FIBERTOWER SPECTRUM HOLDINGS, LLC, FiberTower Corporation, Appellant v. FEDERAL COMMUNICATIONS COMMISSION, Appellee. Fixed Wireless Communications Coalition, Inc., Intervenor.
No. 14-1039.
United States Court of Appeals, District of Columbia Circuit.
Argued Jan. 20, 2015. Decided April 3, 2015.
782 F.3d 692
Before ROGERS and SRINIVASAN, Circuit Judges, and WILLIAMS, Senior Circuit Judge.
Opinion for the court filed by Circuit Judge ROGERS.
ROGERS, Circuit Judge:
This appeal challenges orders of the Federal Communications Commission denying applications to renew 689 wireless spectrum licenses in the 24 gigahertz (“GHz“) and 39 GHz bands for failure to meet the “substantial service” performance standard during the license term. It succeeds only in part. FiberTower Spectrum Holdings, LLC, and FiberTower Corporation (hereinafter “FiberTower“) contend that the Commission‘s interpretation of the performance standard as requiring some actual construction in each license area conflicts with the Commission‘s statutory mandate in
I.
The Communications Act of 1934, as amended, establishes a system for licensing the use of radio spectrum, and vests in the Commission the exclusive authority to grant radio licenses. See
performance requirements, such as appropriate deadlines and penalties for performance failures, to ensure prompt delivery of service to rural areas, to prevent stockpiling or warehousing of spectrum by licensees or permittees, and to promote investment in and rapid deployment of new technologies and services.
Under Commission rules, licenses in the 24 and 39 GHz bands, at issue here, are awarded for ten years, and the licensee must demonstrate “substantial service” in the area covered by the license by the time of renewal. See
A failure to demonstrate substantial service by the renewal deadline “will result in forfeiture of the license.”
In May 2012, FiberTower filed for an extension or a waiver of the 2012 deadline with respect to 699 licenses. Two weeks later, FiberTower also filed substantial service showings for each license. In November 2012, the Bureau found that FiberTower had not satisfied the substantial service requirement. See Bureau Order, ¶ 18. Ten licenses in which the Bureau found there had been “some level of actual construction as of the deadline,” id. ¶ 12, were not terminated, but the other 689 licenses were because FiberTower‘s “antecedent activities“—investing in new technology, developing its own back-office operations, acquiring equipment and property, and making its spectrum available for lease on the secondary market—could not alone “constitute substantial service.” Id. ¶ 22 (citing In the Matter of Amendment of Part 101 of the Comm‘n‘s Rules to Facilitate the Use of Microwave for Wireless Backhaul and Other Uses and to Provide Additional Flexibility to Broadcast Auxiliary Service and Operational Fixed Microwave Licensees, 27 FCC Rcd. 9735, ¶ 104 (2012) (”Wireless Backhaul Order“); 26 FCC Rcd. 11614, ¶ 114 (2011)). Concluding that FiberTower‘s failure to “build out” its licenses was a “business decision” within its control, the Bureau denied an extension. The Bureau also concluded the public interest would not be served by waiving the substantial service requirement. See also Bureau Order, ¶ 39.
The Commission affirmed, upon consideration of FiberTower‘s Application for Review and Petition for Reconsideration. In the Matter of FiberTower Spectrum Holdings LLC, 28 FCC Rcd. 6822 (2013) (”Order“); 29 FCC Rcd. 2493 (2014) (”Reconsideration Order“). The Commission endorsed the Bureau‘s conclusion, based on prior Commission decisions, that FiberTower‘s antecedent activities without actual construction could not satisfy the substantial service requirement. See Order, ¶ 39 & n.156 (citing Wireless Backhaul Order, ¶ 104). Agreeing also that FiberTower‘s decision not to construct links was a voluntary business decision, the Commission rejected FiberTower‘s claims that the
II.
FiberTower‘s statutory challenge flounders under
The filing of a petition for reconsideration shall not be a condition precedent to judicial review ... except where the party seeking such review ... relies on questions of fact or law upon which the Commission, or designated authority within the Commission, has been afforded no opportunity to pass.
