United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 16, 2000 Decided July 28, 2000

No. 97-1245

Benkelman Telephone Company, et al.,

Petitioners

v\.

Federal Communications Commission and

United States of America,

Respondents

Nationwide Paging, Inc., et al.,

Intervenors

No. 97-1294

Metamora Telephone Company,

Petitioner

v\.

Federal Communications Commission and

United States of America,

Respondents

No. 99-1247

Advanced Paging, Inc, et al.,

Petitioners

v\.

Federal Communications Commission and

United States of America,

Respondents

No. 99-1251

Advanced Paging, Inc., et al.,

Petitioners

v\.

Federal Communications Commission and

United States of America,

Respondents

No. 99-1331

Robert L. Wagner, et al.,

Petitioners

v\.

Federal Communications Commission and

United States of America,

Respondents

No. 99-1337

Personal Communications Industry Association,

Petitioner

v\.

Federal Communications Commission and

United States of America,

Respondents

On Petitions for Review of Orders of the

Federal Communications Commission

Carl W. Northrop argued the cause for the petitioners and intervenors.
Timothy E. Welch, Kenneth E. Hardman, John D. Pellegrin, Frederick M.
Joyce, Kenneth D. Patrich and Robert L. Hoggarth were on brief. Ray M.
Senkowski, Christine M. Crowe and David A. Gross entered appearances.

Roberta L. Cook, Counsel, Federal Communications Commission, argued the
cause for the respondents. Christopher J. Wright, General Counsel, John
E. Ingle, Deputy Associate General Counsel, Federal Communications
Commission, Joel I. Klein, Assistant Attorney General, United States
Department of Justice, and Robert B. Nicholson and Andrea Limmer,
Attorneys, United States Department of Justice, were on brief. Daniel M.
Armstrong, Associate General Counsel, and Gregory M. Christopher,
Counsel, Federal Communications Commission, entered appearances.

Before: Williams, Sentelle and Henderson, Circuit Judges.

Opinion for the court filed by Circuit Judge Henderson.

Karen LeCraft Henderson, Circuit Judge: The petitioners challenge a
Federal Communications Commission (FCC) rulemaking that established a
geographic area licensing regime for common carrier paging and 929 MHz
private carrier paging licenses[^1] and a competitive bidding procedure
for mutually exclusive[^2] 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. § 309(j) to auction the new
geographic paging licenses, that the FCC arbitrarily failed to require
that geographic licensees provide notice of construction to neighboring
incumbent licensees and that the algorithm the FCC used to identify
pending mutually exclusive applications violates the Paperwork Reduction
Act of 1995 (PRA), 44 U.S.C. §§ 3501 et seq. For the reasons set out
below we reject each of these arguments and deny the petitions for
review.

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. § 22.529 (1996); id. § 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. § 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. §
22.537(a). When mutually exclusive site-specific applications were
filed, a single applicant was selected by lottery. See id. §
22.131(c)(1).

In the challenged rulemaking the FCC replaced the site-specific
licensing process with a scheme of geographic licenses. 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 the licenses 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 geographic 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 conducted the auction.

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] and dismissed
license applicants (applicant petitioners),[^4] challenge 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. §
309(j)(1) to require that existing licensees bid at auction when they
seek to \"modify\" their present licenses. Section 309(j)(1) requires:

> 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.

47 U.S.C. § 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. § 309(j)(6)(E). In determining the Commission\'s
authority under this statute, \"the court reviews the FCC\'s
interpretation of the Communications Act under the now-familiar standard
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 auctions.

The petitioners first argue modified licenses are not \"initial\"
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.\" Despite some general similarities\--the two
licensing schemes provide the same paging service on the same
frequencies, provide fill-in sites and maintain the same licensee
buildout requirements\--the FCC pointed out significant fundamental
differences. \"\[G\]eographic licensees will gain use of a large,
geographic area and the freedom to locate base stations anywhere within
that larger geographic region\" as opposed to \"the existing paging
service licenses that are essentially confined to the smaller region.\"
In re Revision of Part 22 and Part 90 of the Comm\'n\'s Rules to
Facilitate Future Dev. of Paging Sys., Notice of Proposed Rulemaking, 11
F.C.C.R. 3108, 3128 (1996). The former site-specific licenses were
\"heavily licensed,\" \"confined largely to the addition of fill-in
sites and minor expansion\" and had \"relatively little desirable
spectrum \... available for licensing,\" while the new geographic
licenses provide greater freedom for construction and thus more
desirable spectrum. Id. at 3112. The petitioners themselves acknowledge
that the geographic license scheme has wrought \"fundamental alterations
to the paging industry\'s market structure and licensing schemes.\"
Petitioners\' Br. 30. Given these alterations, we hold the FCC
reasonably treated modification applications by incumbents as
\"initial\" applications within the meaning of section 309(j)(1).

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 frequencies, and by creating \"phantom\" or
\"artificial\" mutual exclusivity through the \"All\" box option and the
\"substantial service\" alternative. We reject this argument for
substantially 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 § 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 \[its previous\] methodology\--for
> sufficient reasons, as we have seen\--it was faced with mutually
> exclusive applications. Nothing in § 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
> instructs 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. § 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 encourage 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. § 309(j)(6)(E), and \"within the framework of
existing policies,\" 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, § 22.503(h). Site-specific incumbent licensees, however, do
not share geographic licensees\' need for such warning 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 licensee\'s service and interfering signals.\"
Second R&O, 12 F.C.C.R. at 2767.[^7] Geographic licensees, by contrast,
enjoy no similar protection from interference. Because of this
distinction, we conclude the FCC reasonably accorded the two groups
different treatment.

C. PRA

Finally, the applicant petitioners and two intervenors claim that the
algorithm the FCC used to determine their applications should be
dismissed for mutually exclusivity is a \"collection of information\"
for which OMB approval was not obtained 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 \"obtaining, 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. § 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 criteria for mutual exclusivity. It is true, as the
petitioners assert, that \"if an applicant is to ensure its basic
acceptability,\" 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.

[^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
    geographic 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)).

[^3]: The incumbent licensees are Benkelman Telephone Co., Frederick W.
    Hiort dba B&B Beepers, Wauneta Telephone Co., Metamora Telephone
    Co., Advanced Paging, Inc., Mark A. Apsley dba Progressive Paging,
    Capitol Radiotelephone Co., Inc. dba Capitol Paging, Express Message
    Corp., A. V. Lauttamus Communications, Inc. and NEP, LLC dba
    Northeast Paging. The trade association is Personal Communications
    Industry Association. For convenience, 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, Mohammed Siddiqui and Lenard
    Travis.

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

[^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. §
    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.

[^7]: In addition, geographic licensees are required to provide
    construction information upon request. See 47 C.F.R. § 22.529(c).

[^8]: PRA section 3507(a) provides that \"\[a\]n agency shall not
    conduct 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. § 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. § 155(c)(7). The FCC concedes, however, that the court has
    jurisdiction over at least one of the petitions. See Brief of
    Respondents at 32. The PRA issue is therefore squarely before the
    court.

[^10]: The petitioners\' alternative argument that the algorithm
    violates the Administrative Procedure Act, 5 U.S.C. § 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)).