United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 20, 2001 Decided July 3, 2001

No. 00-1246

National Public Radio, Inc., et al.,

Petitioners

v\.

Federal Communications Commission and

United States of America,

Respondents

Cornerstone Community Radio, Inc., et al.,

Intervenors

Consolidated with

00-1255

On Petitions for Review of an Order of the

Federal Communications Commission

Patrick F. Philbin argued the cause for petitioners. With him on the
briefs were John F. Wood, Ernest Thomas Sanchez, Susan M. Jenkins, Neal
A. Jackson, Marilyn Mohrman-Gillis and Robert M. Winteringham.

Dennis J. Kelly, Lauren A. Colby and John G. Bentley were on the brief
for intervenors Lay Catholic Broadcasting Network, Spring Arbor College
and Cornerstone Community Radio, Inc.

Cheryl A. Leanza, Andrew Jay Schwartzman and Harold J. Feld were on the
brief for amicus curiae National Federation of Community Broadcasters.

C. Grey Pash, Jr., Counsel, Federal Communications Commission, argued
the cause for respondents. With him on the brief were Jane E. Mago,
Acting General Counsel, Daniel M. Armstrong, Associate General Counsel,
John M. Nannes, Acting Assistant Attorney General, U.S. Department of
Justice, Robert B. Nicholson and Christopher Sprigman, Attorneys.
Christopher J. Wright, General Counsel, Federal Communications
Commission, entered an appearance.

Before: Ginsburg, Randolph and Tatel, Circuit Judges.

Opinion for the Court filed by Circuit Judge Tatel.

Concurring opinion filed by Circuit Judge Randolph.

Tatel, Circuit Judge: The Federal Communications Commission exempts
noncommercial educational entities from participating in auctions for
broadcast licenses when they apply for channels within the portion of
the spectrum re-served for them, but not when they apply for channels in
the unreserved spectrum. In this case, noncommercial educational
broadcasters challenge the Commission\'s policy, arguing that the
Balanced Budget Act of 1997 requires the Commission to exempt them from
participating in auctions for any channel, reserved or unreserved, and
that the Commission\'s adoption of this policy was arbitrary and
capricious. Finding the Commission\'s refusal to exempt such
broadcasters from auctions for unreserved channels contrary to the
Act\'s plain language, we vacate the offending portions of the
Commission\'s order.

I

For more than fifty years, the Federal Communications Commission has
reserved part of the FM radio spectrum and several television channels
exclusively for noncommercial educational use. In re Applications of
WQED Pittsburgh & Cornerstone Television, Inc., 15 FCC Rcd 202 p 16
(1999), vacated in part by 15 FCC Rcd 2534 (2000). The Commission has
done this because of the \"high quality type of programming which would
be available in such stations\--programming of an entirely different
character from that available on most commercial stations.\" Id.
(internal quotations omitted). Not restricted to this spectrum, however,
noncommercial educational broadcasters (NCEs) may also apply for
licenses in the unreserved spectrum, known as \"commercial\" licenses.

Historically, the Commission allocated licenses for both reserved and
unreserved channels through evidentiary hearings. Seeking to lessen
reliance on these time-consuming hearings, Congress, acting through the
Balanced Budget Act of 1997, amended Communications Act section
309(j)(1) to provide that if \"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.\" Balanced Budget Act of 1997 § 3002(a)(1)(A), 47 U.S.C. §
309(j)(1). Section 309(j)(2) states that this competitive bidding
authority \"shall not apply to licenses or construction permits issued
by the Commission\" for, among other things, NCEs. 47 U.S.C. §
309(j)(2)(C) (cross-referencing id. § 397(6)).

