENCY POWER ...................220020---- 14

II. THE MAJORITY’S UNPRECEDENTED DE-

CISION THAT AN AGENCY HAS THE AU-

THORITY TO TAKE ANY ACTION NOT

EXPRESSLY PROHIBITED CONTRAVENES

THE STATUTORY SCHEME AND IS CON-

TRARY TO FUNDAMENTAL PRINCIPLES

OF ADMINISTRATIVE LAW .......00 000. 18

A. Agencies May Not Impose Multi-Million Dol-

lar Payment Requirements Without Express

Authorization From Congress ........................ 19

E. The FCC’s Assertion of Power Is “Inconsist-

ent With” the Communications Act and Con-

gress’s Traditional Role in Limiting Agency

Authority to Levy Fees ....................20........------ 20

C. Congress’s General Intention to Raise Monies

Cannot Support the Commission’s Broad

Assertion of Section 4(i) Authority in the

Face of More Specific Statutory Directions.... 22

FC sicisb sschcnctpanitinineicbninainitiindaiatiniatniniiie tia ata 24

APPENDIX A

March 8, 1996 Opinion of the United States Court

of Appeals for the Distriet of Columbia .................. la

TABLE OF CONTENTS—Continued

APPENDIX B Page

July 18, 1994 Memorandum Opinion and Order of

the Federal Communications Commission for a

Nationwide Authorization in the Narrowband Per-

sonal Communications Service ............... 29a

APPENDIX C

May 8, 1996 Order of the United States Court of

Appeals for the District of Columbia Circuit Deny-

ing Mobile Telecommunications Technologies Cor-

poration’s Petition for Rehearing... 72a

May 8, 1996 Order of the United States Court of

Appeals for the District of Columbia Circuit Deny-

ing Mobile Telecommunications Technologies Cor-

poration’s Suggestion for Rehearing In Banc...... 73a

APPENDIX D

May 22, 1996 Order of the United States Court of

Appeals for the District of Columbia Circuit Grant-

ing Mobile Telecommunications Technologies Cor-

poration’s Motion for Stay of Mandate... 74a

APPENDIX E

Statutory and Regulatory Provisions... 75a

TABLE OF AUTHORITIES

CASES Page

Caminetti v. United States, 242 U.S. 470 (1917)... 23

Chevron, U.S.A., Inc. v. Natural Resources Defense

Council, Inc., 467 U.S. 887 (1984) ..........-....-..-... 22

Holder v. Hall, 114 S. Ct. 2581 (1994) ..................... 18

Industrial Union Department v. American Petro-

leum Institute, 448 U.S. 607 (1980) —.................. 20

Leatherman v. Tarrant County Narcotics Intelli-

gence & Coordination Unit, 507 U.S. 163 (1993) .. 18

Lyng v. Payne, 476 U.S. 926 (1986) ......................... 21

MCI Telecommunications Corp. v. AT&T, 114 8. Ct.

BORE CIGD) vsescntitasihinilidlitln ttn albinos 22

National Cable Television Association, Inc. v. :

United States, 415 U.S. 386 (1974) ....................... 19

National Cable Television Association, Inc. v. FCC, /

554 F.2d 1094 (D.C. Cir. 1976) ...................2..----- 19

New England Telephone v. FCC, 826 F.2d 1101 |

(D.C. Cir. 1987), cert. denied, 490 U.S. 1039 ;

0), SERENA SOMO RU Ke ne SE SARS A ETS Pee Ca 15 i

Railway Labor Executives’ Association v. National {

Mediation Board, 29 F.8d 655 (D.C. Cir. 1994),

cert. denied, 115 S. Ct. 1892 (1995) ..............--.. 21

Rake v. Wade, 508 U.S. 464 (1998) -..............-....... 23 :

Skinner v. Mid-America Pipeline Co., 490 U.S. 212

(1000) cs ee ee 20

Stark v. Wickard, 321 U.S. 288 (1944) ................... 21 '

Telecommunications Research and Action Center v.

FCC, 886 F.2d 1849 (D.C. Cir. 1988) .................. 15

Transamerica Mortgage Advisors, Inc. v. Lewis,

GGG TE, FS ee wished codeicienitebitittatd shee ieiaicnsatan 21

Turner v. FCC, 514 F.2d 1354 (D.C. Cir. 1975) ...... 15

United States v. Munoz-Flores, 495 U.S. 385

tf , RROB ARE abea tee Bite SSS AE 19

ADMINISTRATIVE DECISIONS

Amendment of the Commission’s Rules to Estab-

lish New Personal Communications Services, 7

PO Fan GRO CR cecliceecBetecabdncqstttitciinilstesticccn 5

vii

TABLE OF AUTHORITIES—Continued

Page

Amendment of the Commission’s Rules to Estab-

lish New Narrowband Personal Communications

Services, 8 FCC Red 7162 (1998) ................-........ 5

Amendment of the Commission’s Rules to Estab-

lish New Narrowband Personal Communications

Services, 9 FCC Red 1809 (1994) ...................... 7

Establishment of Procedures to Provide A Prefer-

ence to Applicants Proposing an Allocation for

New Services, 6 FCC Red 3488 (1991) ................ 4

Nationwide Wireless Network Corp., 9 FCC Red

BRIAR, Ceiedinae R Na sieied led Deitel passim

Procedures to Provide a Preference to Applicants

Proposing an Allocation for New Services, 5

I Ee HE eI le terprctcrn seen cenicpransecientcdeenctapsxtnnen 3,4

Review of the Pioneer's Preference Rules, 8 FCC

Sk RISA Re SR Sala ce aa 7

Review of the Pioneer’s Preference Rules, 9 FCC

I I nr cen meapunec 7

THE CONSTITUTION AND STATUTES

ey se nnn cccuemmiamene 19

Omnibus Budget Reconciliation Act of 1993, Pub.

L. No. 108-66, 107 Stat. 388 (1993) 2.00000. 5, 6

Be ion iekscsecrsikscecnsdedennseb ined 3, 4, 16, 19

BO se I sco ern cdbecemeierc cecencscusoaceoasiains 14

ee CE I oo 18, 19

ye Te | | PIR cera anne alle eae 2

Be Cre ae ee ET eines vccedecddeesncctetendcsecanienensosiencs 3, 14, 16

42 U.S.C. § 2214 (1994) 0... eet Saks Se apf Teh 16

ais Te COD eceseccesececececsvstusecosessenenssbeeesoen 19

A rn enum 14

nn cncccuomavnmaes 18

es 14,17

Se ee He Cases 17

43 U.S.C. § 1718 (1994) .....000.. or PRON Oo SOL ICT ee 15

ee Be I ann cas saiscccoeechcccecsssecsnkeccceeesmocus 3

Sr 15

en nn 14, 15

eR I hai sees ps tonnes nsocloncbiceninccesasiivds passim

viii

TABLE OF AUTHORITIES—Continued

Page

Oe Te I cereal passim

Ee yi iti hitiicdnbiticiaeninnienal passim

AE Ts ee I ii ecreeictbteseteciisitleninceenansininipaaned passim

OF ee ini ctciich sccsrerciintclcnaeviaonitail 10

\ ak eee 17

a I oe reccenecustlnninnsictiicesinnituadseicinitn 14,17

ie ee ID ctecenstheccertetcneseevaiivenvescontineen 17

MISCELLANEOUS

get ft HF | 8) | Ram nners aemnT Osea ere 4

Pi gee Et Sa: 5 RRP eter ee 4

H.R. 1407, 102d Cong., Ist Sess. (1991) —.......-...0-...... 6

H.R. 4700, CCH Congressional Index, 103d Cong.,

Ts a tae 8

H.R. 531, 102d Cong., 1st Sess. (1991) ..................... 10

H.R. Doc. No. 316, 103d Cong., 2d Sess. (1994) ...... 10

H.R. Rep. No. 826 (II), 108d Cong., 2d Sess.

(1994), reprinted in 1994 U.S.C.C.A.N. 4013...... 10

H. Conf. Rep. No. 213, 108d Cong., 1st Sess.

(1993), reprinted in 1993 U.S.C.C.A.N. 1088...... 6

Spectrum Auctions: FCC Proposals for the Air-

waves, 1986: Hearing on H.R. 170 Before the

Subcomm. on Telecommunications, Consumer

Protection, and Finance of the House Comm. on

Energy and Commerce, 99th Cong., 2d Sess.

CO ea Siviteccnid Lace tiankdadishaimddia eben aids 6

FCC Public Notice, Mimeo #41645 (February 3,

| TR RN, eee aie tee Pee na ee ee Lee 7

FCC Public Notice, Mimeo #41908 (February 25,

FOE wkveSetecccnciinicccaasstbircadcienlectauiiaind Maidan te cata sk. 10

Letter from the Hon. John D. Dingell to William E.

Kennard, General Counsel, Federal Communica-

tions Commission (May 3, 1994) ........00.000000000000.... 8

In THE

Supreme Court of the United States

OCTOBER TERM, 1995

No. 95-

MOBILE TELECOMMUNICATION TECHNOLOGIES CorpP.;

DESTINEER CORPORATION,

" Petitioners,

FEDERAL COMMUNICATIONS COMMISSION,

Respondent.

Petition for Writ of Certiorari to the

United States Court of Appeals

for the District of Columbia Circuit

PETITION FOR WRIT OF CERTIORARI

Mtel’ respectfully petitions this Court for a writ of

certiorari to review the determination of the United States

Court of Appeals for the District of Columbia Circuit

that the Commission has the authority under 47 U.S.C.

section 154(1) (1994) to require Mtel to pay $33.3

million for a paging license despite the unprecedented

nature of the charge and despite the agency’s lack of

authority to impose such a fee.

1 Mobile Telecommunication Technologies Corp. (‘Mtel”) was

the original pioneer’s preference applicant in this case. Upon re-

ceiving a pioneer’s preference, it requested that the license granted

pursuant to the preference be issued in the name of Nationwide

Wireless Network Corp. (“NWN Corp.”). NWN Corp. was, at the

time, a wholly owned subsidiary of Mobile Telecommunication

Technologies Corp. Since then, NWN Corp. has been renamed

“Destineer Corporation.”

OPINIONS AND ORDERS BELOW

The court of appeals panel opinion granting in part

and denying in part Mtel’s petition for review is reported

in Mobile Communications Corp. of Amer. v. FCC, 77

F.3d 1399 (D.C. Cir. 1996) (“Mtel’) and is reproduced

at Appendix A (“App.”) bound with this petition. Chief

Judge Harry T. Edwards concurred in the panel’s conclu-

sion that the FCC’s decision was arbitrary and capricious,

but dissented from the majority’s determination that the

FCC had the authority to impose a $33.3 million charge.

The May 8, 1996, order of the court of appeals denying

Mtel’s petition for rehearing and suggestion for rehearing

en banc is unreported and is reproduced at App. C. The

court of appeals stayed the mandate on May 22, 1996.

(App. D) The FCC’s July 13, 1994 order under review

is published at Nationwide Wireless Network Corp., 9

FCC Red 3635 (1994) (“Licensing Order’), and repro-

duced at App. B.

JURISDICTION

The Court of Appeals for the District of Columbia Cir-

cuit issued its decision on March 8, 1996. On May 8,

1996, Mtel’s petition for rehearing and suggestion for

rehearing en banc were denied. On May 22, 1996, the

court of appeals stayed the mandate for 30 days, until

June 21, 1996. This petition is being filed within 90

days of the date the court of appeals denied Mtel’s peti-

tion for rehearing. The jurisdiction of this Court is

proper under 28 U.S.C. § 1254(1) (1994).

STATUTORY PROVISIONS INVOLVED

This case primarily involves 47 U.S.C. § 154(i)

(1994) of the Communications Act of 1934 (hereinafter

“section 4(i)”), which provides that:

The Commission may perform any and all acts, make

such rules and regulations, and issue such orders,

not inconsistent with this chapter, as may be neces-

sary in the execution of its functions.

The other sections of the Communications Act in-

volved in this case are 47 U.S.C. §§ 158, 159, 309(a),

and 309(j) (1994). These statutory provisions are set

out in relevant part at App. E.

STATEMENT OF THE CASE

Mtel is a small Jackson, Mississippi company that was

awarded a “pioneer’s preference’ in recognition of a

path-breaking innovation in paging technology. Although

the “preference entitled Mtel to bypass what had been

the traditional mechanism for allocating licenses, through

a ‘comparative hearing,’ after which the successful appli-

cant would receive a license free of charge,” Mtel, App.

2a, the FCC required Mtel to pay the United States

Treasury $33.3 million for its license.

The Communications Act does not expressly authorize

the Commission to compel Mtel’s payment. Recognizing

the FCC’s lack of express authority, the agency and the

lower court instead invoked the Commission’s general

authority under section 4(i), its so-called “necessary and

proper clause.” The unprecedented nature of the lower

court’s action is highlighted by the fact that, although gen-

eral grants of authority like section 4(i) are not uncom-

mon, see, é.g., 43 U.S.C. § 1733 (1994) (Bureau of

Land Management), 15 U.S.C. § 77s(a) (1994) (Secu-

rities and Exchange Commission), 42 U.S.C. § 2201(p)

(1994) (Nuclear Regulatory Commission), neither the

FCC nor any other federal agency has ever charged enor-

mous sums for a license based only on such a grant of

authority.

A. The Pioneer’s Preference Rules Do Not Contemplate

Charging Licensees an Amount in Excess of Nominal,

Statutorily Prescribed Fees.

On April 27, 1990, the FCC proposed a “pioneer’s

preference” policy to reward entrepreneurs who “under-

take the effort and risk associated with the development

of new services and technologies.” Procedures to Provide

a Preference to Applicants Proposing an Allocation for

New Services, 5 FCC Rcd 2766 (1990). The grantee

was to receive a license “without having to face competing

applications and, under the assumption prevailing when

the preference was awarded, without having to pay.”

Mtel, App. 22.

The FCC ultimately a»pted a pioneer’s preference

policy that set forth specific, highly restrictive criteria

that, if met, would entitle an innovator to a preference in

the licensing of the new service. Establishment of Proce-

dures to Provide a Preference to Applicants Proposing an

Allocation for New Services, 6 FCC Rcd 7488 (1991).

That preference was meant to be dispositive; the rules

provided that a pioneer would “not be subject to mutually

exclusive applications.” Jd. at 3498 (codified as amended

at 47 C.F.R. § 1.402(b) (1994) (App. 101la)). Mutu-

ally exclusive applications are those where the applicants’

conflicts are such that “the grant of one application would

effectively preclude . . . the grant of one or more of the

other[]” applications. 47 C.F.R. § 22.131 (1995)

(“Mutually Exclusive Applications”) (App. 106a).

When the Commission established the preference policy,

the only fees it had ever charged were those expressly

set forth in the Communications Act (the “Act”). Sec-

tions 158 and 159 of the Act, along with the Commis-

sion’s newly granted auction authority, establish a com-

prehensive schedule of fees and charges. Section 158’s

language is mandatory: “Until modified [to reflect

changes in the CPI], the Schedule of Application Fees

which the Federal Communications Commission shall

prescribe pursuant to subsection (a) of this section shall

be as follows.” 47 U.S.C. § 158(g) (1994) (App. 77a-

78a) (emphasis added); see also 47 U.S.C. § 159(g)

(1994) (App. 83a-85a) (setting forth schedule of annual

fees). Additional charges may be imposed only “as a

penalty for late payment of charges.” 47 U.S.C. § 158

(c)(1) (1994) (App. 76a). The statutorily prescribed

edition etdaitacs aaa

application fee for Mtel’s license was $230, with an addi-

tional annual fee of 2 cents for every unit deployed.”

B. The FCC Rewarded Mtel for Its Innovative Service by

Granting It a Pioneer’s Preference Subject Only to

Statutory Licensing Fees.

Relying on the FCC’s promise that a sufficiently inno-

vative technological advance would be rewarded with a

pioneer’s preference, Mtel initiated an ambitious research

project it called the Nationwide Wireless Network

(“NWN”) in the spring of 1991. Mtel invested some $50

million in research and development to create a revolu-

tionary two-way messaging service that permits lengthy

messages to be sent wirelessly at a rate ten times that of

then-existing paging systems. Amendment of the Com-

mission’s Rules to Establish New Personal Communica-

tions Services, 7 FCC Red 5676, 5735 (1992).

On July 23, 1993, the FCC “grant[ed] a [final] pio-

neer’s preference to Mtel for a nationwide license.”

Amendment of the Commission’s Rules to Establish New

Narrowband Personal Communications Services, 8 FCC

Red 7162, 7175 (1993). The agency found that “Mtel’s

development of [NWN] . . . is a significant communica-

tions innovation of the sort the Commission established

the pioneer’s preference rules to recognize.” Jd. at 7174.

C. Following Congress’s Grant of Auction Authority, the

FCC Repeatedly Concluded Mtel Should Not Be

Required to Pay an Extraordinary Charge.

Months after Mtel’s pioneer’s preference was finalized,

the FCC received long sought-after authority from Con-

gress to auction radio licenses. Omnibus Budget Recon-

2 After the FCC had adopted its pioneer’s preference policy, and

after Mtel’s preference was finalized, Congress conferred on the

Commission the authority to dispose of licenses via auction. See

infra pp. 5-7. Prior to 1998, however, the FCC did not have the

authority to conduct such auctions.

ciliation Act of 1993, Pub. L. No. 103-66, § 6002, 107

Stat. 388 (1993) (codified at 47 U.S.C. § 309(j)(1))

(1994) (App. 86a).* For the first time, the Commission

was authorized to collect, through “competitive bidding,”

charges in excess of the statutory application fees. “This

right was a major development for an agency that, for

almost sixty years, had been confined by statute to charg-

ing nominal license fees.” Mtel, App. 23a (Edwards,

C.J., dissenting in part).

