Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-00-01466/USCOURTS-caDC-00-01466-0/pdf.json

Parties Involved:
Federal Communications Commission
Respondent
Fixed Wireless Communications Coalition
Intervenor for Respondent
Teledesic LLC
Petitioner
United States of America
Respondent
WinStar Communications, Inc.
Intervenor for Respondent

Document Text:

<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 5, 2001 Decided December 28, 2001

No. 00-1466

Teledesic LLC,

Petitioner

v.

Federal Communications Commission and

United States of America,

Respondents

Fixed Wireless Communications Coalition and

WinStar Communications, Inc.,

Intervenors

Petition for Review of an Order of the Federal

Communications Commission

Mark A. Grannis argued the cause for petitioner. With

him on the briefs were Scott Blake Harris and Timothy J.

Simeone.

C. Grey Pash, Jr., Counsel, Federal Communications

Commission, argued the cause for respondents. With him on

the brief were Daniel M. Armstrong, Associate General

USCA Case #00-1466 Document #647727 Filed: 12/28/2001 Page 1 of 18
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

Counsel, John M. Nannes, Acting Assistant Attorney General, United States Department of Justice, Robert B. Nicholson,

and Adam D. Hirsh, Attorneys. John E. Ingle, Deputy

Associate General Counsel, Federal Communications Commission, Thomas E. Chandler, and James M. Carr, Counsel,

and Christopher J. Sprigman, Attorney, United States Department of Justice, entered appearances.

Joseph M. Sandri, Jr., Barry J. Ohlson, Leonard R. Raish,

and Liliana E. Ward were on the brief for intervenors.

Before: Edwards and Randolph, Circuit Judges, and

Williams, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge Edwards.

Edwards, Circuit Judge: Teledesic LLC ("Teledesic") petitions for review of the Federal Communications Commission's

("FCC" or "Commission") Report and Order governing the

reallocation of a band of radio spectrum previously shared by

satellite and traditional terrestrial spectrum users. See In re

Redesignation of the 17.7-19.7 GHz Frequency Band, Report

and Order, 15 F.C.C.R. 13,430 (2000) ("Report and Order").

The Report and Order set forth rules allocating one part of

the band to satellite users and another part to terrestrial

users. Teledesic, a company that plans to build a global

telecommunications network using satellite technology, objects to the new rules requiring satellite operators to pay the

relocation costs incurred by terrestrial operators during the

initial reallocation period.

Just before oral argument in this case, the FCC revised the

new rules so as to accede to the demands of Teledesic with

respect to two issues. Teledesic's challenges on these two

issues are therefore moot. With respect to the remaining

issues, we find no merit in Teledesic's challenges. The new

rules are founded on the FCC's goals of protecting existing

terrestrial spectrum users while facilitating the growth of

new, comprehensive satellite networks. The agency's goals

and the regulatory means used to implement them are both

permissible and reasonable.

Accordingly, we hereby dismiss the moot challenges and

otherwise deny Teledesic's petition for review.

I. Background

Among its many responsibilities, the FCC is charged with

regulating and overseeing radio spectrum. See 47 U.S.C.

ss 151 (Supp. V 1999) (creating the FCC for the purpose of

regulating commerce in communication by wire and radio),

303 (1994 & Supp. V 1999) (authorizing the Commission, inter

alia, to assign station frequencies, issue regulations to avoid

interference between stations, study new uses for radio, and

encourage broader and more effective use of radio in the

public interest). This responsibility has become more challenging in recent years due to the growth of new telecommunications technologies. This case concerns the FCC's efforts

to reallocate one portion of the spectrum to accommodate an

ascendant and promising technology: satellite telecommunications networks.

USCA Case #00-1466 Document #647727 Filed: 12/28/2001 Page 2 of 18
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

Prior to the Commission's Report and Order, the band of

spectrum from 17.7 to 19.7 (known as the "18 GHz band") was

allocated to two broad groups of telecommunications users.

Terrestrial fixed services (also known as "FS") operate by

connecting one fixed location with one or more other fixed

locations. See 47 C.F.R. s 2.1(c) (2000). They serve many

functions, including remote monitoring of gas and petroleum

pipelines, public safety communications, railroad communications, public utilities, and high speed Internet access. See Br.

for Respondents at 3; Br. for Intervenors at 1-2. The FCC

estimates that approximately 179,000 terrestrial FS links

operate in the 18 GHz band, and this number will grow as

services move up from more congested lower bands. Report

and Order, 15 F.C.C.R. at 13,436 p 11.

