Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-04-01052/USCOURTS-caDC-04-01052-0/pdf.json

Parties Involved:
Compass Systems, Inc.
Appellant
Federal Communications Commission
Appellee
Northpoint Technology, Ltd.
Appellant

Document Text:

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued January 14, 2005 Decided June 21, 2005

No. 04-1052

NORTHPOINT TECHNOLOGY, LTD. AND

COMPASS SYSTEMS, INC.,

APPELLANTS

v.

FEDERAL COMMUNICATIONS COMMISSION,

APPELLEE

No. 04-1053

NORTHPOINT TECHNOLOGY, LTD. AND

COMPASS SYSTEMS, INC.,

PETITIONERS

v.

FEDERAL COMMUNICATIONS COMMISSION,

RESPONDENT

Notice of Appeal and Petition for Review of an Order of the

Federal Communications Commission

Michael K. Kellogg argued the cause for the appellants/

petitioners. John C. Rozendaal and Antoinette Cook Bush were

USCA Case #04-1052 Document #901432 Filed: 06/21/2005 Page 1 of 19
2

1 Northpoint timely filed both a petition for review (No. 04-1053)

under section 402(a) and an appeal(No. 04-1052) under section 402(b)

of the Communications Act. See 47 U.S.C. § 402(a)-(b). Because

subsections (a) and (b) are “mutually exclusive,” Friedman v. FCC,

263 F.2d 493, 494 (D.C. Cir. 1959), “a claim directed to the same

matters may be brought only under one of the two provisions.”

Tribune Co. v. FCC, 133 F.3d 61, 66 n.4 (D.C. Cir. 1998); accord

Freeman Eng’g Assocs. v. FCC, 103 F.3d 169, 177 (D.C. Cir. 1997).

Subsection (a) provides for review in the courts of appeals of “[a]ny

proceeding to enjoin, set aside, annul, or suspend any order of the

Commission,” 47 U.S.C. § 402(a), while “relief . . . under 402(b)

requires as a trigger the grant or denial of a license application.”

Waterway Communications Sys., Inc. v. FCC, 851 F.2d 401, 403 (D.C.

Cir. 1988); accord Freeman Eng’g Assocs., 103 F.3d at 177; see also

47 U.S.C. § 402(b). Because Northpoint challenges only the

Commission’s conclusion regarding its authority to auction licenses

for DBS service, not the actual grant or denial of a license or any

action “ancillary to” such a licensing decision, Tomah-Mauston

Broad. Co. v. FCC, 306 F.2d 811, 812 (D.C. Cir. 1962) (internal

on brief.

Joel Marcus, Counsel, Federal Communications Commission,

argued the cause for the appellee/respondent. R. Hewitt Pate,

Assistant Attorney General, Robert B. Nicholson and Steven J.

Mintz, Attorneys, United States Department of Justice, and John

A. Rogovin, General Counsel, Austin C. Schlick, Deputy General

Counsel, and Daniel M. Armstrong, Associate General Counsel,

Federal Communications Commission, were on brief.

Before: EDWARDS, HENDERSON, and RANDOLPH, Circuit

Judges.

Opinion for the court filed by Circuit Judge HENDERSON.

KAREN LECRAFT HENDERSON, Circuit Judge: Northpoint

Technology, Ltd., and its subsidiary, Compass Systems, Inc.

(collectively, Northpoint), petitions for review1 of the decision

USCA Case #04-1052 Document #901432 Filed: 06/21/2005 Page 2 of 19
3

quotation marks omitted), Northpoint properly invoked our section

402(a) jurisdiction. Accordingly, we dismiss Northpoint’s appeal, No.

04-1052, and treat only its petition for review, No. 04-1053. See

NextWave Personal Communications, Inc. v. FCC, 254 F.3d 130, 140

(D.C. Cir. 2001). 

