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


OMNIPOINT CORP

v.

FCC


99-1316a

D.C. Cir. 2000


*	*	*


Karen LeCraft Henderson, Circuit Judge: On September  17, 1996 the
Federal Communications Commission (FCC or  Commission) granted
Omnipoint Corporation (Omnipoint)  eighteen broadband personal
communications services (PCS)  licenses for C Block spectrum which it
won at auction.  Because Omnipoint was a qualifying "small business"
the  FCC financed ninety per cent of Omnipoint's auction bid at a  7%
interest rate "based on the rate for ten-year U.S. Trea- sury
obligations applicable on the date the license is granted."  47 C.F.R.
s 24.711(b)(3). Omnipoint requested a waiver of  the 7% interest rate
calculated under section 24.711(b)(3),  arguing that it contravened
the FCC's policy of setting inter- est rates "no higher than the
government's cost of money,"  which was then 6.5%. In re
Implementation of Section 309(j)  of the Communications
Act--Competitive Bidding, Second  Report and Order, 9 F.C.C.R. 2348,
2390 (1994). The FCC's  Bureau of Wireless Communications (Bureau)
first denied  Omnipoint's waiver request, a decision the Commission
ulti- mately affirmed, finding that strict adherence to section 
24.711(b)(3) did not frustrate its underlying policy or unduly  burden
Omnipoint contrary to the public interest. We deny  Omnipoint's


I.


In 1993 the United States Congress authorized the FCC to  allocate
spectrum by auction and directed it to promulgate  rules "to ensure
that small businesses ... are given the  opportunity to participate in
the provision of spectrum-based  services." 47 U.S.C. s 309(j)(4)(D).
In setting up the small 


business preference, the FCC identified "two broad, basic ...  policy
goals: promoting economic growth and enhancing ac- cess to
telecommunications service offerings for consumers,  producers, and
new entrants." Second Report and Order, 9  F.C.C.R. at 2349. The FCC
intended its rules to foster  economic growth by ensuring "that small
businesses ... are  given the opportunity to participate in both the
competitive  bidding process and the provision of spectrum-based ser-
vices." Id. at 2388. It promulgated section 24.711(b)(3), 
establishing the interest rate for small business auction win- ners
"based on the rate of the U.S. Treasury obligations (with  maturities
closest to the duration of the license term) at the  time of
licensing." Id. at 2410 (codified at 47 C.F.R.  s 24.711(b)(3)). In
promulgating section 24.711(b)(3) the  FCC stated:


Finally, we also agree with those commenters that sug- gest that
interest on installments should be charged at a  rate no higher than
the government's cost of money. We  recognize that, in addition to
providing a source of fi- nancing that might not otherwise be
available to small  entities, we should impose interest in a manner
that is  designed to provide significant financial assistance to 
small businesses. Accordingly, in order to ensure that  this
government financing results in significant capital  cost savings to
small businesses, we will impose interest  on installment payments
equal to the rate for U.S. Trea- sury obligations of maturity equal to
the license term.  This rate is generally lower than the prime lending
rate  established by private banks.


Id. at 2390-91.1 The FCC consistently applied the Treasury  note rate
in assigning installment payment interest rates. 




__________

n 1 In 1995 the FCC amended section 24.711(b)(3) to provide for an 
interest rate "based on the rate for ten-year U.S. Treasury obli-
gations applicable on the date the license is granted." See Race  and
Gender Based Provisions for Auctioning C Block Broadband  Personal
Communications Services Licenses, 60 Fed. Reg. 37,786,  37,796 (1995)
(codified at 47 C.F.R. s 24.711(b)(3)). The amended 


See In re Implementation of Section 309(j) of the Communi- cations
Act--Competitive Bidding, Fifth Report and Order, 9  F.C.C.R. 5532,
5592-93 (1994) ("Interest will accrue at the  Treasury note rate.");
In re Implementation of Section 309(j)  of the Communications
Act--Competitive Bidding, Sixth Re- port and Order, 11 F.C.C.R. 136,
156-59 (1995), aff'd, Omni- point Corp. v. FCC, 78 F.3d 620 (D.C. Cir.
1996) (Interest will  be charged "at a rate equal to ten-year U.S.
Treasury obli- gations applicable on the date the license is