FS users share the 18 GHz band on a co-primary basis with

fixed satellite services (or FSS), which connect fixed locations

by satellite. See 47 C.F.R. s 2.1(c). These services utilize

many earth stations that communicate with one or more

space stations. Satellite technology has the potential to

provide global Internet access, two-way digital communications, video conferencing, telemedicine, and residential voice

and data communications services. In re Redesignation of

the 17.7-19.7 GHz Frequency Band, Notice of Proposed Rulemaking, 13 F.C.C.R. 19,923, 19,929 p 9 (1998) ("NPRM").

USCA Case #00-1466 Document #647727 Filed: 12/28/2001 Page 3 of 18
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

The FCC expects these services to expand dramatically in the

next decade. Id. Currently, the FCC reports that no nongovernmental satellite earth stations operate in the 18 GHz

band, but Teledesic has been granted a license, and a number

of other companies have also applied for licenses. Br. for

Respondent at 3 n.1. Teledesic plans to deploy a large

number of earth stations to support a global Internet telecommunications network. See Br. for Petitioner, Corporate

Disclosure Statement at 1.

Establishing so many satellite stations would be difficult

under the co-primary system, because the FS stations currently occupying the band can cause harmful interference to

the new satellite systems if the two are located too close

together on the spectrum. See In re Redesignation of the

17.7-19.7 GHz Frequency Band, Comments of Teledesic LLC,

IB Docket No. 98-172 (Nov. 19, 1998), at 3-4 ("Teledesic

Comments"), reprinted in Joint Appendix ("J.A.") 150-51.

Under the co-primary system, all users must coordinate with

one another to prevent such interference. See 47 C.F.R.

ss 25.203 (setting forth coordination procedures for selection

of sites and frequencies), 101.103(d) (setting forth frequency

coordination procedures). By 1998, satellite companies had

advised the Commission about the "ubiquitous" nature of the

networks they planned to construct. NPRM, 13 F.C.C.R. at

19,933 p 18. They urged the Commission to adopt "blanket

licensing" for satellite systems, in which a large number of

stations would be authorized at once without the licensee

having to specify each station's individual location. Id. The

companies also advised the FCC that it would be difficult to

construct ubiquitous satellite networks if the satellites had to

share band space on a co-primary basis with terrestrial users.

Id.

The Commission responded with a Notice of Proposed

Rulemaking proposing changes designed to make more efficient use of the 18 GHz band in light of the impending

widespread deployment of satellite earth stations. Id. at

19,925 p 1. The Commission found that satellite operators

planned to deploy "potentially millions of small antenna earth

stations," and expressed concern about "the feasibility of

USCA Case #00-1466 Document #647727 Filed: 12/28/2001 Page 4 of 18
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

sharing between terrestrial fixed service and ubiquitously

deployed FSS earth stations." Id. It agreed with the satellite

companies that blanket licensing would probably be necessary

to keep up with the large numbers of satellite earth stations

in the works. Id. at 19,933 p 19. In light of these concerns,

the Commission proposed segmenting the band into subsections dedicated to satellite and terrestrial stations respectively. Id.

Under the proposed plan, FS services would lose their coprimary status in portions of the band, but the Commission

proposed to grandfather FS services already operating in

those sections. Id. at 19,941-42 p 40. One reason for this

proposal was that, while there were not yet any commercial

satellite systems operating in the band, there were thousands

of existing FS operators there, and the FCC wished to

protect the investment in those services. Id. Another reason was the Commission's tentative conclusion that satellite

operators would be able to design their networks to avoid

reception of harmful interference from existing FS users. Id.

The FCC further concluded that some existing terrestrial

facilities would probably have to be relocated from one frequency to another, and it solicited comments about the best

way to accomplish this relocation. Id. at 19,942 p 41. The

Commission noted that it had addressed the same question in

earlier proceedings, and it asked commenters to discuss

whether the principles adopted in the earlier proceedings

should apply here. Id. at 19,942-43 p 41 & nn.65-66 (citing

the "Emerging Technologies" proceedings: In re Redevelopment of Spectrum to Encourage Innovation in the Use of

New Telecommunications Technologies, First Report and

Order and Third Notice of Proposed Rule Making, 7

F.C.C.R. 6886 (1992); Second Report and Order, 8 F.C.C.R.

