Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-98-01503/USCOURTS-caDC-98-01503-0/pdf.json

Parties Involved:
Federal Communications Commission
Appellee
Mountain Solutions, LTD., Inc.
Appellant

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 12, 1999 Decided December 3, 1999

No. 98-1503

Mountain Solutions, Ltd., Inc.,

Appellant

v.

Federal Communications Commission,

Appellee

Appeal of an Order of the

Federal Communications Commission

Michael K. Kurtis was on the briefs for appellant.

Christopher J. Wright, General Counsel, Federal Communications Commission, Daniel M. Armstrong, Associate General Counsel, and Pamela L. Smith, Counsel, were on the

brief for appellee.

Before: Ginsburg, Rogers and Tatel, Circuit Judges.

Opinion for the Court filed by Circuit Judge Rogers.

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Rogers, Circuit Judge: Mountain Solutions Ltd., Inc. was

the winning bidder for ten licenses in the broadband personal

communications service C block auction. Under the rules of

the Federal Communications Commission, Mountain Solutions was required to make a 10% down payment for the

licenses, payable in two installments. See 47 C.F.R.

ss 24.711(a)(2), 24.809(b). Mountain Solutions paid the first

installment but was unable to make timely payment of the

second down payment. On the due date, Mountain Solutions

petitioned the Commission for a thirty-day waiver of its rules

in order to allow completion of financing discussions. Although Mountain Solutions supplemented its waiver request

within twenty-three days to state that financing discussions

had been successfully concluded and then, following the Commission's grant of other waivers, tendered an irrevocable

letter of credit, the Commission denied the waiver request for

lack of financing on the due date. On appeal Mountain

Solutions contends that the Commission was arbitrary and

capricious in denying a waiver when it granted waivers to

similarly situated entities, and that changed regulatory procedures make recission an appropriate remedy for such arbitrary and capricious action. Alternatively, Mountain Solutions asks the court to enjoin the Commission's enforcement

of any default penalties against it. Because the Commission

did not abuse its broad discretion in denying a waiver and

because the claim for injunctive relief is not ripe, we deny the

petition in part and dismiss the petition in part.

I.

In 1993, Congress authorized the Federal Communications

Commission ("Commission") to allocate radio spectrum by

auction. See Omnibus Budget Reconciliation Act of 1993,

Pub. L. No. 103-66, tit. VI, s 6002(a), 107 Stat. 312, 387-392

(1993) codified in principal part at 47 U.S.C. s 309(j). Congress directed the Commission to design its implementing

rules to "ensure that smaller businesses ... and businesses

owned by members of minority groups and women are given

the opportunity to participate in the provision of spectrumbased services," and thus "to consider the use of ... [such

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procedures as] bidding preferences...." 47 U.S.C.

s 309(j)(4)(D). Accordingly, the Commission set aside two

blocks of personal communications service ("PCS") spectrum,

the 30 MHz C block and the 10 MHz F block, for bidding by

"designated entities," defined as "small businesses, businesses

owned by members of minority groups and/or women, and

rural telephone companies." 47 C.F.R. s 1.2110(a) (1999);

see also Implementation of Section 309(j) of the Communications Act--Competitive Bidding, Fifth Report and Order, 9

F.C.C.R. 5532 p p 93-95, 113 (1994). In recognition of the

challenges faced by designated entities in obtaining financing,

the Commission adopted a special payment program for C

block licenses, reducing both the upfront bid amount and the

percentage down payment at the close of the auction. Thus,

the licensees were required to submit a 5% down payment

within five days of the close of the auction and a second 5%

down payment within five days of the conditional grant of

their licenses, with the remaining 90% and interest payable in

quarterly installments over ten years. See 47 C.F.R.

s 24.711(a)(1), (2), (b) (1996).

Mountain Solutions was the successful bidder for ten licenses in the Commission's original C block auction held from

December 1995 through May 1996. It timely paid approximately $1.2 million as its initial 5% down payment. Its

license applications were conditionally granted on September

17, 1996, and thus its second down payment was due on

September 24th. On the due date, Mountain Solutions filed

an emergency petition for a waiver, seeking a thirty-day

extension of the second down payment deadline. Asserting

that an agreement providing the necessary financing was

imminent and was expected within the following thirty days,

Mountain Solutions stated that it was negotiating an agreement with a major United States financier to obtain the

financing required to meet its obligations but was not yet in

possession of the funds. On October 17, 1996, Mountain

Solutions supplemented its waiver petition to advise that it

had secured the necessary financing from its current investors, while noting that a public notice released August 28,

1996, which gave guidance to D, E, and F Block bidders on

the Commission's anti-collusion rule, had contributed to

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"Mountain Solutions' inability to remit its second down payment within the prescribed time period."1

Mountain Solutions was one of seventeen applicants for

various spectrum licenses seeking a waiver of the down

payment deadlines, including seven other C block applicants.