2 The FCC defines “Direct Broadcast Satellite Service” as “[a]

radiocommunication service in which signals transmitted or

retransmitted by space stations, using frequencies specified in

§ 25.202(a)(7), are intended for direct reception by the general

public.” 47 C.F.R. § 25.201 (definitions). DBS is known as

Broadcast Satellite Service (BSS) internationally. See Amendment to

the Commission’s Regulatory Policies Governing Domestic Fixed

Satellites & Separate International Satellite Systems, Report & Order,

11 FCC Rcd 2429, 2438, ¶ 57 (1996). 

of the Federal Communications Commission (FCC or

Commission) in Auction of Direct Broadcast Satellite Licenses,

Order, 19 FCC Rcd 820 (2004) (DBS Auction Order), reprinted

in Joint Appendix (J.A.) at 7-23. Specifically, Northpoint

challenges the Commission’s conclusion that, notwithstanding

the Congress’s enactment of section 647 of the Open-market

Reorganization for the Betterment of International

Telecommunications Act (ORBIT Act), Pub. L. No. 106-180,

§ 647, 114 Stat. 48 (2000) (codified at 47 U.S.C. § 765f), the

Commission remains authorized to auction licenses to operate

Direct Broadcast Satellite (DBS) service2channels. We agree

with Northpoint that the Commission’s interpretation of section

647 of the ORBIT Act cannot stand on the current

administrative record and, accordingly, we set aside Part III.A

of the DBS Auction Order and remand for the Commission’s

further consideration. 

I.

In March 2002, Northpoint’s subsidiary, Compass Systems,

Inc. (Compass), submitted to the Commission an application for

USCA Case #04-1052 Document #901432 Filed: 06/21/2005 Page 3 of 19
4

licenses to provide DBS service from unassigned channels at

two of the eight orbital positions—157/ and 166/ west

longitude—assigned to the United States by the International

Telecommunications Union (ITU) at the 1983 Regional

Administrative Radio Conference for the Planning in Region 2

of the Broadcasting-Satellite Service in the Frequency Band

12.2-12.7 GHz and Associated Feeder Links in the Frequency

Band 17.3-17.8 GHz (the ITU Region 2 Band Plan or Plan).

The International and Wireless Telecommunications Bureaus

(Bureaus) dismissed Compass’s application as premature one

year later. See Letter to Antoinette Cook Bush, 18 FCC Rcd

3091 (Int’l & Wireless Telecomms. Burs. 2003). The Bureaus

explained that, because the Commission’s competitive bidding

rules governed the awarding of the DBS service licenses

Compass sought, Compass’s application would be accepted only

during an established filing window. See id. While the Bureaus

observed that there was no filing window currently open “with

respect to licenses for the DBS channels [Compass] seeks,” they

nevertheless pointed out that “today the Commission has issued

a public notice announcing the auction of DBS service licenses

scheduled for August 6, 2003.” See id. at 3091-92. 

The public notice to which the Bureaus referred proposed the

auction of four DBS service licenses, including the two sought

by Compass. See Public Notice, Auction of Direct Broadcast

Satellite Service Licenses Scheduled for August 6,2003,18 FCC

Rcd 3478 (2003), reprinted in J.A. at 25-38. In addition to

announcing the upcoming auction, the Commission invited

public comment on its authority vel non to hold the auction. See

id. at 3480. The Commission had initially concluded that

section 647 of the ORBIT Act, which provides in part that “the

Commission shall not have the authority to assign by

competitive bidding orbital locations or spectrum used for the

provision of international or global satellite communications

USCA Case #04-1052 Document #901432 Filed: 06/21/2005 Page 4 of 19
5

3

Section 647 of the ORBIT Act provides in toto:

Notwithstanding any other provision of law, the

Commission shall not have the authority to assign by

competitive bidding orbital locations or spectrum

used for the provision of international or global

satellite communications services. The President shall

oppose in the International Telecommunication

Union and in other bilateral and multilateral fora any

assignment by competitive bidding of orbital

locations or spectrum used for the provision of such

services.

47 U.S.C. § 765f. 

services,”3 47 U.S.C. § 765f, did not divest it of authority to

auction DBS service licenses “because,” it said, “they are not

authorizations to use spectrum ‘for the provision of international

or global satellite communications services.’ ” 18 FCC Rcd at

3479 (quoting 47 U.S.C. § 765f). The Commission received

four comments in response to its invitation, including

Northpoint’s. See DBS Auction Order, 19 FCC Rcd at 823, ¶ 6

& n.14. Only Northpoint challenged the Commission’s

authority to auction licenses to operate DBS service channels.

See id. at 824-25, ¶¶ 9-11.

In the end Northpoint’s comments did not persuade the

Commission. Finding Northpoint’s two statutory arguments

“without merit,” the Commission reaffirmed its original

conclusion. Id. at 826, ¶ 13. It first disagreed with Northpoint’s

“exceedingly broad reading of the ORBIT Act auction

prohibition,” explaining that “it would be unreasonable to

conclude that Congress intended that the incidental provision of

transborder service would convert an otherwise auctionable

license into an unauctionable one.” Id. at 826, ¶ 14. The

Commission relied in part on the ORBIT Act’s legislative

history. See id. at 826-27, ¶ 14. It explained that, while the

USCA Case #04-1052 Document #901432 Filed: 06/21/2005 Page 5 of 19
6

House Commerce Committee Report accompanying a bill

containing an identical exemption “indicated that an auctions

exemption could help [global or international satellite

communications] service providers avoid financial burdens they

might otherwise face if a U.S. auction regime precipitated a

succession of auctions in numerous countries in which the

operators might seek to provide service,” the auctioning of DBS

service licenses “does not raise these concerns because these

licenses are for channels designed under the Plan to serve the

United States.” Id. 