The grant of auction authority was not unconstrained,

however. Although Congress obviously could not specify

the amounts that would be bid for licenses auctioned pur-

suant to section 309(j), it carefully limited the Commis-

sion’s authority to use competitive bidding. See, e.g., 47

U.S.C. §§ 309(j)(1), (2), (10), (11) (1994) (App.

86a-87a, 93a-94a). Specifically, Congress restricted the

use of competitive bidding to situations where “mutually

exclusive applications are accepted for filing.” 47 U.S.C.

§ 309(j)(1) (1994) (App. 86a) (emphasis added). Be-

cause pioneer’s preference licenses are, as noted above,

by definition not mutually exclusive, this provision neces-

sarily excludes pioneers such as Mtel from the statute’s

ambit.

Congress also made clear that its grant of auction au-

thority did not “alter” the traditional manner in which the

Commission was to allocate spectrum or the other proce-

dures set forth in the rest of the Act. 47 U.S.C, § 309

(j)(6)(A) (1994) (App. 89a-90a); H. Conf. Rep. No.

213, 103d Cong., Ist Sess. 484-85 (1993), reprinted in

8 The FCC had pursued auction authority at least since the mid-

1980s. See, e.g., Spectrum Auctions: FCC Proposals for the Air-

waves, 1996: Hearing on H.R. 170 Before the Subcomm. on Tele-

communications, Consumer Protection, and Finance of the House

Comm. on Energy and Commerce, 99th Cong., 2d Sess. (1986).

Although Congress had often contemplated giving the agency such

authority, it did not actually confer this authority until 1993. See

also H.R. 531, 102d Cong., Ist Sess. (1991); H.R. 1407, 102d

Cong., lst Sess. (1991).

1993 U.S.C.C.A.N. 1088, 1173-74. Nor was the con-

ferral of such authority to “be construed to prevent the

Commission from awarding licenses to those persons who

make significant contributions to the development of a

new telecommunications service or technology.” 47 U.S.C.

§ 309(j)(6)(G) (1994) (App. 90a).*

Subsequently, the Commission began a rulemaking pro-

ceeding to assess how the pioneer’s preference rules should

be applied in the new auction era. The FCC noted that

“[iJnasmuch as we have determined that a pioneer’s pref-

erence application will be the sole application acceptable

for filing . . . we believe that the statutory language,

combined with our pioneer’s preference regulatory scheme

as it currently exists, exempts pioneer’s preference licen-

sees from payment for a license so issued.” Review of

the Pioneer’s Preference Rules, 8 FCC Red 7692, 7693

(1993) (emphasis added). On three occasions over the

next six months, the Commission reaffirmed its conclusion

that the statutory and regulatory scheme, as well as equita-

ble considerations, required that Mtel not be charged an

extraordinary fee. Id. at 7694-95; Review of the Pioneer's

Preference Rules, 9 FCC Red 605, 610 n.21 (1994);

Amendment of the Commission's Rules to Establish New

Narrowband Personal Communications Services, 9 FCC

Red 1309, 1316 1994); see Mtel, 22a-23a (Edwards,

C.J., dissenting in part).

The Commission then invited Mtel to apply for a

license. FCC Public Notice, Mimeo # 41645 (rel. Feb.

3, 1994).

* Congress also reiterated the FCC’s “obligation in the public

interest to continue to use engineering solutions, negotiations,

threshold qualifications, and other means in order to avoid mutual

exclusivity in application and licensing proceedings.” 47 U.S.C.

§ 309(j) (6) (E) (1994) (App. 90a).

D. Following a Letter and Proposed Legislation from an

Influential Congressman, the FCC Abruptly Reversed

Course and Imposed an Unprecedented Charge on Mtel.

Expecting its license to be routinely granted in accord-

ance with the Commission’s rules, Mtel applied to convert

its finalized preference into a license on February 9,

1994. Three months after Mtel applied for its license, the

then-Chairman of the Subcommittee on Oversight and

Investigations of the United States House of Representa-

tives Committee on Energy and Commerce sent the FCC

a letter expressing concerns about the absence of payment

obligations on recipients of pioneer’s preferences. Letter

from the Hon. John D. Dingell to William E. Kennard,

General Counsel, Federal Communications Commission

(May 3, 1994). On June 30, 1994, Congressman Dingell

sponsored H.R. 4700 (which eventually died in commit-

tee). See CCH Congressional Index, 103d Cong., 2d

Sess., 28, 428-28, 429 (1994). Had it passed, H.R.

4700 would have required Mtel and other pioneer’s pref-

erence holders to pay 90 percent of the highest bid re-

ceived for a comparable license at auction. H.R. 4700,

103d Cong., 2d Sess. (1994).

Approximately two months after this letter and the

introduction of H.R. 4700, the Commission abruptly

reversed course on the payment issue. Licensing Order,

9 FCC Rcd 3635 (App. B); Mtel, App. 24a (“The FCC

[then] got weak-kneed and turned tail on Mtel when a

member of Congress cried ‘wolf’.”) (Edwards, C.J., dis-

senting in part). The agency granted Mtel’s license, but

conditioned that license on payment “to the United States

Treasury [of] an amount equal to ninety (90) percent

of the lowest winning bid for a nationwide narrowband

[personal communications service (“PCS”)] license or

three million dollars ($3,000,000) less than the lowest

winning bid for a nationwide narrowband PCS license,

wae ne mm

whichever is less.” Licensing Order, App. 66a." Given

that the lowest winning bid for a comparable license was

$37 million, the FCC order would require Mtel to pay

90 percent of that figure, or $33.3 million.

Because no statutory provision explicitly authorized

such an extraordinary payment obligation, the Commis-

sion relied on its so-called “necessary and proper” author-

ity in section 4(i). 47 U.S.C. § 154(i) (1994). AI-

though concurring in the result, Commissioner Quello

found “problematic” the FCC’s “statutory basis for im-

posing this payment requirement on Mtel.” Licensing

Order, App. 67a. He candidly conceded that: “[{The

FCC’s] legal analysis, although plausible, certainly entails

what may best be described as an aggressive interpreta-

tion of Section 4(i) of the Communications Act.” Jd.

(emphasis added).

E. Congress Adopted a Statute Explicitly Granting the

Commission Fee Authority to Charge Certain Pioneers,

But Not Mtel, Auction-Based Fees.

In response to concerns about the agency’s power to

require pioneers to pay, in November 1994 Congress

enacted legislation explicitly authorizing the FCC to com-

pel payment from certain pioneer’s preference licensees.

This legislation, which was integrated into the financ-

ing package of the Uruguay Round Agreements Act

(“GATT”), thus required payments, calculated accord-

ing to a statutorily prescribed formula, from existing 2

GHz pioneers and from all future pioneers. 47 U.S.C.

§ 309(j)(13)(B) (1994) (App. 96a).°

® Although the FCC’s Licensing Order acknowledged receiving

the letter and described the recently introduced legislation, the

Commission denied that it had been influenced by the bill. /d.

at 48a n.66.

® Mtel’s “narrowband” PCS service is in the 900 MHz band and

is suitable for paging-type services. The FCC also separately

awarded pioneer’s preferences in the broadband, or 2 GHz, fre-

quency band, which is appropriate for voice transmissions.

The House Ways and Means Committee incorporated

language into GATT expressly authorizing such a pay-

ment in the fear that “there may be some question about

the authority of the Commission to require pioneer pref-

erence holders to pay.” H.R. Rep. No. 826 (II), 103d

Cong., 2d Sess. 7 (1994), reprinted in 1994 U.S.C.C.A.N.

4013, 4019. Similarly, the Statement of Administrative

Action in the President’s Message on GATT asserted that

“Section 801 eliminates the uncertainty arising from cur-

rent legislation by mandating” payments for some licenses.

H.R. Doc. No. 316, 103d Cong., 2d Sess. (1994).

Importantly, the GATT legislation does “not apply to

applications that have been accepted for filing on or

before September 1, 1994.” 47 U.S.C. § 309(j)(13)

(D)(iv) (1994) (App. 97a). By its own terms, there-

fore, the GATT legislation did not grant the authority

to charge for Mtel’s application, which was accepted for

filing on February 25, 1994 (FCC Public Notice, Memo

#41903 (February 25, 1994)), and finalized in July

1994. Licensing Order, App. 29a, 32a.

F. The Court of Appeals Invalidated the Payment Re-

quirement as Arbitrary and Capricious, But Upheld

the FCC’s Authority to Impose Such a Charge.

Pursuant to 47 U.S.C. § 402(b)(1) (1994), Mtel

appealed the FCC’s payment condition to the court of

appeals. On March 8, 1996, the panel issued an opinion

finding that the FCC “failed to engage in reasoned

decision-making in deciding to impose the payment re-

quirement.” Mtel, App. 12a. The majority believed,

however, that section 4(i) gave the FCC authority to

impose a payment on Mtel.

The majority acknowledged “the specificity of Con-

gress’s grants of authority to charge applicants for li-

censes”—namely, “certain administrative fees in connec-

tion with the licensing process” and monies from “auctions

of specified types of licenses where [the Commission ]

has accepted competing applications.” Mtel, App. 7a.

But it rejected Mtel’s argument that “because the statu-

tory scheme ‘limits a thing to be done in a particular

mode, it includes the negative of any other mode.’ ” /d.

(quoting Botany Worsted Mills v. United States, 278

U.S. 282, 289 (1929)). The majority characterized this

argument as mere “reliance on the expressio unius maxim”

which “has little force in the administrative setting where

we defer to an agency’s interpretation of a statute unless

Congress has directly spoken to the precise question at

issue.” Jd. (quotation marks and citations omitted ).

The majority held that “the nature of Congress’s auc-

tion authorization more supports than undermines the

Commission’s” assertion of authority to charge Mtel. /d.

The court concluded that Congress intended auction-like

fees to be applied to “valuable” licenses like that of Mtel.

Id. Charging Mtel an auction-based payment, the court

said, “would enable the Commission to reap many of the

benefits of Congress’s own new policy.” Jd. at 9a. The

majority also found that the Commission’s assertion that

a payment was in the “public interest” made it not “incon-

sistent with” the Communications Act, and therefore per-

mitted under section 4(i). Jd. at 10a. The court re-

manded the case to the Commission to reconsider

“whether Mtel’s license should be conditioned on payment

in light of its claims of reliance and inconsistent treatment

of others.” Jd. at 20a.

Chief Judge Edwards agreed that the Commission had

acted arbitrarily and capriciously in imposing the pay-

ment. He disagreed, however, that the FCC had the

power under section 4(i) to mandate such a charge. “It

is undisputed that the FCC has never before in its history

imposed a licensing fee absent explicit authorization,” he

noted. Id. at 25a (Edwards, C.J., dissenting in part)

(emphasis in original). “Jt is also conceded that there

is no such authorization in this case.” Id. (emphasis in

original). Judge Edwards therefore rejected the FCC’s

effort “[iJn the absence of statutory authorization for the

fee it sought to impose,” to “concoct[] an argument to

support its action by bridging together its general author-

ity to administer the Communications Act, found in 47

U.S.C. § 154(i) (1994) (‘section 4(i)’), and the auction

framework that Congress established in 1993 to govern

non-pioneer’s preference licensees in 47 U.S.C. § 309(j)

(‘section 309(j)’).” Id. at 26a.

Judge Edwards continued: “[c]haritably speaking, the

[FCC’s] argument is something akin to the FCC saying

that it has the power to do whatever it pleases merely

by virtue of its existence, a suggestion that this court

normally would view as incredible.” Jd. (citations and

quotation marks omitted). Judge Edwards noted that

Congress itself “apparently did not share such an expan-

sive view of the FCC’s authority under the existing law,

because, in late 1994, it decided to pass a statute spe-

cifically authorizing the FCC to collect fees from [other]

pioneer’s preference license recipients.” Id.

Explicating the implications of the majority’s decision,

Chief Judge Edwards concluded:

Under the FCC’s logic, as soon as Congress grants

the agency permission to engage in certain conduct,

such as charging market-value license fees, on an

explicitly-defined basis, section 4(i) automatically

confers the right to apply that power across the

board. If this reading were correct, it would com-

pletely eviscerate the power of Congress to determine

the scope of the statutes it passes.

Id. at 27a.

REASONS FOR GRANTING THE WRIT

As Judge Edwards said, at stake in this case is “the

power of Congress to determine the scope of the statutes

it passes.” Mtel, App. 27a. Congress’s ability to control

agencies is particularly important in the present context,

where an agency has for the first time asserted the author-

ity to impose a multi-million dollar charge based on a

residual grant of general authority shared by many agen-

cies. Although Congress limited the FCC’s auction author-

ity to licenses that were mutually exclusive—which neces-

sarily excludes Mtel—the lower court relied on the FCC’s

public interest authority, an overly expansive view of Con-

gress’s intent, and section 4(i) to override that limitation.

It is simply too dangerous to let stand a ruling that could

allow every agency with a residual grant of authority to

claim the untrammelled power to charge monies, or other-

wise act as it pleases, unless Congress has specifically

prohibited that agency from taking such action.

The FCC’s statutory scheme shows that Congress has

specifically and narrowly circumscribed the Commission’s

power to impose fees and conduct auctions. The auction

authority is limited to licenses that, unlike Mtel’s, are

mutually exclusive. The Commission’s fee authority sets

highly specific charges for licenses that do not contem-

plate or authorize Mtel’s $33 million charge. These con-

straints, as well as sixty years of agency practice, manifest

a strong congressional intention not to give the FCC such

broad authority. In fact, when Congress sought to have

the agency charge other pioneer’s preference recipients,

it gave the agency the power to do so explicitly. This

illustrates Congress’s belief that the agency does not hold

the power that the lower court has now found the Com-

mission to possess.

This Court’s review is therefore warranted to ensure

that agencies do not rely on general grants of authority to

collect multi-million dollar fees from regulated entities (or

take whatever other action they wish) simply because

Congress has. not expressly forbidden them from doing

so.

I. DUE TO THE SIMILARITY OF MANY ADMINIS-

TRATIVE AGENCIES’ STATUTORY SCHEMES,

THE LOWER COURT'S DECISION REPRESENTS

A SWEEPING EXPANSION OF AGENCY POWER.

The lower court’s validation of the FCC’s use of its

so-called necessary and proper clause, section 4(i), to

authorize Mtel’s fee would grant sweeping new powers

to other administrative agencies that have similar au-

thority. By giving this common provision such a broad

interpretation, the lower court has opened the door to

a wide array of unauthorized administrative actions. In-

deed, the lower court’s ruling grants agencies a roving

commission to raise funds by administrative fiat simply

by invoking their necessary and proper authority.

The abundance of “necessary and proper” clauses in

other agencies’ organic statutes makes the lower court’s

decision especially dangerous. Among the agencies pos-

sessing such authority are the Securities and Exchange

Commission, 15 U.S.C. § 77s(a) (1994); the Bureau of

Land Management, 43 U.S.C. § 1740 (1994); the Nu-

clear Regulatory Commission, 42 U.S.C. § 2201(p)

(1994); the Food and Drug Administration, 21 U.S.C.

§ 363 (1994); the Environmental Protection Agency, 42

U.S.C. § 7601 (1994) (Clean Air Act); the Department

of Transportation, 49 U.S.C. § 40113(a) (1994); and

the Federal Energy Regulatory Commission, 42 U.S.C.

§ 7172(a)(2) (1994). Congress granted these agencies

so-called “necessary and proper” authority in order to

fill in the gaps left in statutory schemes and to prevent

agencies from having to obtain congressional approval

whenever they seek to “stray[] a little way beyond the

apparent boundaries of the Act—to the extent necessary

to regulate effectively those matters already within its

—— a

borders.” Licensing Order, App. 55a. Congress did not

grant such authority to allow agencies to rewrite statutory

constraints on their power, particularly constraints on

imposing monetary charges."

The assertion by an agency of “the power to do what-

ever it pleases merely by virtue of its existence,” Mtel,

App. 26a (Edwards, C.J., dissenting in part), has

dramatic implications. For example, the Bureau of Land

Management (“BLM”), has a necessary and proper

clause not unlike that of the FCC; BLM may “promul-

gate rules and regulations to carry out the purposes of

this Act and of other laws applicable to the public lands

.” 43 US.C. § 1740 (1994). Like the FCC, BLM

may also auction off a public good (land) to advance

public interest objectives. 43 U.S.C. §§ 1713, 1734

(1994).

Congress has decreed that BLM must sell agricultural

lands in parcels “no larger than necessary to support a

family-sized farm.” 43 U.S.C. § 1713(e) (1994). But

the rationale of the lower court’s decision would enable

BLM to use its necessary and proper authority to sell

larger than family-sized parcels to corporate agricultural

purchasers, for example. These corporations would pre-

sumably pay a higher price for the land, thereby advanc-

ing one of Congress’s goals in passing the auction legisla-

tion: to raise monies for the Treasury. Under the lower

court’s logic, barring such a sale would prevent BLM

from “reap[ing] many of the benefits of Congress’s own

7 Previous judicial decisions support this interpretation of sec-

tion 4(i). See Telecommunications Research and Action Center v.

FCC, 836 F.2d 1849 (D.C. Cir. 1988) (rejecting reliance on section

4(i) to justify lotteries absent preferences for media diversifica-

tion) ; New England Telephone v. FCC, 826 F.2d 1101, 1107-08 (D.C.

Cir. 1987) (permitting the FCC to employ a remedy under section

4(i) because it was “absolutely necessary” to achieve a congres-

sionally mandated goal), cert. denied, 490 U.S. 1039 (1989) ; Turner

v. FCC, 514 F.2d 1854, 1855 (D.C. Cir. 1975) (agency lacked au-

thority under section 4(i) to assess attorney fees).

new policy—including obtaining reimbursement for the

transfer of a valuable entitlement.” Mrtel, App. 9a (re-

jecting Mtel’s assertion that Congress excluded Mtel from

the FCC’s auction authority).

