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


BENKELMAN TELE CO

v.

FCC


97-1245b

D.C. Cir. 2000


*	*	*


Karen LeCraft Henderson, Circuit Judge: The petitioners  challenge a
Federal Communications Commission (FCC) rule- making that established
a geographic area licensing regime  for common carrier paging and 929
MHz private carrier  paging licenses1 and a competitive bidding
procedure for  mutually exclusive2 applications filed thereunder. See
In re  Revision of Part 22 and Part 90 of the Comm'n's Rules to 
Facilitate Future Dev. of Paging Sys., Second Report and  Order and
Further Notice of Proposed Rulemaking, 12  F.C.C.R. 2732 (1997)
(Second R&O); In re Revision of Part  22 and Part 90 of the Comm'n's
Rules to Facilitate Future  Dev. of Paging Sys., Memorandum Opinion
and Order on  Reconsideration and Third Report and Order, 14 F.C.C.R. 
10,030 (1999) (Third R&O). The petitioners and intervenors  contend
the FCC lacked statutory authority under 47 U.S.C.  s 309(j) to
auction the new geographic paging licenses, that  the FCC arbitrarily
failed to require that geographic licen- sees provide notice of
construction to neighboring incumbent 




__________

n 1 Common carrier paging licensees "gain[ ] the exclusive use of  the
licensed frequency within their protected service area." PSWF  Corp.
v. FCC, 108 F.3d 354, 355 (D.C. Cir. 1997). Private carrier  paging
licensees, on the other hand, "ha[ve] to share their allotted 
frequency with other such licensees operating in the same geo- graphic
area." Id.


2 Applications are considered "mutually exclusive" if only one can  be
granted because they seek the same license or different licenses  that
would interfere with each other. See Lakeshore Broadcasting,  Inc. v.
FCC, 199 F.3d 468, 470 (D.C. Cir. 1999) (citing Ashbacker  Radio Corp.
v. FCC, 326 U.S. 327, 333 (1945)).


licensees and that the algorithm the FCC used to identify  pending
mutually exclusive applications violates the Paper- work Reduction Act
of 1995 (PRA), 44 U.S.C. ss 3501 et seq.  For the reasons set out
below we reject each of these  arguments and deny the petitions for


I.


Before 1996 the FCC allocated licenses for common carrier  paging and
exclusive private carrier paging service spectrum  under the
traditional site-specific licensing scheme which  required a separate
license for each paging transmitter site.  Each license application
proposed a transmission frequency  and set out technical information
on the proposed station,  including its potential for electrical
interference with adjacent  stations. See 47 C.F.R. s 22.529 (1996);
id. s 22.559. Once  an applicant filed, the FCC reviewed each
site-specific appli- cation preliminarily for formal compliance and
issued public  notice of acceptance of filing. See id. s 22.120.
Generally, if  an applicant's proposed service would overlap and
interfere  with an incumbent licensee's transmission, the application
was  denied. See id. s 22.537(a). When mutually exclusive site-
specific applications were filed, a single applicant was selected  by


In the challenged rulemaking the FCC replaced the site- specific
licensing process with a scheme of geographic licens- es. The new
scheme authorizes a licensee to operate a  transmitter anywhere within
the licensed geographic area  without notice to the FCC of the
transmitter's operation or of  its precise location. The geographic
licensee must, however,  protect incumbent operators in the geographic
area and  adjacent areas from harmful electrical interference. In
order  to bid at a geographic license auction, an applicant must file 
an FCC Form 175 (Short Form) either identifying individual  channels
and markets it seeks or checking the "All" box,  which allows it to
bid on any or all of the channels and  markets being auctioned. After
filing the Short Form, but  before the auction, an applicant must
submit an "upfront"  payment which "bear[s] a relation to the value of


to be awarded." Second R&O, 12 F.C.C.R. at 2794. A  successful bidder
faces "automatic cancellation" of the license  if it does not either
(1) "provide coverage to one-third of the  population within three
years of the license grant, and to two- thirds of the population
within five years of the license grant"  or (2) "provide substantial
service to the geographic license  area within five years of license
grant." Id. at 2765.


In contemplation of the new geographic system, the FCC  imposed a
filing freeze as of February 8, 1996. On February  19, 1997 the
Commission released its Second Report and  Order outlining the auction
procedures for the new geograph- ic licenses and authorizing the
Wireless Telecommunications  Bureau to dismiss all pending exclusive
paging applications  and to either grant or dismiss all pending
non-mutually  exclusive paging applications. On June 24, 1999 the FCC 
issued its Third Report and Order affirming the geographic  licensing
scheme but somewhat modifying its procedures. On  August 12, 1999 the
FCC issued a public notice announcing  the relevant auction procedures
for the geographic paging  licenses. See Auction of 929 MHz Paging
Serv. Spectrum,  Public Notice (1999). Applicants for the licenses
filed their  Short Forms on January 20, 2000 and deposited their
upfront  payments on February 7, 2000. On February 24, 2000 the  FCC


Six petitions for review of the FCC's rulemaking have been  filed at
various points in the proceedings and have been  consolidated for
consideration here.


II.


The petitioners, consisting of incumbent paging licensees  and a paging
industry trade association (licensee petitioners)3 




__________

n 3 The incumbent licensees are Benkelman Telephone Co., Freder- ick W.
Hiort dba B&B Beepers, Wauneta Telephone Co., Metamora  Telephone Co.,
Advanced Paging, Inc., Mark A. Apsley dba Pro- gressive Paging,
Capitol Radiotelephone Co., Inc. dba Capitol Pag- ing, Express Message
Corp., A. V. Lauttamus Communications, Inc.  and NEP, LLC dba
Northeast Paging. The trade association is  Personal Communications
Industry Association. For convenience, 


and dismissed license applicants (applicant petitioners),4 chal- lenge
the FCC's new geographic licensing scheme on three  grounds. We
address--and reject--each ground in turn.


A. Statutory Authority for License Auctions


The petitioning trade association and incumbent licensees,  joined by
the intervenors,5 challenge the FCC's authority  under 47 U.S.C. s
309(j)(1) to require that existing licensees  bid at auction when they
seek to "modify" their present  licenses. Section 309(j)(1)


If, consistent with the obligations described in paragraph  (6)(E),
mutually exclusive applications are accepted for  any initial license
or construction permit, then, except as  provided in paragraph (2),
the Commission shall grant  the license or permit to a qualified
applicant through a  system of competitive bidding that meets the
require- ments of this subsection.


47 U.S.C. s 309(j)(1). Section 309(j)(6)(E), in turn, provides: 
"Nothing in this subsection, or in the use of competitive  bidding,
shall ... (E) be construed to relieve the Commission  of the
obligation in the public interest to continue to use  engineering
solutions, negotiation, threshold qualifications,  service
regulations, and other means in order to avoid mutual  exclusivity in
application and licensing proceedings;...." Id.  s 309(j)(6)(E). In
determining the Commission's authority  under this statute, "the court
reviews the FCC's interpreta- tion of the Communications Act under the




__________

n these petitioners or any subgroup of them will be identified as 
"licensee petitioners."


4 These petitioners, whose applications, filed between November  15,
1995 and February 8, 1996, were dismissed without action  because the
FCC considered them mutually exclusive, are Robert  L. Wagner, Melvia
M. Woods, Robert Horn, John Piskor, Mo- hammed Siddiqui and Lenard
Travis.


5 The intervenors include AirTouch Paging, Arch Communications  Group,
Inc., Metrocall, Inc., Nationwide Paging, Inc. and Power- Page, Inc.


dard set forth in Chevron U.S.A. Inc. v. Natural Resources  Defense
Council, Inc., 467 U.S. 837, 842-843, 104 S.Ct. 2778,  81 L.Ed.2d 694
(1984), by which the court considers 'whether  Congress has directly
spoken to the precise question at issue,'  id. at 842, and if it has
not, 'whether the agency's answer is  based on a permissible
construction of the statute.' Id. at  843." Community Television, Inc.
v. FCC, Nos. 98-1106 et  al., slip op. at 5 (D.C. Cir. 2000). We
conclude that, while the  cited statutory language is ambiguous, the
Commission has  reasonably construed it to authorize the challenged