The Commission next rejected Northpoint’s “conjectures

about the possibility of DBS licensees providing a full-fledged

international service.” Id. at 827, ¶ 15. According to the

Commission, “the DBS licenses that are slated for auction

cannot now be—nor are they anticipated to be—used to provide

any significant degree of international service.” Id. It explained

that the “ ‘coverage’ maps” Northpoint relied on identified

“areas of the world that are visible from certain orbit locations,”

not the “actual coverage areas of those orbital positions as

defined in the ITU Region 2 Band Plan.” Id. It also observed

that DBS service is not an international service simply because

“[s]atellite beams . . . illuminate beyond the borders of a

particular country.” Id. On the contrary, “in order to have full

coverage of a national territory, coverage of regions beyond

those borders is to be expected.” Id. The Commission further

noted that a licensee wishing to provide service outside the

United States must obtain a modification of the Plan—“a

process,” it advised, “that has no guarantee of success.” Id.

The Commission also rejected Northpoint’s contention that it

had previously considered DBS service to be an international

service in Amendment to the Commission’s Regulatory Policies

Governing Domestic Fixed Satellites & Separate International

Satellite Systems, Report & Order, 11 FCC Rcd 2429 (1996)

(DISCO I), explaining that in DISCO I it concluded only that “it

USCA Case #04-1052 Document #901432 Filed: 06/21/2005 Page 6 of 19
7

should not impose regulatory barriers on a licensee interested in

providing DBS service outside the United States.” See 19 FCC

Rcd at 827, ¶ 16 (emphasis added). Since DISCO I, the

Commission observed, it had received only four proposals to

provide DBS service beyond the borders of the United States

and “currently all U.S.-licensed providers of DBS service are

providing service only to the United States and not to any

foreign counties.” See id. at 828, ¶ 16. 

The Commission next explained that, contrary to Northpoint’s

claim, the Commission did not routinely secure a modification

of the ITU Region 2 Band Plan for a “U.S.-licensed DBS

operator in order for such an operator to provide international

service.” Id. at 829, ¶ 17. According to the Commission, most

of the cases in which it had sought modification “have had

nothing to do with the provision of service outside the United

States” and that it had sought modification “on behalf of a

licensee proposing to provide international service from a U.S.

orbit location in only two instances.” Id.; see also id. n.38.

The Commission further noted that its authorization of the

EchoStar 7 satellite did not mean that it considered DBS service

to be international service. See id. at 830, ¶ 18. It explained that

its observation in EchoStar Satellite Corporation, Application

for Minor Modification of Direct Broadcast Satellite

Authorization, Launch & Operating Authority for EchoStar 7,

Order & Authorization, 17 FCC Rcd 894, 896, ¶¶ 4-5 (Chief,

Satellite & Radiocomm. Div., Int’l Bur. 2002) (Echostar), that

it “permits DBS licensees to provide DBS service in other

countries,” id. at 896, ¶ 5, simply responded to an argument that

it “should require EchoStar to direct all of its proposed spot

beams to locations within the United States.” 19 FCC Rcd at

830, ¶ 18. The Commission stated that EchoStar 7 “was

designed to provide service to the United States, including

Alaska and Hawaii, on its assigned channels” and that it was

allowed to direct one spot beam toward Mexico because that

USCA Case #04-1052 Document #901432 Filed: 06/21/2005 Page 7 of 19
8

4 Only three licenses (instead of four) ended up on the block. See

DBS Auction Order, 19 FCC Rcd at 821, ¶ 1. While the Commission

declined to impose any ownership eligibility restrictions on the DBS

service licenses available at the western orbit locations (175/ W.L.,

166/ W.L. and 157/ W.L.), it reserved the question whether the

ownership of the DBS service license available at the eastern orbit

location (61.5/ W.L.) should be subject to eligibility restrictions. See

id. at 833-34, ¶¶ 25-27. As the Commission had to resolve that issue

beam could not be directed within the United States “without

causing harmful self-interference into other spot beams in its

own fleet.” Id. at 830-31, ¶ 19. And EchoStar “may” use this

beam, the Commission explained, “if Echostar decides to

provide service to Mexico and obtains any necessary authority

from [Mexico] to do so.” Id. at 831, ¶ 19. 

