UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


BELLSOUTH CORP

v.

FCC


97-1630a

D.C. Cir. 1999


*	*	*


Rogers, Circuit Judge: In 1994, the Federal Communica- tions Commission
established a 45 MHz spectrum cap on  commercial mobile radio services
("CMRS") that limited the  total amount of cellular, broadband
personal communication  service ("PCS"), and specialized mobile radio
("SMR") spec- trum that a given entity could accumulate. See 9
F.C.C.R.  7988, 7999, para. 16. Because BellSouth1 had an ownership 
interest in RAM Mobile Data USA, L.P., a holder of SMR  licenses,
BellSouth's combined CMRS spectrum holdings pre- vented it from
acquiring two 10 MHz PCS licenses in certain  markets without
exceeding the cap. See Request for Waiver  at 1-4. BellSouth requested
a waiver of the spectrum cap as  well as reconsideration of the rule
on the grounds that the  cap was designed to ensure competition in
voice transmission  and should apply only to "covered" SMR spectrum




__________

n 1 BellSouth Corporation petitions for review of the Commis- sion's
order enforcing the 45 MHz cap. BellSouth Wireless appeals  the
Commission's denial of its waiver request. For ease of refer- ence, at
times we will refer to them collectively as "BellSouth."


spectrum that is interconnected with the public switched  network and
devoted to real-time, two-way switched voice  service). The Commission
denied both requests. On appeal,  BellSouth contends that the
Commission's action was arbi- trary because the cap is overbroad and
virtually unwaivable.  We deny the petition for review and affirm the
Commission's  denial of the waiver request.


I.


CMRS encompasses different types of spectrum put to a  variety of uses.
It includes all mobile services commercially  offered to the public
that are connected to the telephone  network, such as cellular phone
service, paging, mobile data,  mobile satellite, and other wireless
services. See generally  Second Report & Order, 9 F.C.C.R. 1411,
1422-42, paras. 30- 70 (1994). CMRS is composed of cellular, PCS, and
SMR  spectrum. Within each of these categories, spectrum is de-
scribed as narrowband (using less than 5 MHz of spectrum)  and
broadband (using more than 5 MHz of spectrum). The 
narrowband/broadband distinction rests in part on whether it  is
possible to accumulate enough spectrum to provide voice 
communication. Entities can use CMRS spectrum to provide 
voice-to-voice service, such as cellular phone or dispatch  service,


In 1994, the Commission adopted changes to the technical,  operational,
and licensing rules "to establish regulatory sym- metry among similar
mobile services." Third Report &  Order, 9 F.C.C.R. 7988, 7992, para.
1 (1994). These changes  included imposition of a 45 MHz cap on the
total amount of  cellular, PCS, and SMR spectrum an entity could have
in any  geographic area. Id. at 7999, para. 16. The Commission 
justified the cap "as a minimally intrusive means of ensuring  that
the mobile communications marketplace remains compet- itive and
retains incentives for efficiency and innovation." Id.  at 8100, para.
238; see also id. at 8104, para. 248. The  spectrum cap would prevent
entities from accumulating spec- trum and thereby "precluding entry by
other service provid- ers." Id. at 8101, para. 240. Rejecting a


approach, the Commission described the cap as a "bright line  test"
that would provide certainty and ease the Commission's 
"administrative burden." Id. at 8104-05, para. 250.


The changing nature of the market was key to determining  the scope of
the cap. The Commission first observed that  services provided on the
CMRS spectrum were converging.  See id. at 8020, para. 56. The
Commission explained that the  various mobile services shared the
common purpose of servic- ing customers who "need to communicate
electronically on a  real-time basis (or virtually real-time basis)
while they are 'on  the move.' " Id. at 8021, para. 58. Technological
innovation  influenced market trends that would allow various CMRS 
licensees to compete. The Commission observed that voice 
communication providers had the capacity to provide data  services and
that data service providers had the option, with  reconfiguration and
accumulation of spectrum, to provide  voice services. See id. at
8026-35, paras. 69-77. The Com- mission concluded that "trends in the
CMRS marketplace ...  illustrate a strong potential for further
competition among all  CMRS services." Id. at 8035, para. 77.