The Wireless Telecommunications Bureau ("the Bureau") and

the Mass Media Bureau issued a Public Notice seeking

comment on how it should evaluate these waiver requests.

On February 4, 1997, the Bureau granted other waiver requests, subject to a 5% late penalty, of the other C block

applicants as well as other waiver petitions. In each order

granting a partial waiver, the Bureau noted that the failure to

pay timely was inadvertent. In a number of cases, the

inadvertence occurred because the first down payment was

sufficient to cover both the first and second down payments,

and the bidder had assumed that the Commission retained

sufficient funds to cover the latter.2 Two other bidders had

miscalculated the amount of their down payments.3 The

__________

1 Specifically, Mountain Solutions asserted that "Mountain Solutions' investors are bidders in the D, E and F block auction," and

that the Commission's anti-collusion guidelines were "confusing and

unclear regarding the extent to which bidders in the D, E and F

block auction could enter into business-related discussions with C

block auction winners."

2 See In the Matter of Cenkan Towers, L.L.C. Request for

Waiver of Section 90.811 of the Comm'n's Rules, 12 F.C.C.R. 1516,

p p 5-8 (1997); In the Matter of CSS Communications Co. Request

for a Waiver of Section 90.811 of the Comm'n's Rules, 12 F.C.C.R.

1507, p p 5-8 (1997); Elec. SMR Communication Services Request

for Waiver of Section 90.811 of the Comm'n's Rules, 12 F.C.C.R.

1520, p p 5-8 (1997); In the Matter of Hickory Telephone Co., Inc.

Request for Waiver of Section 90.811 of the Comm'n's Rules, 12

F.C.C.R. 1528, p p 5-8 (1997); In the Matter of Independence

Excavating, Inc. Request for Waiver of Section 90.811 of the

Comm'n's Rules, 12 F.C.C.R. 1524, p p 5-8 (1997); In the Matter of

The Wireless, Inc. Request for Waiver of Section 90.811 of the

Comm'n's Rules, 12 F.C.C.R. 1821, p p 5-8 (1997).

3 See In the Matter of Roberts-Roberts & Associates, LLC

Request for Waiver of Section 24.711(a)(2) of the Comm'n's Rules,

remaining partial waivers were granted in circumstances

where the bidder was either unaware of the payment deadline4 or, due to payment submission complications, made

payment one day late.5 In each order, the Bureau made note

of two circumstances: first, the importance the Commission

attached to the first and second down payment obligations for

"discouraging insincere or financially unqualified bidders

from 'shopping' a winning bid in order to obtain financing for

a down payment,"6 and second, that the inadvertent nature of

the missed second payment deadline, combined with the fact

that payment was submitted promptly upon discovery of the

mistake in each case, demonstrated "that, but for the [inadvertent error, each bidder] would have been able to meet its

payment obligations on time."7

__________

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12 F.C.C.R. 1825, p p 2, 5-8 (1997); In the Matter of RFW, Inc.

Request for Waiver of Section 24.711(a)(2) of the Comm'n's Rules,

12 F.C.C.R. 1536, p p 2, 5-8 (1997).

4 See In the Matter of Longstreet Communications Int'l., Inc.

Request for Waiver of Section 24.711(a)(2) of the Comm'n's Rules,

12 F.C.C.R. 1549, p p 2, 5-8 (1997); In the Matter of Southern

Communications Systems, Inc. Request for Waiver of Section

24.711(a)(2) of the Comm'n's Rules, 12 F.C.C.R. 1532, p p 2, 5-8

(1997); In the Matter of Wireless Telecommunications Company

Request for Waiver of Section 24.711(a)(2) of the Comm'n's Rules,

12 F.C.C.R. 1544, p p 2, 5-8 (1997); In the Matter of AMK International Inc. and Mobilecall, Inc. Requests for Waiver of Section

90.811 of the Comm'n's Rules, 12 F.C.C.R. 1511, p p 5-8 (1997).

5 In the Matter of MFRI, Inc. Request for Waiver of Section

24.711(a)(2) of the Comm'n's Rules, 12 F.C.C.R. 1540, p p 2, 5-8

(1997); In the Matter of Paradise Cable, Inc. Request for Waiver of

Section 21.955(B) of the Comm'n's Rules, 12 F.C.C.R. 9760, p p 6-8

(1997).