The Commission also rejected Northpoint’s contention that the

ORBIT Act prohibits the auction of DBS service licenses

because DBS service “relies on spectrum that is ‘used for the

provision of,’ ” id. at 831, ¶ 20 (quoting 47 U.S.C. § 765f), Nongeostationary Fixed Satellite Service (NGSO FSS or FSS)

which, according to Northpoint, is “ ‘indubitably’ ” an

international satellite communications service. Id. The

Commission explained that it construed the relevant language of

section 765f of the ORBIT Act to “focus on whether the

particular spectrum being ‘assigned’ is ‘used for’ international

or global satellite communications services” and that DBS

service licenses are “limited almost exclusively to domestic

use.” Id. at 832, ¶ 20. The Commission therefore concluded

that, “[b]ecause NGSO FSS and DBS licenses are assigned

entirely separately, there is no reason to read the ORBIT Act to

constrain the DBS license assignments merely because NGSO

FSS shares the same spectrum band.” Id. 

On July 14, 2004, the Commission auctioned three DBS

service licenses,4two of which were the 157/ and 166/ west

USCA Case #04-1052 Document #901432 Filed: 06/21/2005 Page 8 of 19
9

before it could auction the license for the eastern orbit location, it did

not proceed with auctioning that license on July 14, 2004. See id. at

833-34, ¶¶ 26-27.

longitude orbital locations Northpoint had applied for. Two

bidders won the three licenses for a total of $12.3 million.

Northpoint did not participate in the auction; instead, on

February 17, 2004, it petitioned for review of the FCC’s DBS

Auction Order. 

II.

Unwilling to take no for an answer, Northpoint again

challenges the FCC’s construction of section 647 of the ORBIT

Act with the two statutory arguments the Commission concluded

were “without merit.” See DBS Auction Order, 19 FCC Rcd at

826, ¶13. Northpoint first argues that licenses for DBS service

channels fall within the ORBIT Act’s auction ban because DBS

service is, in light of the Commission’s prior treatment of it, an

“international or global satellite communications” service. 47

U.S.C. § 765f. “Having treated DBS as an international service

for years,” Northpoint asserts, “the FCC cannot now pretend that

the service is purely domestic simply to gratify its own desire to

assign DBS orbital locations and spectrum via auction.”

Petitioners’ Br. at 23. In so doing, Northpoint says, the

Commission “deviate[d] from previous policy without even

acknowledging that it has deviated.” Petitioners’ Br. at 23

(emphasis in brief). 

Northpoint additionally asserts that even if DBS service is not

itself an “international or global satellite communications”

service under section 647 of the ORBIT Act, the spectrum DBS

service uses cannot be auctioned because it is “used for the

provision of international or global satellite communications”

service within the meaning of section 647. 47 U.S.C. § 765f.

As Northpoint sees it, “if a particular portion of the spectrum is

USCA Case #04-1052 Document #901432 Filed: 06/21/2005 Page 9 of 19
10

used by anyone for international service,” then no portion of the

spectrum may be awarded by competitive bidding “even if a

particular licensee or group of licensees will use that spectrum

only for domestic service.” Petitioners’ Br. at 24-25 (emphasis

in brief). That is, in Northpoint’s view, section 647’s “denial of

auction authority is based on the spectrum in which the applicant

seeks to operate, rather than on the character of the applicant.”

Petitioners’ Br. at 26. Therefore, because DBS service and

NGSO FSS service share a slice of spectrum—the 12.2-12.7

GHz downlink band—and NGSO FSS uses the spectrum for

international or global satellite communications service, section

647 of the ORBIT Act prohibits the Commission from

auctioning DBS service licenses. See Petitioners’ Br. at 25-27.

We review the Commission’s interpretation of section 647 of

the ORBIT Act under the methodology announced by the United

States Supreme Court in Chevron U.S.A. Inc. v. Natural Res.