In defining the scope of the cap's coverage, the Commission  decided to
exclude all terrestrial narrowband radio services.  See id. at 8111,
para. 267. Because it was "highly unlikely  that one entity could ever
accumulate as much as 5 MHz in  any given geographic market" and other
regulatory safe- guards existed, the Commission concluded that "there
is little  risk that an entity could use narrowband allocations to
exert  undue market power over CMRS as a whole." Id. The  Commission
also excluded Mobile Satellite Service ("MSS")  from the cap, in view
of the differences between satellite and  terrestrial service,
capacity, and spectrum use that "mak[e] it  unreasonable to equate
relative spectrum usage for purposes  of determining a spectrum
aggregation limit." Id. at 8112,  para. 269. By contrast, while
acknowledging some merit to  the view that SMR spectrum is not
currently equivalent to  cellular or broadband PCS spectrum, the
Commission con- cluded that SMR would be subject to spectrum
aggregation  limits. To take account of the unique nature of SMR spec-
trum, each licensee would be attributed a maximum of 10 


MHz of SMR spectrum, regardless of how much spectrum  above 10 MHz it
actually held, because 10 MHz constituted  the largest attainable
block of contiguous SMR spectrum.  See id. at 8113-14, para. 275. The
Commission specifically  recognized that "small" SMR providers, i.e.
entities with  under 5 MHz of attributable SMR spectrum, would be
subject  to the cap. It viewed this result as acceptable because these
 entities were still eligible for up to 40 MHz of broadband PCS 
spectrum, and able to acquire both a 30 MHz and a 10 MHz  PCS license
in the same geographic area. See id. at 8114,  para. 275; 8109, para.
263. The Commission also placed all  SMR channels under the cap, and
rejected the view that 900  channel SMR should be excluded due to its
small spectrum  and narrow channel bandwidth, explaining that "high
quality  mobile telephony service can be provided on 900 MHz SMR 
channels and there is the possibility of aggregating up to 5  MHz of
spectrum in this band, [so] there seems no compelling  reason to
exclude those channels." Id. at 8116, para. 280.


The Commission reconsidered the cap following a remand  from the United
States Court of Appeals for the Sixth  Circuit, in a case in which the
45 MHz cap itself was not at  issue but the attribution and
eligibility rules were. See  Cincinnati Bell Tel. Co. v. FCC, 69 F.3d
752 (6th Cir. 1995).2 




__________

n 2 The attribution rule provided that any entity with a twenty 
percent ownership interest in an existing cellular provider was 
deemed to be a cellular provider subject to limits on how much PCS 
spectrum it could acquire. The cellular eligibility rules limited the 
amount of PCS spectrum that a cellular licensee could obtain in 
regions where its cellular and PCS license areas overlapped. The 
Sixth Circuit held that both rules were arbitrary, concluding that:


while avoiding excessive concentration of licenses certainly is a 
permissible goal under the Communications Act, simply pre- cluding a
class of potential licensees from obtaining licenses  (without a
supported economic justification for doing so) solves  the problem
arbitrarily. The FCC must supply a reasoned  basis for its decision.
The need to avoid "excessive concentra- tion of licenses" does not
provide the requisite "reasoned  basis." Without any economic
rationale, the Cellular eligibility  rules are nothing more than an


In response to the court's holding that the attribution rule  was
arbitrary because the Commission had failed to present  any support
for its common sense predictive judgment about  market behavior, see
69 F.3d at 761, the Commission did two  things, see Report & Order, 11
F.C.C.R. 7824 (1996). First, it  eliminated the spectrum-specific
caps,3 observing that most  commentators considered the 45 MHz cap
adequate to avoid  concentration and entry barriers. See id. at 7865,
para. 87.  Second, it conducted a Herfindahl-Hirschman Index analysis 
to determine what level of concentration of ownership would  result in
an undesirable level of competition. See id. at 7869- 73, paras.
94-102. Concluding that a spectrum cap was  needed to avoid "excessive
concentration of licenses" and to  promote competition in the CMRS
marketplace, id. at 7869,  para. 94, the Commission considered various
hypothetical  market structures for mobile two-way voice
communications  service in the same geographic area.4 It determined
that the  45 MHz cap would do the trick--guard against high concen-
tration in the market, prevent licensees from gaining too  great a
competitive advantage over new entrants, and further  the goal of
diversity. See id. at 7873-74, paras. 101-02. The 




__________

n Cincinnati Bell, 69 F.3d at 764 (citations omitted).


