Mobile Relay Associates v. Federal Communications Commission , 457 F.3d 1 ( 2006 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 3, 2006 Decided July 14, 2006
No. 04-1413
MOBILE RELAY ASSOCIATES AND
SKITRONICS, L.L.C.,
PETITIONERS
v.
FEDERAL COMMUNICATIONS COMMISSION AND
UNITED STATES OF AMERICA,
RESPONDENTS
SPRINT NEXTEL COMMUNICATIONS, INC. ET AL.,
INTERVENORS
On Petition for Review of Orders of the
Federal Communications Commission
David J. Kaufman argued the cause for the petitioners.
Joel Marcus, Counsel, Federal Communications
Commission, argued the cause for the respondents. Thomas O.
Barnett, Acting Assistant Attorney General, Robert B. Nicholson
and James J. Fredricks, Attorneys, United States Department of
Justice, and Samuel L. Feder, General Counsel, and Daniel M.
Armstrong, Associate General Counsel, Federal
Communications Commission, were on brief. Laurel R.
2
Bergold, Counsel, Federal Communications Commission,
entered an appearance.
Christopher J. Wright argued the cause for intervenors
Sprint Nextel Corporation et al. Timothy J. Simeone, Christine
M. Gill, and Martin William Bercovici were on brief.
Before: SENTELLE, HENDERSON and TATEL, Circuit Judges.
Opinion for the court filed by Circuit Judge HENDERSON.
KAREN LECRAFT HENDERSON, Circuit Judge: Mobile
communications operators Mobile Relay Associates (MRA) and
Skitronics petition for review of two orders of the Federal
Communications Commission (FCC or Commission)
reconfiguring the electromagnetic spectrum’s 800 MHz band.
The reconfiguration plan, which the Commission established to
eliminate interference with public safety communications,
segregates different communications system architectures in
separate newly-established segments of the band. Under the
plan, MRA and Skitronics, 800 MHz licensees which operate
Specialized Mobile Radio (SMR) systems that broadcast signals
from a base station antenna situated at a high elevation, will be
segregated from licensees who operate Enhanced Specialized
Mobile Radio (ESMR) systems, which use smaller and more
numerous base stations and a cellular network architecture.
Pursuant to the plan’s restrictions licensees required to move to
parts of the band set aside for SMR use will be unable to use that
spectrum to operate ESMR services. MRA and Skitronics argue
the reconfiguration plan arbitrarily treats them differently from
similarly situated licensees, constitutes unlawful retroactive
agency action and unconstitutionally takes their protected
interest in spectrum. They also claim that the FCC overvalued
spectrum offered by Nextel Communications, Inc. (Nextel)
3
pursuant to the spectrum migration. In addition MRA claims
that the Commission was obligated to compensate it for its
customer loss resulting from the migration. Nextel and fellow
ESMR licensee Southern LINC intervene, arguing the
Commission’s orders are lawful. For the reasons set forth
below, we deny the petition for review.
I.
Since the 1970s the FCC has licensed spectrum in the 800
MHz band to a variety of licensees providing mobile
communications. At that time technology did not allow for
contiguous spectrum use by a single user so a large part of the
800 MHz band was “interleaved,” with different kinds of
communications technologies operating on adjacent frequencies
in the band. Improving Public Safety Communications in the
800 MHz Band; Consolidating the 900 MHz Industrial/Land
Transportation and Business Pool Channels, Notice of Proposed
Rule Making (NPRM), 17 F.C.C.R. 4873, 4877 (2002). Because
of the minimal restrictions the Commission placed on the band’s
use, licensees operating in it have developed a number of
different network architectures to provide mobile
communications for users. One technology is a high-site
system, whose network architecture consists of a large antenna
placed at a high elevation such as a tower, mountain, hilltop or
tall building transmitting a signal across a roughly circular
geographical area with the antenna at the center. In a high-site
system the system operator assigns a network user to one
channel or frequency on which a base unit and all mobile radio
units on that user’s network operate. Signal propagation physics
dictate that the farther a mobile unit is from the central antenna,
the weaker the signal. Id. at 4879–80.
Around 1980 the FCC began licensing 800 MHz band
spectrum use to public safety providers like police and fire
departments and medical rescue teams, which use their spectrum
4
space to develop and operate mobile communications systems
by which first responders communicate with each other and with
their dispatchers via hand-held or vehicular mobile radio units.1
Id. The Commission also licensed frequencies in the band to
commercial licensees using high-site network architecture
known as Specialized Mobile Radio (SMR) systems. The
typical commercial service provided on an SMR system is
service for taxicab companies, service fleets and other
businesses requiring mobile communications which, like high-
site public safety communications systems, use a dispatcher.
The mobile units are all tuned to the same station and can both
listen and respond. An SMR licensee sells communications
services to subscribers which use the licensee’s equipment and
network architecture for mobile communications operations.
Later 800 MHz licensees developed “enhanced” SMR, or
ESMR, systems. In an ESMR system the system operator
divides the service area into several multiple antenna sites,
placed at a lower altitude, each of which is called a “cell” and
operates at a lower power and covers a smaller area than an
SMR high-site antenna.2 Unlike the SMR system, in which the
operator assigns the user a single channel for the entire service
area, in the ESMR system the same channel may be used in non-
adjacent cells by different users at the same time. As the mobile
1
Public safety providers also use high-site systems because they
are relatively inexpensive to set up and operate.
2
Traditional cellular telephone systems are similar to ESMR
systems in terms of their system architectures and the service they
provide to consumers but they operate in a different spectrum band
and use somewhat different technology. Improving Public Safety
Communications in the 800 MHz Band, 19 F.C.C.R. 14969, 14971 n.7
(2004). Unlike other cellular telephone providers, intervenors Nextel
and Southern LINC operate in the 800 MHz band.
5
unit moves from one cell to another, the communications link is
automatically “handed off” to the next cell and the channel
switches with no noticeable effect on the user. The ESMR
system can support a greater number of users than the SMR
system and, because it allows for a frequency’s reuse within the
same system, is a more efficient—and therefore more
profitable—use of spectrum. Id. at 4880.
The Commission issued two types of 800 MHz licenses for
the two different system architectures. Consistent with SMR
system use, the Commission first issued a site-based license to
an 800 MHz band operator, which license it granted free of
charge and allowed the user to construct a transmitter at a
specific site. The site-based license gives the licensee the right
to serve a particular area defined by the FCC via reference to the
territory covered by the licensee’s proposed high-site base
station. In the mid-1990s the FCC began auctioning economic
area (EA) licenses in the 800 MHz band, which license
authorized the licensee to serve a large geographic area, usually
defined by political boundaries, from any site or sites the
licensee chose, subject to the rights of pre-existing incumbent
site-based licensees already licensed to operate in that
geographic area.
As ESMR system use increased, so too did interference with
the high-site public safety systems in the 800 MHz band. The
source of the interference was the overlap of the different
architectures and their operations’ proximity on the spectrum,
particularly where a public safety mobile or portable radio was
within an ESMR transmitter’s range. Specifically, public safety
radio users experienced coverage loss in areas where adequate
coverage previously existed within their site-based system. For
example, if an en route police officer or firefighter near the
outermost border of his site-based network’s range attempted to
communicate by portable radio with a distant base station and
6
was also within the range of a low-power, low-elevation cell site
using an adjacent band frequency, his communication could be
disrupted and he could miss a critical transmission from his base
station or be unable to call for assistance.3 In 2002 the FCC
initiated a rulemaking and solicited proposals to remedy the
interference problem. NPRM, 17 F.C.C.R. 4873 (2002). In
response to the NPRM a wireless service provider coalition
including intervenor Nextel, the largest 800 MHz licensee and
ESMR system operator in the United States, proposed that the
Commission segregate high-site and ESMR systems into a
separate block of the 800 MHz band (the Consensus Plan).
Nextel offered for public safety use part of its 800 MHz
spectrum holdings in what the FCC previously called the
“General Category” part of the band. Because moving to a new
part of the spectrum band is an expensive process, requiring
retuning or even replacing the licensee’s (and, for commercial
operators, their customers’) equipment to operate on the new
frequency, Nextel also agreed to pay the costs associated with
the relocation of all current 800 MHz licensees. Nextel, as an
interference-causing ESMR provider, proposed to move its
operations to a new block of spectrum in the 800 MHz band
3
The Commission identified two types of interference caused by
cellular systems to which high-site systems were susceptible: out of
band emission (OOBE) interference, where a signal spills over a
transmitter’s licensed frequency into adjacent spectrum, and
intermodulation interference, where two signals in use in a particular
cell mix within the mobile radio to form a third frequency that
nullifies the desired signal. In the first type of interference the mobile
radio picks up a cellular system’s signal on an adjacent frequency,
thereby interfering with communications with the base station. In the
second type of interference the third frequency blocks the channel on
which the mobile radio attempts to communicate.
7
dedicated exclusively to ESMR operations. In exchange it also
sought new spectrum in the 1.9 GHz band.4
In a Report and Order released on August 6, 2004 the
Commission largely adopted the Consensus Plan’s structural
solution, dividing the 800 MHz band into several smaller blocks
and assigning ESMR cellular operations, high-site public safety
and commercial SMR operations to the appropriate blocks
according to their respective network architectures. Improving
Public Safety Communications in the 800 MHz Band;
Consolidating the 800 and 900 MHz Industrial/Land
Transportation and Business Pool Channels, Report and Order,
Fifth Report and Order, Fourth Memorandum Opinion and
Order, and Order, 19 F.C.C.R. 14969 (2004) (Rebanding
Decision).5 The Commission recognized the 800 MHz band’s
mélange of “generally incompatible” high-site and cellular
technologies as the “root cause” of the interference; thus it
decided that creating new frequency blocks and “placing similar
system architectures in like spectrum and isolating dissimilar
architectures from one another” would minimize interference.
Rebanding Decision ¶¶ 3, 22. The five smaller blocks of
frequencies created by the Rebanding Decision are as follows:
4
Frequencies in the 1.9 GHz band are used to offer broadband
personal communications services (PCS) such as high-speed wireless
Internet service.
5
The Commission later amended and clarified the Rebanding
Decision with three Errata and a Supplemental Order released on
December 22, 2004. Improving Public Safety Communications in the
800 MHz Band, 19 F.C.C.R. 25120 (2004) (Reconsideration Order).
The petitioners’ challenge encompasses the Rebanding Decision, the
Errata and the Reconsideration Order. Pet’rs’ Br. 1.
8
• A 6 MHz spectrum block at the 800 MHz band’s lower end
dedicated exclusively to public safety radio communication
systems (the NPSPAC block). All private users then-
located in this portion of the band must move to new
spectrum.
• An “interleaved” block for both public safety and private
systems. Most of the non-public safety operators that
remain in the interleaved block under the plan are SMR
licensees that operate high-site systems. A licensee in the
interleaved block can implement cellular architecture
without prior approval from the Commission so long as the
licensee does not operate a “high density” cellular system
as 47 C.F.R. § 90.7 defines that term. A high density system
uses especially low antenna sites and especially small cells;
ESMR systems were the spectrum use-intensive high
density cellular systems that principally caused interference
with public safety and commercial SMR systems.6
• An “expansion” block and a “guard” block to provide
additional spectral separation between ESMR users and
public safety and SMR users. Public safety channels
currently operating on expansion block frequencies can
relocate at their election. Non-high-density ESMR
operators can operate in the expansion and guard blocks
subject to strict interference guidelines. Rebanding
Decision ¶¶ 154–58.
6
The Rebanding Decision defines a “high-density cellular system”
as an ESMR system with more than five overlapping interactive cells
featuring “hand-off”capability (i.e., the capability to “hand off” calls
from one cell to the next as a user moves through the coverage area)
and with at least one site that uses a low elevation antenna as the
Rebanding Decision defines that term. Rebanding Decision ¶ 172.
9
• The ESMR block, reserved for licensees operating ESMR
systems. All high-density ESMR systems are required to
migrate to the ESMR block. No non-cellular system can
operate in the ESMR block. The Commission recognized
that in some cases the proposed ESMR block would not
contain sufficient spectrum to accommodate all ESMR
users’ systems. Accordingly, to allow intervenor Southern
LINC, a large ESMR operator in the Southeast, to migrate
to the ESMR block, the Commission expanded the size of
the ESMR block in those counties where Southern LINC
provides service. Rebanding Decision ¶¶ 164–66. The
Commission allowed Southern LINC and Nextel to reach a
private arrangement regarding spectrum-sharing in the
ESMR block.
The Rebanding Decision required many 800 MHz band
users, including Nextel and MRA, to relocate to different parts
of the spectrum. Many SMR and ESMR licensees, for example,
were located in what had been the General Category block but
was slated to become the new NPSPAC block; under the new
configuration those licenseholders would have nonconforming
operations and therefore had to move. The Commission stated
that it was “committed to ensuring” that the band
reconfiguration would not result in the degradation of existing
service, Rebanding Decision ¶ 26, and assigned relocation
details to a Transition Administrator appointed by and reporting
to the Commission. Id. at ¶ 201. To compensate Nextel for its
offer to pay all relocation costs, the Commission adopted a
“value for value” approach under which it would determine the
value of the 800 MHz spectrum Nextel was forfeiting, plus
relocation costs, and then offset that amount against the
estimated value of the 1.9 GHz replacement spectrum Nextel
requested as well as Nextel’s spectrum in the new ESMR block.
Rebanding Decision ¶ 212.