Def. Council, Inc., 467 U.S. 837 (1984), under which we defer

to the Commission’s interpretation of the Communications Act

so long as the Congress has not unambiguously forbidden it and

the interpretation is otherwise permissible. See id. at 842-43;

see also Barnhart v. Walton, 535 U.S. 212, 218 (2002). That is,

under the Chevron two-step, we stop the music at step one if the

Congress “has directly spoken to the precise question at issue”

because we—and the agency—“must give effect to [its]

unambiguously expressed intent.” Chevron U.S.A. Inc., 467

U.S. at 842-43. “If the intent of Congress is clear, that is the end

of the matter.” Id. at 842. But if the statute is silent or

ambiguous, we dance on and, at step two, defer to the

Commission’s interpretation if it is “based on a permissible

construction of the statute.” Id. at 843. A “reasonable”

explanation of how an agency’s interpretation serves the

statute’s objectives is the stuff of which a “permissible”

construction is made, id. at 863; see, e.g., Continental Air Lines

v. Dep’t of Transp., 843 F.2d 1444, 1452 (D.C. Cir. 1988); an

explanation that is “arbitrary, capricious, or manifestly contrary

USCA Case #04-1052 Document #901432 Filed: 06/21/2005 Page 10 of 19
11

to the statute,” however, is not. Chevron U.S.A. Inc., 467 U.S.

at 844;see, e.g., Motion Picture Ass’n of Am., Inc. v. FCC, 309

F.3d 796, 801 (D.C. Cir. 2002); cf. Gen. Instrument Corp. v.

FCC, 213 F.3d 724, 732 (D.C. Cir. 2000) (“[W]e have

recognized that an arbitrary and capricious claim and a Chevron

step two argument overlap . . . .”); Nat’l Ass’n of Regulatory

Util. Comm’rs v. ICC, 41 F.3d 721, 726 (D.C. Cir. 1994) (“[T]he

inquiry at the second step of Chevron overlaps analytically with

a court’s task under the Administrative Procedure Act . . . .”).

In this case the Commission trips at step two. 

To the extent that Northpoint couches its arguments in

Chevron step one terms—i.e., that section 647 of the ORBIT Act

unambiguously prohibits the auctioning of licenses to operate

DBS service channels—it misses the mark. See Walton, 535

U.S. at 218 (step one asks “whether the statute unambiguously

forbids the Agency’s interpretation”). Section 647’s ambiguity

is plain and profound, as Northpoint’s counsel conceded at oral

argument. See Tr. of Oral Argument at 4-5 (statute “absolutely”

ambiguous). The section provides that “the Commission shall

not have the authority to assign by competitive bidding orbital

locations or spectrum used for the provision of international or

global satellite communications services.” 47 U.S.C. § 765f

(emphasis added). Orbital locations or spectrum not yet

assigned by the Commission, however, are plainly not “used

for” any type of service, including international or global

satellite communications services. Id. § 765f. Accordingly,

because the statute, if read literally, would limit the

Commission’s auction authority based on non-existent

conditions, it is ambiguous and requires interpretation. See

Chevron U.S.A. Inc., 467 U.S. at 843. 

Under Chevron step two, the Commission’s interpretation of

section 647 at first blush appears plausible. The Commission

interpreted “the language of the statutory prohibition to focus on

whether the particular spectrum being ‘assigned’ is ‘used for’

USCA Case #04-1052 Document #901432 Filed: 06/21/2005 Page 11 of 19
12

international or global satellite communications services.” DBS

Auction Order, 19 FCC Rcd at 832, ¶ 20. This makes sense as

section 647 prohibits only the auctioning of spectrum that is

“used for” international or global satellite communications

service, see 47 U.S.C. § 765f; it does not expressly prevent the

auctioning of spectrum that is “used for” domestic satellite

communications services simply because that spectrum is also

“used for” for international or global satellite communications

services. This construction is consistent with the statute’s

apparent purpose of deterring foreign governments from

auctioning spectrum used to provide international or global

satellite communications services. As the Commission points

out, the scant legislative history of section 647 consists of a

House Report on an earlier bill (with an auction prohibition

identical to section 647) that noted “concurrent or successive

spectrum auctions in the numerous countries in which U.S.-

owned global satellite service providers seek downlink or

service provision licenses could place significant financial

burdens on providers of such services,” H.R. REP. NO. 105-494,

at 65 (1998), a concern that is manifested in section 647’s

second sentence. See 47 U.S.C. § 765f (“The President shall

oppose in the [ITU] and in other bilateral and multilateral fora

any assignment by competitive bidding of orbital locations or

spectrum used for the provision of such services.”). A strictly

domestic satellite communications service, however, has nothing

to do with multiple spectrum auctions in foreign jurisdictions.

And given that satellite beams do not stop at national borders,

there is also logic to the Commission’s rejection of Northpoint’s

contention that DBS service is an international or global satellite

communications service on account of transborder “spill-over.”