3 The Commission had earlier imposed a cap of 25 MHz on  cellular
spectrum and a cap of 40 MHz on PCS spectrum. See  Third Report &
Order, 9 F.C.C.R. 7988, 8104 n.479 (1994).


4 For purposes of its HHI analysis, the Commission defined the  product
market as "mobile two-way voice communications service."  11 F.C.C.R.
at 7904, App. A. "Competitors" were defined as  licensees for cellular
service, broadband PCS, and the largest  interconnected SMR. See id.
Market share was measured in  terms of "[a]llocated spectrum," which
gauges a CMRS carrier's  long-term capacity, id. at 7870, para. 96,
and the "capacity" for a  geographic market was represented by
licensed spectrum for  cellular service (two licenses for 25 MHz),
broadband PCS (three  licenses for 30 MHz and three licenses for 10
MHz), and the largest  potential interconnected SMR provider (holding
multiple licenses  for a maximum total of 10 MHz), see id. at 7870,
para. 97. The  Commission compared the market concentration that would
result  with and without the spectrum cap.


Commission noted that divestiture, see id. at 7876, para. 107,  and
eventually disaggregation and geographic partitioning,  see id. at
7873, para. 100, would be available to allow an entity  to bid on
blocks of PCS spectrum as they became available.


Shortly thereafter, BellSouth Wireless requested a waiver  of the
spectrum aggregation limit.5 Explaining that RAM  Mobile (an entity in
which it holds a 49% ownership interest)  had a number of 900 MHz SMR
licenses, BellSouth pledged  that with those licenses RAM provided
data-only services and  "does not offer now and does not intend in the
future to offer  real time, two-way switched voice service given the
architec- ture of its network and the telecommunications market seg-
ments it has targeted." The spectrum cap would prevent  BellSouth from
bidding on two 10 MHz packages of PCS  spectrum because its .5 MHz (or
less) of SMR would take it  over the spectrum cap when added to the 25
MHz of cellular  spectrum it already held. Consequently, BellSouth
proposed  that the Commission apply to the spectrum cap the
distinction  it had recognized in other contexts between "covered" and
 "non-covered" SMR.6 BellSouth Corporation, in turn, re- quested
reconsideration of the rule so that it would include  only "covered"
SMR in the spectrum cap, asserting that this  modification would bring
the Commission's spectrum cap  policy in line with other decisions in




__________

n 5 At footnote 18 of its waiver request, BellSouth suggested that  the
waiver could include the condition that the .5 MHz of spectrum  not be
used for "real-time, two-way switched voice service."


6 In other proceedings, the Commission had defined "covered  SMR" as
spectrum devoted to licensees that offer real-time, two- way switched
voice service that is interconnected with the public  switched
network. That term did not include "local SMR licensees  offering
mainly dispatch services to specialized customers in a non- cellular
system configuration, ... licensees offering only data, one- way, or
stored voice services on an interconnected basis" or "any  SMR
provider that is not interconnected to the public switched  network."
Interconnection and Resale Obligations Pertaining to  CMRS, First
Report & Order, 11 F.C.C.R. 18455, 18466, para. 19  (1996).


The FCC's response was two-fold. First, in a letter dated  August 29,
1996, the Wireless Telecommunications Bureau  denied BellSouth's
request for a waiver. See Letter re:  BellSouth Wireless, Inc. Request
for Waiver in Auction No.  11, 11 F.C.C.R. 9970 (1996). The Bureau
stated that Bell- South's assertion that RAM does not compete with
real-time  two-way voice service was based on a misconception about
the  underlying purpose of the CMRS spectrum cap; the cap in  fact
arose out of concerns about excessive horizontal concen- tration and
market barriers. See id. at 9971. Additionally,  while covered versus
non-covered SMR was a significant  distinction in some contexts, it
was not so in the spectrum  aggregation context. See id. The Bureau
also invited Bell- South to seek to divest itself of the .5 MHz of SMR
spectrum  if it wished to bid for two 10 MHz bundles of PCS or to 
pursue its argument as part of a request for reconsideration  of
related orders. See id. at 9972.