6495 (1993); Third Report and Order and Memorandum

Opinion and Order, 8 F.C.C.R. 6589 (1993); Memorandum

Opinion and Order, 9 F.C.C.R. 1943 (1994); Second Memorandum Opinion and Order, 9 F.C.C.R. 7797 (1994), as well

as the "Mobile Satellite Service at 2 GHz" allocation proceeding: In re Amendment of Section 2.106 of the Commission's

Rules to Allocate Spectrum at 2 GHz for Use by the MobileUSCA Case #00-1466 Document #647727 Filed: 12/28/2001 Page 5 of 18
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

Satellite Service, First Report and Order and Further Notice

of Proposed Rule Making, 12 F.C.C.R. 7388, 7396-7404, 7414-

21 (1997)).

The Commission received comments from interested parties, including Teledesic and FS users. The latter group

included the Fixed Wireless Communications Coalition and

Winstar Communications, Inc., the intervenors before this

court, which represent the interests of FS users. In general,

Teledesic "strongly support[ed]" the proposal to segment the

18 GHz band, but expressed concern about the delay that

would be caused by grandfathering existing FS users. Teledesic Comments at ii, reprinted in J.A. 146. Teledesic asked

the FCC to adopt "blanket licensing" of satellite earth stations. Id. at 8-11, reprinted in J.A. 155-58. It urged the

FCC not to require satellite users to pay to relocate FS

stations to "comparable facilities," as had been required in the

Emerging Technologies rules, and requested that the FCC

adopt principles of "cost mitigation." Id. at 15-21, reprinted

in J.A. 162-68.

The FCC issued its Report and Order on June 22, 2000.

The Report and Order reflect the FCC's conclusion that

separating terrestrial users from satellite stations will serve

the public interest. Report and Order, 15 F.C.C.R. at 13,431-

32 p 2. The Report and Order articulate a policy of protecting existing FS operations "to the maximum extent possible,"

while providing for the growth of both satellite and terrestrial

services. Id. To facilitate this policy, the Report and Order

designate, broadly, one subset of the band in which FS users

will be primary, and another, larger subset for satellite users.

See id. at 13,432 p 4, 13,443-56 pp 28-54. The Report and

Order also authorize blanket licensing for certain satellite

earth stations. Id. at 13,470-75 pp 85-95.

Rather than permanently grandfathering existing FS users,

the Report and Order allow FS stations in the portion of the

band that will be reallocated for satellite use to retain coprimary status for 10 years. Satellite operators wishing to

evict terrestrial users must first negotiate with them. This

negotiation period begins with the adoption of the Report and

USCA Case #00-1466 Document #647727 Filed: 12/28/2001 Page 6 of 18
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

Order and lasts for two years in most cases, and for three

years for terrestrial public safety services. 47 C.F.R.

s 101.85(c). A terrestrial user contacted by a satellite user

may not refuse to negotiate and all parties are required to

negotiate in good faith. Id. s 101.89(b). In deciding whether

the parties have negotiated in good faith, the FCC will

consider factors including whether the satellite has made a

bona fide offer of relocation and whether, if the terrestrial

user demanded a premium, the premium was proportionate to

the cost of providing comparable facilities. Id. "Comparable

facilities" are defined by the regulations in terms of "throughput" or capacity, reliability, and operating costs. Id.

s 101.89(d). For example, if digital facilities are replaced

with digital facilities, the satellite service must provide the

terrestrial user with equivalent data loading bits per second.

Id. s 101.89(d)(1). Satellite users must also compensate FS

licensees for any "increased recurring costs associated with

the replacement facilities" for five years after relocation. Id.

s 101.89(d)(3).

If no agreement is reached during the negotiation period,

then 47 C.F.R. s 101.91 allows the satellite service to displace

the FS user involuntarily. If involuntary displacement occurs

during the 10-year transition period, however, the satellite

user must pay all costs of moving the terrestrial user to

replacement facilities, complete all activities necessary for

implementing the relocation, build the new system, and test

the new system. 47 C.F.R. s 101.91(a). The replacement

facilities must be at least equivalent, in terms of throughput,

reliability, and operating costs, as the facilities from which the

FS user is evicted. Id. s 101.91(b). At the end of the 10-

year transition period, satellite operators will be able to evict

terrestrial incumbents without having to pay their relocation

costs. 47 C.F.R. s 101.95(a). The initial, unrevised Report

and Order exempted a small subset of the band (19.26-19.3

GHz) from the sunset provisions. Report and Order, 15

F.C.C.R. at 13,464 p 69; 47 C.F.R. s 101.95. The initial,

unrevised Report and Order also provided that low-power

stations could continue to operate on a primary basis. Report

and Order, 15 F.C.C.R. at 13,457 p 56.

