United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 10, 2001 Decided January 11, 2002

No. 00-1292

High Plains Wireless, L.P.,

Appellant

v\.

Federal Communications Commission,

Appellee

Digital PCS, LLC and Tritel Communications, Inc.,

Intervenors

Appeal from an Order of the

Federal Communications Commission

Eliot J. Greenwald argued the cause and filed the briefs for appellant.

Stanley Scheiner, Counsel, Federal Communications Commission, argued the
cause for appellee. With him on the brief were Jane E. Mago, General
Counsel, Daniel M. Armstrong, Associate General Counsel, and Thomas
Chandler, Counsel.

Thomas Gutierrez argued the cause for intervenors Digital PCS, LLC and
Tritel Communications, Inc. With him on the joint brief was Russell D.
Lukas.

Before: Ginsburg, Chief Judge, Edwards and Sentelle, Circuit Judges.

Opinion for the Court filed by Chief Judge Ginsburg.

Ginsburg, Chief Judge: High Plains Wireless, L.P. appeals an order of
the Federal Communications Commission awarding 32 licenses to Mercury
PCS II, LLC, now called Tritel Communications, Inc. High Plains and
Mercury both bid at an auction conducted by the Commission for licenses
to provide personal communications services (PCS). See Mercury PCS II,
LLC, 15 F.C.C.R. 9654 (2000) (Mercury). High Plains asserts that the
Commission unreasonably refused to disqualify Mercury from receiving the
licenses even though Mercury concededly violated the Commission\'s rule
against collusion. High Plains also alleges that Mercury orchestrated a
slew of unlawful ex parte contacts in an attempt to influence the
investigation into its bidding practices. We hold that, insofar as High
Plains has standing to appeal, it has not shown that the award to
Mercury was arbitrary or irrational, and we therefore affirm the order
of the Commission.

I. Background

Broadband PCS is a group of technologies that allow mobile communication
using the electromagnetic spectrum. See Amendment of the Comm\'n\'s
Rules to Establish New Personal Comms. Servs., 8 F.C.C.R. 7700 at p 24
(1993) (2d R&O). Advanced cellular telephones, portable facsimile
machines, and many other methods of wireless communication are based
upon broadband PCS. See id. at p 18. Recognizing the commercial and
technological potential of broadband PCS, the Commission reserved 120
MHz of spectrum for provision of these services. See 47 C.F.R. § 24.200.

Before a party may use the spectrum to provide broadband PCS, it must
get a license from the Commission. See 47 U.S.C. § 301. In 1993 the
Congress directed the Commission to choose between mutually exclusive
applications for a li-cense through a system of competitive bidding, see
47 U.S.C. § 309(j)(1); 47 C.F.R. § 24.701; the Commission has since held
several of the highest value auctions in history. See Remarks of
then-Chairman Reed Hundt at the Inst. for Int\'l Econ., Washington, D.C.
(Oct. 23, 1996), at http: //www.fcc.gov/Speeches/Hundt/spreh647.txt
(visited Dec. 18, 2001) (comparing himself to Genghis Khan as one of the
\"most profit-generating\" officials ever).

The Commission divided the 120 MHz of spectrum reserved for broadband
PCS in two ways. First, it partitioned the spectrum into six blocks:
three of 30 MHz each (A, B, and C) and three of 10 MHz each (D, E, and
F). See 2d R&O at p 56. Second, it divided the spectrum into geographic
service areas. Licenses for the A and B blocks of spectrum were
established for each of the 51 Market Trading Areas into which the
United States and its territories were divided in the Rand McNally
Commercial Atlas & Marketing Guide (1992). See id. at p p 64, 76.
Licenses for the C, D, E, and F blocks were established for each of the
493 Basic Trading Areas (BTAs) defined by the same source. See id.
Between August 26, 1996 and January 14, 1997 the Commission auctioned
off the D, E, and F block licenses in all 493 BTAs. See Mercury, 15
F.C.C.R. 9654 at p 2.