The Commission affirmed the Bureau's denial of a waiver,  rejecting
BellSouth's arguments that the rule was in effect  unwaivable and that
the Bureau had not given a "hard look"  at the waiver application. See
Memorandum Opinion & Or- der, 12 F.C.C.R. 14031 (1997). The Bureau had
considered  the facts proffered, balanced them and the purposes
underly- ing the CMRS spectrum aggregation limit, and noted the 
availability of alternative ways that BellSouth could obtain  relief.
The Commission also declined to reconsider the cap,  rejecting
BellSouth's narrow view of its purpose. The cap,  the Commission
explained, was designed


to promote diversity and competition in mobile services,  by
recognizing the possibility that mobile service licen- sees might
exert undue market power or inhibit market  entry by other service
providers if permitted to aggre- gate large amounts of spectrum....
Despite BellSouth's  contention to the contrary, the underlying
purpose of the  spectrum cap was not limited to promoting competition 


Id. at 14038-39, para. 12. Further, the Commission explained  that it
distinguished covered and non-covered SMR in rules 


that only affected two-way voice services interconnected to  the
public switched network. See id. at 14040, para. 14.  With regard to
spectrum aggregation, the Commission ex- plained that it


still concludes that SMR technology holds the potential  to permit SMR
operators to offer services that are nearly  identical to those
offered by both cellular and broadband  PCS providers, and thus that
all SMR services regulated  as CMRS should be within the cap in order
to guard  against excessive spectrum aggregation. Further, tech-
nological innovation may drive cellular, broadband PCS,  and SMR
services toward a convergence of similar ser- vice offerings designed
to respond to consumer demand.


Id.


II.


In its petition and appeal to this court, BellSouth makes  two
principal contentions: first, that the spectrum cap rule is 
overbroad, extending beyond its purpose to assure competi- tion in
voice communications, and second, that the Commis- sion has adopted a
virtually unwaivable rule and failed to give  the waiver request a
"hard look." Just as narrowband is  exempt from the cap, BellSouth
contends, SMR dedicated to  data-only services should be as well.
Essentially, BellSouth  maintains that the only purpose of the rule
was to prevent the  exercise of market power in voice services, not
non-voice  data-only services. This purpose is clear, BellSouth main-
tains, from the fact that (1) the Commission exempted nar- rowband
spectrum, which is used for non-voice services; (2)  in conducting its
market analysis following the remand from  the Sixth Circuit, the
Commission defined the market and  other terms such that the only
economic justification for the  cap is to deter excess spectrum
concentration and market  power in the voice communication market; and
(3) the Com- mission has repeatedly distinguished between covered SMR 
(voice services) and non-covered SMR (non-voice services) in 
regulatory decisions on the ground that the services did not  compete


that by failing to identify the standards for evaluating waiver 
requests, the Commission has engaged in the type of tauto- logical
reasoning rejected by this court in WAIT Radio v.  FCC, 418 F.2d 1153,
1158 (D.C. Cir. 1969)(WAIT I). See  Pet'r's Br. at 19 ("In sum, the
[Commission's] failure to cure  the overbreadth of its rule, coupled
with its unwillingness to  entertain a clearly de minimis waiver was
unreasoned deci- sionmaking.").


A.


Under the Administrative Procedure Act, the court must  "hold unlawful
and set aside agency action" that is "arbitrary,  capricious, an abuse
of discretion, or otherwise not in accor- dance with law." 5 U.S.C. s
706(2)(A) (1994). Thus, in  reviewing decisions of the Commission, the
court


must affirm the decision if we find that it is not contrary  to law,
that it is supported by substantial evidence and  based upon a
consideration of the relevant factors, and if  we determine that the
conclusions reached have a ration- al connection to the facts found.
When, as in this case,  an agency is obliged to make policy judgments
where no  factual certainties exist or where facts alone do not 
provide the answer, our role is more limited; we require  only that
the agency so state and go on to identify the  considerations it found


Melcher v. FCC, 134 F.3d 1143, 1152 (D.C. Cir. 1998) (cita- tions and
quotation marks omitted). Although the arbitrary  and capricious
standard of review is deferential, the court will  "intervene to
ensure that the agency has examine[d] the  relevant data and
articulate[d] a satisfactory explanation for  its action. Where the
agency has failed to provide a reasoned  explanation, or where the
record belies the agency's conclu- sion, we must undo its action."
Petroleum Communications,  Inc. v. FCC, 22 F.3d 1164, 1172 (D.C. Cir.
1994) (alteration in  original) (citation and quotation marks
omitted). However, to  the extent that the FCC's decision is based
upon a "predictive  judgment," the court's review is "particularly
deferential."  Melcher, 134 F.3d at 1151. The Commission is not


"to 'conclusively establish' the factual validity of the agency's 
premises." Id. (quoting FCC v. National Citizens Comm. for  Broad.,
436 U.S. 775, 796 (1978)).


Challenging the denial of a waiver is likewise not an easy  task
because an applicant for waiver bears the heavy burden  on appeal to
show that "the Commission's reasons for declin- ing to grant the
waiver were so insubstantial as to render  that denial an abuse of
discretion." Turro v. FCC, 859 F.2d  1498, 1499 (D.C. Cir. 1988); see
also Thomas Radio Co. v.  FCC, 716 F.2d 921, 924 (D.C. Cir. 1983).


B.


Central to BellSouth's challenge to the spectrum cap is its  view that
the cap has one goal: to foster competition in  mobile voice-to-voice
communication. With this goal as a  basis for regulation, BellSouth
contends that the FCC irra- tionally included within the CMRS spectrum
cap SMR spec- trum dedicated to data services, which, BellSouth
maintains,  can have no impact on the competitive nature of the voice 
communication market. Yet the Commission has taken a  different
position, maintaining that it was concerned with the  effect of CMRS
spectrum aggregation on the development of  market power and on the
competitive market for mobile  services as a whole in light of the
predicted potential for  various services along that spectrum to
converge. The gen- eral cap on CMRS spectrum thus reflects concern for
the  CMRS market generally. The Commission has predicted  that mobile
services will converge because of consumer de- mands and providers'
technological capabilities to offer vari- ous voice and data services.
Contrary to BellSouth's charac- terization, which either ignores or
discredits other concerns  and objectives that resulted in the
spectrum cap, the Commis- sion has consistently maintained that
general spectrum ag- gregation will enable an anticompetitive exercise
of market  power absent a cap on the amount of spectrum one entity can
 hold. So viewed, BellSouth's contentions about the effects of 
excluding SMR spectrum used to provide data-only services  falter. To
exempt SMR spectrum "dedicated" to data-only 


use, as BellSouth proposes, would not prevent an entity from 
accumulating spectrum and in the process, would allow that  entity to
preclude others from obtaining it. The same entity  could subsequently
decide to use that spectrum to provide  voice services, a change over
which the Commission has  limited control. Further, even the provision
of data-only  services would have an impact on the market because
mobile  voice and data services are marketed to the same consumers 
and, under the Commission's theory, they are converging  services.


BellSouth maintains, however, that the economic analysis  conducted by
the Commission in response to the remand by  the Sixth Circuit in
Cincinnati Bell demonstrates that the  Commission is only concerned
with the market for voice  communication. For purposes of its economic
analysis, the  Commission defined the product market as "mobile
two-way  voice communications service," and competitors as "licensees 
for cellular service and broadband PCS, and the largest 
interconnected SMR." Report & Order, 11 F.C.C.R. 7824,  7904 (1996).
For purposes of its rulemaking, however, the  Commission has viewed
the market as the CMRS spectrum  as a whole, not merely the provision
of certain services on  that spectrum. It was this construction of the
market that  controlled when the spectrum cap was first established in
the  1994 Third Report and Order. While its HHI analysis  focused on
voice-to-voice communication, thus indicating that  voice
communication was high on the Commission's list of  concerns, there is
nothing to suggest that the Commission  abandoned its more general
concern in responding to the  Sixth Circuit's direction for a
"reasoned basis" and "an eco- nomic rationale" for the Commission's
attribution and eligibil- ity rules. To the contrary, what BellSouth
fails to acknowl- edge is that the HHI market analysis, although
confined to  voice communication, takes into account general spectrum 
aggregation and market concentration concerns underlying  the spectrum