USCA Case #00-1466 Document #647727 Filed: 12/28/2001 Page 7 of 18
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

Teledesic petitioned for review, challenging the relocation

rules and the Commission's failure to adopt its alternative

proposals. Teledesic also challenged the exception for lowpower stations and the exemption of stations in the 19.26-19.3

GHz band from the sunset provisions. The FCC moved to

hold the case in abeyance, because some parties to the

proceeding before the Commission had petitioned for reconsideration of the Report and Order. Teledesic was not

among the parties seeking reconsideration. A panel of this

court denied the FCC's motion to hold these proceedings in

abeyance, see Teledesic LLC v. FCC, No. 00-1466 (D.C. Cir.

Jan. 31, 2001) (Order), and oral argument was scheduled for

November 5, 2001.

Less than a week before oral argument, the Commission

issued a Reconsideration Order. See In re Redesignation of

the 17.7-19.7 GHz Frequency Band, First Order on Reconsideration, IB Docket No. 98-172 (Nov. 1, 2001) ("Reconsideration Order"). In the Reconsideration Order, the FCC addressed, sua sponte, some of the concerns Teledesic had

raised in its petition and briefs to this court. Specifically, the

Commission decided that low-power stations should be subject to the same relocation regime as all other FS stations.

Id. at 16-20 pp 32-41. The Commission also decided not to

exempt stations in the 19.26-19.3 subset from the sunset

provisions. Id. at 12-14 pp 23-25. The Commission stated

that it had authority to address sua sponte the issues that

Teledesic had chosen to raise before this court, regardless of

whether any petitions pending before the Commission had

raised those issues. Id. at 11 p 20 & n.66 (citing Cent. Fla.

Enters., Inc. v. FCC, 598 F.2d 37, 48 n.51 (D.C. Cir. 1978)).

II. Discussion

A. The Order under Review is Final.

Before turning to the merits of Teledesic's challenges, we

consider whether the Report and Order are final and reviewable by this court. This court has jurisdiction to review final

orders of the FCC made reviewable under 47 U.S.C. s 402(a).

28 U.S.C. s 2342(1) (1994). Section 402(a) governs proceedUSCA Case #00-1466 Document #647727 Filed: 12/28/2001 Page 8 of 18
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

ings to set aside or annul FCC orders except those specifically listed as being appealable under s 402(b), relating to

particular applications. Teledesic's petition falls under

s 402(a), and is therefore reviewable.

Teledesic was within its rights to seek review in this court

without first petitioning for reconsideration by the FCC. See

47 U.S.C. s 405(a) (1994) (providing that the filing of a

petition for reconsideration shall not be a condition precedent

to judicial review of an FCC order unless the party seeking

review was not a party to the initial proceedings or relies on

questions of law or fact on which the Commission has not had

an opportunity to pass). Teledesic was a party to the initial

proceeding before the Commission, and the Commission addressed Teledesic's arguments regarding the relocation rules.

Therefore, Teledesic had standing to seek judicial review of

the Report and Order.

The fact that parties other than Teledesic petitioned the

FCC for reconsideration of the Report and Order does not

deprive the court of jurisdiction over Teledesic's petition. See

Wrather-Alvarez Broad., Inc. v. FCC, 248 F.2d 646, 649 (D.C.

Cir. 1957) (noting that because parties to FCC proceedings

"have their choice whether to seek relief from Commission

action from the Commission itself or from the court ... it

may happen ... that one party will choose one tribunal and

another party the other"). In such cases, we often hold a

petition for review in abeyance pending the FCC's further

proceedings, see id., but this practice is not an iron-clad rule,

see, e.g., MCI Telecomms. Corp. v. FCC, 143 F.3d 606, 608

(D.C. Cir. 1998) (determining that prudential considerations

militated in favor of resolving the petitions for review even

though parties other than the petitioners had filed petitions

for reconsideration before the FCC). It is likewise true that

it does not matter whether petitions are filed to challenge

portions of the Reconsideration Order. Any such challenges

do not bear on our resolution of Teledesic's challenges to the

disputed Report and Order, because the Reconsideration

Order is not subject to review in this case. What is important

here is that the Report and Order were final and appealable

as to Teledesic.