The DEF auction was open, simultaneous, and ascending. That the auction
was \"open\" means that, in contrast to a sealed-bid auction, the
participants became aware of each others\' bids as they were cast. The
auction was \"simultaneous\" in that the D, E, and F licenses for each
of the 493 BTAs were open for bidding at the same time, and the auction
was \"ascending\" in the sense that bidding on the licenses continued
through successive rounds until no new high bid was cast. The Commission
built these features into the auction to maximize the revenue it would
generate and the allocative efficiency it would achieve. See generally
Peter Cramton, The Efficiency of the FCC Spectrum Auctions, 41 J. L. &
Econ. 727, 728-35 (1998). Because the bidding was open, however, any
bidder could send all other bidders a message encoded in the digits of
its bid. See Peter Cramton & Jesse A. Schwartz, Collusive Bidding:
Lessons from FCC Spectrum Auctions, 17 J. Reg. Econ. 229, 237 (2000). In
this way, participants could collude through the auction process itself.

Mercury and High Plains both bid on the licenses for the F block of
spectrum in Lubbock and for the D and F blocks in Amarillo, Texas. See
Mercury, 15 F.C.C.R. 9654 at p 2. High Plains was the successful bidder
for the F block license in Amarillo. See id. at p 2 & n.9. Mercury
acquired the F block license in Lubbock as well as 31 other licenses for
which High Plains did not bid. See id. at p 2 & n.10.

Mercury used so-called \"reflexive bidding,\" a tactic for deterring
would-be competitors from bidding on a particular license, to dissuade
High Plains from bidding on the F block license for Lubbock. See id. at
p 5 & n.23. Specifically, Mercury made the last three digits of its bids
for the F block licenses in Lubbock and in Amarillo the same as the
Commission\'s numeric designations for the Amarillo and Lubbock BTAs
respectively. See Mercury PCS II, LLC, 13 F.C.C.R. 23755 (1998) p 3
(NALF Rescission). In one round of the auction, for example, Mercury bid
\$1,375,013 on the F block license in Lubbock, \"013\" being the BTA for
Amarillo; after High Plains bid again for the F block license in
Lubbock, Mercury bid \$1,615,264 on the F block license in Amarillo,
\"264\" being the BTA for Lubbock. See id. By repeatedly thus encoding
its bids, Mercury was able to warn High Plains that if High Plains did
not stop bidding, then Mercury would drive up the price of the F block
license in Amarillo. See id. at p 4.

The message was not lost on High Plains, which stopped bidding for the F
block license in Lubbock, see id., and filed with the Commission an
emergency motion to disqualify Mercury from the auction. High Plains
alleged that Mercury violated the anti-collusion rule, which prohibited
bidders \"from cooperating, collaborating, discussing or disclosing in
any manner the substance of their bids or bidding strategies\" during
the auction. 47 C.F.R. § 1.2105(c) (2000), amended by Competitive
Bidding Procedures, 66 Fed. Reg. 54447, 54447-48 (Oct. 29, 2001). When
the auction ended without the Commission having acted upon the motion,
High Plains filed a motion to deny the award to Mercury of any licenses
in the DEF auction. During ensuing investigations conducted separately
by the Commission and by the Department of Justice, the executive
responsible for formulating Mercury\'s bidding strategy admitted that
Mercury had used reflexive bidding to threaten other bidders. See
Mercury, 15 F.C.C.R. 9654 at p 16 n.57. Mercury claimed, however, that
reflexive bidding was a common practice and did not violate the rule
against collusion. See NALF Rescission, 13 F.C.C.R. 23755 at p 4.

While the investigation into Mercury\'s bidding practices was ongoing,
High Plains again complained to the Commission, this time about ex parte
contacts between Members of Congress and the staff of the Commission. At
least 27 Members inquired of the Commission about Mercury\'s licenses
and the delay in their award. After yet another investigation, the
Office of General Counsel (OGC) dismissed the charge, finding that the
contacts were all congressional \"status inquiries\" exempt from the ban
on ex parte contacts under the Commission\'s rules. 47 C.F.R. §
1.1202(a).