Since its Third Report and Order, the Commission has  focused on the
CMRS spectrum as a whole. It has predicted  that the services provided
on the CMRS spectrum will con-


verge. Those service providers who are not already actual  competitors
are certainly potential competitors. See 9  F.C.C.R. at 8003, para.
27. As a cellular licensee, BellSouth  qualifies as a competitor. Once
an entity qualifies as a  competitor, the Commission is concerned with
how much  spectrum that entity accumulates. In its view, market power 
hinges on the amount of spectrum an entity holds. CMRS  spectrum is a
finite resource and is also exclusive in that  whatever one entity
holds cannot be held by another. More- over, all the spectrum included
under the cap could potential- ly be used to provide voice services.
It follows that identifica- tion of voice communications as the
product market would not  undermine the force of the Commission's
conclusion that a 45  MHz cap is needed to prevent the exercise of


Furthermore, the fact that the Commission has distin- guished between
voice and data uses of SMR spectrum in  other regulatory decisions7
does not, as BellSouth appears to  conclude, necessarily demonstrate
that the Commission's re- fusal to do so with regard to the spectrum
cap is arbitrary  and capricious. Rather, an examination of these
decisions  reveals that the Commission made the "covered"/"non-
covered" distinction primarily in addressing how a carrier  could
structure its CMRS services after acquiring the spec- trum.


For example, in CMRS Resale Order, the Commission  decided that only
covered SMR providers would be required  to comply with the cellular
resale obligation, which prohibits 




__________

n 7 See Telephone Number Portability, CC Docket No. 95-116  RM 8535,
FCC 98-275 (released Oct. 20, 1998); In re Application  of Motorola,
Memorandum Opinion & Order, 13 F.C.C.R. 5182  (1998) (ARDIS Order);
Interconnection and Resale Obligations  Pertaining to CMRS, First
Report & Order, 11 F.C.C.R. 18455  (CMRS Resale Order) (1996);
Interconnection and Resale Obli- gations Pertaining to CMRS, Second
Report & Order, 11 F.C.C.R.  9462 (CMRS Roaming Order) (1996);
Revision of the Commis- sion's Rules to Ensure Compatibility with
Enhanced 911 Emergen- cy Calling Systems, Report & Order, 11 F.C.C.R.
18676 (E911  Order) (1996); Telephone Number Portability, First Report
&  Order, 11 F.C.C.R. 8352 (1996) (Number Portability Order).


cellular carriers from restricting resale of their services. See  11
F.C.C.R. at 18,466, para. 19. The Commission concluded  that
non-covered licensees, who offer narrowband-type ser- vices, do not
compete substantially with cellular and broad- band PCS providers, and
wished only to regulate providers  with "significant potential to
compete directly with cellular  and broadband PCS providers in the
near term." Id. Simi- larly, in CMRS Roaming Order, the Commission
extended  the manual roaming rule only to "all CMRS licensees compet-
ing in the mass market for real-time, two-way voice services" 
including covered SMR providers. 11 F.C.C.R. at 9470, para.  12. With
regard to non-covered licensees, the Commission  concluded that
because they "do not compete substantially  with cellular and
broadband PCS providers," these providers  would not be covered. Id.
at 9471, para. 14. In other  proceedings, the Commission has continued
to recognize the  covered/non-covered distinction in determining how
carriers  can use their spectrum. See E911 Order, 11 F.C.C.R. at 
18716, para. 81; Number Portability Order, 11 F.C.C.R. at  8355, para.
4 & 8433-34, para. 156. Recently the Bureau  permitted Motorola to
transfer ownership interests in certain  telecommunications holdings
to the American Mobile Satellite  Corporation, see ARDIS Order 13
F.C.C.R. at 5193-94, paras.  18-21, and the Commission decided that
any CMRS system  not offering two-way switched voice service would be
exempt  from the requirements of number portability, see Telephone 
Number Portability, CC Docket No. 95-116 RM 8535, FCC  98-275