In an effort to implement the Balanced Budget Act, the Commission
proposed holding auctions for all licenses for commercial channels, but
not for channels reserved for NCEs. In re Implementation of Section
309(j) of the Communications Act\--Competitive Bidding for Commercial
Broad. & Instructional Television Fixed Serve. Licenses, 12 FCC Rcd
22363 p 50 (proposed Nov. 26, 1997). The Commission would continue
allocating the latter through evidentiary hearings. Although NCEs
applying for licenses to operate stations on the part of the spectrum
reserved for them would thus not have to participate in auctions, those
applying for commercial licenses would. Because commenters disagreed
about whether this approach was consistent with section 309(j)(2), and
because the Commission \"did not focus on the complicated nature of this
issue in \[its\] Notice in this proceeding,\" the Commission solicited a
further round of comment. In re Implementation of Section 309(j) of the
Communications Act\--Competitive Bidding for Commercial Broad. &
Instructional Television Fixed Serv. Licenses, 13 FCC Rcd 15920 p 25
(1998). In doing so, the Commission recognized that if section 309(j)(2)
barred it from requiring NCEs to participate in auctions for commercial
licenses, several alternatives existed: establishing a special track for
processing NCE applications; adopting a hybrid approach when NCEs apply
(for instance, evaluating applicants initially on a point system and, if
the NCE is thereby eliminated, proceeding to an auction); or even making
NCEs ineligible to apply for commercial licenses altogether. In re
Reexamination of the Comparative Standards for Noncommercial Educ.
Applicants, 13 FCC Rcd 21167 p p 39-44 (1998).

In the resulting Report and Order challenged here, the Commission
answered what it called \"\[p\]erhaps the most difficult question posed
in this proceeding\"\--how to interpret section 309(j)(2)\--by adopting
its initial proposal and exempting NCEs from competing in auctions only
when they apply for licenses to operate channels in the reserved
spectrum. See In re Reexamination of the Comparative Standards for
Noncommercial Educ. Applicants, 15 FCC Rcd 7386 p 101 (2000); see also
id. at p p 101-111. Petitioners\--National Public Radio, the Association
of America\'s Public Television Stations, the Corporation for Public
Broadcasting, and the State of Oregon (acting on behalf of Southern
Oregon University)\--seek review of this decision, arguing that it
conflicts with the 1997 Act\'s NCE exemption and that it is arbitrary
and capricious.

II

In evaluating petitioners\' argument that the Commission\'s action
violates the Balanced Budget Act of 1997, we proceed under the familiar
two-part test of Chevron U.S.A. Inc. v. Natural Resources Defense
Council, Inc., 467 U.S. 837 (1984). If \"Congress has directly spoken to
the precise question at issue \... that is the end of the matter; for
the court, as well as the agency, must give effect to the unambiguously
expressed intent of Congress.\" Id. at 842-43. Only if the statute is
silent or ambiguous do we defer to the agency\'s interpretation, asking
\"whether \[it\] is based on a permissible construction of the
statute.\" Id. at 843.

Arguing that the Commission\'s action fails step one, petitioners claim
that the Act unambiguously forbids the Commission from requiring NCEs to
participate in auctions to obtain licenses for any channel, reserved or
unreserved. We agree. While section 309(j)\'s first paragraph directs
the Commission to award licenses through a system of competitive
bidding, it only does so subject to limitations set forth in the second
paragraph, one of which expressly denies the Commission authority to
hold auctions for \"licenses \... issued \... for \[NCEs\].\" 47 U.S.C.
§ 309(j)(2). Because this paragraph\'s denial of authority is based on
the nature of the station that ultimately receives the license, not on
the part of the spectrum in which the station operates, nothing in the
Act authorizes the Commission to hold auctions for licenses issued to
NCEs to operate in the unreserved spectrum.

This is not to say that the Act\'s language is perfectly crafted. For
instance, because the exemption refers to the ultimate recipient of the
license, not to applicants for the license, the Commission apparently
has authority to require an NCE applicant to participate in an auction
so long as it does not ultimately receive a license. But as petitioners
noted at oral argument, to ensure that an NCE never has to participate
in an auction for a license that it ultimately receives, the Commission
must exempt all NCE applicants from such auctions. Inartful drafting is
not the same as ambiguity. Cf. Meredith v. Fed. Mine Safety & Health
Review Comm., 177 F.3d 1042, 1053 (D.C. Cir. 1999) (\"\[T\]he presence
of a difficult question of statutory construction does not necessarily
render that provision ambiguous for purposes of Chevron.\"). Here, the
fact remains that under the Act\'s plain language the Commission must
exempt NCEs from participating in all auctions. In any event, the
Commission has not argued that the statute is ambiguous for this reason.

Our concurring colleague, advancing another argument not made by the
Commission, believes that the statute is ambiguous for a different
reason: the word \"issued\" in section 309(j)(2) may mean that the
section applies only to licenses already issued, that is, to renewals of
existing licenses. But this is not a plausible reading of the statute:
section 309(j)(1)\'s grant of bidding authority for licenses is
expressly limited to \"initial licenses,\" not to renewals. 47 U.S.C. §
309(j)(1). Reading 309(j)(2) as exempting only NCE renewals from this
authority would thus render the section meaningless.

The Commission argues not that the statute is ambiguous for any of these
reasons, but rather that it is silent on the specific question before
us, thus requiring us to defer to the Commission\'s interpretation under
Chevron step two. \"\[N\]othing in the text of the provision,\" the
Commission argues, \"evinces unambiguous Congressional intent on the
narrow question of competing applications filed by \[NCEs\] for a
non-reserved channel.\" Respondent\'s Br. at 16; see also In re
Reexamination of the Comparative Standards for Noncommercial Educ.
Applicants, 15 FCC Rcd p 106. By failing to distinguish between reserved
and unreserved channels, however, section 309(j)(2) exempts NCEs that
apply for commercial licenses from participating in auctions. True,
nothing in the Act\'s text specifically says that NCEs applying for
commercial licences are exempt from auctions. But general rules need not
list everything they cover: no one would argue, for instance, that the
statutory requirement that the Commission award licenses to serve
\"public convenience, interest, or necessity\" does not apply to
licenses for AM stations because the Act does not expressly mention AM
licenses. 47 U.S.C. § 307(a). For the same reason, section 309(j)(2)\'s
NCE exemption from all auctions means that NCEs are exempt from auctions
for commercial as well as reserved licenses.

Because statutory language represents the clearest indication of
Congressional intent, cf. Qi-Zhuo v. Meissner, 70 F.3d 136, 140 (D.C.
Cir. 1995) (\"Where \... the plain language of the statute is clear, the
court generally will not inquire further into its meaning.\"), and
because the Act\'s general language covers all auctions, we must presume
that Congress meant precisely what it said. Extremely strong, this
presumption is rebuttable only in the \"rare cases \[in which\] the
literal application of a statute will produce a result demonstrably at
odds with the intentions of its drafters.\" United States v. Ron Pair
Enterp., Inc., 489 U.S. 235, 242 (1989) (internal quotation omitted).
The Commission\'s burden in rebutting the presumption created by clear
language is onerous: the Commission must \"show either that, as a matter
of historical fact, Congress did not mean what it appears to have said,
or that, as a matter of logic and statutory structure, it almost surely
could not have meant it.\" Engine Mfrs. Ass\'n v. EPA, 88 F.3d 1075,
1089 (D.C. Cir. 1996); see also Griffin v. Oceanic Contractors, Inc.,
458 U.S. 564, 571 (1982) (courts may ignore plain language in a narrow
category of cases where \"the literal application of a statute will
produce a result demonstrably at odds with the intentions of its
drafters.\"). The Commission here has fallen short of this high
standard.