The petitioners first argue modified licenses are not "ini- tial"
licenses for which section 309(j)(1) authorizes competitive  bidding.
In order for a license to be considered initial under  section
309(j)(1), "a newly issued license must differ in some  significant
way from the license it displaces." Fresno Mobile  Radio, Inc. v. FCC,
165 F.3d 965, 970 (D.C. Cir. 1999). In  Fresno we noted that "nothing
in the text of [section 309(j)]  forecloses [the FCC] from considering
a license 'initial' if it is  the first awarded for a particular
frequency under a new  licensing scheme, that is, one involving a
different set of  rights and obligations for the licensee." Id. The
FCC  reasonably treated the incumbent licensees' applications for 
modification under the new geographic system as applications  for
"initial" licenses under such a "new licensing scheme."  The
petitioners note that the two licensing schemes  provide the same
paging service on the same frequencies,  basically provide fill-in
sites and maintain the same licensee buildout  requirements.
Nevertheless, they themselves acknowledge,  as they must, that the
geographic license scheme has wrought  34fundamental alterations to
the paging industry's market structure and licensing schemes.34
Petitioners' Br. 30. Under the geographic scheme non-incumbents can
compete for the  available spectrum, however much remains, on equal
footing  with incumbents and successful applicants have far greater 
freedom in selecting transmitter locations; yet at the same time  new
licensees assume much more responsibility for researching site
locations to protect incumbents from interference. Given the new 
scheme's 34fundamental34 alterations, we hold the FCC reasonably
treated modification applications by incumbents as 34initial34 


The petitioners also assert the FCC shirked its duty under  section
309(j)(6)(E) to affirmatively avoid mutual exclusivity  by adopting
the new licensing scheme, which necessarily  causes a high rate of
mutual exclusivity at certain frequen- cies, and by creating "phantom"
or "artificial" mutual exclu- sivity through the "All" box option and
the "substantial  service" alternative. We reject this argument for
substantial- ly the same reason we rejected a similar argument raised
in  DIRECTV v. FCC, 110 F.3d 816, 827-28 (D.C. Cir. 1997). In  DIRECTV
the petitioners contended that "the Commission  lacked authority to
adopt an auction rule under s 309(j)  because it did not first make
sufficient efforts, while still  using the [previous] approach to the
assignment of licenses, to  avoid mutual exclusivity among their
applications."  DIRECTV, 110 F.3d at 828. We concluded, however:


Once the Commission had abandoned [its previous] meth- odology--for
sufficient reasons, as we have seen--it was  faced with mutually
exclusive applications. Nothing in  s 309(j)(6)(E) requires the FCC to
adhere to a policy it  deems outmoded "in order to avoid mutual
exclusivity in  ... licensing proceedings"; rather, that provision in-
structs the agency, in order to avoid mutual exclusivity,  to take
certain steps, such as the use of an engineering  solution, within the
framework of existing policies.


Id. (quoting 47 U.S.C. s 309(j)(6)(E)). Similarly here, the  FCC
reasonably abandoned the site-specific system in favor  of a
geographic one, finding that "the public interest is better  served by
licensing all remaining paging spectrum through a  geographic
licensing scheme than by processing additional  site-specific
licenses," Third R&O, 14 F.C.C.R. at 10,043, 


while "it would not be in the public interest to implement  other
licensing schemes or other processes that avoid mutual  exclusivity,"
id at 10,042. The Commission further reason- ably found that both the
"All" box option and the substantial  service alternative were
necessary to effectively implement  the new scheme--the former to
"give[ ] bidders the flexibility  to pursue back-up strategies in the
event they are unable to  obtain their first choice of licenses" and
the latter to encour- age service to rural areas as required under
section 309(j)(3).  Third R&O, 14 F.C.C.R. at 10,081-82. Having found
the  policy changes in the public interest, the Commission was 
authorized to implement them without regard to section  309(j)(6)(E)
which imposes an obligation only to minimize  mutual exclusivity "in
the public interest," 47 U.S.C.  s 309(j)(6)(E), and "within the
framework of existing poli- cies," DIRECTV, 110 F.3d at 828. Thus, the
FCC's authority  to adopt the new licensing scheme was not foreclosed
by its  section 309(j)(6)(E) obligation.6