Northpoint’s contention would tend to blur a distinction implicit

in the statute: Section 647’s reference to “international” service

implies that there is also non-international, or domestic,

service—that is, that not all “satellite communications service[]”

is necessarily “international.” See id. The Commission’s

USCA Case #04-1052 Document #901432 Filed: 06/21/2005 Page 12 of 19
13

argument that “it would be unreasonable to conclude that

Congress intended that the incidental provision of transborder

service would convert an otherwise auctionable license into an

unauctionable one” is thus not unreasonable. 19 FCC Rcd at

826, ¶ 14. While its construction may be permissible under

section 647, however, we cannot defer to it on this record for at

least three reasons which we now explain. 

First, the Commission’s reliance on the ITU Region 2 Band

Plan as a basis for treating DBS service as a solely domestic

satellite communications service is dubious in light of the policy

it announced in DISCO I. Here, the Commission declares that

“the DBS licenses that are slated for auction cannot now

be—nor are they anticipated to be—used to provide any

significant degree of international service” because a licensee

desiring to “provide service outside the United States,

inconsistent with the ITU Region 2 Band Plan” must request

modification of the Plan, which “is a process that has no

guarantee of success, as it requires the agreement of other

[foreign] administrations that have DBS assignments that may

be affected by the modification.” Id. at 827, ¶ 15 (emphasis

added). But in DISCO I the Commission took a more sanguine

view of the bureaucratic gauntlet—involving both procedural

and substantive components—an FCC licensee seeking to

provide international DBS service from U.S. orbital locations

must run. Rather than suggesting, as it does now, that

modification of the Plan poses a formidable substantive bar, in

DISCO I the Commission explained that the Plan “was written

primarily for domestic use, but it does not preclude the

provision of international DBS service.” 11 FCC Rcd at 2438

n.76 (emphasis added). There it stated that, while the Plan

“specifies the technical parameters under which DBS systems

are to operate,” the Plan may nevertheless “be modified to

permit non-standard [including international] satellites and

operations.” Id. at 2438, ¶ 57. 

USCA Case #04-1052 Document #901432 Filed: 06/21/2005 Page 13 of 19
14

Moreover, the Commission mischaracterizes DISCO I in

asserting that its current conclusion that DBS is a

“predominantly domestic” service “does not represent a

departure from” its earlier order. 19 FCC Rcd at 828, ¶ 16. In

DISCO I the Commission did not simply decline to “impose

regulatory barriers on a licensee interested in providing DBS

service outside the United States” or do no more than “note[] the

potential advantages of international DBS service” while not

“conclud[ing] that such service would be anything other than

incidental to domestic service,” as the Commission now says, id.

at 827-28, ¶ 16; instead, it stated that it intended to “encourage”

DBS service licensees to provide “both domestic and

international services from their authorized channels.” 11 FCC

Rcd at 2439, ¶ 67, ¶ 70 (emphasis added). It sought to

“encourage international DBS service,” the Commission in

DISCO I concluded, “since it would advance the public

interest,” including by “expand[ing] the potential audience for

American programming.” Id. at 2439, ¶ 67. Discussing one

way to further this interest, the Commission noted that “the

possibility of providing international DBS services to Pacific

Rim nations could make the western-most DBS orbital locations

allocated to the United States—from which no permittee appears

ready to operate in the near future—more attractive platforms,

which could accelerate development of those locations and

thereby accelerate the delivery of DBS service to Hawaii and

Alaska.” Id. at 2439, ¶ 67 (emphasis added). Its present attempt

to characterize DISCO I as merely announcing a policy of

regulatory forbearance is thus perplexing and, ultimately,

unconvincing. 

Indeed, the Commission gives every appearance of practicing

the policy it preached in DISCO I. As Northpoint points out, the

Commission permitted EchoStar to launch a satellite that aimed

a spot beam directly at Mexico City, a site hundreds of miles

from our border. See EchoStar, 17 FCC Rcd at 896, ¶¶ 4-5. The

Commission minimized this fact here, stating that, while

USCA Case #04-1052 Document #901432 Filed: 06/21/2005 Page 14 of 19
15

EchoStar’s satellite “was designed to provide service to the

United States,” EchoStar was compelled to aim a beam at

Mexico City because it “could not technically direct this

particular spot beam into the United States without causing

harmful self-interference into other spot beams in its own fleet”

and that EchoStar might eventually use this international beam

“if [it] decides to provide service to Mexico and obtains any

necessary authority from” Mexico. DBS Auction Order, 19 FCC

Rcd at 830-31, ¶ 19. But in EchoStar the Commission went

further, reaffirming its DISCO I policy: “[T]he Commission

permits DBS licensees to provide DBS service in other

countries, in accordance with U.S. treaty obligations, from U.S.