Plainly, such a sale should not be permitted even if it

were to comport with one of Congress’s objectives in pass-

ing auction legislation—raising funds—because it vio-

lates a limitation on BLM’s auction authority—i.e.,

requiring family-sized farm parcels. Similarly, subjecting

a non-mutually exclusive applicant to an auction-based

fee based on Congress’s general intention to raise reve-

nues is inconsistent with the limitations on the FCC’s

authority.

The lower court also utilizes the general public interest

provision in the Communications Act to undercut the

explicit statutory language. See Mtel, App. 10a. Here,

too, the prevalence of general public interest mandates

opens the door for other agencies to expand their au-

thority. For example, in addition to having section 4(1)-

type authority, see 15 U.S.C. § 77s(a) (1994), the SEC

also has the power to exempt certain securities from

registration and the corresponding fees, if registration is

“not necessary in the public interest and for the protec-

tion of investors.” 15 U.S.C. § 77c(b) (1994). Con-

gress has limited this exemption authority to securities

whose aggregate amount is less than $5 million. /d.

Under the lower court’s rationale, the SEC could invoke

its necessary and proper authority, together with its gen-

eral public interest mandate, to exempt certain securities

that are valued at more than $5 million. Such an asser-

tion of power is, again, no different than subjecting non-

mutually exclusive licenses to auction-based fees based

on the public interest.

Other agencies could also assert enhanced authority

under the lower court’s sweeping interpretation of the

FCC’s necessary and proper clause. Thus,

* Based on the Nuclear Regulatory Commission’s

general mandate to regulate “to protect [the]

health” of the public, 42 U.S.C. § 2201(b)

(1994), the NRC could use its necessary and

proper authority and general public safety man-

date to place license charges on research reactors,

despite a statutory fee exemption for reactors

“used primarily for educational training and aca-

demic research purposes.” 42 U.S.C. § 2214

(c)(4) (1994).

Using “necessary and proper” authority, and de-

spite the mandate that the Secretary of Transpor-

tation may not collect fees other than those that

were in effect on January 1, 1973, 49 U.S.C.

§ 45301(a) (1994), the Secretary could impose

new fees or charge a completely new class of

aviation authorizations. The Secretary could con-

tend that new fees are “necessary to carry

out” air commerce and safety programs, 49 U.S.C.

§ 40113(a) (1994), and are required to meet the

Department’s “public interest” obligations. 49

U.S.C. § 40101 (a) (1994).

The EPA could use its “necessary and proper”

authority, 42 U.S.C. §7601(a) (1994), to

change the way it administers acid rain “pollu-

tion allowances” under the Clean Air Act. Under

the lower court’s reasoning, despite specific direc-

tions from Congress on auction procedures and

applicability, 42 U.S.C. §765lo (1994), the

EPA might require that allowances be bought in

minimum blocks, or give bidding credits to certain

parties, if the Administrator were to find that

such regulations are “necessary to carry out his

functions” under the Act.*

8 As noted above, Congress drew a line in the GATT legislation

that the pioneer’s preference fees do “not apply to applications

that have been accepted for filing on or before September 1, 1994.”

47 U.S.C. § 309(j) (18) (D) (iv) (1994) (App. 97a). The FCC

nonetheless determined that Mtel should be charged an auction-

The similarity of many regulatory regimes to that of

the FCC, most notably the widespread existence of neces-

sary and proper clauses, makes the lower court’s decision

-a dangerous precedent. There are sound reasons for the

statutory maxims that the specific controls the general,

see, e.g., Holder v. Hall, 114 S. Ct. 2581, 2604 (1994)

(citing Cleveland v. United States, 329 U.S. 14, 18

(1946) ), and that the specific grant of a particular power

implies the negative of another, closely related power.

See, e.g., Leatherman v. Tarrant Cty. Narcotics Intel. &

Coordination Unit, 507 U.S. 163, 168 (1993). Agencies

cannot be permitted to assert the power to do anything

that Congress has not explicitly prohibited them from

doing. The lower court’s decision warrants review and

reversal.

Il. THE MAJORITY’S UNPRECEDENTED DECISION

THAT AN AGENCY HAS THE AUTHORITY TO

TAKE ANY ACTION NOT EXPRESSLY PROHIB-

ITED CONTRAVENES THE STATUTORY SCHEME

AND IS CONTRARY TO FUNDAMENTAL PRINCI-

PLES OF ADMINISTRATIVE LAW.

In addition to being unprecedented, the charge to Mtel

for its license is also unauthorized. Moreover, it is “in-

consistent with” the carefully circumscribed power that

Congress has given the Commission to collect monies via

fees and auctions. 47 U.S.C. § 154(i) (1994). As such,

it contravenes the principle that agencies are limited to

the powers Congress granted them. Where Congress has

based fee even though Mtel filed its application in February, well

before the September cut-off date. Congress has often drawn

temporal lines on fee-charging authority. See, e.g., 42 U.S.C. § 7178

(a) (1) (1994) (granting FERC fee authority beginning in fiscal

year-1987); 21 U.S.C. §379h(a)(1)(A) (1994) (granting FDA

fee authority after September 1, 1992). The lower court’s decision

thus suggests that an agency need not adhere to these temporal

restrictions on their fee authority where the agency finds that the

public interest warrants continued (or earlier) imposition of the

once authorized charges.

SIR hha ccna

narrowly limited the power of an agency to take a par-

ticular action under certain defined circumstances only,

the agency may not rely on its residual grant of authority

to act in dramatically different circumstances of its own

choosing.

A. Agencies May Not Impose Multi-Million Dollar

Payment Requirements Without Express Authoriza-

tion From Congress.

The lower court’s opinion fails to recognize the limited

and narrowly defined role that Congress has granted ad-

ministrative agencies in levying fees and charges. The

Constitution permits only one branch of government to

impose taxes and otherwise raise revenue, and through

one procedure only: “All Bills for raising Revenue shall

Originate in the House of Representatives.” U.S. Const.,

art. I. sec. 7. See, e.g., United States v. Munoz-F lores,

495 U.S. 385, 396 (1990) (discussing importance of

provision). For this reason, Congress has carefully

spelled out the circumstances under which, agencies can

exact payments from those they regulate. See, e.g., 15

U.S.C. §77f(b) (1994) (SEC); 42 USC. § 4370c

(1994) (EPA); 21 U.S.C. § 379h(b) (1994) (FDA).

Absent a clear statement, courts will not presume that

Congress has authorized a federal agency to levy charges

on regulated entities in excess of the administrative costs

associated with that agency’s functions. Thus, in National

Cable Television Ass’n, Inc. v. United States, 415 US.

336, 342 (1974), this Court held that the relevant

statute must be construed “narrowly to avoid constitu-

tional problems” that would arise from an open-ended

delegation to the FCC of authority to impose charges

higher than mere “fees” for services rendered by the

agency. See also National Cable Television Ass’n, Inc.

v. FCC, 554 F.2d 1094, 1106 (D.C. Cir. 1976) (“fees”

are based on “a reasonable approximation of the at-

tributable costs which the Commission identifies as being

expended to benefit the recipient” ).

Nor does Section 4(i) set forth “standards guiding [the

agency’s] actions such that a court could ascertain

whether the will of Congress has been obeyed” in levying

a charge on Mtel. Skinner v. Mid-America Pipeline Co.,

490 U.S. 212, 218 (1989) (quotation marks omitted).

As such, “[a] construction of the statute that avoids this

kind of open-ended grant should certainly be favored.”

Industrial Union Dep’t. v. American Petroleum Inst., 448

U.S. 607, 646 (1980). Yet the lower court construed

the statute in precisely such an impermissibly “open-

ended” way.

Here, as Chief Judge Edwards explained, “[i]t is un-

disputed that the FCC has never before in its history

imposed a licensing fee absent explicit authorization from

Congress. It is also conceded that there is no such au-

thorization in this case.” Mtel, App. 25a (Edwards, C.J.,

dissenting in part) (emphasis in original). Given the

absence of authorization to impose this multi-million dol-

lar fee, such a charge must be considered beyond the

agency’s power.

B. The FCC’s Assertion of Power Is “Inconsistent

With” the Communications Act and Congress’s Tra-

ditiona! Role in Limiting Agency Authority to Levy

Fees.

Not only was the multi-million dollar charge to Mtel

unauthorized, it was also “inconsistent with” the fee col-

lection and auction provisions of the Act in violation of

section 4(i). 47 U.S.C. § 154(1) (1994). These two

congressional grants—license fees and the monies from

competitive bidding—are the only types of assessments

the Commission is authorized to collect in connection

with telecommunications licenses. See 47 U.S.C. §§ 158,

159 (1994) (App. 75a-85a). This statutory backdrop

suggests that the payment requirement is “inconsistent

with” the Communications Act.

What is more, when Congress wanted to authorize the

agency to require payments from pioneers, it did so ex-

pressly, in the form of Title VIII to the GATT legisla-

tion. Title VIH permitted the FCC to charge pioneer’s

preference recipients who filed their applications after

September 1, 1994. Congress thus excluded Mtel’s license

application, which was filed almost eight months before.

As Chief Judge Edwards observed, had Congress shared

the majority’s expansive view of the FCC’s authority

under the existing law, it presumably would not have

deemed it necessary “to pass a statute specifically au-

thorizing the FCC to collect fees from [other] pioneer’s

preference license recipients.” Mrtel, App. 26a.

“ “When a statute limits a thing to be done in a par-

ticular mode, it includes the negative of any other mode.’ ”

Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S.

11, 20 (1979) (quoting Botany Worsted Mills v. United

States, 278 U.S. 282, 289 (1929)). Contrary to the

lower court’s decision, this rule applies with special force

in the administrative context, for administrative agencies

possess only the power Congress has delegated to them.

See, e.g., Stark v. Wickard, 321 U.S. 288, 309 (1944)

(“When Congress passes an act empowering administra-

tive agencies to carry on governmental activities, the

power of those agencies is circumscribed by the authority

granted.”); Railway Labor Executives’ Ass’n v. National

Mediation Bd., 29 F.3d 655, 671 (D.C. Cir. 1994)

(“the extent of [an agency’s] powers can be decided only

by considering the powers Congress specifically granted

it;” “the duty to act under certain carefully defined

circumstances simply does not subsume the discretion

to act under other, wholly different, circumstances’),

cert. denied, 115 S. Ct. 1392 (1995). An agency thus

does not possess “plenary authority to act within a

given area simply because Congress has endowed it with

some authority to act in that area.” 29 F.3d at 670. In

short, an agency may not unilaterally ignore conditions

that Congress has placed on a particular action. See, e.g.,

Lyng v. Payne, 476 U.S. 926, 937 (1986) (“[A]n

agency's power is no greater than that delegated to it by

Congress.”’).

The lower court’s assertion that charging Mtel is “con-

sistent” with the Communications Act because the Com-

mission found the fee in the “public interest” as required

under section 309 ignores the rest of the statute. 47

U.S.C. § 309 (1994) (App. 86a) While Congress has

mandated that the FCC grant or deny licenses based in

part on the public interest, convenience and necessity, this

statutory charge does not negate the rest of the statute.

The public interest language cannot trump sixty years of

congressional limitations on the Commission’s authority

to charge fees and the specific language of the auction

statute. A Commission rule or order purporting to im-

pose multi-million dollar charges on a licensee without

any hint of congressional authorization is therefore “in-

consistent with” Congress’s specification of fees and

charges in Sections 158, 159, and 309(j) of the Act.

Moreover, because the FCC is acting in a manner

inconsistent with the terms of the Communications Act,

there is no occasion to defer to the agency under step

two of Chevron, U.S.A., Inc. v. Natural Resources De-

fense Council, Inc., 467 U.S. 837, 842-44 (1984). “[A]n

agency’s interpretation of a statute is not entitled to

deference when it goes beyond the meaning that the

statute can bear.” MCI Telecommunications Corp. v.

AT&T, 114 S. Ct. 2223, 2231 (1994) (citing cases).

Here, the FCC’s interpretation goes well beyond the point

at which it is due any deference.

C. Congress’s General Intention to Raise Monies Can-

not Support the Commission’s Broad Assertion of

Section 4(i) Authority in the Face of More Specific

Statutory Directions.

The court of appeals also attempted to support its

broad interpretation of the agency’s authority by relying

on some general aspects of Congress’s intentions in pass-

ing the auction statute. Mtel, App. 7a-9a. Intention must

be viewed in the context of, and certainly cannot override,

the plain terms of the statute. “The meaning of a statute

must, in the first instance, be sought in the language in

which the act is framed, and if that is plain, . . . the

sole function of the courts is to enforce it according to

its terms.” Caminetti v. United States, 242 U.S. 470,

485 (1917). See also Rake v. Wade, 508 U.S. 464, 471

(1993). Those terms are clear; auctions are permitted

only “[{i]f mutually exclusive applications are accepted

for filing . . .” and fees for preference holders are only

permitted if the preference was accepted for filing after

September 1, 1994. 47 U.S.C. § 309(j)(1) (1994)

(App. 86a).°

In analyzing congressional intent, the lower court as-

serts that auctions usually only “make sense” when mu-

tually exclusive applications are accepted because such

licenses are valuable. Mtel, App. 6a-7a. The court then

contends that, since Mtel’s license is valuable, Congress

would have intended Mtel to be subject to a fee. In

essence, the lower court has rewritten the statute to sub-

stitute the word “valuable” for the words “mutually ex-

clusive.” But this is not the statute Congress passed.

Moreover, section 4(i) does not authorize either the

FCC or the courts to ignore clear limitations on the

agency’s authority in the guise of advancing one aspect

of congressional intent.”

° The lower court’s discussion of legislative intent passes over

Congress’s intent in setting defined limits on the FCC’s auction

authority.

10 The lower court analyzes congressional intent as if Congress

was simply not aware of the non-mutually exclusive pioneer’s pref-

erence program. This assumption is belied by the fact that Con-

gress specifically addressed the program in the auction statute,

stating that the auction authority should not “be construed to

prevent the Commission from awarding licenses to those persons

who make significant contributions to the development of a new

telecommunications service or technology.” 47 U.S.C. § 309(j) (6)

(G) (1994) (App. 90a).

CONCLUSION

Whether agencies with general grants of authority

have sweeping implied authority to impose multi-million

dollar payments, or to act as they please, is of sufficient

importance to warrant plenary review by this Court. A\l-

though Mtel will have an opportunity to remand to con-

test the reasonableness of the FCC’s $33.3 million charge,

the question of whether the Commission has the authority

to impose such a non-statutorily based charge should be

determined by this Court now. For the reasons set forth

above, Mtel respectfully requests that the Court grant its

petition for certiorari.

Dated: June 20, 1996

Respectfully submitted,

RICHARD E. WILEY *

R. MICHAEL SENKOWSKI

DANIEL E. TROY

BRYAN N. TRAMONT

WILEY, REIN & FIELDING

1776 K Street, N.W.

Washington, D.C. 20006

(202) 429-7000

Counsel for

Mobile Telecommunication

Technologies Corp.

* Counsel of Record

APPENDICES

APPENDIX A

UNITED STATES COURT OF APPEALS

DISTRICT OF COLUMBIA

Nos. 93-1518, 94-1552 and 94-1553

MoBILE COMMUNICATIONS CORPORATION

OF AMERICA, et al.,

7" Appellants,

FEDERAL COMMUNICATIONS COMMISSION,

Appellee,

MosBILE TELECOMMUNICATIONS TECHNOLOGIES

CORPORATION,

Intervenor.

MoBILE TELECOMMUNICATIONS TECHNOLOGIES

CORPORATION, et al.,

¥ Appellants,

FEDERAL COMMUNICATIONS COMMISSION,

Appellee,

Cox ENTERPRISES, INC., et al.,

Intervenors.

Appeals of an Order of the

Federal Communications Commission

Argued Dec. 8, 1995

Decided March 8, 1996

Before: EDWARDS, Chief Judge, BUCKLEY and

WILLIAMS, Circuit Judges.

Opinion for the Court filed by Circuit Judge WIL-

LIAMS.

Opinion concurring in part and dissenting in part filed

by Chief Judge EDWARDS.

STEPHEN F. WILLIAMS, Circuit Judge:

Petitioner Mobile Telecommunications Technologies

Corp. (“Mtel”) received a “pioneer’s preference” in 1993

as a reward for developing technology making it possible

to transmit information through the airwaves much fas-

ter than had formerly been possible. See Notice of Pro-

posed Rule Making and Tentative Decision, Amendment

of the Commission’s Rules To Establish New Personal

Communications Services, 7 F.C.C.R. 5676, 5735-36

qq 149-51 (1992) (“Tentative Preference Order”); First

Report and Order, Amendment of the Commission’s Rules

To Establish New Personal Communications Services, 8

F.C.C.R. 7162, 7172-75 9457-77 (1993) (“Final Pref-

erence Order”). The preference entitled Mtel to bypass

what had been the traditional mechanism for ai‘ocating

licenses, through a “comparative hearing,” after which

the successful applicant would receive a license free of

charge. Mtel would instead receive a communications li-

cense, specifically a narrowband personal communications

service (“PCS”) license, without having to face compet-

ing applications, and, under the assumptions prevailing

when the preference was awarded, without having to pay.

Unfortunately for Mtel, Congress drastically changed the

background norm for licensing before Mtel could ac-

tually receive its license. It amended the Communications

Act to allow the Federal Communications Commission to

use auctions for allocation of some kinds of licenses (in-

cluding PCS licenses) when “mutually exclusive applica-

tions are accepted for filing,” see Omnibus Budget Re-

conciliation Act of 1993, Pub.L. No. 103-66, § 6002

(codified at 47 U.S.C. § 309(j)), i.e., on occurrence of the

event that formerly would have triggered a comparative

hearing. In the case of a pioneer’s preference, this con-

dition for licensing via auctions was not satisfied, as the

preference gave its holder a pass on any such competition.