USCA Case #00-1466 Document #647727 Filed: 12/28/2001 Page 9 of 18
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

The court decided not to hold in abeyance Teledesic's

petition for review of the Report and Order, even though

other parties had petitioned the Commission for reconsideration. And our jurisdiction over Teledesic's petition was not

lost when the Commission elected to issue its Reconsideration Order mere days before oral argument. The FCC

claims that, under Central Florida Enterprises, Inc. v. FCC,

598 F.2d 37, 48 n.51 (D.C. Cir. 1978), the agency had authority to address sua sponte in its Reconsideration Order several

of the issues that were pending before this court. In other

words, the FCC contends that it had the discretion to reconsider certain of the issues raised by Teledesic and then issue

a Reconsideration Order even though Teledesic had not filed

a petition for reconsideration and had opted instead to seek

judicial review. We need not decide this question.

Notwithstanding the Reconsideration Order, the Commission's Report and Order of June 22, 2000, are the only

matters under review in this proceeding. Thus, in addressing

Teledesic's claims, we rely only on the agency's positions set

forth in the Report and Order, not on the Commission's

subsequent elaborations in the Reconsideration Order. We

note, however, that, apart from the FCC's decision to accede

to Teledesic's demands on two issues, the Reconsideration

Order merely expands upon the rationales for the relocation

rules contained in the original Report and Order.

Although this petition for review involves only the June 22,

2000 Report and Order, we cannot ignore the fact that two of

Teledesic's challenges have evaporated in light of the Commission's change of policy as expressed in its Reconsideration

Order. See Reconsideration Order at 12-14 pp 23-25 (making

terrestrial stations in the 19.26-19.3 GHz subset of the band

subject to the sunset date), 16-20 pp 32-41 (making low-power

terrestrial stations in the 18 GHz band subject to the relocation rules). At oral argument, the Commission gave official

notice to the court via the Reconsideration Order that the

rules regarding (1) the 19.26-19.3 GHz subset of the band and

(2) low-power terrestrial stations were no longer in effect.

Counsel for Teledesic assured the court that the Reconsideration Order had fully addressed Teledesic's concerns on these

USCA Case #00-1466 Document #647727 Filed: 12/28/2001 Page 10 of 18
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

matters. Neither side sought to pursue the issues. It is

therefore clear that the issues concerning low-power stations

and the 19.26-19.3 GHz subset are moot. Accordingly, we

turn to Teledesic's remaining challenges.

B. The FCC's Relocation Rules are Reasonable.

1. Standard of Review

We must uphold the FCC's actions unless they are arbitrary, capricious, an abuse of discretion, or otherwise unlawful. 5 U.S.C. s 706(2)(A) (1994). Pursuant to this standard,

we look to determine whether the Commission has "articulate[d] a satisfactory explanation for its action including a

'rational connection between the facts found and the choice

made.' " Motor Vehicle Mfrs. Ass'n v. State Farm Mut.

Auto. Ins. Co., 463 U.S. 29, 43 (1983) (quoting Burlington

Truck Lines, Inc. v. United States, 371 U.S. 156, 168 (1962)).

The court must ensure that the agency has given reasoned

consideration to all of the relevant facts and issues. Greater

Boston Television Corp. v. FCC, 444 F.2d 841, 851 (D.C. Cir.

1970).

While agreeing on these basic principles, the parties nonetheless dispute the degree of deference that is warranted.

The Commission argues that review must be especially limited because the Report and Order concern matters within its

area of expertise that involve predictions "at the frontiers of

science." Br. for Respondents at 15 (quoting Balt. Gas &

Elec. Co. v. Natural Res. Def. Council, Inc., 462 U.S. 87, 103

(1983)). It further argues that the spectrum reallocation

rules at issue are just the sort of technical rules within its

area of expertise that traditionally have merited a heightened

degree of deference. Id. at 16 (citing Aeronautical Radio,

Inc. v. FCC, 928 F.2d 428, 443-45 (D.C. Cir. 1991) (upholding

an FCC decision on allocation because it was a predictive

judgment of the type historically left to agency discretion);

Nat'l Ass'n of Broadcasters v. FCC, 740 F.2d 1190, 1209-14

(D.C. Cir. 1984) (upholding an FCC decision on FS relocation

given that the Commission acted against an evolving technological and factual background)). Teledesic counters that it

objects not to the Commission's scientific predictions, but to

USCA Case #00-1466 Document #647727 Filed: 12/28/2001 Page 11 of 18
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

its system of compensating displaced terrestrial operators.