On September 17, 1996, after auction, the FCC granted  Omnipoint
eighteen broadband PCS licenses for C Block  spectrum. As a qualifying
small business Omnipoint was  eligible for government-sponsored
financing of ninety per  cent of its winning bid obligation and a
favorable interest rate  on its debt. See Second Report and Order, 9
F.C.C.R. at  2389-90; 47 C.F.R. s 24.711(b). At the time the "rate for
 ten-year U.S. Treasury obligations" was 7%, set by the  August 1996
United States Treasury auction. As both sides  agree, however, the
August 1996 Treasury auction was "un- usual." In re Requests for
Waiver of Section 24.711(b)(3) of  the Comm'n's Rules Establishing the
Interest Rate on In- stallment Payments for C Block PCS Licensees,
Memoran- dum Opinion and Order, 14 F.C.C.R. 9298, 9302 (1999).


Treasury auctions for ten-year notes are typically held in  February,
May, August and November of each year using a  competitive bidding
methodology.2 In 1996, however, for the 




__________

n version applies to Omnipoint. After a 1998 amendment not relevant 
here, section 24.711(b)(3) now provides for an interest rate based on 
the ten-year Treasury note "plus 2.5 percent." Competitive Bid- ding
Process, 63 Fed. Reg. 2315, 2349 (1998) (codified at 47 C.F.R.  s
24.711(b)(3)).


2 The Treasury auctions ten-year notes by accepting investors'  written
bids specifying the lowest asking yield and moving upward  until it
raises a targeted amount of money. Each auction estab- lishes a yield
and a coupon rate. Treasury regulations define  "yield" as the
"annualized rate of return to maturity on a note or  bond expressed as
a percentage." 31 C.F.R. s 356.2. The coupon  rate, which a ten-year
note bears, is "set at a 1/8 of one percent 


first time since 1980, the Treasury Department auctioned ten- year
notes in July and then reopened the July auction in  August. As a
result, the August notes bore the coupon rate  of 7% from the July
auction even though the rate in fact  reflected neither the August
auction results, nor August  market conditions nor the government's
actual cost of mon- ey--a yield of 6.535%. Instead, the bidders in the
August  auction paid a premium for the ten-year notes. According to 
Omnipoint, had the Treasury Department instead issued a  new security
in August, "the average auction yield of 6.535%  would have dictated a
coupon rate of 6.5% on the new  security." John Friel Decl. 2 (Dec.
11, 1996). On December  16, 1996 Omnipoint filed a request for waiver
of section  24.711(b)(3), claiming that, because of the August
auction's  "unusual circumstances," the FCC's use of the 7% coupon 
rate contravened both its policy of setting interest rates at no  more
than the government's cost of money and the public  interest.
Omnipoint requested that the FCC instead apply a  6.5% interest rate
based on the August auction's weighted  yield. The Bureau denied
Omnipoint's waiver request and  the FCC, on June 2, 1999, affirmed the
Bureau's denial.  Omnipoint then timely petitioned for review.


II.


The FCC interpreted "rate" as used in section 24.711(b)(3)  as the
coupon rate and therefore applied the August auction's  7% coupon rate
for ten-year notes to Omnipoint's installment  payments.3 See
Memorandum Opinion and Order, 14  F.C.C.R. at 9303. Omnipoint contends
that the FCC arbi-




__________

n increment" which is "closest to, but not above, par when evaluated 
at the weighted-average yield of awards to successful competitive 
bidders." Id. s 356.20(b).


3 Omnipoint contends that the FCC arbitrarily interpreted "rate"  as
the coupon rate instead of the yield. Such an argument,  however, is
beyond the scope of a waiver request. See WAIT  Radio v. FCC, 418 F.2d
1153, 1158 (D.C. Cir. 1969) ("The very  essence of waiver is the
assumed validity of the general rule, and  also the applicant's
violation unless waiver is granted.").


trarily and capriciously denied its waiver request, ignoring  the
required "hard look" standard. BellSouth Corp. v. FCC,  162 F.3d 1215,
1224-25 (D.C. Cir. 1999) (Waiver requests "are  not subject to
perfunctory treatment, but must be given a  hard look.") (quotation
omitted). According to the FCC  waiver rule:


The Commission may grant a request for waiver if it is  shown that:


(i) The underlying purpose of the rule(s) would not be  served or would
be frustrated by application to the  instant case and that a grant of
the requested waiver  would be in the public interest; or


(ii) In view of the unique or unusual factual circum- stances of the
instant case, application of the rule(s)  would be inequitable, unduly
burdensome or contrary to  the public interest, or the applicant has
no reasonable  alternative.