But as other parties receiving similar licenses would have

to pay for them at market rates, the Commission con-

fronted the issue of how to treat Mtel’s prefrence: Should

it escape not only competition with other applicants for

a license but also the necessity of payment?

The Commission originally ruled that Mtel would not

be required to pay. Notice of Proposed Rule Making,

Review of the Pioneer’s Preference Rules, 8 F.C.C.R.

7692, 7694-95 418 (1993) (“Pioneer’s Preference Re-

view I”); see also First Report and Order, Review of the

Pioneer's Preference Rules, 9 F.C.C.R. 605, 610 n. 21

(1994) (“Pioneer’s Preference Review II”) (reaffirming

original determination); Memorandum Opinion and Or-

der, Amendment of the Commission’s Rules To Estab-

lish New Narrowband Personal Communications Services,

9 F.C.C.R. 1309, 1316 4 45 (1994) (“Narrowband Or-

der”) (same). It then reversed itself, requiring payment

of what amounted to a substantially discounted auction

price—the lesser of “ninety (90) percent of the lowest

winning bid for a nationwide narrowband PCS license”

and “three million dollars ($3,000,000) less than the

lowest winning bid for a nationwide narrowband PCS li-

cense.” Nationwide Wireless Network Corp., 9 F.C.C.R.

3635, 3639-41 44 15-20 (1994) (“Licensing Decision”).

Mtel objects that the Commission lacks statutory au-

thority to impose a payment requirement, and that in any

event it failed to engage in reasoned decision-making in

reaching the determination to impose the payment require-

ment. We agree with the Commission that it has statu-

tory authority to require payment but find its explana-

tion of imposing the requirement on Mtel inadequate—

particularly in its back-of-the-hand treatment of Mtel’s

argument that its reliance on the preference as originally

conceived called for granting a license free of charge.

Accordingly, we remand the case to the Commission for

reconsideration of Mtel’s contentions.

In addition, petitioner Mobile Communications Cor-

poration of America (“Mobile-Comm”), an unsuccessful

applicant for a pioneer’s preference, challenges both the

original preference grant and the Licensing Decision,

basically on the ground that the Commission failed to

provide an adequate basis for its award of a preference

and, then, a license to Mtel. We reject these contentions.

I. Imposition of a Payment Requirement on

Mtel’s License

A. Jurisdiction Over Mtel’s Appeal.

Section 402(b)(1) of the Communications Act gives

this court jurisdiction over an appeal of a decision or

order of the Commission brought by an “applicant for a

construction permit or station license, whose application

is denied by the Commission.” 47 U.S.C. § 402(b)(1).

“Station” is defined by the Communications Act as “a

Station equipped to engage in radio communication or

radio transmission of energy,” id. § 153(k), and includes

mobile as well as land stations. See id. § 531(1) & (m).

Further, § 153 defines “mobile service” in language imply-

ing that narrowband PCS is a service involving mobile or

land stations or both:

(n) “Mobile service” means a radio communica-

tion service carried on between mobile stations or

receivers and land stations, and by mobile stations

communicating among themselves, and includes .. .

(3) any service for which a license is required in a

personal communications service established pur-

suant to the proceeding entitled “Amendment to the

Commission’s Rules to Establish New Personal Com-

munications Services” [i.e., the Tentative Preference

Order]... .

Tn ee ee

eet eee ah mies

Id. §153(n) (emphasis added). Thus, we have juris-

diction over Mtel’s appeal under § 402(b)(1) if, as re-

quired by that section, its “application [was] denied by

the Commission.”

If Mtel’s application were an application for a license

subject to any sort of condition the Commission might

choose to impose, then the Licensing Decision would not

be a denial of the application; Mtel was granted a license,

though subject to the payment requirement. On the other

hand, if, as we think is the case, Mtel was applying for a

license of a specific sort—here, one free of charge, as

had traditionally been the case—then the Licensing De-

cision is a denial. Several considerations support this

view of Mtel’s application. First, it made specific refer-

ence to its financial terms, namely the associated admin-

istrative fee of $230, implying that it was an application

for a license at the price of the administrative fee. Second,

interpreting an application as one for a license subject

to any condition of the Commission’s choosing would

permit the Commission to foreclose judicial review of a

de facto denial by couching its decision as an approval

subject to some intolerable condition. At least it would

have this effect unless § 402(a), allowing review under

the Hobbs Act, specifically 28 U.S.C. § 2342, of any

attack on an order of the Commission under the wire or

radio communications chapter of its authority “except

those appealable under [§ 402(b)]” is a general catch-all

that picks up anything that falls through the cracks of

§ 402(b). Whether or not this is true is immaterial for

present purposes because Mtel’s application is more prop-

erly viewed as being for a free license, so that the Com-

mission’s order qualifies as a “denial” within the meaning

of § 402(b) (1).

Nonetheless, a party whose license application has been

denied by approval subject to conditions (other than ones

requested by the applicant) must normally comply with

the applicable administrative exhaustion requirements.

These include 47 CFR § 1.110, which states that an ap-

proval subject to conditions “shall be considered as a

grant of such application unless the applicant” files a

timely request “rejecting the grant as made,” thereby pre-

cipitating Commission reconsideration. Normally failure

to comply with this requirement bars judicial review.

Central Television, Inc. v. FCC, 834 F.2d 186, 190-91

(D.C.Cir.1987). Here, however, the Commission explic-

itly waived the § 1.110 requirement, see Licensing De-

cision, 9 F.C.C.R. at 3644 439, thereby negating the

basic reason for the requirement of this form of exhaus-

tion—-protecting the Commission’s interest in crystallizing

its position prior to review. See Central Television, 834

F.2d at 191; cf. Darby v. Cisneros, 509 U.S. 137

, 113 S.Ct. 2539, 2542-45, 125 L.Ed.2d 113 (1993)

(agency regulation specifying that party “may request”

review of hearing officer’s determination did not “require”

exhaustion within the meaning of § 10(c) of the APA,

5 U.S.C. § 704).

B. Commission's Authority To Impose a Payment

Requirement.

The Commission based its decision to require payment

from Mtel on § 4(i) of the Communications Act, 47

U.S.C. § 154(1), which we have described as the “neces-

sary and proper clause” of the Act. New England Tel. &

Tel. v. FCC, 826 F.2d 1101, 1108 (D.C.Cir.1987)

(quoting North Am. Telecommunications Ass'n v. FCC,

772 F.2d 1282, 1292 (7th Cir.1985)). Section 4(i)

authorizes the Commission to “perform any and all acts,

. .. and issue such orders, not inconsistent with [the Com-

munications Act], as may be necessary in the execution

of its functions.” Mtel believes the section inapplicable

here.

Mtel points first to the specificity of Congress’ grants

of authority to charge applicants for licenses. Those grants

a pens ae oe

i i Daa Ata a

take two forms. The Commission is under an obligation

to impose certain administrative fees in connection with

the licensing process. See 47 U.S.C. §§ 158, 159. And,

as we have seen, the Commission is empowered under

the 1993 amendment to the Communications Act to con-

duct auctions of specified types of licenses where it has

accepted competing applications. Mtel offers up the tra-

ditional argument that because the statutory scheme

“limits a thing to be done in a particular mode, it includes

the negative of any other mode.” Botany Worsted Mills

v. United States, 278 U.S. 282, 289, 49 S.Ct. 129, 132,

73 L.Ed 379 (1929). Thus, the payment requirement

is “inconsistent with” the Communications Act and not

within the Commission’s power under § 4(i).

We agree with the Commission, however, that Mtel’s

reliance on the expressio unius maxim—that the expres-

sion of one is the exclusion of others—is misplaced. The

maxim “has little force in the administrative setting,”

where we defer to an agency’s interpretation of a statute

unless Congress has “ ‘directly spoken to the precise ques-

tion at issue.”” Texas Rural Legal Aid, Inc. v. Legal

Serv. Corp., 940 F.2d 685, 694 (D.C.Cir.1991) (quot-

ing Chevron v. NRDC, 467 U.S. 837, 842, 104 S.Ct.

2778, 2781, 81 L.Ed.2d 694 (1984)). Expressio unius

“is simply too thin a reed to support the conclusion that

Congress has clearly resolved [an] issue.” Jd.; see also

Cheney R.R. Co. v. ICC, 902 F.2d 66, 68-69 (D.C.Cir.

1990) (similar). Indeed, we think the nature of Con-

gress’s auction authorization more supports than under-

mines the Commission’s decision here. See Texas Rural

Legal Aid, 940 F.2d at 694 (“[A] congressional prohibi-

tion of particular conduct may actually support the view

that the administrative entity can exercise its authority to

eliminate a similar danger.” ).

The event Congress identified as justifying auctions—

the acceptance of mutually exclusive applications—norm-

ally defines the type of license where an auction makes

sense: In such cases, there is every reason to believe that

the entitlement that the Commission has carved out from

de facto ownership by the general public is quite valuable.

Thus, an auction will yield reimbursement to the public

for the transfer of the entitlement; it will save the public

and private expense involved in a comparative hearing;

and, because the party able to use the license most effi-

ciently will be able to bid the most, the license will end

up in the hands of the firm best able to develop its poten-

tial. See H.R.Rep. No. 111, Ist Sess., 1993 U.S.Code

Cong. & Admin.News 1993, pp. 378, 767. WL 181528,

at *535 (1993) (listing, as goals of auction regime,

“promot[ing] the development . . . of new technologies

. without administrative or judicial delays” and “pro-

mot[ing] economic opportunity and competition”); 139

Cong. Rec. $1437-38 (1993) (statement of Sen. Inouye

introducing original version of auction legislation) (re-

ferring to goals of “promot[ing] economic efficiency, re-

duc[ing] the administrative burden of issuing licenses, and

allow[ing] the Government to receive significant revenues

from the use of this public asset”); id. $1442 (statement

of Sen. Stevens, co-sponsor of the original auction legis-

lation) (similar). By contrast, in the typical case where

mutually exclusive applications are not accepted, the li-

cense would have negligible value, there would be no need

for any comparative hearing (much less a costly one),

and the selection of the license recipient would be a fore-

gone conclusion. The license sought by Mtel clearly fits

the first set of cases, where the principles supporting an

auction are powerful; indeed, but for the Commission’s

pioneer’s preference policy, that license clearly would have

fit Congress’s criteria for an auction. Mtel is therefore in

essence asking us to read congressional intent as follows:

Because the Commission before the 1993 amendment of

the Communications Act had provided for an exception

to what was then its only way of issuing licenses for which

there was competition, Congres forbade it from qualifying

that exception, even where doing so would enable the

Commission to reap many of the benefits of Congress’s

own new policy—including obtaining reimbursement for

the transfer of a valuable entitlement. We think such a

reading untenable.

To put the same point slightly differently: The pioneer’s

preference itself was a creation of the Commission, not

an act of subservience to a mandate of Congress. But the

congressional provision for auctions sharply widened the

incremental benefit accruing to a preference, vis-a-vis

other would-be license holders. Before, the preference re-

cipient enjoyed an assured free license, while its competi-

tors enjoyed a chance at a free license; after Congress’s

provision for auctions, and in the absence of a decision

to charge a preference recipient, the recipient would en-

joy an assured free license, while its competitors enjoyed

only a chance to buy a license at the market price (i.e., by

paying the government for all the estimated economic

rents attributable to the license). This change in the rela-

tion between preference recipients and other would-be

license holders might properly have led the Commission to

drop the preference altogether (at least if it took into

account reliance interests based on the prior policy); in-

stead the Commission adjusted the terms of the preference

to reduce the gulf between recipients of preferences and

other license aspirants.

Contrary to Mtel’s contention, our decision in Railway

Labor Executives’ Ass'n v. Nat'l Mediation Bd., 29 F.3d

655 (D.C.Cir.1994) (en banc), did not enshrine expressio

unius as a maxim of universal and conclusive application.

The conclusion in RLEA that the agency lacked authority

for its action followed a careful exegesis of the entire

statutory context, the statute’s legislative history, and the

agency’s unvarying practice over a 60-year history. /d. at

664-71. In the very different context of the case before

10a

us, we see no conflict between the language and structure

of the Communications Act and the imposition of a pay-

ment requirement on Mtel.”

Mtel argues that even if requiring payment is not di-

rectly “inconsistent with” the Communications Act, the

lack of affirmative statutory support for the Commission’s

action proves that it was not “necessary in the execution

of [the Commission’s] functions” under the Act, as re-

quired by § 4(i). In imposing the payment requirement,

the Commission relied on its duty to determine “whether

the public interest, convenience, and necessity will be

served” by the granting of a license application. 47

U.S.C. § 309(2); Licensing Decision, 9 F.C.C.R. at 3639

415 & n. 53. In light of that requirement, the payment

condition would be “necessary in the execution of [the

Commission’s] functions” under § 4(i) so long as the

Commission properly found it necessary to “ensure the

achievement of the Commission’s statutory responsibilit[y]”

to grant a license only where the grant would serve the

1 Congress further amended the regime for auctioning licenses

after the Commission had issued the Licensing Decision. See Dis-

sent at 1413; Uruguay Round Agreements Act, Pub.L. No. 103-

465, § 801 (1994) (codified at 47 U.S.C. § 309(j) (18)). It is not

clear to us how the later legislative developments would shed light

on the pre-existing legal situation, but even assuming they could,

they do not do so here. The amendment required—as opposed to

merely authorizing—the Commission to charge for future licenses

issued to pioneer’s preference recipients at rates discounted under

a statutorily specified formula. See Uruguay Round Agreements

Act § 801 (codified at 47 U.S.C. § 309(j) (18) (A) & (B)). Con-

gress also required that preference recipients of certain already-

awarded broadband licenses be charged for their licenses. See id.

(codified at 47 U.S.C. §309(j) (13) (E)). Congress was silent

about the treatment of narrowband license recipients such as Mtel.

Thus, if one were to infer from the amendment that congressional

intent may have been in some way different with respect to already-

issued narrowband licenses than with respect to licenses to which

the amendment spoke, then the Commission’s decision—that it was

authorized but not directed to charge—would nevertheless be con-

sistent with the amendment.

lla

public interest, convenience, and necessity. F CC v. Mid-

west Video Corp., 440 U.S. 689, 706, 99 S.Ct. 1435,

1444-45, 59 L.Ed.2d 692 (1979) (citing United States v.

Southwestern Cable Co., 392 U.S. 157, 88 S.Ct. 1994,

20 L.Ed.2d 1001 (1968)); see also Southwestern, 392

USS. at 180 n. 46, 88 S.Ct. at 2006 n. 46 (relying on

§ 4(i) as basis for Commission’s authority to act in fur-

therance of its statutory purpose). We accord substantial

deference to “the Commission’s judgment regarding how

the public interest is best served.” FCC v. WNCN Listen-

ers Guild, 450 U.S. 582, 596, 101 S.Ct. 1266, 1275,

67 L.Ed.2d 521 (1981). Here, a finding of the required

sort might rest on the unjust enrichment of Mtel from

receipt of a free license while, under the new auction

regime, others would be required to pay, or (less plausi-

bly) on the prospect of predation by a deep-pocketed

Mtel, flush with its free license—both concerns alluded

to by the Commission in its Licensing Decision. See 9

F.C.C.R. at 3639-40 94 15-18. Thus, the Commission's

present reasoning, coupled with an adequate response to

Mtel’s special objections discussed in part I.C. below,

would support a finding that the payment requirement is

“necessary in the execution of [the Commission’s] func-

tions.”

Mtel suggests that this conclusion is belied by Con-

gress’s amendment of the Communications Act to author-

ize auctions of communications licenses. It argues that if

the Commission could charge Mtel for its license (apart

from the nominal administrative fees) in the absence of

explicit statutory authorization, then amendment of the

Act to authorize charges would have been unnecessary.

But the amendment of the Communications Act neces-

sarily alters any analysis of what is in the “public interest,”

which is not an issue of abstract political economy but of

fulfilling the congressional view of the public interest.

Thus, assessment of whether imposition of a charge ad-

vances the public interest was quite different against the

backdrop of the traditional comparative hearing proce-

12a

dure for allocating licenses than it is against the backdrop

of the new auction regime. We are therefore unpersuaded

by Mtel’s argument that the Commission lacks affirmative

authority to impose a payment requirement on Mtel.

C. Failure To Give Adequate Consideration to Mtel’s

Reliance Interests.

Mtel argues that the Commission failed to engage in

reasoned decision-making in deciding to impose the pay-

ment requirement, and we agree. Given the route by

which the Commission reached its decision, the inadequacy

is unsurprising. After stating repeatedly that Mtel would

not be required to pay, the Commission reversed itself

at the eleventh hour. Because the issue appeared settled

prior to the Licensing Decision’s announcement of the

reversal, Mtel did not offer—and thus the Commission

did not consider—arguments that imposing a payment

requirement would be against the public interest. Mtel’s

submission to the Commission stated simply—and quite

accurately—that “the question of whether Mtel should be

required to pay auction level fees [was] addressed on

reconsideration in the Narrowband PCS proceeding [Nar-

rowband Order, 9 F.C.C.R. at 1316 445], as well as

extrajudicially in the Pioneer’s Preference review proceed-

ing [Pioneer’s Preference Review II, 8 F.C.C.R. at 7694-

95 4 18].” Opposition of Mtel, Nationwide Wireless Net-

work Corp., Docket No. 22888-CD-P/L-94. When the

Commission reversed course, it failed to address such

questions as whether its new position was consistent with

the reliance interests of Mtel or with the Commission’s

decision not to charge for certain other paging system

licenses.”