Teledesic argues that the FCC's economic compensation

scheme is not entitled to the same deference as an order

dealing with purely technical matters.

In our view, the parties' dispute involves a fundamental

disagreement over the policy goals underlying spectrum reallocation. The problem presented by the 18 GHz band is not

merely one of economics. The Commission correctly conceives of its role in prophetic and managerial terms: it must

predict the effect and growth rate of technological newcomers

on the spectrum, while striking a balance between protecting

valuable existing uses and making room for these sweeping

new technologies. Report and Order, 15 F.C.C.R. at 13,431-

33 pp 1-2, 4-5. In striking this balance, the Commission has

relied on its judgments about the importance of old, terrestrial services, as well as the potential value to society of new,

emerging satellite systems. Its decisions about how best to

strike this balance thus involve both technology and economics. The Commission is therefore entitled to the deference

traditionally accorded decisions regarding spectrum management. See Telocator Network of Am. v. FCC, 691 F.2d 525,

538 (D.C. Cir. 1982) (finding that when it is fostering innovative methods of exploiting the spectrum, the Commission

"functions as a policymaker and, inevitably, a seer - roles in

which it will be accorded the greatest deference by a reviewing court").

2. The Challenges to the FCC's Relocation Rules

Teledesic argues that the rules governing the relocation of

terrestrial services are arbitrary and capricious because they

force satellite operators to confer windfalls on terrestrial

services by paying for and building "comparable facilities."

It claims that, because many terrestrial operators currently

use aging equipment, satellite operators will end up subsidizing the terrestrial operators' upgrades to new equipment.

Teledesic characterizes this result as one of systematic overcompensation. Br. for Petitioner at 27. In its comments to

the Commission, Teledesic urged the agency to require that

satellite operators compensate displaced FS users only for

USCA Case #00-1466 Document #647727 Filed: 12/28/2001 Page 12 of 18
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

the unamortized "book value" of their old equipment. It now

accuses the Commission of rejecting this proposal without

articulating a satisfactory reason for doing so.

Teledesic's contentions fail because the Commission adequately explained both the rationale underlying its chosen

approach, as well as its reasons for rejecting Teledesic's

proposed alternative. First, as noted above, one of the

Commission's goals was to protect existing terrestrial services. Report and Order, 15 F.C.C.R. at 13,431-32 p 2. If the

Commission only required FSS users to pay terrestrial users

for the book value of their equipment, FS users that were

unable to afford replacement equipment might be put out of

business when displaced. Second, in addressing Teledesic's

proposal, the Commission reaffirmed its policy of placing the

cost of involuntary relocation to comparable facilities on new

entrants. Id. at 13,468 p 78. According to the FCC, the

justification for this policy is that existing users must be able

to obtain replacement equipment at no cost in order to

continue to provide service with a minimum of disruption.

Id.; In re Amendment of Section 2.106 of the Commission's

Rules to Allocate Spectrum at 2 GHz for Use by the MobileSatellite Service, Second Report and Order and Second Memorandum Opinion and Order, 15 F.C.C.R. 12,315, 12,352

p 109 (2000) ("2 GHz MSS Relocation Order") (reiterating in

a more recent decision that the Commission "consider[s] it

essential that the process not disrupt the communications

services provided by the existing ... operations") (citing the

Emerging Technologies proceeding, In re Redevelopment of

Spectrum to Encourage Innovation in the Use of New Telecommunications Technologies, Third Report and Order and

Memorandum Opinion and Order, 8 F.C.C.R. 6589, 6594 p 13

(1993)).