The Commission can reasonably and rationally distinguish  between
regulating spectrum already held and regulating the  accumulation of
spectrum. As the Commission notes in its  brief, the orders BellSouth
cites for the covered/non-covered  SMR distinction address the current
state of the market,  while the spectrum cap is forward looking,
designed to pre- vent the exercise of market power by providers in the
future.  In addition, covered and non-covered SMR are not necessari-
ly mutually exclusive over time because the distinction is  based on
the services offered. Presumably, a licensee may  choose to offer
services that would render it subject to the 


regulations for covered SMR; thus, a built-in remedy exists  for such
developments should they occur. By contrast, the  acquisition of
spectrum must be limited from the outset.  Once an entity acquires the
spectrum, it can exercise market  power and prevent other licensees
from acquiring that spec- trum. Although BellSouth argues that the
covered/non- covered SMR distinction should operate in the spectrum 
aggregation context just as it does in the spectrum regulation 
context, BellSouth has identified no parallel built-in remedy  whereby
an entity can be divested of spectrum if the Commis- sion later
discovers that the market is anticompetitive. The  practical
differences between regulating the use--as opposed  to the
acquisition--of spectrum can reasonably render the 
covered/non-covered SMR distinction inapplicable in this con- text.


Ultimately, BellSouth's contentions fail because of its re- stricted
view of the Commission's goals and purposes that  directly contradicts
the Commission's analysis. Absent a  showing that SMR spectrum
dedicated to data is virtually  identical to the "narrowband" spectrum
excluded from the  cap, which BellSouth failed to make in its briefs
or at oral  argument, BellSouth cannot demonstrate that the Commis-
sion acted arbitrarily when it drew the line between SMR and 
narrowband spectrum and included SMR in the 45 MHz cap.  The
Commission's reliance on the converging nature of the  CMRS market is
sufficient to justify its inclusion of all SMR  in the spectrum cap.
Similarly, its explanation for the exclu- sion of narrowband PCS from
the cap, namely that it is  virtually impossible to accumulate
sufficient spectrum, is ade- quate.


C.


BellSouth's attack on the denial of its request for a waiver  of the
spectrum cap fares no better. BellSouth focuses on  the fact that
granting its waiver would have involved a de  minimis exception to the
cap, and maintains that the RAM  spectrum was "incapable" of being
used for voice communica-


tion.8 For these reasons it contends that the Commission  failed to
give the requisite "hard look" at its waiver request  and that the
Commission has effectively adopted a "no waiv- er" policy for the
spectrum cap. Maintaining further that the  Commission failed to
articulate the standards it would apply  for waivers, BellSouth wants
the court to require such articu- lation. For the following reasons we
conclude that BellSouth  has failed to show that the Commission's
"reasons for declin- ing the waiver were 'so insubstantial as to
render that denial  an abuse of discretion.' " Thomas Radio Co. v.
FCC, 716  F.2d 921, 924 (D.C. Cir. 1983) (quoting WAIT Radio v. FCC, 
459 F.2d 1203, 1207 (D.C. Cir. 1972) (WAIT II)).


The "hard look" requirement assures that a general rule  serving the
public interest for a broad range of situations will  not be rigidly
applied where its application would not be in  the public interest as,
for example, where an applicant "pro- poses a new service that will
not undermine the policy"  served by the rule. WAIT Radio v. FCC, 418
F.2d 1153, 1157  (D.C. Cir. 1969) (WAIT I). Therefore, when an agency 
receives a request for waiver that is "stated with clarity and 
accompanied by supporting data," such requests "are not  subject to
perfunctory treatment, but must be given a hard  look." Id. While an
agency must consider the relevant  factors, see KCST-TV, Inc. v. FCC,
699 F.2d 1185, 1191-92  (D.C. Cir. 1983), in explaining the denial of
a waiver request,  "the agency is not required to author an essay for
the  disposition of each application. It suffices, in the usual case, 
that we can discern the why and wherefore." ICBC Corp. v.  FCC, 716
F.2d 926, 929 (D.C. Cir. 1983) (quotations omitted);  see also P&R
Temmer v. FCC, 743 F.2d 918, 932 (D.C. Cir.  1984).