2 The mere fact that the Commission reversed its position in an

adjudicatory proceeding after announcing its initial view in a

rule-making proceeding (without, however, actually promulgating

a rule on the matter) does not invalidate the shift, contrary to

Mtel’s contention. “An agency’s view of what is in the public

interest may change, either with or without a change in circum-

13a

The Commission did address itself to reliance interests

of pioneer’s preference recipients in a related proceeding—

concerned with the payment obligations of broadband

pioneers. See Memorandum Opinion and Order on Re-

mand, Amendment of the Commission's Rules To Estab-

lish New Personal Communications Services, 9 F.C.C.R.

4055, 4059 417 (1994). The pioneers there argued

that the public interest would be best served by granting

them “free licenses as a reward for investments and dis-

closure of information they have made in reliance on

their expectation of a preference.” Id. The Commission

rejected this argument, saying that there was no evidence

in the record to suggest that the pioneers would not have

made the investment and information disclosure if they

had known they would have to pay for their licenses. Id.

But Mtel has had no opportunity to put forth arguments

and evidence on the question of reliance, having been

lulled into a false sense of security by the Commission’s

repeated disavowal of intent to charge Mtel. See Pioneer’s

Preference Review I, 8 F.C.C.R. at 7694-95 4 18; Pio-

neer’s Preference Review II, 9 F.C.C.R. at 610 n. 21;

Narrowband Order, 9 F.C.C.R. at 1316 445. We think

Mtel is entitled to an opportunity to state its reliance

concerns and to have the Commission address whatever

Mtel may say.

Mtel also suggests that the Commission has undercut

its own case for charging Mtel by its contrary decision

as to certain other paging system licenses. The Commis-

sion notes several distinctions between these licenses and

the one granted to Mtel, see Response of FCC to Post-

Argument Submission of Mtel, but did not do so in the

Licensing Decision, where the surprise move to require

payment was made. Accordingly, we remand the case to

the Commission for consideration of these issues. See

stances,” as long as the agency “suppl[ies] a reasoned analysis

indicating that prior policies and standards are being deliberately

changed, not casually ignored.” Greater Boston Television Corp.

v. FCC, 444 F.2d 841, 852 (D.C.Cir.1970) (footnotes omitted).

l4a

SEC v. Chenery Corp., 318 U.S. 80, 93-94, 63 S.Ct. 454,

461-62, 87 L.Ed. 626 (1943).

II. Grant of Preference and License to Mtel

While Mtel challenges the imposition of a payment

condition on its license, MobileComm challenges the

grant of both the pioneer’s preference and the license to

Mtel. We address and reject these claims in turn.

A. Grant of a Preference to Mtel.

MobileComm’s challenge to the preference grant may

be viewed as an attack on the grant of a license, which

the pioneer’s preference was intended to “guarantee,” see

Report and Order, Establishment of Procedures To Pro-

vide a Preference to Applicants Proposing an Allocation

for New Services, 6 F.C.C.R. 3488, 3492 432 (1991)

(“Pioneer’s Preference Order”) and thus within our juris-

diction under 47 U.S.C. § 402(b)(6), which provides for

review at the behest of persons aggrieved by the grant or

denial of a license application. Alternatively, the chal-

lenge may be viewed as an attack on an order not appeal-

able under § 402(b) and thus within our jurisdiction

under § 402(a) and 28 U.S.C. § 2342(1). There being

no other apparent possibilities, and the timing and venue

provisions of both subsections being satisfied, we have

jurisdiction.

According to MobileComm, the Commission, in grant-

ing a preference to Mtel, failed to provide an adequate

justification for the grant and thus behaved in an arbitrary

and capricious fashion in violation of § 10(e)(B)(1) of

the Administrative Procedure Act, 5 U.S.C. § 706(2)(A).

Under that section, we must set aside the Commission’s

action if the Commission failed to “articulate a satisfac-

tory explanation for its action” or reached a conclusion

“so implausible that it could not be ascribed to a differ-

ence in view or the product of agency expertise.” Motor

Vehicle Mfrs. Ass'n v. State Farm Mutual Auto. Ins. Co.,

15a

463 U.S. 29, 43, 103 S.Ct. 2856, 2867, 77 L.Ed.2d 443

(1983).

The Commission adopted its pioneer’s preference rules

in order to encourage and reward the development of new

and innovative communications services. See Notice of

Proposed Rule Making, Establishment of Procedures To

Provide a Preference to Applicants Proposing an Alloca-

tion for New Services, 5 F.C.C.R. 2766, 2766-67 44 1-5

(1990); Pioneer’s Preference Order, 6 F.C.C.R. at 3488

41. Here, it granted a preference to Mtel on the basis

of its having “developed. . . what [Mtel] has named

‘Multi-Carrier Modulation’ (“MCM”) technology that is

capable of transmitting 24 kilobits per second simulcast

in a single 50 kHz channel.” See Tentative Preference

Order, 7 F.C.C.R. at 5735 4 149; see also Licensing

Decision, 9 F.C.C.R. at 3644 4 41 (reiterating basis for

preference award). In its effort to show that the Com-

mission’s explanation was defective, MobileComm at-

tempts to recast the award as one based on Mtel’s use of

two specific MCM technologies, “MOOK” and “PSFK.”

In fact the Commission never explained why MOOK or

PSFK might deserve a preference, for the simple reason

that it never rested the award on those technologies. In-

deed, it never mentioned MOOK or PSFK in its explana-

tion for making the preference award. See Tentative

Preference Order, 7 F.C.C.R. at 5735 149; Final Prefer-

ence Order, 8 F.C.C.R. at 7172-75 44 57-77. Further-

more, Mtel said in its preference application that it was

“experimenting with” MOOK and PSFK, as well as with

“an innovative FM multitone modulation technique,” and

that it did not want to tie itself to MOOK or any other

8 MobileComm also argues that the Commission violated § 309 (d)

of the Communications Act, 47 U.S.C. § 309(d), in granting Mtel’s

preference request. We need not decide whether § 309(d), which

governs contested license grants, applies to the grant of a pioneer’s

preference; MobileComm’s argument under § 309(d)—that the

Commission failed to specify the basis for its decision—is the

same as its argument under the APA.

16a

specific MCM technology. See Mtel’s Petition for Rule-

making, Mobile Telecommunication Technologies Corp.,

ET Docket No. 92-100 (emphasis added); Mtel’s Tech-

nical Feasibility Demonstration, Mobile Telecommunica-

tions Technologies Corp., ET Docket No. 92-100. Thus,

the preference award clearly rested, as the Commission

said, on Mtel’s having developed and applied MCM< tech-

nology in a simulcast environment. See Tentative Prefer-

ence Order, 7 F.C.C.R. at 5735 4 149; Final Preference

Order, 8 F.C.C.R. at 7174 4 68. The Commission can-

not be faulted for failing to justify a decision it never

made.

MobileComm also contends that one cannot understand

the award to have been based, as the Commission said,

on the development and application of MCM technology

in a simulcast environment, because, it says, the Com-

mission failed to answer its claims that Mtel’s proposed

integration of MCM technology and simulcast paging was

neither “new” nor “innovative.” See MobileComm’s Nar-

rowband PCS Pioneer’s Preference Comments, Amend-

ment of the Commission’s Rules To Establish New Per-

sonal Communications Services, ET Docket No. 92-100.

In fact the Commission responded at some length. See

Final Preference Order, 8 F.C.C.R. at 7173-75 44] 64-74;

see also Tentative Preference Order, 7 F.C.C.R. at 5737-

38 4150. When a party seeks to persuade a non-tech-

nical court of the inadequacies of a specialized agency’s

treatment of a highly technical issue, its burden, as a

practical matter, is necessarily quite heavy. Here Mobile-

Comm has not begun to pinpoint gaps in the Commission’s

response that this court could characterize as material.

Finally, MobileComm argues that the Commission’s

decision to base the preference grant on Mtel’s integration

of MCM and simulcast paging, rather than on the de-

velopment and use of specific MCM technologies such as

MOOK and PSFK, will “vitiat{e] the FCC’s intent and

[give] Mtel an opening to use a range of technologies that

17a

did not form the basis for the preference award.” Brief

of Petitioner at 16. The argument seems to be that the

apparently broad basis for the preference grant may limit

the force of the Commission’s requirement that Mtel use

the technology on which the preference is based. Narrow-

band Order, 9 F.C.C.R. at 1316 44 46-48. But Mobile

Comm at most identifies a practical issue the Commission

will confront in enforcing the preference’s limits. We are

in no position to say the Commission was arbitrary or

capricious in its choice of the level of generality at which

to define the preference-winning technology.

B. License Grant.

MobileComm recasts its last objection to the preference

grant as a challenge under 47 U.S.C. § 402(b) (6) to the

Licensing Decision, saying that the Commission failed to

respond adequately to its claim that Mtel did not intend

to use the technology on which Mtel’s preference was

based. As to this contention, the Commission found that

MobileComm had not raised any substantial and material

question of fact, a finding that (if correct) would justify,

under 47 U.S.C. § 309(d)(2), the denial of Mobile-

Comm’s petition to deny Mtel a license. In fact the

claims raised by MobileComm were no more than a

regurgitation of its previous argument about the techno-

logical basis of Mtel’s preference. In the licensing venue,

MobileComm pointed to various clues that Mtel would

not use the MOOK and PSFK modulation techniques that,

according to MobileComm but no one else, were the

foundation of Mtel’s preference. See Licensing Decision,

9 FC.CR. at 3644 §41; MobileComm’s Petition To

Deny, Nationwide Wireless Network Corp., File No.

22888-CD-P/L-94; id. Att. C. As we have seen, however,

the Commission based the grant of a preference to Mtel

on its having developed and applied MCM technology

in a simulcast environment, not on its having developed

any specific MCM technique. Thus the Commission was

quite correct in concluding that MobileComm’s evidence

18a

about Mtel’s possible non-use of MOOK and PSFK cre-

ated no substantial and material question of fact under

§ 309(d)(2). For the same reason, the Commission

“articulate[d] a satisfactory explanation for its action”

under 5 U.S.C. § 706(2)(A). See Motor Vehicle Mfrs.

Ass'n, 463 U.S. at 43, 103 S.Ct. at 2866.

Its substantive point being feeble, MobileComm en-

| deavors to ensnare the Commission, Mtel and the court

in a procedural jumble that turns out to be completely

irrelevant. The Communications Act’s provision on peti-

tions to deny a license application, § 309(d), is divided

into two subsections, which we have read as assigning

distinct tasks to the Commission. We have described sub-

section (1) as instructing the Commission to determine

whether a petition to deny sets forth “specific allegations

of fact sufficient to show that . . . a grant of the appli-

cation would be prima facie inconsistent with subsection

(a) of this section [requiring that granting the application

serve the public interest, convenience, and necessity],”

and subsection (2) as telling the Commission (if the first

“requirement” is met) to consider whether “on the basis

of the application, the pleadings filed, or other matters

which [the Commission] may officially notice,” “a sub-

stantial and material question of fact is presented.” Citi-

zens for Jazz on WRVR v. FCC, 775 F.2d 392, 394

(D.C.Cir.1985). MobileComm says that the Commission

failed to perform step one of this process.

In the first place we note that, despite Citizens for Jazz,

we are unable to identify any words in § 309(d)(1) it-

self that assign any task at all to the Commission. On

their face, the words say simply that the petitioner is to

do various things, against a background set of ancillary

rules about the Commission’s power to set time limits and

the applicant’s opportunity to respond. The Commission

comes into the picture in § 309(d)(2), which specifies

how it is to handle the materials produced under subsec-

tion (1). If it finds that no “substantial and material

19a

question of fact is presented,” it is to deny the petition

and make the grant, and that, as we have seen, is just

what the Commission did (with, of course, the added

wrinkle that the grant was conditioned).

Nevertheless, it is quite true that in Citizens for Jazz

we construed § 309(d) as establishing a two-step process.

But we have never said that the Commission must plod

through the two steps on pain of being reversed. Quite

the opposite. In Citizens for Jazz we noted that § 309(d)

determinations

“are typically made concurrently: Whether the peti-

tion to deny meets the statutory requirements [and]

whether the application under consideration raises

a factual issue substantial enough to call for a hear-

ing . . . are discussed in the same opinion—/f, in-

deed, they are discussed separately at all, which is

rarely, since a negative resolution of the second ques-

tion alone makes the first question moot... .”

Citizens for Jazz, 775 F.2d at 396 (first emphasis in

original; second emphasis added). This, of course, is

exactly what happened here.

Astroline Communications Co, v. FCC, 857 F.2d 1556,

1562 (D.C.Cir.1988), is not to the contrary. While we

stressed the importance of the two-step process, we did

not reverse any conclusion of the Commission based on

its failure to perform step one. On none of the four

issues to be addressed by the Commission on remand had

it performed a proper analysis under step two that would

have mooted the supposed error under step one. See

Astroline, 857 F.2d at 1567 (first issue) (“unrefuted

factual record” belied Commission’s conclusion that the

petitioner had presented no substantial and material ques-

tion of fact); id. at 1570 (second issue) (Commission

“failed to articulate adequately its reasons” for conclud-

ing that no substantial and material question cf fact was

presented); id. at 1572 (third issue) (Commission’s con-

20a

clusion that petitioner had failed to raise a substantial and

material question of fact was potentially arbitrary and

Capricious when viewed in light of substantial issue raised

in the petition as to de facto control of applicant); id. at

1572-73 (fourth issue) (although decision under step

one was not arbitrary or capricious viewed in isolation,

context of “persistent misapplication of the statutory man-

date” called for a remand, there being no step-two deci-

sion at all).

* ok * *

Accordingly, the case is remanded to the Commission

for consideration of whether Mtel’s license should be con-

ditioned on payment in light of its claims of reliance and

inconsistent treatment of others. In all other respects the

etitions for review are denied.

So ordered.

2lia

HARRY T. EDWARDS, Chief Judge, dissenting in

part and concurring in part:

I agree with the majority that the Federal Communica-

tions Commission (“FCC” or “Commission”) failed to

engage in reasoned decision-making in reaching a deter-

mination to require Mobile Telecommunications Tech-

nologies Corporation (“Mtel”) to pay over $33 million

for a license to operate a narrowband personal communi-

cations service. As the majority correctly holds, the

FCC’s “back-of-the-hand treatment” of Mtel surely cannot

survive judicial review. However, the FCC’s flippant and

unreasoned treatment of Mtel is the least of its sins. On

the record before us, it is clear that the Commission

lacked statutory authority to require Mtel to pay for the

license at issue, so there was no legal basis for the action

taken. Accordingly, I believe that we must reverse the

Commission’s action and grant the relief sought by Mtel.

In all other respects, I concur in the judgment of the

majority.

This case involves a small corporation, Mtel, and its

efforts to develop and market a two-way data communi-

cations service that promised to improve existing data

transmission rates by a factor of ten. Mtel invested ap-

proximately $50 million in developing this service; its

reward was a “pioneer’s preference” grant from the FCC

that, in the words of the agency, was to be the equivalent

of a guarantee of a license to operate its new. service.’

In granting Mtel a pioneer’s preference, the FCC ap-

plauded Mtel for “solv[ing] significant technical engineer-

ing problems” that had stumped its competitors, and

described the company’s work as “a significant communi-

cations innovation of the sort the Commission established

1See Establishment of Procedures to Provide a Preference to

Applicants Proposing an Allocation for New Services, 6 F.C.C.R.

3488, 3492 [32 (1991) (report and order).

22a

the pioneer’s preference rules to recognize.” * On Febru-

ary 3, 1994, after consideration of comments regarding

Mtel’s receipt of a pioneer’s preference, the FCC invited

Mtel to apply for a license based on its pioneer’s prefer-

ence.*

At all times during consideration of Mtel’s pioneer’s

preference (a process that spanned more than two years),

the FCC repeatedly assured Mtel that the license it needed

to operate its pioneer’s preference technology would be

issued for no charge other than the nominal statutory fee

due from all licensees. However, at the last stage of the

pioneer’s preference licensing process, when all that re-

mained was for the FCC to issue a license to Mtel, the

Commission suddenly reversed course and made an en-

tirely unprecedented determination that Mtel should be

required to pay a fee of over $33 million for its license.

Because the FCC has no basis for demanding this pay-

ment from Mtel, I must dissent.

There is no dispute that, while Mtel’s pioneer’s prefer-

ence and licensing proceedings were underway, dramatic

changes were being made in the FCC’s operations; how-

ever, none of these changes gave the FCC the authority

to extort a multi-million-dollar payment from Mtel. Mtel

filed for a pioneer’s preference in November 1991; the

FCC adopted a tentative finding that Mtel’s application

was successful in July 1992, and affirmed this decision

in an order adopted in June 1993. Then, in August 1993,

while reconsideration of Mtel’s pioneer’s preference was

2 Amendment of the Commission’s Rules to Establish New Nar-

rowband Personal Communications Services, 8 F.C.C.R. 7162, 7174

{| 72-78 (1993) (first report and order).

3 See Commission Invites Filing of Narrowband Personal Com-

munications Service Pioneer’s Preference Application, FCC Public

Notice (Feb. 3, 1994), reprinted in Joint Appendix (“J.A.”) 672.

23a

underway, the FCC for the first time received permission

from Congress to auction spectrum licenses at market

value.* This right was a major development for an agency

that, for almost sixty years, had been confined by statute

to charging nominal license fees.

