United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 13, 2000 Decided June 6, 2000

No. 99-1316

[Omnipoint Corporation,]{.smallcaps}

[Petitioner]{.smallcaps}

v\.

[Federal Communications Commission and]{.smallcaps}

[United States of America,]{.smallcaps}

[Respondents]{.smallcaps}

On Petition for Review of an Order of the

Federal Communications Commission

*Mark J. O\'Conner* argued the cause for the petitioner. *Mark J.
Tauber* and *Donna N. Lampert* were on brief.

*Stanley R. Scheiner*, Counsel, Federal Communications Commission,
argued the cause for the respondents. *Christopher J. Wright*, General
Counsel, *Daniel M. Armstrong*, Associate General Counsel, *James M.
Carr*, Counsel, Federal Communications Commission, and *Joel I. Klein*,
Assistant Attorney General, and *Andrea Limmer*, and *Catherine G.
O\'Sullivan*, Attorneys, United States Department of Justice, were on
brief. John E. Ingle, Deputy Associate General Counsel, Federal
Communications Commission, entered an appearance.

Before: [Edwards]{.smallcaps}, *Chief Judge*, [Henderson]{.smallcaps}
and [Rogers]{.smallcaps}, *Circuit Judges*.

Opinion for the court filed by *Circuit Judge* [Henderson]{.smallcaps}.

[Karen LeCraft Henderson]{.smallcaps}, *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. Treasury obligations
applicable on the date the license is granted.\" 47 C.F.R. §
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 interest 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 ultimately
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 petition for review of the
FCC\'s waiver denial.

**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. § 309(j)(4)(D). In
setting up the small business preference, the FCC identified \"two
broad, basic \... policy goals: promoting economic growth and enhancing
access 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
services.\" *Id.* at 2388. It promulgated section 24.711(b)(3),
establishing the interest rate for small business auction winners
\"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. § 24.711(b)(3)). In promulgating
section 24.711(b)(3) the FCC stated:

> Finally, we also agree with those commenters that suggest 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 financing 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. Treasury 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. *See In re
Implementation of Section 309(j) of the Communications 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 Report and Order, 11 F.C.C.R. 136, 156-59 (1995),
*aff\'d, Omnipoint 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 obligations
applicable on the date the license is granted.\").

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. § 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 \"unusual.\" *In re Requests for Waiver of Section 24.711(b)(3) of
the Comm\'n\'s Rules Establishing the Interest Rate on Installment
Payments for C Block PCS Licensees*, Memorandum 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 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 money---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 arbitrarily 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 circumstances 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. § 1.925(b)(3). Omnipoint assumes a \"heavy\" burden 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, producers, 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 payments over the license term. *See* 47 C.F.R. § 24.711(b).
The 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 recognized that Treasury auctions
provide an identifiable benchmark on which to base interest rates for
installment payments, 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, Memorandum 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* Memorandum 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 underlying
purpose to provide interest rates lower than those of private banks.

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 contrary to the public interest.
Although the August 1996 Treasury auction was unusual, Omnipoint claims
that its additional \$6 million dollar cost (over ten years) resulting
from the 0.5% interest rate difference harms the public interest.
Omnipoint cannot satisfy the public interest requirement, 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
denial is

*Denied.*

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[^3]: