WASHINGTON-A federal appeals court here rejected a challenge to the Federal Communications
Commission’s auction of 800 MHz specialized mobile radio licenses in 1997, but struck down rules imposing tighter
buildout requirements on firms that got licenses before the auction than on those that bought dispatch radio
permits.
The Feb. 5 ruling removes a big legal cloud hanging over the 1997 auction, which was dominated by the
country’s No. 1 SMR operator, Nextel Communications Inc.
“Clearly, reasonable people can disagree on the
FCC’s policy-making process and the auction rules. However, in an industry plagued by uncertainty, it’s good to have a
decision that closes the process-more or less-so the industry can move forward,” said Alan Shark, president of the
American Mobile Telecommunications Association.
Still, the court’s opinion appears to keep the door open for
incumbent 800 MHz SMR licenses to exercise their rights relative to their relocation from the upper 200 SMR channels
to the lower 230 channels at 800 MHz.
Fresno Mobile Radio and SMR WON, a coalition of small incumbent 800
MHz SMR operators, sued to overturn the 800 MHz SMR auction on grounds the 1993 auction law limited competitive
bidding to “initial” licenses. The parties claimed, among other things, that 800 MHz SMR licenses were not
initial but rather existing licenses held by small firms who offered the same interconnected service that auction winners
would provide.
The court, despite conceding that auction law is ambiguous on the meaning of initial licenses,
rejected Fresno’s and SMR WON’s arguments. The court deferred to the FCC, which asserted that licenses were indeed
initial in terms of being the first granted for geographically-based economic areas.
“It’s heartbreaking. A lot of
incumbents hoped the court would not see this as new licenses and [believed] the statute was open to
interpretation,” said Frederick Joyce, an attorney for SMR WON.
Because the court was silent on whether
incumbent 800 MHz SMRs were entitled to FCC hearings before being relocated, saying the issue was not raised
previously before the FCC, Joyce said incumbents may have an opportunity to raise objections before federal regulators
about problems associated with moving to the lower 230 SMR channels on the 800 MHz band.
The court reserved
its harshest words for the FCC’s decision to impose a stricter wide-area SMR buildout deadline on Southern Co. and
other existing SMRs than on firms that bought SMR licenses at the 1997 auction.
Southern was required to provide
service to everyone in its service area within two years of licensing, while spectrum-buying SMRs and personal
communications services licensees need only offer service after three years to one-third of the covered population.
After five years, wireless auction licensees must serve two-thirds of the people in geographic service areas.
The
FCC said the disparity in buildout rules was necessary to curb against spectrum hoarding by
incumbents.
“This is a foolish notion that should not be entertained by anyone who has had even a single
undergraduate course in economics,” said Judge Douglas Ginsburg, who filed the opinion for the majority.
He
added: “Would anyone be less interested in earning a return on money he had inherited than on money he had
worked for? Of course not! Are radio licensees not as alert as inheritors? Whether a license costs millions of dollars or
nothing, that is, absent some institutional constraint imposed upon EA licensees by the commission, or lenders, for
example-and the agency alludes to none-a rational licensee will voluntarily put its spectrum into service only when the
additional revenue it expects to earn from doing so exceeds the additional cost it must incur to do so.”