Also while the investigation into Mercury\'s bidding practices was
ongoing, the Wireless Telecommunications Bureau (WTB) of the Commission
awarded Mercury all but nine of the licenses for which the company was
the high bidder. See Mercury PCS II, LLC, 13 F.C.C.R. 5756 (1997) p 1.
When the investigation was over, the Commission imposed upon Mercury a
\$650,000 forfeiture, see Notice of Apparent Liability for Forfeiture,
12 F.C.C.R. 17970 (1997) p 1 (NALF Order); the WTB granted Mercury the
remaining nine licenses, including the F block license for Lubbock; High
Plains filed an application for review of that order; and the Commission
rescinded its earlier forfeiture order. See NALF Rescission, 13 F.C.C.R.
23755 at p 1. In the rescission order, the Commission found that Mercury
was not on notice that reflexive bidding would violate the rule against
collusion, see id. at p 10, and therefore declined to punish the
company. See id.

The Commission consolidated High Plains\' applications to review (1) the
OGC\'s determination that Mercury had not violated the ban against ex
parte contacts and (2) the WTB\'s award of licenses to Mercury, and
affirmed on both counts. See Mercury, 15 F.C.C.R. 9654 at p p 13, 26. It
also rejected High Plains\' new contention that Mercury had shown a lack
of candor during the investigations into its bidding practices so
egregious as to disqualify it from holding a Commission license. See id.
at p p 14-21. High Plains appealed to this court and Mercury intervened
in the case.

II\. Analysis

High Plains presents three issues on appeal. First, it challenges the
Commission\'s award of licenses to Mercury on the ground that Mercury
violated the rule against collusion and the Commission had so held.
Second, High Plains asserts that this court should reverse the decision
of the Commission because it erred in holding that Mercury did not
violate the rules against ex parte communications. Third, High Plains
renews its claim that Mercury exhibited a disqualifying lack of candor.
We turn to these claims only after considering whether High Plains has
standing under Article III of the Constitution of the United States to
bring this appeal. See Steel Co. v. Citizens for a Better Env., 523 U.S.
83, 94-95 (1998); see also United Transp. Union-Ill. Legis. Bd. v.
Surface Transp. Bd., 175 F.3d 163, 165 (D.C. Cir. 1999) (\"\[W\]e must
determine whether the court has jurisdiction of the case before we may
turn to the merits\").

A. Standing and Jurisdiction

The Commission and Mercury, which has intervened, advance numerous
arguments that High Plains is without standing to assert some or all of
its claims on appeal. We consider the objections of the litigants, fully
aware of our independent obligation to be sure we have jurisdiction.

The \"irreducible constitutional minimum\" that High Plains must show
for standing to maintain this appeal is that it suffered an injury in
fact, that the conduct of which it complains caused the injury, and that
a favorable decision of this court would redress the injury. U.S.
Airwaves, Inc. v. FCC, 232 F.3d 227, 231-32 (D.C. Cir. 2000). This court
has had occasion in prior cases to tailor the application of these
prerequisites specifically to complaints arising from the Commission\'s
auctions of spectrum. We have held that \"\[a\] bidder in a government
auction has a \'right to a legally valid procurement process\'; a party
allegedly deprived of this right asserts a cognizable injury.\" Id. at
232 (quoting DirecTV, Inc. v. FCC, 110 F.3d 816, 829 (D.C. Cir. 1997)).
A disappointed bidder need not show that it would be successful if the
license were auctioned anew, but only that it was able and ready to bid
and that the decision of the Commission prevented it from doing so on an
equal basis. See id. The bidder may satisfy the requirement of
redressability by showing that \" \'it is ready, willing, and able\' to
participate in a new auction should it prevail\" in court. Id. (quoting
Orange Park Fla. T.V., Inc. v. FCC, 811 F.2d 664, 672 (D.C. Cir. 1987)).