Even though pioneer’s preference licenses were not af-

fected by the 1993 change in the law,° the FCC sought to

evaluate its pioneer’s preference program under the auc-

tion framework. Part of this evaluation involved consid-

eration of whether the auction process would be adversely

affected if pioneer’s preference licenses were awarded for

nominal fees. Throughout this process, the FCC repeat-

edly confirmed that Mtel would not be subjected to

auction-based fees. The FCC noted that, because Mtel’s

pioneer’s preference had already been granted at the time

that Congress gave the Commission auction authority, it

would be inequitable to charge Mtel an auction-based

fee. Thus, before Mtel applied for the license to operate

4 See 47 U.S.C. § 309(j) (Supp. V 1993).

5 See 47 U.S.C. § 309(j) (6) (G) (Supp. V 1993) (“Nothing ...

in the use of competitive bidding, shall . . . be construed to prevent

the Commission from awarding licenses to those persons who make

significant contributions to the development of a new telecom-

munications service or technology. . . .”); H.R.REP. No. 111, 103d

Cong., Ist Sess. 257 (1993) U.S.Code Cong. & Admin.News 1993

pp. 378, 584. (“The provisions of section 309(j) are .. . expressly

neutral with respect to [pioneer’s preferred] policies.”).

6 See Review of the Pioneer's Preference Rules, 8 F.C.C.R. 7692,

7694-95 18 & n. 19 (1998) (notice of proposed rulemaking)

(“{I]t would be inequitable to apply any change in our rules in

[Mtel’s] pioneer’s preference proceeding.”); Review of the Pio-

neer’s Preference Rules, 9 F.C.C.R. 605, 610 79 & n. 21 (1993)

(first report and order) (“We previously determined that, as a

matter of equity, nothing in our pioneer’s preference review will

affect [Mtel’s] proceeding, and we adhere to that decision.’’) ;

Amendment of the Commission’s Rules to Establish New Narrow-

band Personal Communications Services, 9 F.C.C.R. 1309, 1316

45 (1994) (memorandum opinicn and order) (“We continue to

believe that as a matter of equity we should not apply any new

24a

its pioneer’s preference technology in February 1994, the

FCC had assured the company on several occasions that,

not only would it not be charged a market-value fee for

its license, but also that the FCC recognized that the

imposition of any such fee would be inequitable.

The FCC got weak-kneed and turned tail on Mtel

when a member of Congress cried “wolf.” In May of

1994, Congressman John D. Dingell sent a letter to the

FCC’s General Counsel intimating that pioneer’s prefer-

ence recipients should pay for their licenses;* he also

proposed legislation to that effect, which would have sub-

jected pioneer’s preference licensees to a charge equal to

90% of the highest auction price of similar licenses.* This

legislation was never enacted, but Congressman Dingell’s

threats apparently succeeded: in July 1994, when the

FCC issued Mtel’s final licensing order, the Commission

suddenly reversed course and essentially adopted Con-

pioneer’s preference rules in this proceeding, because a final order

addressed the preference prior to enactment of the 1993 Budget

Reconciliation Act. Accordingly, except for our normal established

fees, we will not charge Mtel for the license that it may receive

pursuant to its preference grant.” )

Although the FCC did not specifically address whether Mtel had

relied on the existing pioneer’s preference framework in pursuing

its application, the FCC did observe that other, similarly situated

pioneer’s preference recipients submitted pioneer’s preference re-

quests and “publicly disclosed substantial detail of their system de-

signs in reliance on the continued applicability of the pioneer’s

preference rules.” Review of the Pioneer’s Preference Rules, 9

F.C.C.R. 605, 610 79 (1998) (first report and order). The FCC

also noted that, “[h]ad the rules been different, these applicants

might have structured their requests differently; or conducted

research, development, and experimentation differently; or elected

not to disclose detailed information about their systems.” /d.

7 See Letter from John D. Dingell, Chairman, House Subcomm.

on Oversight and Investigations of the Comm. on Energy and Com-

merce, to William Kenard, General Counsel, FCC (May 3, 1994),

reprinted in J.A. 902-08.

8 See H.R. 4700, 103d Cong., 2d Sess. (1994).

25a.

gressman Dingell’s suggestion by requiring Mtel to pay

90% of the lowest auction price of similar licenses. The

results of an auction conducted shortly thereafter set this

amount at $33.3 million.’

Recognizing that it had repeatedly promised Mtel a

“free” license, and that it had on numerous occasions ex-

pounded on the inequity of charging Mtel an auction-

based license fee, the Commission was forced to explain

its about-face. Not surprisingly, no good explanation was

forthcoming. The best the Commission could offer was

an obtuse discussion regarding its evolving understanding

of the auction process accompanied by an unsupported

suggestion that Mtel’s “free” license might possibly harm

the auction market." The FCC summarized its changed

position by declaring that “previously we overvalued .. .

equities [favoring Mtel] and undervalued the countervail-

ing competitive concerns.” *' At the end of the FCC's

new “valuation,” Mtel was the party that ended up short,

by over $33 million.

Not only did the FCC fail to justify the inequitable

action taken against Mtel, it also failed to locate a statu-

tory basis for the fee Mtel was to pay. It is undisputed

that the FCC has never before in its history imposed a

licensing fee absent explicit authorization from Congress.

It is also conceded that there is no such authorization in

this case. Obviously, the FCC could not rely on Repre-

sentative Dingell’s proposed but unenacted legislation as

authority for its sudden decision to charge Mtel. In the

® The FCC’s licensing order required Mtel to pay 90% of the low-

est winning bid for a narrowband personal communications service

license, or $3,000,000 less than the lowest winning bid for such a

license, whichever was less. See Nationwide Wireless Network

Corp., 9 F.C.C.R. 3635, 3646 § 50(4) (1994) (memorandum opinion

and order). As it turned out, the lesser of these options was for

Mtel to pay 90% of the lowest auction bid, or $33.3 million.

10 See id. at 3640 {If 17-19.

11 Jd, at 3640 {[ 19.

26a

absence of statutory authorization for the fee it sought

to impose, the FCC concocted an argument to support its

action by bridging together its general authority to admin-

ister the Communications Act, found in 47 U.S.C.

§ 154(i) (“section 4(i)”), and the auction framework

that Congress established in 1993 to govern non-pioneer’s

preference licensees in 47 U.S.C. § 309(j) (“section

309(j)”). Charitably speaking, the argument is some-

thing akin to the FCC saying that it “has the power to

do whatever it pleases merely by virtue of its existence,”

a suggestion that this court normally would view as “in-

credible.” Railway Labor Executives’ Ass'n v. National

Mediation Bd., 29 F.3d 655, 659 (D.C.Cir.1994) (en

banc), cert. denied, U.S. ——, 115 S.Ct. 1392, 131

L.Ed.2d 243 (1995).

Congress apparently did not share such an expansive

view of the FCC’s authority under the existing law, be-

cause, in late 1994, it decided to pass a statute specifically

authorizing the FCC to collect fees from pioneer’s pref-

erence license recipients.” Under any other circumstances,

Mtel would likely have celebrated this legislation, because

the effective date of the provision served to exclude Mtel’s

pioneer’s preference license from the new fees.“ However,

the FCC's decision to charge Mtel a fee a few months

earlier, irrespective of whether Congress had authorized

such a payment, deprived Mtel of the exemption Congress

provided.

12 See 47 U.S.C.A. § 309(j) (18) (B) (Supp.1995). This provi-

sion sets forth a very detailed formula by which the FCC is to

compute the fee that pioneer’s preference license recipients are to

pay.

18 As the FCC has acknowledged, the pioneer’s preference pay-

ment statute does “‘not apply to applications that have been

accepted for filing on or before September 1, 1994.’” Brief for

Appellee at 18 (quoting 47 U.S.C. § 809(j) (18) (D) (iv)). Mtel’s

license was issued in July 1994, subject to the disputed fee.

27a

Counsel for the FCC conceded at oral argument that

neither of the sections upon which the FCC relies permit

it to charge Mtel a fee: section 4(i), which speaks in

general terms, does not alone authorize the imposition

of such a fee, and, it is clear that section 309(j) does

not permit a fee in Mtel’s case. Thus, the FCC claims

that, because it has general authority over the communica-

tions industry and because it can assess fees to parties

other than Mtel, it is therefore free to charge Mtel as

well. As noted above, this kind of argument was rejected

in Railway Labor Executives’ Association where the en

banc court categorically dismissed the idea that an agency

“possesses plenary authority to act within a given area

simply because Congress has endowed it with some au-

thority to act in that area.” 29 F.3d at 670. Under the

FCC’s logic, as soon as Congress grants the agency per-

mission to engage in certain conduct, such as charging

market-value license fees, on an explicitly-defined basis,

section 4(i) automatically confers the right to apply that

power across the board. If this reading were correct, it

would completely eviscerate the power of Congress to

determine the scope of the statutes it passes. As this

court has held, “it is beyond cavil that ‘an agency’s power

is no greater than that delegated to it by Congress,’” /d.

(quoting Lyng v. Payne, 476 U.S. 926, 937, 106 S.Ct.

2333, 2341, 90 L.Ed.2d 921 (1986)), and “[t}he duty

to act under certain carefully defined circumstances does

not subsume the discretion to act under other, wholly

different, circumstances, unless the statute bears such a

reading,” id. at 671.

Even if I were to assume the fallacious premise that

section 4(i) could bestow upon the FCC the authority

to charge Mtel for its license, there is no indication that

the charge is “necessary” to the FCC’s functions. The

Commission’s justification for the charge is that granting

Mtel a free license could harm the public interest by

jeopardizing competition in the communications industry.

28a

This justification is belied by the fact that the FCC is

presently awarding licenses to competitors of Mtel with

no such fee attached.”*

Further, Mtel and other pioneer’s preference appli-

cants made large investments in research and development

of new products in reliance on the pioneer’s preference

framework as it existed before the FCC’s auction au-

thority. Mtel asserts that it continued to invest in improv-

ing the capabilities of its system after the pioneer’s prefer-

ence was granted.” Only an extraordinarily naive person

could believe that the FCC’s repeated promises that Mtel

would not be charged an auction-based license fee did not

affect Mtel’s allocation of its resources to this endeavor.

At oral argument, counsel for the FCC was disinclined

to address the agency’s various guarantees that Mtel would

not be charged an auction-based fee.” There was nothing

of substance for him to offer by way of explanation, so

counsel’s reluctance was savvy. Nonetheless, counsel’s

inability to respond in no way obscures the obvious: in

addition to being lawless, the FCC’s action in this case

borders on outrageous. I dissent.

14 As the majority concedes, Mtel has submitted information in-

dicating that the FCC has recently issued paging licenses without

subjecting the recipients to auction-based fees.

15 See, e.g., Letter from R. Michael Senkowski & Eric W. DeSilva,

counsel for Mtel to William Caton, Acting Secretary, FCC 3 (Apr.

26, 1994), reprinted in J.A. 879 (“Mtel has kept its commitments

to the Commission by strengthening its financing and improving

the service’s technological capabilities since the award was made.”)

16 Transcript of Oral Argument at 28.

29a

APPENDIX B

BEFORE THE

FEDERAL COMMUNICATIONS COMMISSION

WASHINGTON, D.C. 20554

File No. 22888-CD-P/L-94

In re Application of

Nationwide Wireless Network Corp.

For a Nationwide Authorization

in the Narrowband Personal

Communications Service

MEMORANDUM OPINION AND ORDER

Adopted: July 13, 1994; Released: July 13, 1994

By the Commission: Commissioncr Quello concurring

and issuing a statement at a later date; Commissioner

Ness issuing a statement; Commissioner Chong not

participating.

I. INTRODUCTION

1. On February 10, 1994, Nationwide Wireless Net-

work Corp. (NWN Corp.)’ filed the above-captioned ap-

1NWN Corp. is a wholly-owned subsidiary of Mobile Tele-

communication Technologies Corporation (Mtel). We note that

petitioners express some confusion regarding applicant’s name.

See BellSouth Companies Reply at n.41 and PageNet Reply at

n.2. Mtel filed a minor amendment to the application stating that

NWN Corporation had changed its name to Nationwide Wireless

Network Corporation. See Letter from Jai P. Bhagat to James

H. Bennett (March 25, 1994). Mtel later filed a minor amendment

to its application stating that the Delaware corporation records

state that the applicant’s name is Nationwide Wireless Network

Corp. rather than Nationwide Wireless Network Corporation. Mtel

30a

plication for a 50 kHz unpaired nationwide license in the

narrowband Personal Communications Service (PCS).

Two petitions to deny (Petitions) were filed, one by

BellSouth Corporation, BellSouth Telecommunications,

Inc., BellSouth Cellular Corporation, and Mobile Com-

munications Corporation of America (the “BellSouth

Companies”) and one by Paging Network, Inc. (Page-

Net) (jointly “Petitioners”).? For the reasons set forth

below, we deny the Petitions to the extent indicated here

and grant NWN Corp.’s application subject to the con-

ditions set forth here.

2. By this action, we award the first commercial license

for Personal Communications Service. We expect this

service to contribute to the development of the National

Information Infrastructure by providing Americans with

ubiquitous access to wireless data and voice services. We

further expect the introduction of commercial narrowband

PCS will result in the creation of new jobs, increase pro-

ductivity, and provide the basis for more effective U.S.

competition in the global telecommunications market.*

asserts they have elected to notify the Commission of the use of

the Corp. abbreviation in order to “ensure the complete accuracy

of the Commission’s records.” See Letter from Jai P. Bhagat to

James H. Bennett (April 26, 1994). We refer to Mtel and NWN

Corp. interchangeability in this order.

2 PageMart, Inc. also filed a Petition to Deny that was subse-

quently withdrawn. Withdrawal of Petition to Deny filed June 16,

1994 by PageMart, Inc.

Mtel challenges the Petitioners’ legal standing under Section 309

of the Act to file petitions to deny given, among other things, the

Petitioners “ineligibility to file competing applications and the

different markets to be served by their proposed PCS offerings.”

Opposition of Mobile Telecommunication Technologies Corporation

and Nationwide Wireless Network Corporation (Mtel Opposition)

at n.4. Mtel has not persuaded us that Petitioners do not have

standing.

3 See Amendment of the Commission’s Rules to Establish New

Narrowband Personal Communications Services, GEN Docket No.

90-314 and ET Docket No. 92-100, Memorandum Opinion and

3la

ll. BACKGROUND

3. In July 1992, the Commission tentatively granted

to Mtel a pioneer’s preference for having developed and

demonstrated the feasibility of significant innovations that

will permit the delivery of existing and new advanced

paging and messaging service in a spectrum-efficient man-

ner. In June 1993, the Commission granted a final pio-

neer’s preference to Mtel and determined that it should

receive a nationwide license for a 50 kHz unpaired block.

The grant was affirmed on reconsideration with the im-

position of a number of conditions.’ Specifically, the Com-

mission directed the licensing bureau to condition any

license granted to Mtel based on its pioneer’s preference

upon Mtel’s agreement to build a system that substan-

tially uses the design and technologies upon which that

award is based;* and to hold the license for a minimum

of three years or until the construction requirement appli-

cable to the five-year build-out period has been satisfied,

whichever occurs first.”

Order, 9 FCC Red 1309, at para. 8 (1994) (“Narrowband Recon-

sideration”), recon. pending.

4 Amendment of the Commission’s Rules to Establish New Per-

sonal Communications Services, GEN Docket No. 90-314 and ET

Docket No. 92-100, Notice of Proposed Rule Making and Tentative

Decision, 7 FCC Red 5676, 5735-36 (1992).

5 Amendment of the Commission’s Rules to Establish New Nar-

rowband Personal Communications Services, GEN Docket No. 90-

814 and ET Docket No. 92-100, First Report and Order, 8 FCC

Red 7162, 7172-75 (1993) (“Narrowband Order”) ; recon. granted

in part, Narrowband Reconsideration, 9 FCC Red at 1315-17

(1994) ; further recon. pending; appeal pending sub nom. BellSouth

Corp. v. FCC, No. 98-1518 (D.C. Cir. filed Aug. 20, 1993).

6 This condition applies only for the nationwide channel for which

the preference has been granted and only until Mtel has satisfied

the initial five-year build-out requirement in the rules. Narrowband

Reconsideration, 9 FCC Red at 1316, para. 47.

7 Id. at para. 48.

32a

4. The Commission also directed the Common Carrier

Bureau (Bureau) to issue a Public Notice inviting Mtel

to submit an application.* In addition, the Commission

directed the Bureau to consider conditioning any license

granted to Mtel as a result of its pioneer’s preference on

Mtel’s agreement to a stricter build-out requirement than

the requirement generally applicable in the ten-year build-

out period for licenses in the narrowband PCS service.’

In February 1994, the Bureau issued the Public Notice

and, as directed by the Commission, stated that it would

consider the possibility of imposing a stricter build-out

requirement on Mtel, such as requiring the construction

of base stations that serve 90 percent of the United

States population within 10 years after the grant of the

license.” On February 10, 1994, Mtel submitted its appli-

cation, which was placed on Public Notice on February

25, 1994." The two petitions to Deny were filed on

March 28, 1994. Mtel’s Opposition was filed on April 7,

1994, and replies to its Opposition were filed on April 19,

1994,”

8 Id., 9 FCC Red at 1316 n.26.

* Td.

10 Commission Invites Filing of Narrowband Personal Communi-

cations Service Pioneer’s Preference Application, Public Notice,

No. 41645 (released Feb. 3, 1994) (“February 3 Public Notice’).

11 Common Carrier Public Mobile Services Information, Public

Notice, No. 41908 (released February 25, 1994). File No. 22888-

CD-P/L-94 was assigned to the application. A subsequent Public

Notice was issued reminding interested parties that the Commission

will consider the imposition of stricter build-out requirements on

Mtel than applicable to other narrowband PCS licensees and invit-

ing interested parties to address this issue in petitions to deny.

Common Carrier Public Mobile Service Information Supplemental

Notice Inviting Comments, Public Notice, No. 42032 (released Mar.