FiberTower contends that the Commission‘s construction requirement as a part of demonstrating “substantial service” is “at odds with” the statutory goal in
FiberTower‘s suggestions that it nonetheless afforded the Commission an “opportunity to pass” on its statutory argument are unpersuasive. First, FiberTower states that “[a] core premise of FiberTower‘s application for review was that the Commission‘s policy of disregarding leasing and other activities hindered ‘legitimate investment’ and the ‘develop[ment] [of] the licensed spectrum.‘” Reply Br. 4 (quoting Application for Review, at 21-22) (alterations in original). But the Application for Review characterized that argument only as illustrating why the build-out requirement was “contrary to the public interest,” Application for Review, at 20, not that the requirement was contrary to
Time Warner Entertainment Co., L.P. v. FCC, 144 F.3d 75 (D.C. Cir. 1998), on which FiberTower relies, is inapposite. In that case, the court held that its reasoning in an earlier remand had given the Commission an “opportunity to pass” on an issue, even though the issue had not been raised in a petition for reconsideration. Id. at 81-82. The court observed that the logic of its prior decision meant it was unreasonable for the Commission not to respond on remand. Id. The court viewed the Commission‘s position that the issue had been conceded in a pre-remand filing to be “a disingenuous gimmick used to avoid a principled response to our remand.” Id. at 81. Here, by contrast, no other party brought the
Because FiberTower failed to present its
III.
FiberTower also challenges the Commission‘s interpretation of “substantial service” as requiring construction as a matter of law, on the ground that it conflicts with the rule originally promulgated by the Commission, and as applied to forty-two license renewal applications, where substantial service showings stated construction had occurred.
A.
In adopting the substantial service standard as the condition for license renewal in the 39 GHz and 24 GHz bands, the Commission emphasized the need for “flexibility in meeting the[] performance requirement” and rejected proposals to require a specific number of constructed links per market population or geographic area, because “such a build-out requirement would be unduly restrictive and burdensome.” 39 GHz Order, ¶¶ 42, 43; see 24 GHz Order, ¶¶ 37-38. In FiberTower‘s view, by interpreting “substantial service” to include a rigid construction requirement, the Commission adopted the very inflexible build-out requirements that it rejected during the rulemaking.
The regulations define “24 GHz Service” as involving constructed links. See
The rulemakings show that in discussing the standard for the 39 GHz band, the Commission acknowledged that the types of services available from 39 GHz providers are “tremendously varied.” 39 GHz Order, ¶ 42. It decided not to apply to this band the then-existing general requirement to construct one link within 18 months of licensure, id. ¶ 39, and declined to replace it with “a specific build-out benchmark.” Id. ¶ 43 (emphasis added). The performance standards that it rejected as too rigid involved specific build-out requirements—“four links per 100 square kilometers ... within 18 months,” “a specific number of links, increasing over time, per geographic area,” or “a specific number of link installations based on the market‘s population.” Id. ¶¶ 43, 44, 45. The Commission explained that the specificity of those construction requirements did “not adequately take into account the differences among licensees,” id. ¶ 44, such as varying market size, population density, and services offered, id. ¶¶ 44-46. But in providing examples for what might satisfy substantial service, the Commission still described activities that involved link construction. See 24 GHz Order, ¶ 38; 39 GHz Order, ¶¶ 42 & n.97, 46. For instance, its “examples of presumed substantial service” were “based on a specific number of links per population.” Id. ¶ 42. The one “showing tailored to a particular type of operation” it described involved “giv[ing] greater weight to a high capacity link than is recognized by the specific build-out option.” Id. ¶ 42 n.97. In addition, the Commission rejected “the arguments of some commenters that a build-out requirement should not be imposed” at all. Id. ¶ 50. The Commission did not state that the flexibility it sought in adopting “substantial service” as the performance standard extended to allowing license renewal where there had not been any construction. Rather, the Commission described its approach as a “build-out/renewal requirement[]” that would “give licensees a sufficient opportunity to construct their systems.” 39 GHz Order, ¶¶ 47, 49.
FiberTower‘s reference to other regulations that contrast “substantial service” with specific build-out requirements is also unavailing. Although these regulations list different types of “performance or build-out requirement[s]“—to include “e.g., a requirement that the licensee construct and operate one or more specific facilities, cover a certain percentage of geographic area, cover a certain percentage of population, or provide substantial service,”
The fact that, as FiberTower points out, neither the regulations nor the rulemakings for the 39 or 24 GHz bands include a statement that construction of at least one link is required is of no moment. The Commission‘s interpretation is consistent with the text of the regulations and rulemaking records. And courts are to “defer to an agency‘s interpretation of its regulations, even in a legal brief, unless the interpretation is ‘plainly erroneous or inconsistent with the regulation[s]’ or there is any other ‘reason to suspect that the interpretation does not reflect the agency‘s fair and considered judgment on the matter in question.‘” Talk America, Inc. v. Mich. Bell Tel. Co., 131 S. Ct. 2254, 2261 (2011) (quoting Chase Bank USA, N.A. v. McCoy, 562 U.S. 195, 208 (2011) (quoting Auer v. Robbins, 519 U.S. 452, 461 (1997))); see Rural Cellular Ass‘n v. FCC, 685 F.3d 1083, 1093 (D.C. Cir. 2012). FiberTower has not shown that the Commission‘s interpretation of the substantial service requirement is inconsistent with the regulatory text or the original rulemakings.