Insofar as the appellant challenges the award to Mercury of the F block
license for Lubbock, it meets these requirements. High Plains complains
that it was injured because the Commission awarded the license to
Mercury, which had violated the anti-collusion rule, instead of holding
a new auction in which High Plains could bid free of the illicit
influence of reflexive bidding. Further, High Plains has expressed its
willingness to bid in a reprise of the vendue for the F block license in
Lubbock; and it is obvious that the court could redress High Plains\'
injuries by ordering the Commission to auction the license anew. High
Plains\' contentions that Mercury tried to mislead the Commission and to
influence the Commission through illicit ex parte contacts also assert a
cognizable injury, that of deprivation to a valid, impartial
administrative proceeding, which injury this court could redress by
reversing the Commission. Accordingly, High Plains has standing to
appeal the Commission\'s award to Mercury of the F block license for
Lubbock.

The Commission contends separately that High Plains does not have
standing to challenge the award of the 31 other licenses that Mercury
acquired in the DEF auction, and High Plains does not counter the
Commission\'s argument. We agree with the Commission (as does the
intervenor, not surprisingly). High Plains did not compete against
Mercury for those licenses. Nor does it allege that the award of those
licenses somehow deprived it of a valid auction process with respect to
the lots for which it did bid. It follows that denying those 31 licenses
to Mercury will not redress the injury that High Plains suffered in its
attempt to acquire the F block license in Lubbock. Accordingly, we hold
that High Plains\' challenge to the award of licenses other than the F
block license in Lubbock is not within the jurisdiction of this court.

Standing aside, Mercury argues that the court lacks jurisdiction over
the entire dispute, but its objections are predicated upon technical and
not upon constitutional grounds. Mercury\'s principal claim is that in
order to raise to this court any objection to the award of licenses to
Mercury based upon the anti-collusion rule, High Plains should have
sought review of the NALF Rescission order, which is now barred by the
60-day limitation in the Hobbs Act. See 28 U.S.C. § 2344. The point is
not well taken: High Plains could not have gotten review of the NALF
Rescission because it did not have standing to object to the agency\'s
refusal to sanction Mercury. See Branton v. FCC, 993 F.2d 906, 910-11
(D.C. Cir. 1993) (citing Linda R.S. v. Richard D., 410 U.S. 614 (1973)).
When the Commission later disposed of High Plains\' consolidated
applications for review, the company had and took its first opportunity
to seek judicial review of the Commission\'s award of the Lubbock
license to Mercury. For the same reason, we reject Mercury\'s second
contention, namely, that High Plains is precluded from asserting its
objections in this appeal because it could have done so when the
Commission issued the NALF Rescission order. See Restatement (Second) of
Judgments § 28(1).

B. The Anti-Collusion Rule

High Plains argues that the Commission\'s decision to award the license
to Mercury despite its having violated the anti-collusion rule was
\"neither plausible nor reasonable.\" We understand High Plains to
object to the decision under two theories: First, that the Commission
erred in holding the rule against collusion too ambiguous to put Mercury
on notice reflexive bidding was a violation; and, second, that the
Commission unreasonably departed from a putative policy making violation
of the rule a ground for forfeiture.

As for the first theory, our review is deferential: the agency\'s
interpretation of its own rule is given \"controlling weight unless it
is plainly erroneous or inconsistent with the regulation.\" Capital
Network Sys., Inc. v. FCC, 28 F.3d 201, 205 (D.C. Cir. 1994). The issue
for the court, then, is whether the Commission plainly erred or
contravened the rule against collusion when it read the rule as not
providing notice that reflexive bidding was prohibited. Here is the rule
in relevant part:

\[A\]fter the short-form application filing deadline, all applicants are
prohibited from cooperating, collaborating, discussing or disclosing in
any manner the substance of their bids or bidding strategies \... with
other applicants until after the down payment deadline\....