At the same time, an agency that is required to give a  "hard look" at
a waiver request is not necessarily required to  have an existing
waiver policy for all of its rules. The "strict  adherence to a
general rule may be justified by the gain in  certainty and
administrative ease, even if it appears to result 




__________

n 8 Contrary to BellSouth's contentions, the record does not  confirm
that SMR "dedicated" to data-only use is truly "incapable"  of being
used for voice-to-voice services.


in some hardship in individual cases." Turro v. FCC, 859  F.2d 1498,
1500 (D.C. Cir. 1988); see also FCC v. WNCN  Listeners Guild, 450 U.S.
582, 601 n.44 (1981); Thomas  Radio, 716 F.2d at 925 & n.20. Rigid and
consistent adher- ence to a policy will be upheld if it is valid. See
ICBC, 716  F.2d at 929.


From the outset, the Commission has characterized the  spectrum cap as
a "bright line" rule. Third Report & Order,  9 F.C.C.R. 7988, 8104-05,
para. 250 (1994). A spectrum cap,  unlike many other regulations,
might actually require a  bright-line rule to be effective. Moreover,
refusal to grant a  waiver to BellSouth does not necessarily mean that
the  Commission has created a "no-waiver" policy. The Commis- sion has
consistently stated that the de minimis nature of the  excess above
the cap, standing alone, would not justify a  waiver. At oral
argument, the Commission explained that,  hypothetically, if a market
was not adequately served by  providers, the Commission would consider
permitting a carri- er already in the market to accumulate spectrum
above the  cap if it seemed that no competitor would enter the market 
and use otherwise fallow spectrum. In other words, even a  bright-line
rule may give way to special circumstances war- ranting an exception
in the public interest. Such circum- stances do not arise, however,
where, as here, a waiver  applicant seeks to circumvent a rule merely
because it does so  only minimally.9




__________

n 9 To the contrary, BellSouth's situation arguably presents an 
instance where the cap should apply. BellSouth is a major player  in
the CMRS market, and the aggregation of CMRS spectrum,  regardless of
the use to which it is put, allows BellSouth to exercise  market
power. BellSouth's situation is also far less sympathetic  given the
alternatives available, including divestiture of the .5 MHz  of SMR
spectrum, geographic partitioning, and disaggregation of  larger
spectrum blocks. Insofar as the record shows, BellSouth did  not
attempt to exercise the divestiture option as the Bureau hinted  it
could. Nor does BellSouth challenge the Commission's further 
observations about how it might either acquire 19.5 MHz of 
disaggregated PCS spectrum in the "after market" or partition its 


The Commission reasonably determined that the Bureau  gave BellSouth's
waiver request a "hard look," explaining that  the cap was designed to
prevent aggregation of spectrum as  well as spur competition and that
BellSouth had alternative  ways to avoid exceeding the cap. Because
BellSouth did not  explicitly present a de minimis argument in its
waiver peti- tion, the Bureau had no reason to address this argument
in  its letter ruling.10 In any event, as we have explained, the de 
minimis amount of excess above the cap will not suffice to  warrant a
waiver. BellSouth has never explained how the  public interest would
be served by granting its waiver re- quest; instead it merely equates
its own business interest  with the public interest. In the end,
BellSouth's waiver  request, aside from its de minimis nature, is
nothing but a  further attack on the Commission's decision to include
all  SMR spectrum within the 45 MHz cap, a decision which we  have
held to be reasonable.


Accordingly, we deny BellSouth's petition and affirm the  Commission's
denial of the waiver request.




__________

n 10 Furthermore, BellSouth's contention that the Wireless Tele-
communications Bureau applied the wrong standard of review is of  no
moment, given the virtual identity of material provisions of the 
correct standard. The standard the Bureau should have applied  allows
the Commission to grant a waiver that is founded upon an  appropriate
general standard, shows special circumstances warrant- ing a deviation
from the general rule, and would serve the public  interest. See WAIT
Radio, 418 F.2d at 1157-59. The standard the  Bureau used, which
applies only to broadband PCS waivers, ex- plains that a waiver will
be granted upon a showing that "the  underlying purpose of the rule
will not be served, or would be  frustrated, by its application in a
particular case, and that grant of  the waiver is otherwise in the
public interest," 47 C.F.R.  s 24.819(a)(1)(i), or that "unique facts
and circumstances of a partic- ular case render application of the
rule inequitable, unduly burden- some or otherwise contrary to the
public interest," id.  s 24.819(a)(1)(ii).