10
MRA, an SMR licensee operating in Colorado, provides
two-way communications services from four high-site locations
with overlapping service areas covering metropolitan Denver.
Pet’rs’ Br. 9. Its licenses are all of the site-based type.
Approximately half of its 800 MHz band spectrum is located in
the NPSPAC block and those operations are thereby scheduled
for migration to the interleaved block at Nextel’s expense. The
other half of its 800 MHz band spectrum is already located in
the interleaved block. Under the reconfiguration MRA will be
unable to develop a high-density ESMR architecture network
using its spectrum. Skitronics, an SMR licensee operating in the
Carolinas and West Virginia, holds 800 MHz site-based and EA
licenses in the interleaved block.7 Its site-based licenses are
located within the geographic boundaries of the EA licenses it
subsequently acquired at auction.8 It provides mobile
communications via two-way mobile dispatch services for
taxicab companies, trucking companies and other small
businesses. Like MRA, it also operates multi-cell SMR systems
in each of its markets and its customers can manually re-key to
a new channel when passing out of the range of one cell and into
7
As noted, the Rebanding Decision does not require a licensee
currently located in the interleaved block to move; however, the
licensee may relocate to the ESMR block at its own expense on the
condition it converts its operations to cellular architecture so as to
operate as an ESMR system in the ESMR block. Reconsideration
Order ¶ 81.
8
Skitronics won auctions for EA licenses in the Charleston, West
Virginia, Columbia, South Carolina, and Wilmington, North Carolina
EAs, intending to use each license to construct an ESMR system in
conjunction with its site-based license. See Pet’rs’ Br. 11; Improving
Public Safety Communications in the 800 MHz Band, Skitronics
Comments, WT Docket No. 02-55, at 3-4 & n.4 (May 6, 2002).
11
another. Id. at 11. MRA and Skitronics petition for review of
the Rebanding Decision under 47 U.S.C. § 402(a).
II.
We have jurisdiction to review FCC rulemaking orders
under the Communications Act, 47 U.S.C. § 402, and the
Judicial Review Act, 28 U.S.C. § 2342. Under the
Administrative Procedure Act we reverse an agency’s decision
only if it is “arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A).
To pass our review the agency need only articulate a “rational
connection between the facts found and the choice made.”
Motor Vehicle Mfrs. Ass’n v. State Farm Mutual Ins. Co., 463
U.S. 29, 43 (1983) (State Farm) (quotations and citation
omitted). In reviewing an FCC order, we “presume the validity
of the Commission’s action and will not intervene unless the
Commission failed to consider relevant factors or made a
manifest error in judgment.” Consumer Elecs. Ass’n v. FCC,
347 F.3d 291, 300 (D.C. Cir. 2003). We have previously
declared that if the Commission is “fostering innovative
methods of exploiting the spectrum,” it “functions as a
policymaker” and is “accorded the greatest deference by a
reviewing court.” Teledesic LLC v. FCC, 275 F.3d 75, 84 (D.C.
Cir. 2001) (quotation omitted). We uphold the Commission if
it makes a “technical judgment” that is supported “with even a
modicum of reasoned analysis,” “absent highly persuasive
evidence to the contrary.” Hispanic Info. & Telecomm. Network
v. FCC, 865 F.2d 1289, 1297–98 (D.C. Cir. 1989).
MRA and Skitronics make five challenges to the Rebanding
Decision, claiming the FCC (1) arbitrarily treated them
differently from similarly situated intervenors Nextel and
Southern LINC; (2) engaged in unlawful retroactive rulemaking
and, alternatively, even if its action constituted permissible
“secondary retroactivity” under Bowen v. Georgetown
12
University Hospital, 488 U.S. 204 (1988), its action was
unreasonable; (3) confiscated their spectrum rights without
compensation in violation of the Takings Clause of the Fifth
Amendment to the United States Constitution; (4) unreasonably
declined to reimburse MRA for “churn,” or loss of subscribers,
due to migration; and (5) undervalued the new spectrum granted
to Nextel pursuant to the Consensus Plan. We believe that the
first four claims lack merit and that MRA and Skitronics lack
standing to bring the fifth.
A.
MRA and Skitronics first claim they are similarly situated
to Nextel and Southern LINC in that they are 800 MHz licensees
operating multi-cell SMR systems. Like Nextel and Southern
LINC, they also held spectrum rights which allowed them to
develop more efficient spectrum-use architectures and to deploy
newer equipment, i.e., convert to ESMR. Despite these
similarities, however, under the Rebanding Decision the FCC
assigned Nextel and Southern LINC to the ESMR block, which
allows them to operate ESMR systems, and assigned MRA and
Skitronics to the interleaved block, which is dedicated to SMR
operations, thus depriving them of the flexibility to convert to
high-density ESMR architecture in the future. MRA and
Skitronics argue the Commission therefore acted arbitrarily in
allowing Nextel and Southern LINC to move into the ESMR
block without affording them the same right.