7, 1994).

12J.n addition to the amendment to its application noted above,

supra note 1, on April 26, 1994, Mtel also filed a letter in response

to a claim made by the BellSouth Companies in their Reply regard-

33a

Ill. DISCUSSION

A. Petitions to Deny, Opposition, and Replies

5. Petitioners advance a number of arguments to sup-

port their contention that we should not grant Mtel’s

application.” Petitioners argue that we should deny the

application because Mtel does not intend to offer service

using the specific technology for which it was awarded a

pioneer’s preference. Petitioners request that we investi-

gate Microsoft Corporation’s investment in Mtel * to de-

ing the applicant’s identity, existence, and corporate status. Mtel

contends that we should accept its letter response because the

BellSouth Companies improperly raised this claim for the first time

in their Reply to Mtel’s Opposition. Letter from R. Michael

Senkowski to William Caton, Acting Secretary (April 26, 1994)

(“Mtel Response”). To the extent the Mtel Response addresses

the issue raised for the first time in BellSouth Reply, we will

accept the Mtel Response for filing in order to assure that we have

a complete record in this proceeding. The BellSouth Companies

filed a Reply to the Mtel Response on May 6, 1994 (“Reply to

Response”). We accept BellSouth’s Reply to Response for filing.

18 The arguments made by the Petitioners are, for the most part,

identical in their essentials. To the extent that individual Petition-

ers make unique or separate arguments, we address them accord-

ingly.

14 BellSouth Companies Petition at 6-16 and Reply at 4-11;

PageNet Petition at 2-6 and Reply at 2-6.

1% On March 23, 1994 Mtel entered into agreements contemplating

investments in NWN Corp. by Microsoft, William Gates, Pau) Allen,

Integral Capital Partners (Integral), and Kleiner Perkins. Caufield

& Byers (KPCB). Concurrent with the consummation of the trans-

actions, NWN Corp.’s Board of Directors would be expanded to six

members with Mtel having the right to appoint four directors and

Microsoft and KPCB each having the right to appoint one director.

Mtel would designate the officers of NWN Corp. The appointment

of the President, Chief Operating Officer, and Chief Financial

Officer of NWN Corp. would require the approval of either the

Director appointed by KPCB or the Director appointed by Micro-

soft, which could not unreasonably be withheld. The proposed

agreement provides for certain minority shareholder protections

34a

termine whether a de jure or de facto transfer of control

of NWN Corp. to Microsoft would take place if these

transactions are consummated.” In addition, the BellSouth

Companies and PageNet contend that the application can-

not be granted because application requirements, filing

rules, and procedures for narrowband PCS have not been

adopted by the Commission and, because such require-

ments, rules, and licensing procedures are not in place,

we cannot make the necessary public interest finding under

Section 309 of the Communications Act of 1934, as

amended, (the “Act”).”’

6. The BellSouth Companies also argue that we can-

not grant the application without first determining the

existence, identity and corporate status of the applicant.”

In support of their claims, the BellSouth Companies pro-

and the approval of five of the six Directors (supermajority ap-

proval) for the following extraordinary measures: (1) issuance

of equity securities; (ii) sale, recapitalization, or liquidation; (iii)

redemption of voting securities; (iv) asset acquisitions or invest-

ments in excess of $5 million or 5 percent of the company’s assets,

whichever is greater; (v) creation of any wholly-owned subsid-

iaries; (vi) approval of the annual budget and strategic plan;

(vii) amendment of the charter documents to change voting provi-

sions for stockholder action; and (viii) grant of stock options.

The equity and voting rights in NWN Corp. after consummation

would be: Mtel - 80.57 percent; Microsoft - 8.52 percent; KPCB -

4.66 percent; William Gates - 2.84 percent; Paul Allen - 2.84 per-

cent; and Integral - 0.57 percent. Opposition at 5-7.

16 BellSouth Companies Petition at 3-6; PageNet Reply at 8-10.

17 BellSouth Companies Petition at 16-22; PageNet Petition at

6-18 and Reply at 12-13. PageNet also argues that we cannot grant

the application because Mtel has failed to comply with Section

810(b) of the Act, which limits alien ownership interests in Com-

mission licensees. PageNet points out that applicants routinely

conduct surveys of their stockholders to acquire the information

necessary for them to know with reasonable certainty that they

are in compliance with alien ownership restrictions. PageNet Peti-

tion at 16-18 and Reply at 6-8.

18 BellSouth Companies Reply at 11-16.

35a

vide a number of documents from the State of Delaware

which they assert show that the applicant appears to be

nonexistent.’”

7. PageNet contends that Mtel should be required to

pay for its license.” Specifically, PageNet argues that the

stated purpose of the pioneer’s preference rules was to

“assure the party granted a preference that it would

receive a license to implement its innovative technology.” *

PageNet contends that the failure to require Mtel to pay

for its license would create an enormous “cost structure

disparity” between Mtel and other parties who may,

through our narrowband PCS competitive bidding pro-

cedures, pay millions of dollars for each of the remaining

ten nationwide narrowband PCS licenses. PageNet argues

that giving Mtel a free license would undermine competi-

tive conditions in narré6wband PCS “without promoting

any of the purposes underlying the award of the prefer-

ence to Mtel”™ while providing Mtel with a tremendous

cost advantage over similarly situated competitors. Ac-

cording to PageNet, Mtel’s subscriber costs should be

lower because it does not have to pay for the license and

it will receive an even greater competitive advantage be-

cause it does not have to obtain debt financing to pay

for the license. PageNet further contends, that by allow-

ing a preference that is equivalent to a free license in an

auction environment, “the Commission is directly influ-

encing the cost structure, the debt and equity structure,

and the competitive outcome of PCS.” PageNet argues

that the Commission is creating barriers to entry by giving

Mtel the equivalent of millions of dollars. PageNet further

19 Jd. at 12-14 and Exhibits B, C, D, and E.

20 PageNet Petition at 18-24.

21 Td. at 18.

22 Id. at 19.

23 Id. at 20.

36a

contends that the competitive advantage of a preference

to Mtel also will affect traditional nationwide paging

because Mtel could price its narrowband PCS service

well above costs and still remain competitive with those

whose costs include license costs in addition to construc-

tion and operating costs.”*

8. PageNet also argues that Section 309(a) of the

Act requires the Commission to consider the competitive

ramifications of granting a pioneer’s preference in an auc-

tion environment in order to determine whether the grant

of Mtel’s application is in the public interest. PageNet

asserts that there are no public interest benefits that would

outweigh the competitive harm created by a free grant to

Mtel. PageNet contends that, because the Commission

has authority to conduct auctions and every applicant has

the certainty that it may acquire licenses through those

auctions, the purpose of creating pioneer’s preferences has

been fulfilled, that is, the Commission has reduced the

delays and risks inherent in its allocation and licensing

procedures.” PageNet also argues that the grant of a free

license to Mtel would skew the auction process by inflat-

ing the value of the remaining licenses to Mtel and de-

flating their value to others. Specifically, PageNet asserts

that, to the extent Mtel could achieve economies of scale

and scope by operating several 50 kHz channels, it could

achieve, through cost averaging, a much higher level of

profitability than others. PageNet contends that Mtel

could use the money it saves from the free license to

overbid for additional licenses.”

9. PageNet further argues that we should not grant a

license to Mtel because a proposed repeal of the pioneer’s

preference regime is currently pending with the Commis-

4 Id. at 21.

2% Id. at 22-23.

26 Id. at 23.

37a

sion, the grant of a pioneer’s preference to Mtel was

illegal, the entire pioneer’s preference regime is unlawful,

and the grant would give Mtel an unfair and anticompeti-

tive headstart in providing narrowband PCS services.”

In addition, PageNet contends that award of a license to

Mtel would violate the doctrine of Ashbacker v. FCC *

because the Commission’s public notice invited only Mtel

to submit an application.” PageNet alleges that it would

have filed a competing application if permitted by the

Commission's notice.”

10. Finally, the BellSouth Companies argue that a

number of conditions, in addition to those already im-

posed by the Commission, should be placed on Mtel’s

grant. Specifically, the BellSouth Companies argue that

we should further condition Mtel’s license on its com-

pliance with the following requirements: (i) service

should be provided to every one of the Basic Trading

Area (BTA) service areas; (ii) after 10 years, 90 per-

cent of the population of every BTA service area should

be covered, with 45 percent of the population of every

BTA service area covered at the 5-year mark; and (iii)

transfer of the license should be forbidden unless Mtel

provides service to 90 percent of the population of every

BTA service area.”

11. In its Opposition, Mtel counters that its applica-

tion specifically acknowledges and accepts the three con-

27 Id. at 25-31.

28326 U.S. 327 (1945). The Court held that under the Com-

munications Act all bona fide, competing applications are entitled to

comparative consideration.

2° PageNet argues that granting a pioneer’s preference to Mtel

unlawfully grants it a license without subjecting it to a comparative

hearing.

* PageNet Petition at 36-39.

%1 BellSouth Companies Petition at 22-24 and Reply at 17-19.

38a

ditions that the Commission has adopted or proposes to

adopt * that would require Mtel to: (i) build a system

that substantially uses the designs and technology on

which the preference award was based;™ (ii) hold the

license for three years or until the construction require-

ments applicable to the five-year build-out period have

been met (whichever occurs first); and (iii) satisfy

stricter build-out requirements than those for other 900

MHz narrowband PCS licensees. Mtel argues that the

exhibits to its application demonstrate that it is legally,

technically, and financially qualified to receive a narrow-

band PCS authorization.“ Mtel further contends that the

%2The Narrowband Reconsideration order mandates that any

license granted to Mtel based on its pioneer’s preference award

must include conditions requiring Mtel: to build a system that

substantially uses the design and technologies upon which that

award is based; and to retain the license for a minimum of three

years or until the construction requirement applicable to the five-

year build-out period has bee: satisfied, whichever occurs first.

9 FCC Red at 1316, paras. 47-48. In addition, the Commission con-

cluded that consideration should be given to requiring Mtel, as a

further condition on its receipt of a license based on its pioneer’s

preference, to comply with a build-out requirement stricter than

the requirement applicable to the ten-year build-out period. 9 FCC

Red at 1316 n.26.

33 Mtel states that

{ijn light of the unambiguous statements in Mtel’s applica-

tion regarding the NWN system, there is simply no factual

or legal basis for petitioners’ assertions that Mtel will not

deploy the innovations for which it was granted a preference.

Mtel Opposition at 4.

* For example, in its Financial Qualifications exhibit, NWN

Corp. provides (i) an estimate of the construction costs for a 300

MSA/500 base station transmitter “Nationwide Wireless Network”

(NWN) system and an estimate of the costs to operate the system

for a period of one year; (ii) audited financial statements for Mtel

dated March 1, 1993, including a balance sheet, as submitted to the

Securities and Exchange Commission, for the year ending Decem-

ber 81, 1992; and (iii) unaudited balance sheets for Mtel dated

September 30, 1992, including, as a supplement, a description of

——

39a

more stringent build-out requirements argued for by the

BellSouth Companies “are disproportionate with anything

the Commission should rationally expect from any single

terrestrial-based service provider.” With regard to in-

vestment of Microsoft and others in NWN Corp., Mtel

states that it will retain de jure and de facto control of

NWN Corp. even after the consummation of the trans-

actions and no minority investor will exercise control.”

With regard to questions raised by PageNet regarding

Section 310(b) alien ownership restrictions, Mtel states

that it has “received the results of a third-party alien

ownership survey which shows compliance with all appli-

cable alien ownership limitations.” ** In response to the

BellSouth Companies’ claims regarding the applicant’s

identity, Mtel claims that there was a minor discrepancy

in NWN Corp.’s incorporation chronology due to miscom-

munications with Mtel’s Delaware counsel. Mtel claims

that it filed its narrowband PCS application on February

10, 1994, under the name NWN Corp., on the under-

standing that this new wholly-owned subsidiary had been

incorporated, when the incorporation was not effected

until February 25, 1994. Mtel argues that this discrep-

ancy did not affect the substance of the application or

the ultimate ownership and control of the applicant by

the parent corporation, Mtel.”

the financial resources available to finance construction and operat-

ing costs for a period of one year of a 300 MSA/500 base station

transmitter NWN system. On February 22, 1994, Mtel amended

the application to provide a more current balance sheet. The ap-

plication also includes a letter from Mtel guaranteeing the avail-

ability of funds for constructing and operating the NWN system.

See Exhibit 3, Attachment 2.5.

35 Mtel Opposition at 10.

36 Id. at 5-9.

37 Id. at 11.

38 Mtel Response at 2-3. Mtel included, with its Response, a

Declaration from Jai P. Bhagat, President of NWN Corp., setting

40a

12. Mtel also contends that Petitioners’ arguments con-

cerning the grant of a pioneer’s preference to Mtel, the

legality of the pioneer’s preference policies, the payment

of a fee for its license, grandfathering Mtel from any

changes adopted in the pioneer’s preference review pro-

ceeding, and the delay of a grant to Mtel to eliminate

any possible headstart advantages have previously been

considered and rejected by the Commission. Accordingly,

Mtel asserts that these challenges should be summarily

rejected.”

B. Discussion

1. Pioneer’s Preference Issues

13. Ashbacker Doctrine. The Commission has dealt

with the applicability of the Ashbacker Doctrine to pio-

neer’s preferences at length in the pioneer’s preference

proceeding, where we concluded that our pioneer’s pref-

erence rules are not precluded by Ashbacker.” We also

have previously considered and rejected PageNet’s argu-

ment that grant of a pioneer’s preference to Mtel is un-

lawful because Mtel’s proposal is not innovative or spec-

trally efficient.“ PageNet’s argument that we cannot

grant Mtel a license because the entire pioneer’s prefer-

ence regime is unlawful is also without merit. The pio-

neer’s preference rules were adopted through notice-and-

forth the chronology of events, confirming that the applicant is

NWN Corp., and listing the Officers, Directors and Shareholders of

NWN Corp., who are identical to those listed in the application.

3° Mtel Opposition at 12-14.

# Establishment of Procedures to Provide a Preference to Appli-

cants Proposing an Allocation for New Services, GEN Docket No.

90-217, Report and Order, 6 FCC Red 3488, 3492 at para. 33 (1991) ;

Memorandum Opinion and Order, 8 FCC Red 1659 (1993).

41 Narrowband Order, 8 FCC Red at 7178.

4la

comment rulemaking “ in accordance with our rules and

the applicable requirements of the Administrative Pro-

cedure Act. PageNet does not contend that the pioneer’s

preference rules are not lawful as a result of a deficiency

in the procedures followed in promulgating the rules.

Moreover, as noted above, the Commission fully addressed

the substantive legality of the pioneer’s preference rules.

In addition, the fact that the Commission is still consider-

ing repeal or modification of the pioneer’s preference

rules for future proceedings is irrelevant to this applica-

tion.” Accordingly, we will not revisit these particular

issues here.

14. Headstart. We have also considered and rejected

PageNet’s arguments concerning any headstart that Mtel

might receive. In the Narrowband Reconsideration, we

found that Mtel is receiving no more than a de facto

headstart and rejected proposals to delay processing of

Mtel’s application.** We have recognized from the outset

that pioneer’s preference grantees may receive a de facto

headstart because of the nature of our licensing process.”

We note that we have recently taken the next steps in

implementing our auction authority to deploy PCS rapidly

*? Establishment of Procedures to Provide a Preference to Ap-

plicants Proposing an Allocation for New Services, GEN Docket

No. 90-217, Report and Order, 6 FCC Red 3488 (1991) (“Pioneer's

Preference Report and Order”), recon. granted in part, Memoran-

dum Opinion and Order, 7 FCC Red 1808 (1992), further recon.

denied, Memorandum Opinion and Order, 8 FCC Red 1659 (1993).

*8 Review of the Pioneer’s Preference Rules( ET Docket No. 92-

266, Notice of Proposed Rule Making, 8 FCC Red 7692 (1993)

(“Pioneer's Preference Review NPRM”); Review of the Pioneer's

Preference Rules, ET Docket No. 98-266, First Report and Order,

9 FCC Red 605 (1944) (“Pioneer's Preference Report and Order’).

“ Narrowband Reconsideration, 9 FCC Red at 1317, para. 51.

* Pioneer's Preference Report and Order, 6 FCC Red at 3492

(1991). We specifically declined to provide a headstart beyond any

auch de facto headstart.

42a

by adopting competitive bidding rules to award narrow-

band PCS licenses.“ and by scheduling the auction for

the remaining ten nationwide narrowband PCS licenses

for later this month.“’ PageNet’s concerns over any de

facto headstart Mtel may receive should be largely allevi-

ated by these actions.“

15. Payment for License. Arguments that Mtel should

pay for its license have been considered in both the

Pioneer's Preference Review NPRM and the Narrowband

Reconsideration. In the Narrowband Reconsideration, we

held that, as a matter of equity, we would not charge

Mtel for the license that it may receive pursuant to its

pioneer’s preference award because a final order (albeit

subject to pending petitions for reconsideration) addressed

the preference prior to the enactment of the Omnibus

Budget Reconciliation Act of 1993 that gave the Com-

mission authority for competitive bidding.” At the outset,

* Implementation of Section 309(j) of the Communications Act,

PP Docket No. 98-258, FCC 94-98, Third Report and Order (re-

leased May 10, 1994). See also FCC Adopts Competitive Bidding

Rules to Award Narrowband PCS Licenses (PP Docket No. 93-

253), News Release, Report No. DC-2590 (Apr. 20, 1994) (“April 20

News Release’).

*7 See FCC to Hold Narrowband PCS and IVDS Auctions July 24-

29, 1994, News Release, Mimeo No. 43178 (released May 23,

1994); and Auction Notice and Filing Requirements for Ten

Nationwide Licenses for Personal Communications Services in the

900 MHz Band, Public Notice, Report No. AUC-94-01, Auction No.

1 (released May 23, 1994) and Erratum to Report No. AUC-94-01

(released May 27, 1994).