These policy goals are reasonable and do not, on their face,

result in windfalls for incumbents. The Commission's objective is simple: ensure that incumbent terrestrial users will be

able to continue operating even if they are forced by satellite

users to relocate. Teledesic expresses concern that the "comparable facilities" standard will result in incumbents replacing

their aging facilities with unduly expensive, state-of-the-art

USCA Case #00-1466 Document #647727 Filed: 12/28/2001 Page 13 of 18
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

equipment at the expense of satellite companies. "Comparable facilities," however, does not mean that terrestrial users

will be able to insist on top-of-the-line replacement facilities.

Rather, satellite operators will have to ensure that the replacement facilities are equivalent to the existing FS facilities

with respect to throughput, reliability, and operating costs, as

explained in the regulations. See 47 C.F.R. ss 101.89(d),

101.91(b). If the satellite operator can meet the standard by

retuning or repairing old equipment, it need not outfit the FS

user with new equipment. Even if new facilities are necessary to meet the standard, this does not necessarily mean

that FS users will be able to demand the newest and most

expensive equipment if less new equipment will meet the

standard. The stated goal of the standard is not to provide

free upgrades to terrestrial users, but rather to "ensure a

seamless handoff" and a smooth transition to the new band

segmentation regime. Id. at s 101.91(c).

The Commission's current approach to the relocation of

incumbents is not new. It was adopted first in the Emerging

Technologies rules and, after the instant order was issued, in

another relocation proceeding. See 2 GHz MSS Relocation

Order, 15 F.C.C.R. at 12,351-52 pp 108-10. Indeed, this court

has approved aspects of a similar relocation scheme in the

Emerging Technologies context. See Ass'n of Pub.-Safety

Communications Officials-Int'l, Inc. v. FCC, 76 F.3d 395,

397, 400 (D.C. Cir. 1996) (upholding the elimination of an

exemption for public safety incumbents from a relocation

regime in which emerging technology licensees would pay all

costs associated with relocating incumbents to comparable

facilities). Moreover, the Commission has adopted similar

relocation schemes in other contexts. See Small Bus. in

Telecomms. v. FCC, 251 F.3d 1015, 1017, 1026 (D.C. Cir.

2001) (denying in part and dismissing in part petition for

review of relocation regime in which displaced incumbents

would be given comparable facilities to ensure a seamless

transition).

Because the Commission's policy in this instance is consistent with its overall approach to new technologies, it argues

that it was not required to give as extensive a justification as

USCA Case #00-1466 Document #647727 Filed: 12/28/2001 Page 14 of 18
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

it would have had it unveiled the policy for the first time here.

We agree. See Hall v. McLaughlin, 864 F.2d 868, 872 (D.C.

Cir. 1989) (holding that where an agency is following established policy, the need for a comprehensive statement of its

rationale is less pressing). Like the Emerging Technologies

proceedings, this Report and Order involve new technologies

displacing existing users and being forced to pay those existing users to relocate to comparable facilities. In Emerging

Technologies, the FCC acknowledged that incumbents that

are forced to relocate involuntarily will not incur any costs as

a result of the forced relocation, and may even benefit in

some instances if their aging equipment is replaced with

state-of-the-art technology. Third Report and Order and

Memorandum Opinion and Order, 8 F.C.C.R. 6589, 6595 p 16

(1993). The Commission viewed such a result as the legitimate byproduct of a process whereby important terrestrial

services are uprooted against their will to accommodate newer technologies. The Commission's consistent policy has been

to prevent new spectrum users from leaving displaced incumbents with a sum of money too small to allow them to resume

their operations at a new location. See 2 GHz MSS Relocation Order, 15 F.C.C.R. at 12,352 p 109 (expressing the Commission's view, dating from the Emerging Technologies proceeding, that existing operations should not be disrupted

during the transition to emerging technologies).

Teledesic objects to the FCC's reliance on Emerging Technologies, arguing that, because the Commission readily acknowledged some differences between this case and Emerging Technologies, the Commission must start from scratch in

this case. There is only one notable difference between

Emerging Technologies and this case: Emerging Technologies involved an entirely new service displacing incumbent

licensees, while, in this case, satellite and terrestrial users

already coexisted in the 18 GHz band on a co-primary basis.

Report and Order, 15 F.C.C.R. at 13,468 pp 79-80. This is a

difference without significance, however. Teledesic and other

companies plan to launch comprehensive new satellite systems involving millions of earth stations that will be licensed

on a blanket basis. To accommodate these new systems,

USCA Case #00-1466 Document #647727 Filed: 12/28/2001 Page 15 of 18
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

existing terrestrial users must be displaced like the incumbents in Emerging Technologies. The compensatory and preservationist justifications for the "comparable facilities" requirement therefore apply equally in this case, and it was

legitimate for the Commission to explain its choices in part by

reference to the earlier proceeding.