Despite the similarities they claim to share with Nextel and
Southern LINC, MRA and Skitronics acknowledged both to the
Commission during the rulemaking process and to us on brief
that their current operations do not meet the Commission’s
definition of “cellular” under the Rebanding Decision. See
Improving Public Safety Communications in the 800 MHz Band,
Reply MRA Comments, WT Docket No. 02-55, at 2 (Aug. 7,
2002) (“MRA holds numerous licenses used for both internal
13
communications and service to customers, all of which operate
analog-only using the same type of system architecture (i.e.,
high elevation, high-power repeater transmitter, reaching mobile
and portable units over a large geographic area) as do most other
traditional SMR . . . and Public Safety Licensees in the 800
MHz band.”); Improving Public Safety Communications in the
800 MHz Band, Skitronics Comments, WT Docket No. 02-55,
at 2 (May 6, 2002) (“Skitronics presently only offers traditional
SMR mobile dispatch services . . . .”); Pet’rs’ Br. 9 (“MRA’s
high-site system . . . lacks hand-off capability . . . .”); id. at 26
(“Petitioners’ current operations do not meet the FCC’s
definition of ‘cellular’ for this proceeding, i.e., at least five
overlapping cells with hand-off” capability.). This distinction
alone is a sufficiently reasonable basis for the FCC’s different
treatment of the SMR and the ESMR licensees. The
Commission’s stated purpose in its Rebanding Decision was to
create distance on the spectrum between systems with high-site
architecture—i.e., SMR operators as well as public-safety
operators—and ESMR systems in order to reduce harmful
interference caused by the ESMR systems. See Rebanding
Decision ¶ 3 (reconfiguration of the 800 MHz band is intended
to separate “generally incompatible technologies” whose current
proximity to each other is the identified “root cause” of
unacceptable interference). Because the ESMR systems caused
the interference with high-site public safety and SMR systems,
it was reasonable for the Commission to segregate MRA and
Skitronics, both high-site SMR system operators, from the new
ESMR block.
MRA and Skitronics rely on our decision in Melody Music
v. FCC, 345 F.2d 730 (D.C. Cir. 1965), for the proposition that
the Commission cannot discriminate within a class of licenses.
There the FCC refused to renew the license of a radio station
operator who had secretly given assistance to contestants in
answering questions on a number of television quiz shows the
14
licensee had produced. At the same time, however, the
Commission, making no mention of the network’s role (or lack
of role) in the deception, had granted several license renewals to
NBC, which aired and for a time owned the tainted quiz shows.
The radio station operator appealed the FCC’s denial of its
request for license renewal and we concluded that the
Commission’s “refusal at least to explain its different treatment
of appellant and NBC was error.” Id. at 732. Because the
Commission did not “explain the relevance of those differences
[between NBC and the radio station] to the purposes of the
Federal Communications Act,” we remanded the matter for it to
explain its decision to treat the two renewal applicants
differently, given that both “were connected with the deceptive
practices and their renewal applications were considered by the
Commission at virtually the same time.” Id. at 733, 732. In
Melody Music, we concluded the FCC’s decision to treat the two
licensees differently was arbitrary and capricious because it did
not give an adequate explanation for doing so. See also Tel. &
Data Sys. v. FCC, 19 F.3d 655, 657 (D.C. Cir. 1994) (FCC’s
explanation for not applying prior prevailing standard was
“intolerably mute” rather than “tolerably terse” and therefore
matter was remanded for more fully articulated rationale)
(quoting Action for Children’s Television v. FCC, 821 F.2d 741,
746 (D.C. Cir. 1987)). Here, by contrast, the FCC adequately
explained its rationale for treating SMR systems differently
from ESMR systems—high-site systems like those operated by
MRA and Skitronics, as well as by public safety entities,
suffered from interference due to the cellular architecture of
licensees like Nextel and Southern LINC. Unlike the two
licensees in Melody Music, the licensees here are not similarly
situated—Nextel and Southern LINC operate cellular systems
and MRA and Skitronics do not—and the FCC explained in
detail why their differences justify differential treatment. See
Rebanding Decision ¶ 3 (high-site and cellular systems
15
“generally incompatible”); id. ¶ 22 (segregation will “minimize
unacceptable interference in the 800 MHz band by placing
similar system architectures in like spectrum and isolating
dissimilar architectures from each other”). The Commission’s
decision to authorize Nextel’s and Southern LINC’s move to the
ESMR block but not to allow MRA and Skitronics the same
move was eminently reasonable.