47 C.F.R. § 1.2105(c)(1) (2000). Plainly, the rule does not refer
specifically to reflexive bidding. To engage in reflexive bidding,
however, is to \"disclos\[e\] \... bidding strategies,\" and Mercury
unquestionably did that during the period covered by the rule.
Therefore, the rule probably did prohibit Mercury\'s conduct, but that
is not the question before the court. Our task is to determine only
whether the Commission reasonably could conclude the rule failed to put
Mercury on notice that reflexive bidding was impermissible.

The Commission itself did not anticipate that participants might collude
through the bidding process. After High Plains filed its emergency
motion to prevent Mercury from bidding for licenses at the auction, for
example, the WTB declared that it had \"reached no determinations on the
merits of \[the\] argument\" that reflexive bidding violated the
anti-collusion rule. NALF Rescission, 13 F.C.C.R. 23755 at p 10 n.20. As
the Commission later noted, this \"neutral pronouncement immediately
following the initial allegation of reflexive bid signaling could
reasonably have been interpreted by auction participants as indicative
of an undefined position on whether reflexive bid signaling was covered
under the anti-collusion rule.\" Id. at p 10.

To the extent the Commission ever contemplated that participants would
convey information about their bidding strategies through the act of
bidding, it considered the exchange of information to be a virtue of the
open auction. See 2d R&O, 8 F.C.C.R. 7700 at p 83 (\"Multiple round
bidding provides information about other bidders\' estimates of common
values, allowing all bidders to improve their estimates of these common
values.\"). The Commission did anticipate that an auction with multiple
rounds of bidding might increase the opportunity for collusion, but only
because the regime could facilitate enforcement of collusive agreements
reached elsewhere, see id. at p 85 (\"Using a single sealed bid could
reduce the likelihood of such collusive behavior since it provides
colluding bidders greater incentive to defect\"), not because the
participants could use the open, iterative bidding process itself to
collaborate. Not until after the DEF auction was over did the Commission
identify the sorts of disclosure that, if encoded within a bid, would
violate the anti-collusion rule. See NALF Order, 12 F.C.C.R. at 17981
(concurring statement of Commissioner Ness).

In sum, whether reflexive bidding violated the rule against collusion
appears to have been an unsettled \-- indeed, an unasked \-- question
before the DEF auction. In this circumstance it was not unreasonable for
the Commission to have deemed the rule ambiguous with respect to whether
reflexive bidding was prohibited.

Having determined that the Commission reasonably deemed the
anti-collusion rule ambiguous, we may dispose in short order of High
Plains\' argument that the Commission nevertheless erred in awarding to
Mercury the licenses for which it had bid using that tactic. That the
rule did not afford adequate notice reflexive bidding was unlawful is
itself sufficient justification for the Commission not to penalize
Mercury. See Satellite Broad. Co., Inc. v. FCC, 824 F.2d 1, 3 (D.C. Cir.
1987) (\"Traditional concepts of due process incorporated into
administrative law preclude an agency from penalizing a private party
for violating a rule without first providing adequate notice of the
substance of the rule\").

High Plains\' other arguments \-- for example, that Mercury\'s use of
reflexive bidding makes it unfit to hold a license from the Commission
\-- misconceive the relationship between the court and the Commission.
We do not review the decisions of the agency de novo. We inquire whether
Commission action was arbitrary and capricious, an abuse of discretion,
or otherwise contrary to law; and we uphold the agency\'s decision when
it is reasonable. See Global Naps, Inc. v. FCC, 247 F.3d 252, 257-58
(D.C. Cir. 2001). Therefore, we reject summarily the appellant\'s other
arguments; aimed only at showing the agency was wrong, they have not the
power to persuade that the agency was unreasonable.