The Commission claims that section 309(j)(2) conflicts with another
section of the Act\--section 309(j)(1). Cf. Engine Mfrs., 88 F.3d at
1089 (\"The \[agency\'s\] strongest arguments arise from an apparent
tension between two aspects of the authorization regime.\"). According
to the Commission, the latter directs it to award licenses through
competitive bidding, while the former prohibits it from doing so. But we
do not understand how a general rule (section 309(j)(1)) can conflict
with its own exception (section 309(j)(2)). Nor do we agree with the
Commission that following section 309(j)(2)\'s plain language would
frustrate the Act\'s purposes. Cf. Envtl. Def. Fund, Inc. v. EPA, 82
F.3d 451, 469 (D.C. Cir. 1996) (\"Because \[a\] literal reading of the
statute would actually frustrate the congressional intent supporting it,
we look to the \[agency\] for an interpretation of the statute more true
to the Congress\'s purpose.\"). According to the Commission, exempting
NCEs from auctions for commercial licenses would undermine Congress\'s
desire to \"recover\[ \] \... a portion of the value of the
\[commercial\] spectrum\" through auctions. 47 U.S.C. § 309(j)(3)(C).
But because the Commission would be required to use auctions when NCEs
have not applied, following the plain language of section 309(j)(2)
would still increase the amount of money the Commission recovers. Most
important, notwithstanding Congress\'s desire to increase revenue, it
expressly exempted NCEs from participating in auctions, thus
demonstrating that it understood that pursuit of this goal would be
limited by the NCE exemption. \"Deciding what competing values will or
will not be sacrificed to the achievement of a particular objective is
the very essence of legislative choice\--and it frustrates rather than
effectuates legislative intent simplistically to assume that whatever
furthers the statute\'s primary objective must be the law.\" Rod-riguez
v. United States, 480 U.S. 522, 526 (1987).

Nor, finally, do we find anything in the legislative history to support
the Commission\'s interpretation of the statute. In fact, what little
relevant legislative history exists reinforces section 309(j)(2)\'s
plain language. The original House and Senate bills expressly limited
the auction exemption to applications for \"channels reserved for
noncommercial use.\" S. 947, 105th Cong. § 3001(a)(1) (1997); H.R. 2015,
105th Cong. § 3301(a)(1) (1997). The House-Senate conference abandoned
this restriction, adopting the exemption as it now stands. H.R. Conf.
Rep. No. 105-217, at 9 (1997). As petitioners point out, \"\[w\]here
Congress includes limiting language in an earlier version of a bill but
deletes it prior to enactment, it may be presumed that the limitation
was not intended.\" Russello v. United States, 464 U.S. 16, 23-24
(1983). The Commission offers an alternative explanation for the
deletion: the restriction was originally used as part of an attempt to
define \"NCE\" and was removed when the conference substituted a
reference to the proper statutory definition. We need not resolve this
debate, for even if the Commission\'s account is correct, the
legislative history falls far short of demonstrating that \"Congress did
not mean what it appears to have said.\" Engine Mfrs., 88 F.3d at 1089.
We thus have no reason to believe that Congress meant anything other
than that the Commission may not require NCEs to participate in
auctions, regardless of the type of license they seek.

III

Because the Commission\'s order conflicts with Communications Act
section 309(j)(2), we have no need to consider petitioners\' arbitrary
and capricious challenge. The petition for review is granted and the
portions of the Commission\'s Report and Order requiring NCEs that apply
for licenses on the unreserved spectrum to participate in competitive
auctions are vacated.

So ordered.

Randolph, Circuit Judge, concurring: One of the interesting features of
a circle is that if you start traveling in one direction along its rim
you will eventually wind up exactly where you began. The majority
opinion starts by declaring the language of statute \"plain.\" Maj. op.
at 2, 6. Why is it \"plain\"? Because it is \"presumed\" that Congress
meant what it said. Id. at 7. What did Congress say? Whatever the
language of the statute makes plain.

The opinion also observes, rather curiously, that although the statute
has a plain meaning, it is not \"perfectly crafted\" and represents
\"inartful \[inartistic?\] drafting.\" Maj. op. at 5. Notice the
argument assuming its conclusion. The statute is not perfectly crafted,
indeed is grammatically incoherent, if and only if the majority\'s
reading of it is correct, which of course is the issue. If the majority
is mistaken, as I think it is, the language of the statute simply
conveys what its authors intended. There is no flaw in its drafting.

Let us now examine the language of 47 U.S.C. § 309(j)(2)(C) in the
context of the entire subsection:

\(j\) Use of competitive bidding

(1) General authority

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 requirements of
this subsection.

\(2\) Exemptions

The competitive bidding authority granted by this subsection shall not
apply to licenses or construction permits issued by the Commission\--

\(A\) for public safety radio services, including private internal radio
services used by State and local governments and non-government entities
and including emergency road services provided by not-for-profit
organizations, that\--

\(i\) are used to protect the safety of life, health, or property; and

\(ii\) are not made commercially available to the public;

\(B\) for initial licenses or construction permits for digital
television service given to existing terrestrial broadcast licensees to
replace their analog television service licenses; or

\(C\) for stations described in section 397(6) of this title.

Section 397(6) defines \"noncommercial educational broadcast station\"
or, NCE.

Attention must be paid to the word \"issued\" in §
309(j)(2)\--competitive bidding does not apply to \"licenses or
construction permits issued by the Commission\" for NCEs. Now if we read
this to mean what it says the exemption from competitive bidding for
licenses would apply only to licenses already \"issued.\" How can that
make sense? One answer is that the auction exemption is limited to
renewals of licenses issued to NCEs in the non-reserved spectrum. In
other words, Congress intended that new licenses may be auctioned off
even if an NCE is vying for the license, but the Commission should not
refuse to renew \"licenses \[already\] \... issued\" to stations merely
because NCEs cannot compete with commercial applicants in an auction.

What does the majority offer in response? That \"issued\" cannot
possibly mean what it means, maj. op. at 5-6\--an answer that refutes
the majority\'s next point that \"Congress meant precisely what it
said.\" Id. at 7. I do not deny the feasibility of the majority\'s
interpretation of § 309(j)(2)(C) nor do I deny the possibility of the
Commission (not the court) interpreting the statute in that manner,
although it would be a bit of a stretch. But to claim that the
majority\'s reading derives from the \"plain meaning\" of the provision
crosses the boggle threshold.

We ought to just face up to the obvious\--this subsection is a mess. The
problem is not just with § 309(j)(2)(C). Look at § 309(j)(2)(B)\--the
\"competitive bidding authority granted by this subsection shall not
apply to licenses \... for initial licenses \... for digital television
service\....\" 47 U.S.C. § 309(j)(2)(B). To what does \"licenses for
initial licenses\" refer? When asked at oral argument the Commission was
as baffled as we were.

The Commission, at least, did not fall into the trap of treating the
statute as clear when it clearly is not. See maj. op. at 8-9; In re
Reexamination of the Comparative Standards for Noncommercial Educational
Applicants, 15 F.C.C.R. 7386 p 106 (2000). The Commission relied instead
on the idea that some conflict existed between the general rule embodied
in § 309(j)(1), requiring auctions, and the exception in § 309(j)(2). I
agree with the majority that this rationale cannot be sustained. See
maj. op. at 8; In re Reexamination of the Comparative Standards for
Noncommercial Educational Applicants, 15 F.C.C.R. 7386 p 106 (2000).
Section 306(j)(2) is an exception; an exception deviates from a general
rule, it does not \"conflict\" with it. Because the Commission\'s
explanation for its decision is erroneous, we must remand under SEC v.
Chenery, 318 U.S. 80, 88, 95 (1943).

I therefore concur that the Commission\'s order must be set aside and
the case remanded to the agency. I do not agree that on remand the
Commission must adopt the majority\'s interpretation of § 309(j)(2)(C).