DBS orbit locations, provided the satellite operator obtains all

necessary approvals from the foreign administration.” EchoStar,

17 FCC Rcd at 896, ¶ 5 (emphases added). The Commission

even noted in the order under review that, pursuant to an

agreement the United States reached with Mexico and

Argentina, EchoStar may provide DBS service in those

territories “if all necessary modifications to the ITU Region 2

Band Plan are obtained.” DBS Auction Order, 19 FCC Rcd at

831, ¶ 19 n.47. And in its brief to us, it notes that a proposed

modification of the Plan to accommodate this international

service is pending. See Respondent’s Br. at 19. Furthermore,

while the Commission suggests that it is no “routine matter” for

it to seek modification of the Region 2 Band Plan on behalf of

a licensee desiring to provide international DBS service, it

concedes that it has twice done so. See DBS Auction Order, 19

FCC Rcd at 828-29, ¶¶ 16-17 & n.36. The Commission’s

contention that the Region 2 Band Plan restricts DBS service to

domestic markets thus cannot be squared with DISCO I. 

Second, despite the Commission’s attempt to convert the Plan

into a substantive bar to international DBS service (or BSS), it

conceded at oral argument that there is no international treaty or

other agreement (including the Plan) that prohibits a licensee

from providing international DBS service from the orbital

USCA Case #04-1052 Document #901432 Filed: 06/21/2005 Page 15 of 19
16

locations assigned to the United States. See Tr. of Oral

Argument at 18 (“There is no agreement that says no

international service, period.”). The only barrier to international

DBS service is the Plan, which imposes a procedural

constraint—not a legal one. As DISCO I made clear, a licensee

seeking to provide international DBS service must obtain a

modification of the Plan which, in turn, requires it to coordinate

with other countries with Plan assignments that may be affected

by the proposed modification. See DISCO I, 11 FCC Rcd at

2438, ¶ 57; 2439-40, ¶ 70. While a Plan modification may

require a licensee to undergo a lengthy and uncertain process

and perhaps accede to conditions imposed by foreign

governments, the Plan itself does not, as the Commission argues

here, pose an insurmountable procedural hurdle to the provision

of international DBS service from the orbital locations assigned

to the United States. 

Third, and finally, the Commission has failed to adequately

distinguish between NGSO FSS, which it treats as an

international service, and DBS, which it treats as a

“predominantly” domestic service. Compare DBS Auction

Order, 19 FCC Rcd at 828, ¶ 16 (noting “many U.S.-licensed

FSS satellites serve the international market”), with id. (“DBS

service from the eight orbital locations assigned to the United

States is predominantly domestic . . . .”). The Commission

rejected Northpoint’s argument that the ORBIT Act prohibits

the auction of DBS service licenses because DBS shares

spectrum with NGSO FSS, explaining that “[b]ecause NGSO

FSS and DBS licenses are assigned entirely separately, there is

no reason to read the ORBIT Act to constrain the DBS license

assignments merely because NGSO FSS shares the same

spectrum band.” DBS Auction Order, 19 FCC Rcd at 832, ¶ 20.

This construction may make sense in theory—although the

statute speaks of spectrum, not licenses, see 47 U.S.C. § 765f

(“spectrum used for the provision of international or global

satellite communications services”) (emphasis added)—but it

USCA Case #04-1052 Document #901432 Filed: 06/21/2005 Page 16 of 19
17

5

See Amendment of Parts 2 & 25 of the Commission’s Rules to

Permit Operation of NGSO FSS Systems Co-Frequency with GSO &

Terrestrial Systems in the Ku-Band Frequency Range, First Report &

Order & Further Notice of Proposed Rule Making, 16 FCC Rcd 4096,

4099 n.1 (2000) (Co-Frequency Order) (“NGSO systems are

characterized by a constellation of satellites continuously orbiting the

earth, rather than remaining stationary relative to an earth station as

geostationary satellites do. A geostationary satellite orbits at about

35,900 km (about 22,300 miles) above the Earth in the plane of the

Earth’s equator. At this altitude above the equator, the satellite

revolves around the Earth at a rate of speed synchronous with the

Earth’s rotation, so that the satellite stays above the same place on the

Earth’s equator.”).