48 The Commission has determined that the first narrowband PCS

auction would include the ten available nationwide narrowband

PCS licenses. April 20 News Release at 2.

* Pub. L. No. 108-66, Title IV, § 6002, 107 Stat. 387 (enacted

Aug. 10, 1998).

% Narrowband Reconsideration, 9 FCC Red at 1316, para. 45.

See also Pioneer's Preference Review NPRM, 8 FCC Red 7692,

7694-95, para. 18 (Nothing in the review of the pioneer’s pref-

——S—aaaa a...

43a

we note, that since the adoption of the Pioneer's Prefer-

ence Review NPRM in October 1993 and the Narrow-

band Reconsideration in February 1994, we have adopted

four reports and orders in the Competitive Bidding pro-

ceeding setting forth general auction rules and specific

auction rules for narrowband PCS, interactive video data

services (IVDS), and broadband PCS." This has led to

a greater understanding of how the competitive bidding

process will work in the context of the award of spectrum

for various services and, in particular, narrowband PCS.

It has also resulted in concern over the effect on the

marketplace that the award of a free license to one com-

petitor will have when other competitors must bid and

pay for licenses in the same service. In particular, and

in light of the arguments raised by PageNet, we are con-

cerned that the award of a free license to Mtel would

create an unfair competitive advantage for Mtel at the

expense of licensees who may pay significant sums for

their licenses. While we have previously decided that

Mtel should not have to pay for its license for equitable

erence rules (for applicability of competitive bidding) will affect

the Mtel proceeding). The Commission also decided that it would

be inequitable to apply any pioneer’s preference rule changes, in-

cluding competitive bidding, to pioneer’s preference proceedings in

which tentative decisions had been made. See Pioneer’s Preference

Review Report and Order.

*! Implementation of Section 809(j) of the Communications Act,

PP Docket No. 93-253, FCC 94-61, Second Report and Order, 9 FCC

Red 2348 (1994) (“Competitive Bidding Second Report and Order’ )

(general auction rules) ; Implementation of Section 309(j) of the

Communications Act, PP Docket No. 93-253, FCC 94-98, Third

Report and Order (released May, 10 1994) (“Competitive Bidding

Third Report and Order”) (narrowband PCS auction rules) ; Imple-

mentation of Section 309(j) of the Communications Act, PP Docket

No. 93-253, FCC 94-99, Fourth Report and Order, 9 FCC Red 2330

(1994) (/VDS auctions rules); and Implementation of Section

309(j) of the Communications Act, PP Docket No. 93-253, FCC

94-178, Fifth Report and Order (adopted June 29, 1994) (broad-

band PCS auction rules).

44a

reasons,” we are required by Section 309 of the Act to

determine whether the grant of a license to Mtel would

serve the public interest, convenience, and necessity.™

Accordingly, as a petition to deny has specifically raised

an issue with regard to payment by Mtel for its license,

we will consider the issue as part of our Section 309

determination here.

16. In adopting the pioneer’s preference procedures,

the Commission was concerned with fostering the develop-

ment of new services and improving existing services by

reducing the delays and risks for innovators associated

with the Commission’s allocation and licensing processes.™

In particular, the Commission was concerned that an

innovator facing a lottery situation would have no assur-

ances of receiving a license and therefore no ability to

obtain a license as a reward for its efforts.“ We decided

that a significant reward should be given to induce in-

novators to present proposals for new technologies and

services to the Commission in a timely manner. In craft-

ing this “reward,” we did not intend to award a com-

petitive advantage to an innovator by giving it a license

for free while its competitors had to pay, but rather

52 See note 4950, supra, and accompanying text.

58 Section 309(a) of the Act provides that

Subject to the provisions of this section, the Commission shall

determine, in the case of each application filed with it to which

section 308 applies, whether the public interest, convenience,

and necessity will be served by the granting of such applica-

tion, and, if the Commission, upon examination of such appli-

cation and upon consideration of such other matters as the

Commission may officially notice, shall find that the public

interest, convenience, and necessity will be served by the grant-

ing thereof, it shall grant such application.

47 U.S.C. § 8309(a).

54 Pioneer's Preference Report and Order, 6 FCC Red at 3488,

para. 1.

55 Pioneer’s Preference Review NPRM, 8 FCC Red 7692, paras.

1 and 5.

ee a ee ae ee ae

45a

decided to permit an otherwise qualified pioneer’s prefer-

ence recipient to apply for a license without facing com-

peting applications.”

Our objective in establishing a pioneer’s preference

is to reduce the risk and uncertainty innovating

parties face in our existing rule making and licensing

procedures, and therefore to encourage the develop-

ment of new services and new technologies. The

essence of this risk and uncertainty is that they may

not be awarded a license and, therefore, may not be

able to take their developmental work into full busi-

ness operation. The most workable action we can

take to reduce this risk is effectively to guarantee an

otherwise qualified innovating party that it will be

able to operate in the new service by precluding

competing applications.”

The Commission concluded that it has the authority to

award a dispositive preference.” The text of the Com-

mission’s decisions makes clear that the overriding objec-

tive of the pioneer’s preference rules simply is to ensure

the award of a license to an otherwise-qualified pioneer’s

preference recipient. Nowhere did the Commission sug-

gest it wished to give the preference recipient a competi-

tive edge over other licenses.” Indeed, in rejecting pro-

posals to give preference recipients a formal headstart over

other licensees, the Commission rejected such a goal.”

56 Pioneer’s Preference Report and Order, 6 FCC Red at 3490,

para. 19.

57 Id. at 3492, para. 32 [emphasis supplied].

58 Jd. at para. 33. Upon reconsideration, the Commission affirmed

that the preference will be dispositive. 7 FCC Red 1808, 1809 at

para. 8. On further reconsideration, the Commission discussed at

length its legal authority to award a dispositive preference. See

8 FCC Red 1659 (1993).

5° See discussion at para. 1919, infra.

% Pioneer’s Preference Report and Order, 6 FCC Red at 3492,

para. 34:

46a

We have recognized from the outset that pioneer’s prefer-

ence recipients may receive a de facto headstart because

of the nature of our licensing process, but we specifically

declined to provide a headstart beyond any such de facto

headstart.®

17. In light of this background, the arguments of Page

Net, and our further understanding of the auction process

and the competitive effect of pioneer’s preference recipi-

ents, particularly in narrowband PCS, receiving licenses

for free, we are unable to determine that a grant of a

license to Mtel without payment would serve the public

interest, convenience, and necessity under Section 309 of

the Act. As noted above, Mtel, if otherwise qualified, is

entitled to the grant of the license under our pioneer’s

preference procedures. The pioneer’s preference rules,

however, were not intended to “reward” Mtel with an un-

fair competitive advantage in the position of narrowband

PCS. If Mtel were to receive a license without paying

anything ® while other narrowband PCS providers were

forced to pay substantial sums for their licenses, the Com-

We further have decided not to provide a headstart for the

pioneering entity beyond the de facto headstart that may occur

due to the time it may take other entities to apply for and

receive a license. The commenting parties have convinced us

that no additional headstart is necessary. As Southwestern

Bell points out, the main effect of a headstart would be to give

the pioneer a temporary service monopoly. As Southwestern

Bell, Geller and Lampert, and others note, the key public in-

terest benefit of a preference is the assurance to the pioneering

entity that, if otherwise qualified, it will receive a license. For

the Commission to go beyond this and guarantee the pioneer

a temporary service monopoly would not appear to be justified

at this time.

[footnote omitted. |

61 Pionver’s Preference Report and Order, 6 FCC Red at 3492,

para. 34.

62 Pioneer’s preference recipients must file the appropriate appli-

cation along with the accompanying filing fee.

47a

mission’s licensing policies might have a significant ad-

verse impact on the competitive marketplace.

18. The Commission has issued a number of orders

relating to auctions since we decided that Mtel would

not have to pay for its license, and we have developed a

fuller understanding of the auction process as we have

resolved various issues relating to the auctions. For ex-

ample, in the Competitive Bidding Second Report and

Order, we concluded that where licenses ‘o be auctioned

are interdependent and their value is expected to be high,

the simultaneous multiple round auctions would best

achieve our goals for competitive bidding and award

interdependent licenses to the bidders who value them the

most.” We later expressed our belief that the value of

most narrowband PCS licenses will be significantly inter-

dependent and we decided to group narrowband PCS

licenses into various simultaneous auctions by aggregating

together licenses exhibiting the greatest degree of inter-

dependence and determined to auction the ten remaining

nationwide narrowband PCS licenses in one group.“ We

further stated that

the licenses are complements as well as substitutes,

and thus their values are highly interdependent. They

are complements because license aggregation enables

bidders to realize certain economies of scale... .

These licenses are also substitutes because, to vary-

ing degrees, they can be used as alternatives in the

provision of the same or similar services.”

We now have a clearer understanding of the interdepend-

ence of the-nationwide narrowband PCS iicenses and the

potential anticompetitive effects that the free award of

63 9 FCC Red at 2367, paras. 109-111.

4 Competitive Bidding Third Report and Order at paras. 18, 25

and 27.

65 Jd. at para. 27.

48a

one of these licenses may have on the PCS market as

well as the auction process.

19. As noted by PageNet, a pioneer’s preference re-

cipient who receives a free license would likely enter the

competitive market with a significantly lower capital in-

vestment than the other licensees who bid and pay for their

licenses. The difference would likely provide the pioneer’s

preference recipient with a substantial competitive advan-

tage over its rivals, an advantage that we did not intend

to confer when we adopted our pioneer’s preference rules.

In addition, the entire bidding process may be distorted

by awarding a pioneer’s preference recipient with a free

license. Parties who might otherwise bid may be dis-

couraged from bidding “top dollar” or from bidding at all

because of their concerns over entering a new competitive

market saddled with significantly greater capital costs that

could place them at a competitive disadvantage. While

we recognize that Mtel is (if otherwise qualified) entitled

to a license grant under our pioneer’s preference rules,

we no longer can conclude that the equities weigh -in

favor of the grant of a free license to Mtel. In this regard,

previously we overvalued such equities and undervalued

the countervailing competitive concerns. Therefore, based

upon the record before us in this proceeding and our

increased understanding of the complex competitive issues

in the narrowband PCS auction context, we cannot reach

the conclusion that a grant to Mtel would serve the public

interest, convenience, and necessity without requiring that

Mtel pay for its license.” Accordingly, we will condition

Mtel’s grant on a payment requirement.

66 We note that Congressman Dingell recently introduced legisla-

tion that would amend Section 309(j) (6) (G) of the Communica-

tions Act, 47 U.S.C. § 309(j) (6) (G), to require that the Commis-

sion charge a pioneer’s preference recipient 90% of the highest

bid for a comparable license. See H.R. 4700, 103d Cong.,h) 2d Sess.

(1994) (“Pioneer Preference Reform Act of 1994”). We recognize

that this pending bill is not law and emphasize that our judgment

on these issues is based on our own analysis and experience.

49a

20. Having concluded that Mtel must pay for its li-

cense, we turn to a determination of the amount that

Mtel must pay. We note that we are imposing more

stringent buildout requirements on Mtel than on the other

nationwide narrowband PCS licensees.“’ These additional

build-out requirements may place Mtel at a competitive

disadvantage because it will incur additional costs in meet-

ing these requirements. We further note that the imposi-

tion of a payment requirement now, after our prior deci-

sion not to do so, may result in additional transaction

costs for Mtel in seeking additional financing for or dedi-

cating funds to the payment. Taking into account these

new costs, we conclude that it is appropriate to grant

Mtel a discount on its payment for the license even though

we recognize the cost and competitive effect of the more-

stringent build-out requirements that we are imposing and

the likely transaction costs Mtel will incur. Accordingly,

we will require Mtel to pay ninety (90) percent of the

lowest winning bid for a nationwide narrowband PCS

license or three million dollars ($3,000,000) less than the

lowest winning bid’ for a nationwide narrowband PCS

license, whichever is less.

21. Although we can not quantify the additional build-

out and transaction costs or the countervailing competitive

imbalance factor, we believe that, particularly in light of

the inherent uncertainty involved in projecting the value

of a license, a charge at these levels reasonably balances

these factors. We recognize that the $3 million alternative

might result in Mtel getting the license without payment

Or at minimal cost, depending on the value of the license

as established by the auction. In the event that this sce-

nario occurs, however, though, it would not undermine

our purposes in requiring payment. Mtel would get the

license without payment or at little cost (in recognition

of its additional build-out and transaction costs) only if

the value of the license itself were relatively small. If this

87 See para. 3942, infra.

50a

scenario occurs, we believe that the relatively low auction

prices will indicate that the price paid for the license at

auction is not a significant portion of the total costs a

narrowband PCS operator will incur, and the license

granted without payment will not be an unfair competitive

advantage for the preference winner.

22. We will condition the license upon Mtel making

this payment within thirty (30) days after this Memoran-

dum Opinion and Order, as well as the order granting its

pioneer’s preference, become final orders, that is, the

orders are no longer subject to administrative reconsider-

ation, or judicial review, appeal, or stay.

2. Authority to Require Payment

23. Our decision in this proceeding requires us to de-

termine whether we have authority to condition Mtel’s

license on its payment of a charge. The question of our

authority to require payment from pioneers was raised in

the rulemaking notice that began our Review of Pioneer's

Preference Rules;® but we did not resolve the question

in that proceeding because our decision at that time was

not to require payment for narrowband or broadband

PCS preference winners.” Now that we have decided to

require payment by Mtel, we must consider our authority

to do so.

24. Section 309(j) of the Communications Act,” the

source of our authority to select licensees by auction,

applies only when the Commission has accepted “mutually

exclusive applications” for licenses or construction per-

mits. Mtel, by operation of our pioneer’s preference rules,

is the only entity eligible to apply for the license at issue,

and there can be no mutually exclusive applications for

$8 Pioneer’s Preference Review NPRM, 8 FCC Red 7692, 7693,

para. 10.

and Order, 9 FCC Red at 610, para. 9.

70 47 U.S.C. § 309(j).

S5la

that license. Thus, we could not require Mtel to bid in

an auction under Section 309(j) unless we amended our

pioneer’s preference rules to change the nature of the

pioneer’s preference award.”

25.- Some parties at various Stages of these proceedings

have contended that Section 309(j) is the only source of

authority for the Commission to assess a charge (other

than a generally applicable fee) for a license, and that

we have no choice but to grant Mtel’s license without a

condition requiring payment.™ We disagree, and for the

reasons that follow, we find such authority under Section

4(i),” in conjunction with Sections 1, 303(r), 307, 309,

and 214," of the Communications Act.

26. Section 4(i), which has been called the “necessary

and proper clause” of the Communications Act.” au-

thorizes the Commission to

perform any and all acts, make such rules and regu-

lations, and issue such orders, not inconsistent with

this Act, as may be_necessary in the execution of its

functions.

We could not rely upon Section 4(i) to contravene an

express prohibition or requirement of the Act, as the lan-

™ See Pioneer’s Preference Review NPRM.

72 See, e.g., Narrowband Reconsideration, 9 FCC Red 1315-16,

para. 44,

8 47 U.S.C. § 154(i).

4 47 U.S.C. §§ 151, 803 (r), 307, 309, 214(c).

™ See New England Telephone & Telegraph Co. v. FCC, 826 F.2d

1101, 1108 (D.C. Cir. 1987), cert. denied, 490 U.S. 1039 (1989)

(quoting North American Telecomm. Ass’n v. FCC, 772 F.2d 1282,

1292 (7th Cir. 1985)). The reference is to Article I, Section 8,

Clause 18 of the Constitution, which authorizes Congress to make

all laws that shall be “necessary and proper” for carrying out the

enumerated powers “and all other powers” vested in the federal

government.

52a

guage of Section 4(i) itself makes clear. Thus, if any

provision of the Act prohibited the Commission from

imposing a charge on a pioneer’s preference recipient,

Section 4(i) would not be an independent basis for such

authority. But no provision of the Act addresses this

issue, either expressly or implicitly. Therefore, requiring

Mtel to pay for its license in the circumstances of this

case is “not inconsistent with the Act.” The remaining

inquiry underLSection 4(i) is whether the action the

Commission proposes to take “may be necessary in the

execution of its functions.” In application, Section 4(i)

has been held to justify FCC orders that clearly were not

within explicit grants of authority, where the orders rea-

76 See North American Telecomm. Ass’n v. FCC, 772 F.2d at

1292-93.

Assessing an auction-based charge is not contrary to the Supreme

Court’s decision in National Cable Television Ass’n v. FCC, 415

U.S. 336 (1974) (NCTA). In that case, as subsequently described,

the Supreme Court struck down Commission fees that the Court

perceived as an effort “to recover from regulated parties costs for

benefits inuring to the public generally.” Skinner v. Mid-American

Pipeline Co., 490 U.S. 212, 223-24 (1989) (Skinner). The Court in

NCTA said that the only proper measure of the fee was “value to

the recipient.” 415 U.S. at 342-43, 344. In this instance, we do

not seek to recover from Mtel (and, by extension, from other

licensees who pay auction-based charges) “costs for benefits inuring

to the public generally.” Skinner, 490 U.S. at 224. Indeed, the

“measure” of the charge for Mtel is precisely the one identified in

NCTA as the only proper measure—the value of the license to the

recipient. That value is determined by the auction price—the value

that bidders are willing to pay—discounted for Mtel’s special cir-

cumstances. See para. 2020, supra. This assessment thus does not

raise concerns that the Commission may have used an incorrect

standard in setting the charge. 415 U.S. at 343. Moreover, because

the action the Commis

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