B.
FiberTower also contends that the Commission misapplied its substantial service interpretation with respect to forty-two license renewal applications. For those licenses, FiberTower submitted substantial service showings stating that links had been constructed and service was being provided in the license area. For example, the substantial service showing for license WMF848 stated that “FiberTower so far has one link built and operating at a school in Kansas City, Missouri, the geographic area of this license.” FiberTower Spectrum Holdings, LLC, Substantial Service Showing, FRN 0019211895, at 8 (June 1, 2012). Neither of the challenged orders indicate an awareness of these construction notifications. The Bureau‘s substantial service analysis was predicated on the finding that there was no “construction of any facilities whatsoever” in any of the terminated license areas. Bureau Order, ¶ 22. The Commission, in turn, adopted the Bureau‘s conclusion that “FiberTower was seeking a finding of substantial service without any construction of facilities,” Order, ¶ 38, and acted on the basis of its understanding that the Bureau “did not take action against any license where construction had been reported, whether or not the construction met a safe harbor,” id. ¶ 33 n.133.
The Commission responds on appeal that FiberTower‘s as applied challenge is barred because FiberTower failed to present this argument to the Commission. FiberTower stated in its Application for Review that:
The Bureau erred as a matter of fact when it found that no facilities have been built-out in FiberTower‘s licensed areas. The record demonstrates that, as of June 1, 2012, a significant amount of construction had occurred in many of FiberTower‘s license areas that the Bureau identified for termination.
Application for Review, at 23. This statement would appear to alert the Commission to FiberTower‘s claim of factual error, and afford the Commission an “opportunity to pass” on the issue, as required by
But the Commission overstates its position in maintaining that it “had no notice of FiberTower‘s ‘specific objections.‘” Appellee‘s Br. 39 (quoting U.S. Airwaves, Inc. v. FCC, 232 F.3d 227, 236 (D.C. Cir. 2000)). The exhaustion cases on which the Commission relies involved arguments that had not been made at all in the Application for Review or Petition for Reconsideration. See Environmentel, LLC v. FCC, 661 F.3d 80, 84 (D.C. Cir. 2011); Qwest Corp. v. FCC, 482 F.3d 471, 478 (D.C. Cir. 2007); U.S. Airwaves, 232 F.3d at 236; Bartholdi Cable, 114 F.3d at 279. Here, FiberTower alerted the Commission to its argument of factual error in the Application for Review. Because the Commission requires that substantial service showings be made on a license-by-license basis, see Order, ¶ 39 n.155, it ill behooves the Commission to imply that it can cancel licenses for failure to show any construction without reviewing each substantial service showing. To the extent the Commission maintains on appeal that the forty-two license renewal applications do not adequately demonstrate substantial service because they failed to “demonstrat[e] the extent of [the constructed] facilities or that those facilities served customers or provided internal service,” Appellee‘s Br. 39-40, that was not the basis on which the Commission denied the renewal applications and cannot provide the basis for upholding the Commission‘s action. See SEC v. Chenery Corp., 318 U.S. 80, 94 (1943).
We therefore vacate the Commission‘s orders denying renewal applications for the forty-two licenses for which FiberTower submitted substantial service showings stating there had been construction. “An agency action is arbitrary and capricious if it rests upon a factual premise that is unsupported by substantial evidence.” Ctr. for Auto Safety v. Fed. Highway Admin., 956 F.2d 309, 314 (D.C. Cir. 1992). Upon remand the Commission can determine whether there was substantial service for those licenses.
IV.
FiberTower‘s other challenges relate to the denials of its requests for an extension or waiver of the substantial service deadline beyond June 1, 2012. In view of our conclusion in Part III.B, supra, we vacate the orders denying these requests, so that the Commission may rule on FiberTower‘s requests in light of an accurate understanding of the license renewal record. Although the burden for challenging the Commission‘s denial of waiver and extension is heavy, see Morris Commc‘ns, Inc. v. FCC, 566 F.3d 184, 188 (D.C. Cir. 2009), the Commission has acknowledged that the proportion of licenses that have been built out may be relevant to its extension analysis. See Order, ¶ 26 (discussing 2 Lightspeed LP, File Nos. 0005222510-0005222513 (July 23, 2012)).
Accordingly, we affirm in part and we remand for the Commission to determine whether there was substantial service for the forty-two licenses in which FiberTower stated there had been construction, and to consider anew FiberTower‘s requests for an extension or waiver of the substantial