B.
Skitronics also claims the FCC engaged in retroactive
rulemaking because Skitronics had purchased eight EA 800
MHz SMR licenses at auction with the expectation that they
could be used for a number of operations, including ESMR
operations, as business permitted.9 With the Rebanding
Decision, however, Skitronics maintains, the Commission
retroactively impaired the rights—namely Skitronics’ right
before the Rebanding Decision to use its eight EA licenses to
operate an ESMR system in the future—Skitronics had
bargained for at auction.
In their reply brief, MRA and Skitronics discussed the
FCC’s Reconsideration Order which, inter alia, provided
“Skitronics partial relief by allowing it” and other EA licensees
“to move immediately to the ESMR [block] with its entire
system,” including its site-based systems, “operating high-site
in the short term if it must, so long as it converts its entire
system to ESMR before the end of its current license term of
March 21, 2011.” Pet’rs’ Reply Br. 3 (citing Improving Public
Safety Communications in the 800 MHz Band: Memorandum
Opinion and Order, 20 F.C.C.R. 16015, 16027 ¶ 25 (2005)
9
At the time of the Rebanding Decision it appears MRA held only
site-based licenses and therefore does not join the retroactivity
argument. See Pet’rs’ Br. 12 n.5; Resp’t’s Br. 32.
16
(Reconsideration Order)). While the Rebanding Decision had
dedicated the ESMR block exclusively for the use of ESMR
systems, the Reconsideration Order allowed non-ESMR
licensees to relocate both their EA and site-based licenses to the
ESMR block so long as the site-based licenses were part of an
“integrated communications system” at the time of the
Rebanding Decision. Reconsideration Order ¶ 25.10 Because
Skitronics had an “integrated communications system” when the
Rebanding Decision issued, it retains the ability to move to the
ESMR block so long as it converts to ESMR by the end of its
current license term.
Still, despite the Reconsideration Order, Skitronics’ claim
is not moot. Although Skitronics now has the ability to move to
the ESMR block and convert to ESMR architecture, it must
convert to ESMR by 2011, a limitation on its license that would
not exist were we to grant the relief it seeks.11 On the merits,
10
The Commission made this change in recognition of the fact that
EA licenseholders’ networks sometimes “employ a patchwork of EA-
based and site-based licenses.” See Rebanding Decision ¶ 163;
Reconsideration Order ¶ 25.
11
Skitronics also claims that the Reconsideration Order granted it
only partial relief because the Rebanding Decision treated it unfairly
compared to Southern LINC in terms of reimbursement expenses and
coverage footprint; the different treatment of Southern LINC and
Skitronics is legitimate, however, because, as discussed in Part II.A
supra, they are not similarly situated and the Commission acted
reasonably in treating them differently. Skitronics’ additional
challenge to the Reconsideration Order because, it alleges, it was
treated differently from mobile communications operators Airpeak and
Airtel is not properly before us as the challenge appeared for the first
time in the reply brief. See AT&T v. FCC, 974 F.2d 1351, 1354 (D.C.
Cir. 1992) (“complainants [must], before coming to court, . . . give the
FCC a fair opportunity to pass on a legal or factual argument”)
17
however, the retroactivity claim fails. Retroactive rules “alter[]
the past legal consequences of past actions.” Bowen, 488 U.S.
at 219 (Scalia, J., concurring) (emphasis in original). However,
an agency order that “alters the future effect, not the past legal
consequences” of an action, Sinclair Broad. Group v. FCC, 284
F.3d 148, 166 (D.C. Cir. 2002), or that “upsets expectations
based on prior law,” DirecTV, Inc. v. FCC, 110 F.3d 816, 826
(D.C. Cir. 1997) (quotation omitted), is not retroactive. While
the Rebanding Decision may have frustrated Skitronics’
expectation that it would be able to operate an ESMR system in
its then-current spectrum allotment, the effect of the Rebanding
Decision is purely prospective. To conclude otherwise would
hamstring not only the FCC in its spectrum management, but
also any agency whose decision affects the financial
expectations of regulated entities. As we stated in Chemical
Waste Management v. EPA, 869 F.2d 1526 (D.C. Cir. 1989),
It is often the case that a business will undertake a certain
course of conduct based on the current law, and will then
find its expectations frustrated when the law changes. This
has never been thought to constitute retroactive lawmaking,
and indeed most economic regulation would be unworkable
if all laws disrupting prior expectations were deemed
suspect.