47 C.F.R. s 1.925(b)(3). Omnipoint assumes a "heavy" bur- den because
"an agency's refusal to grant a waiver will not be  overturned unless
the agency's reasons are so insubstantial as  to render that denial an
abuse of discretion." Mountain  Solutions, Ltd., Inc. v. FCC, 197 F.3d
512, 517 (D.C. Cir.  1999) (quotations omitted). Furthermore, "the
agency's strict  construction of a general rule in the face of waiver
requests is  insufficient evidence of an abuse of discretion." Id.
(citing  BellSouth, 162 F.3d at 1225).


Omnipoint argues that section 24.711(b)(3)'s underlying  purpose is to
provide financing to C Block licensees at a rate  "no higher than the
government's cost of money." The  record, however, does not support
Omnipoint's "restricted  view of the Commission's goals and purposes."
BellSouth,  162 F.3d at 1224. The FCC initially articulated its
purpose  as "promoting economic growth and enhancing access to 
telecommunications service offerings for consumers, produc- ers, and
new entrants." Second Report and Order, 9  F.C.C.R. at 2348. To that
end the FCC allowed a small  business licensee to pay for its licenses
in installment pay- ments over the license term. See 47 C.F.R. s


FCC also "agree[d] with those commenters that suggest that  interest on
installments should be charged at a rate no higher  than the
government's cost of money." Second Report and  Order, 9 F.C.C.R. at
2390. But the FCC stopped short of  committing itself and ultimately
retreated from the notion  that its purpose was to provide an interest
rate no higher  than the government's cost of money. Instead, the FCC 
considered section 24.711(b)(3) to represent "an identifiable 
benchmark" for interest rates. Memorandum Order and  Opinion, 14
F.C.C.R. at 9303 ("The Commission has recog- nized that Treasury
auctions provide an identifiable bench- mark on which to base interest
rates for installment pay- ments, but may not always reflect the
government's cost of  money.") (citing Amendment of Part 1 of the
Comm'n's  Rules--Competitive Bidding Proceeding, Order, Memoran- dum
Opinion and Order and Notice of Proposed Rulemaking,  12 F.C.C.R.
5686, 5709 (1997)). The FCC clarified that "[t]he  policy behind our
installment payment plan was to facilitate  small business
participation in our auction process by, among  other things,
application of the low interest rates used in the  Treasury auctions."
Id.; see also Second Report and Order,  9 F.C.C.R. at 2390-91 (FCC
intended to provide financing "in  a manner that is designed to
provide significant financial  assistance" at rates "generally lower
than the prime lending  rate established by private banks."). The 7%
interest rate,  while higher than the government's cost of money in
August  1996, was nevertheless significantly lower than the 11.625% 
interest rate private banks were then charging. See Memo- randum
Opinion and Order, 14 F.C.C.R. at 9303 n.39. We  conclude that the FCC
reasonably determined that strict  adherence to section 24.711(b)(3)
did not frustrate its underly- ing purpose to provide interest rates


Additionally, Omnipoint failed to show that its "unusual  factual
circumstances" made the application of section  24.711(b)(3) to its
installment payments inequitable or con- trary to the public interest.
Although the August 1996  Treasury auction was unusual, Omnipoint
claims that its  additional $6 million dollar cost (over ten years)


from the 0.5% interest rate difference harms the public  interest.
Omnipoint cannot satisfy the public interest re- quirement, however,
merely by "equat[ing] its own business  interest with the public
interest." BellSouth, 162 F.3d at  1225. We conclude that the FCC did
not abuse its discretion  in denying Omnipoint's request for a waiver
from section  24.711(b)(3) in that it reasonably determined that "the
Bureau  gave [Omnipoint's] waiver request a 'hard look' " and that 
Omnipoint did not show how a waiver would serve the public  interest.
Id. Accordingly, Omnipoint's petition for review of  the FCC's waiver


Denied.