Teledesic's contention that the Commission impermissibly

failed to consider its "cost mitigation" proposals is similarly

misplaced. Teledesic accuses the FCC of failing to consider

how to encourage reasonable cooperation by terrestrial incumbents in the relocation process. Br. for Petitioner at 34.

One of Teledesic's proposals is that no compensation should

be paid for equipment replaced after the Commission issued

its NPRM, and the other is that FS licensees who renew

their grandfathered licenses should receive less compensation

than other FS licensees. Teledesic Comments at 20-21, reprinted at J.A. 167-68. Teledesic's claim is not supported by

the record, which reflects that the Commission was extremely

concerned with providing incentives to incumbents to relocate. The Commission encouraged them to do so by issuing

rules that initially reward relocation and then sunset after 10

years. Terrestrial operators who have not relocated by that

point will be penalized, while those that negotiate a deal

expeditiously with a satellite company will receive the benefit

of the "comparable facilities" standard. By contrast, Teledesic's proposals are aimed less at smoothing the way for

reallocation than at minimizing its own costs, and they do not

advance the FCC's goals of preserving terrestrial systems

while ushering in new satellite networks. Because Teledesic's proposals are patently inconsistent with the Commission's well-explained goals, the Commission was not required

to analyze each of those suggestions in detail.

3. Safeguards

Teledesic raises a legitimate concern over the possibility

that terrestrial operators may hold out during negotiations in

an attempt to extract payments from satellite users over and

above the costs of relocating. The Commission anticipated

USCA Case #00-1466 Document #647727 Filed: 12/28/2001 Page 16 of 18
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

this concern, however, and structured the new rules to protect against unreasonable bargaining by terrestrial operators.

Teledesic objects in particular to the provision in 47 C.F.R.

s 101.89, which requires satellite users to negotiate with FS

users for two (and sometimes three) years, during which time

FS operators may seek "premium[s]." Teledesic's concern is

that, by authorizing terrestrial operators to demand premiums, the rules give them a green light to demand unreasonable sums of money from the satellite companies, who have no

choice but to accede or wait until the end of the two-year

period. In response, the Commission points out that Teledesic's view of the rule is badly distorted, for it ignores the

limitations that the rule places on the bargaining behavior of

incumbents. The Commission is right.

The cited rule explicitly requires both parties to negotiate

in good faith during the negotiation period. "Good faith" is

measured, in part, by looking at whether the FS service has

demanded a premium that is disproportionate to the cost of

providing comparable facilities. 47 C.F.R. s 101.89(b)(2).

Thus, rather than authorizing incumbents to demand inequitable windfalls, the rules explicitly forbid them from doing so.

Moreover, an incumbent whose bargaining demands are challenged must justify its numbers against a regulatory standard. In other words, the demands must be reasonably

related to the actual cost of relocating to an equivalent facility

as defined in the regulations. This requirement prevents

terrestrial users from attempting to gouge satellite companies

that are required to negotiate with them.

A second safeguard exists in the form of time limits on

negotiations. If a terrestrial operator holds out during the

two to three year negotiation period, the satellite user may

initiate involuntary relocation procedures pursuant to 47

C.F.R. s 101.91. An incumbent's incentive during the negotiation period, therefore, is to negotiate as advantageous a deal

as possible before facing forced relocation. Once the negotiation period is over, incumbents still have an incentive to

relocate before the sunset provisions kick in. After 10 years,

incumbents will be forced to relocate without receiving any

USCA Case #00-1466 Document #647727 Filed: 12/28/2001 Page 17 of 18
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

relocation payments. Because of these temporal limits on

incumbents' expectations of relocation payments, the value of

their addresses on the spectrum goes down over time. A

satellite company will presumably be less willing to pay to

relocate an incumbent the longer the latter holds out as the

sunset date approaches. These safeguards provide adequate

protection against unreasonable negotiation tactics.

III. Conclusion

For the reasons cited above, we hereby dismiss the moot

challenges and otherwise deny Teledesic's petition for review

as meritless.

So ordered.

USCA Case #00-1466 Document #647727 Filed: 12/28/2001 Page 18 of 18