Id. at 1536. As in Chemical Waste Management, Skitronics
“finds its present range of options constrained by its own past
actions [the purchase of EA licenses at auction] even though it
could not have foreseen those consequences when the action
(quoting City of Brookings Mun. Tel. Co. v. FCC, 822 F.2d 1153,
1163 (D.C. Cir. 1987)).
18
occurred. This does not, however, make the rule a retroactive
regulation.” Id.Secondary retroactivity—which occurs if an agency’s rule
affects a regulated entity’s investment made in reliance on the
regulatory status quo before the rule’s promulgation—will be
upheld “ ‘if it is reasonable,’ i.e., if it is not ‘arbitrary’ or
‘capricious.’ ” DirecTV, 110 F.3d at 826 (citation omitted); see
Sinclair, 284 F.3d at 166 (if Commission rule is “[a]t most”
secondarily retroactive, “the only question is whether the
agency’s action is reasonable”). The Rebanding Decision was
reasonable because, as discussed earlier, the Commission sought
to segregate incompatible mobile communications architectures
to reduce interference with high-site public safety systems
pursuant to its public interest mandate. See DirecTV, 110 F.3d
at 826 (“A change in policy is not arbitrary or capricious merely
because it alters the current state of affairs. The Commission is
entitled to reconsider and revise its views as to the public
interest and the means needed to protect that interest if it gives
a reasoned explanation for the revision.”) (quotation omitted).
C.
MRA and Skitronics also make a constitutional claim: In
reconfiguring the 800 MHz band the Commission has
unlawfully taken their property in violation of the Takings
Clause because the segregation of the SMR system architectures
to parts of the 800 MHz band that do not allow for conversion
to ESMR architecture reduces the value of their spectrum
assignments. MRA and Skitronics held 800 MHz SMR
spectrum licenses which, until the reconfiguration of that band,
entitled them to operate either high-site SMR or cellular ESMR
systems and to progress from one mode to the other if business
needs required. The FCC’s action deprives them of this
flexibility without compensation, they argue, and therefore
constitutes an unconstitutional taking.
19
The Commission grants a licensee the right to “the use of”
the spectrum for a set period of time “but not the ownership
thereof.” 47 U.S.C. § 301; see also FCC v. Sanders Bros. Radio
Station, 309 U.S. 470, 475 (1940) (“The policy of the
[Communications] Act is clear that no person is to have
anything in the nature of a property right as a result of the
granting of a license.”); NBC v. FCC, 516 F.2d 1101, 1191
(D.C. Cir. 1975) (spectrum “is not the private property of any
individual or group”) (Tamm, J., supporting order vacating grant
of en banc rehearing and remand to FCC), cert. denied, 424 U.S.
910 (1976). Moreover, the Commission has the unilateral
authority, provided it gives notice to the licensee, to modify a
license “either for a limited time or for the duration of the term
thereof, if in the judgment of the Commission such action will
promote the public interest, convenience, and necessity.” 47
U.S.C. § 316(a)(1). Broadly defined, the licenses MRA and
Skitronics hold confer the right to use the spectrum for a
duration expressly limited by statute subject to the
Commission’s considerable regulatory power and authority.
This right does not constitute a property interest protected by the
Fifth Amendment.
D.
MRA next maintains that even if the FCC validly
reconfigured the 800 MHz band, it nonetheless acted arbitrarily
in refusing to compensate MRA for the inevitable customer loss,
or “churn,” that it will suffer as a result of the migration. A
migrating 800 MHz SMR can expect customer churn in the
range of 50 per cent when it migrates, MRA claims, and its
losses due to churn will amount to more than a million dollars.
Pet’rs’ Br. 40–41. MRA asserts the FCC’s failure to include
compensation for churn in calculating Nextel’s reimbursement
of other relocation costs is arbitrary and capricious. Not so.
20
MRA estimates its customer loss based on an earlier
migration from the 800 MHz band that occurred when it sold
800 MHz channels to Nextel and moved its customers to
systems operating below 512 MHz. See Notice of Oral Ex Parte
Presentation, MRA Comments, WT Docket No. 02-55, at 12
(Oct. 23, 2002). But MRA’s estimate is too flimsy of a basis on
which to challenge the Commission’s reconfiguration. First, the
customers’ channels were earlier moved out of the 800 MHz
completely; therefore MRA had to replace its customers’
handsets completely. But the reconfiguration under attack here
requires simply retuning and consequently customer
inconvenience here is not, as MRA claims, “exactly the same.”
See Int’rs’ Br. 26 n.83. And as the FCC points out, we have
consistently upheld its decisions that impose considerable costs
on private actors in the regulated industry. See, e.g., Cmty.