C. The Ex Parte Rules

With certain exceptions clearly not applicable here, the Commission
prohibits \"ex parte presentations\" during the pendency of an
administrative adjudication and any subsequent judicial review. 47
C.F.R. § 1.1208. The regulations define a \"presentation\" as a
\"communication directed to the merits or outcome of a proceeding.\" Id.
at § 1.1202(a). A written presentation is \"ex parte\" if it is \"not
served on the parties to the proceeding.\" Id. at § 1.1202(b). Thus, a
written presentation comes within the prohibition of the rules only if
it is both \"directed to the merits or outcome of a proceeding\" and
\"not served on the parties.\" Responsibility for a violation of the ex
parte rules extends to a party that \"solicit\[s\] or encourage\[s\]
others to make any improper presentation,\" id. at § 1.1210, as High
Plains alleges Mercury did in this case. See Freeman Eng\'g Assocs. v.
FCC, 103 F.3d 169, 184 (D.C. Cir. 1997) (listing factors that inform the
analysis whether a proceeding is \"irrevocably tainted\" by ex parte
contacts and therefore void).

High Plains does not identify a single written contact between a Member
of Congress and the Commission that meets both criteria. The appellant
does refer the court to some congressional letters that arguably called
upon the Commission to give Mercury the licenses being withheld during
the inquiry into its bidding practices. High Plains also avers that it
was not served with copies of certain congressional correspondence, but
there is no overlap in the two epistolary lists.

In its brief High Plains also claims it did not receive some of the
congressional letters written on behalf of Mercury \"until the FCC
submitted the Certified List of Items in the Record to the Court,\" that
is, well after the Commission had closed its inquiry into Mercury\'s
bidding practices. If High Plains did not receive the letters until
then, and if the letters addressed the merits of the licensing dispute,
then reversal of the order and remand to the Commission might have been
appropriate. At oral argument, however, High Plains acknowledged that it
had received the letters long before the Commission closed the record;
indeed, the company attached the letters as exhibits in a proceeding
before the Commission more than three years ago. See High Plains\' Opp.
to Mercury\'s Pet. for Recons. at Exh. C (Oct. 7, 1997).

In the end High Plains has not proffered a single instance in which a
congressional contact violated the ex parte rules. We conclude,
therefore, that the Commission had substantial evidence that High Plains
did not orchestrate a campaign of such contacts.

D. Candor

Finally, High Plains argues that Mercury was not candid with the
Commission during the investigation into its bidding tactics, and that
its lack of candor disqualifies Mercury from holding a Commission
license. The Commission found that Mercury never attempted to mislead
the Commission about its having used bids to convey messages; Mercury\'s
defense had always been that the rule against collusion did not prohibit
its reflexive bidding.

The gravamen of High Plains\' factual claim is that a representative of
Mercury falsely declared in a submission to the Commission that Mercury
had not \"utilized trailing numbers to send secret signals to anyone as
alleged by High Plains,\" and that Mercury had used reflexive bidding
only to \"bluff or confuse other bidders as to Mercury\'s overall
auction strategy.\" In a later deposition this same person admitted he
used reflexive bidding \"to threaten High Plains that I was fixing to
come blister their butt in Amarillo.\" Mercury, 15 F.C.C.R. 9654 at p 17
n.57. The Commission did not consider the apparent contradiction, but
neither did the appellant first present it to the Commission. The matter
is therefore beyond our ken. See 47 U.S.C. § 405(a)(2) (requiring a
litigant first to present an argument to the Commission on
reconsideration if it \"relies on questions of fact or law upon which
the Commission \... has been afforded no opportunity to pass\").

High Plains also adduces some lesser inconsistencies in Mercury\'s
submissions to the Commission as evidence of Mercury\'s disdain for the
truth. Again, however, High Plains attempts to persuade the court that
the Commission was wrong, not that it was unreasonable. There being no
claims to the contrary, we must conclude that the decision of the
Commission is reasonable and is supported by substantial evidence on the
record as a whole. See 5 U.S.C. § 706(2)(C).

III\. Conclusion

For the foregoing reasons, the decision of the Commission to award to
Mercury the F block license for Lubbock is

Affirmed.