B. Notice to Incumbent Licensees


Next, the licensee petitioners and two of the intervenors  contend that
geographic licensees should be required under  the new system to
provide advance notice of new construction  to adjacent site-specific
licensees, in order to warn them of  potential interference, as they
are required to do for adjacent  geographic licensees. See Second R&O,
12 F.C.C.R. at 2765  App. A, s 22.503(h). Site-specific incumbent
licensees, how- ever, do not share geographic licensees' need for such
warn- ing because the existing rules furnish interference protection 
through requirements "that govern transmitter height and  power,
distance between transmission stations, the licensee's  protected
service area, and/or the field strength of the licen- see's service
and interfering signals." Second R&O, 12 




__________

n 6 The petitioners also challenge the "substantial service" standard 
as too vague to permit the FCC to provide notice to licensees of 
license termination, as required under 5 U.S.C. s 558(c). We find 
adequate notice is provided, however, in the review procedure the  FCC
requires before automatic termination can occur. See Brief of 
Respondents at 28.


F.C.C.R. at 2767.7 Geographic licensees, by contrast, enjoy no  similar
protection from interference. Because of this distinc- tion, we
conclude the FCC reasonably accorded the two  groups different


C. PRA


Finally, the applicant petitioners and two intervenors claim  that the
algorithm the FCC used to determine their applica- tions should be
dismissed for mutually exclusivity is a "collec- tion of information"
for which OMB approval was not ob- tained as required by the PRA.8 We
disagree and hold that  the algorithm is not a "collection of
information" under the  PRA.9 The PRA defines "collection of
information" as "ob- taining, causing to be obtained, soliciting, or
requiring the  disclosure to third parties or the public, of facts or
opinions  by or for an agency." 44 U.S.C. s 3502(3)(A). To come 
within this definition the algorithm must impose a "reporting 
requirement" on applicants. See Saco River Cellular, Inc. v.  FCC, 133
F.3d 25, 33 (D.C. Cir. 1998). It does not. The  algorithm simply
blocks applications that meet specific crite- ria for mutual
exclusivity. It is true, as the petitioners  assert, that "if an




__________

n 7 In addition, geographic licensees are required to provide con-
struction information upon request. See 47 C.F.R. s 22.529(c).


8 PRA section 3507(a) provides that "[a]n agency shall not con- duct or
sponsor the collection of information unless in advance of  the
adoption or revision of the collection of information ... the  agency
has" submitted the proposed collection of information to the  OMB
Director, "the [OMB] Director has approved the proposed  collection of
information ...; and ... the agency has obtained from  the [OMB]
Director a control number to be displayed upon the  collection of
information." 44 U.S.C. s 3507(a).


9 The FCC contests our jurisdiction over the claims of those  applicant
petitioners who did not file a petition for reconsideration  of the
FCC's dismissal of their applications. See 47 U.S.C.  s 155(c)(7). The
FCC concedes, however, that the court has juris- diction over at least
one of the petitions. See Brief of Respondents  at 32. The PRA issue
is therefore squarely before the court.


ty," it must research in advance whether or not the license it  seeks
meets the algorithm's criteria, Reply Brief at 24, but  the FCC does
not require such research or that its results be  reported.10


For the foregoing reasons, the petitions for review are


Denied.




__________

n 10 The petitioners' alternative argument that the algorithm vio-
lates the Administrative Procedure Act, 5 U.S.C. s 553, because 
promulgated without public notice and comment is waived because  the
argument was raised for the first time in the petitioners' reply 
brief. See Grant v. United States Air Force, 197 F.3d 539, 543  (D.C.
Cir. 1999) ("[A]n argument first made in a reply brief comes  too
late.") (citing Fraternal Order of Police v. United States, 173  F.3d
898, 902-03 (D.C. Cir. 1999)).