Television, Inc. v. FCC, 216 F.3d 1133 (D.C. Cir. 2000)
(upholding rules requiring all broadcasters to convert from
analog to digital). The Commission reasonably decided not to
compensate MRA for churn.
E.
Finally MRA and Skitronics argue that the FCC improperly
undervalued that part of the ESMR block of the reconfigured
800 MHz spectrum it granted Nextel under the Rebanding
Decision. The FCC argues that even if MRA and Skitronics are
correct that it undervalued the spectrum granted to Nextel, MRA
and Skitronics have identified no injury traceable to the alleged
overvaluation. Furthermore, assuming MRA and Skitronics
prevailed on the improper valuation claim, Nextel would then be
required to pay additional funds into the U.S. Treasury pursuant
to the agreement between it and the Commission.12 The
12
Under the agreement, if the relocation costs Nextel must pay plus
the value of its relinquished spectrum amounts to less than the value
21
possibility that MRA and Skitronics would receive the relief
they seek—the cancellation of the Rebanding Decision—based
on the theory that the Commission would revalue relocation
costs so high that Nextel would withdraw its offer of
compensation under the Consensus Plan is “purely speculative.”
Because MRA’s and Skitronics’ alleged injury is far from likely
to be redressed by the Commission, they lack standing to press
their claim. Resp’t’s Br. 42 (citing Nat’l Wrestling Coaches
Ass’n v. Dep’t of Educ., 366 F.3d 930, 938 (D.C. Cir. 2004)
(“[A] plaintiff’s standing fails where it is purely speculative that
a requested change in government policy will alter the behavior
of regulated third parties.”)).
In response MRA and Skitronics argue that the windfall
Nextel receives due to the undervaluation will be of material
assistance in Nextel’s efforts to compete against them. Agency
action that results in such a “skewed playing field” among
competitors, they claim, is a sufficiently redressable injury to
confer standing. Pet’rs’ Reply Br. 19–20. While we have
recognized competitor standing in the licensing context, the
party seeking to establish standing on that basis “must
demonstrate that it is ‘a direct and current competitor whose
bottom line may be adversely affected by the challenged
government action.’ ” KERM, Inc. v. FCC, 353 F.3d 57, 60
(D.C. Cir. 2004) (quoting New World Radio v. FCC, 294 F.3d
164, 170) (D.C. Cir. 2002)) (emphases in New World). In
KERM, Inc. we concluded that because KERM did not present
evidence that the FCC’s failure to take enforcement action
against its competitor KAYH caused it loss such as “lost
advertising revenues for KERM or otherwise adverse[] [effects
of both the replacement 1.9 GHz spectrum and the ESMR spectrum it
receives under the Consensus Plan, it must pay the difference into the
U.S. Treasury. See Rebanding Decision ¶ 34.
22
on] KERM’s financial interests,” it could not establish standing
on the basis of competitive injury. Id. at 61. KERM instead
“vaguely assert[ed] only that it competes with KAYH and that
its own radio stations serve much of the same audience as
KAYH. Such [b]are allegations are insufficient . . . to establish
a petitioner’s standing to seek judicial review of administrative
action.” Id. (quotation marks omitted) (alterations in original)
(quoting Sierra Club v. EPA, 292 F.3d 895, 898 (D.C. Cir.
2002)).
The FCC claims that “it does not matter that MRA may
compete with Nextel in some minor way,” emphasizing that
“Nextel operates on a nationwide basis, not just in the 2 or 3
markets where MRA and Skitronics have operations,” Resp’t’s
Br. 42. Nevertheless, because Nextel operates in some of the
same markets, the requirement that Nextel be a “direct” and
“current” competitor of MRA and Skitronics is likely met.
MRA and Skitronics lack competitor standing, however,
because they have failed to make a concrete showing that they
are likely to suffer financial injury. Claiming the regulatory
action creates a “skewed playing field,” as MRA and Skitronics
assert, is not enough; that claim is a “bare assertion” of
competition of the type we found insufficient in KERM, Inc. Cf.
Ass’n of Data Processing Serv. Orgs. v. Camp, 397 U.S. 150,
152 (1970) (agency rule allowing banks to sell data processing
services interfered with existing contracts held by data
processing company petitioner which could therefore show more
than that rule’s application “might entail” “some future loss of
profits”). Accordingly, MRA and Skitronics are without
competitor standing to bring their valuation claim.
For the foregoing reasons, MRA’s and Skitronics’ petition
for review of the Federal Communication Commission’s
Rebanding Decision and Reconsideration Order is denied.
So ordered.