6

See Co-Frequency Order, 16 FCC Rcd at 4160-61, ¶ 166 (2000)

(“[W]e conclude that NGSO FSS operations can share this band with

BSS operations on a co-primary basis under certain technical

operating parameters . . . [and] are allocating the 12.2-12.7 GHz band

to the fixed satellite service for use by non-geostationary orbit satellite

downlink operations on a co-primary basis.”); compare also id. at

4099, ¶ 2 (“[W]e allocate the 12.2-12.7 GHz band for NGSO FSS

service downlinks on a primary basis.”), with id. at 4101, ¶ 5 (“[T]he

12.2-12.7 GHz band is allocated to [DBS] on a primary basis.”).

is premised on an insignificant distinction. No doubt there is a

difference between NGSO FSS service and DBS service: DBS

service depends on geostationary satellites—i.e., ones that

remain in fixed positions relative to the earth—while NGSO

FSS service depends on non-geostationary ones—i.e., satellite

rings that continuously circle the earth.5 But the fact that they

use different technologies does not by itself support the

Commission’s labeling DBS service “domestic” and NGSO

FSS service “international.” See DBS Auction Order, 19 FCC

Rcd at 831, ¶ 20. And against that one difference, we cannot

help but note several important similarities. Not only do the

two services share the same band of spectrum,6 but, as DISCO

I tells us, both have coverage areas that make international

USCA Case #04-1052 Document #901432 Filed: 06/21/2005 Page 17 of 19
18

satellite communications service technically possible and both

services’ operators must obtain the authorization of foreign

governments before providing international service. See

DISCO I, 11 FCC Rcd at 2429, ¶¶ 1-2; 2432, ¶ 19; 2438-39,

¶ 57; 2438, ¶ 70; see also Auction of Direct Broadcast Satellite

Service Licenses Scheduled for August 6, 2003, 18 FCC Rcd at

3479 n.8 (“The Region 2 Band Plan assignments for the United

States include satellite beams or ‘footprints’ that . . . spill into

Canada, Mexico, and the Caribbean . . . .”). The Commission

adopted a policy of regulatory parity in DISCO I, that is, “a

policy that permits all U.S.-licensed fixed satellite service

(‘FSS’) systems . . . and direct-broadcast satellite service

(‘DBS’) systems to offer both domestic and international

services.” DISCO I, 11 FCC Rcd at 2429, ¶ 1; compare also id.

at 2437, ¶ 56 (“not[ing] that there might be specific

considerations for [Mobile Satellite Service] and DBS that

could dictate a different domestic/international policy”), with

id. at 2440, ¶ 74 (“[W]e . . . allow all U.S.-licensed satellites in

the fixed satellite service to provide both domestic and

international services . . . [and] extend the benefits of this new

policy to other services by permitting DBS satellites and

geostationary MSS satellites to provide both domestic and

international services.”). In light of these similarities, the

Commission’s failure to identify a significant difference

between NGSO FSS service and DBS service is especially

glaring; accordingly, we cannot defer to the Commission’s

interpretation premised on such a difference unless the

Commission adequately supports it. 

III.

While section 647 of the ORBIT ACT unambiguously forbids

only the auctioning of orbital locations or spectrum used for

“international or global satellite communications services,” not

domestic satellite communications services, the Commission’s

construction of the statute to exclude DBS from the auction

USCA Case #04-1052 Document #901432 Filed: 06/21/2005 Page 18 of 19
19

prohibition cannot withstand scrutiny at this point. Insofar as its

construction is bottomed on a supposed substantive barrier

imposed by the ITU Region 2 Band Plan, it is not reasonable.

Since DISCO I the Commission has treated the Plan as a nonsubstantive barrier to international DBS service. Indeed, the

Commission freely admits that it knows of no agreement or

treaty prohibiting the provision of international DBS service by

an FCC licensee. A statutory interpretation premised in part on

either a non-existent factor or one that results from an

unexplained departure from prior Commission policy and

practice is not a reasonable one. Equally unreasonable is the

Commission’s use of an unidentified, but apparently crucial,

difference between NGSO FFS service and DBS service to

support its interpretation. There may be a key difference

between the two but all the Commission has shown us are

similarities. Chevron, however, does not allow for guesswork.

Therefore, while the Commission’s construction of section 647

of the ORBIT Act may not be prohibited by the statutory text

(and may even represent a wise policy choice), it is an

unreasonable construction on this record and the auction

premised on it is unauthorized. Accordingly, we grant

Northpoint’s petition, vacate Part III.A of the DBS Auction

Order and remand this matter to the Commission for further

consideration consistent with this opinion. 

So ordered.

USCA Case #04-1052 Document #901432 Filed: 06/21/2005 Page 19 of 19