6 See, e.g., Longstreet Communications, 12 F.C.C.R. 1549, p 6

(quoting Implementation of Section 309(j) of the Communications

Act--Competitive Bidding, PP Docket No. 93-253, Second Report

and Order, 9 F.C.C.R. 2348, 2382 (1994)); Roberts-Roberts, 12

F.C.C.R. 1825, p 6 (same).

7 See, e.g., Longstreet Communications, 12 F.C.C.R. 1549, p 7;

Roberts-Roberts, 12 F.C.C.R. 1825, p 7.

On February 12, 1997, Mountain Solutions filed a second

supplement to its waiver request, asserting that the Bureau

had indicated for the first time in its February 4th waiver

orders that it places positive weight on an applicants' late

tendered second down payment in determining whether to

grant a waiver request, and negative weight on an applicants'

apparent inability to pay its second down payment on the due

date. In light of the former, Mountain Solutions tendered an

irrevocable letter of credit demonstrating that it could meet

its second down payment obligation. As to the latter, Mountain Solutions asserted that "the Commission has never suggested [previously] that fundraising efforts to satisfy the

second down payment are an indication of 'insincerity' or lack

of financial qualifications."

On April 28, 1997, the Bureau denied Mountain Solutions'

waiver request on the ground that "[t]he failure to secure

financing does not serve as a justification for a waiver," and

observed:

[W]e have not granted a request for an extension of a

down payment deadline for a license won through competitive bidding in any case where it appeared that the

party requesting the extension did not have the funds on

hand on the date of the payment deadline. We have

granted partial relief to licensees only where a delay in

making payment on the payment due date and the failure

to make payment was either inadvertent or due to miscalculation or administrative complications. Mountain

Solutions' failure to make its payment resulted from a

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lack of funds, not miscalculation, inadvertence, or administrative complications.

In the Matter of Mountain Solutions Ltd., Inc. Request for

Waiver of Section 24.711(a)(2) of the Comm'n's Rules, 12

F.C.C.R. 5904 p p 6-7 (1997). Mountain Solutions unsuccessfully sought review by the Commission, which noted that

"[o]ur second down payment deadline is critical to our licensing process," and that "Mountain Solutions has failed to

demonstrate its financial viability at the time its second down

payment was due." In the Matter of Mountain Solutions

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Ltd., Inc. Emergency Petition for Waiver of Section

24.711(a)(2) of the Comm'n's Rules, 13 F.C.C.R. 21983,

p p 14-15, 17 (1998) ("Commission Order"). By contrast, the

Commission noted, "[i]n other instances where we have partially granted a payment deadline waiver request, the petitioner receiving relief had the money at the time it was due."

Id. at p 16.

II.

Contending that the Commission was arbitrary and capricious in denying its waiver request, Mountain Solutions maintains that (1) all other "similarly situated" parties were

granted waivers, making the Commission's treatment of similarly situated parties inconsistent, and undermining the supposed policy basis behind the Commission's treatment of

Mountain Solutions; (2) the Commission's revision of its

second down payment rule during the pendency of Mountain

Solutions' waiver request to make the deadline more flexible

indicates that denial of Mountain Solutions' waiver request

was unnecessarily harsh and the purported policy basis behind this refusal disingenuous; and (3) the unique circumstances of Mountain Solutions' case renders strict application

of the second down payment rule inequitable and contrary to

the public interest.

According to the Commission's rule:

Waivers will not be granted except upon an affirmative

showing:

(i) That the underlying purpose of the rule will not be

served, or would be frustrated, by its application in a

particular case, and that grant of the waiver is otherwise

in the public interest; or

(ii) That the unique facts and circumstances of a particular case render application of the rule inequitable,

unduly burdensome or otherwise contrary to the public

interest. Applicants must also show the lack of a reasonable alternative.

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47 C.F.R. s 24.819(a)(1)(i), (ii) (1996).8 Under the Administrative Procedure Act, the court must " 'hold unlawful and set

aside agency action' that is 'arbitrary, capricious, an abuse of

discretion, or otherwise not in accordance with law.' " BellSouth Corp. v. F.C.C., 162 F.3d 1215, 1221 (D.C. Cir. 1999)

(quoting 5 U.S.C. s 706(2)(A)). As to waiver of agency rules,

however, the agency's strict construction of a general rule in

the face of waiver requests is insufficient evidence of an abuse

of discretion. See, e.g., BellSouth, 162 F.3d at 1225. Instead,

"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.' " Green Country Mobilephone, Inc. v. F.C.C., 765 F.2d 235, 238 (D.C. Cir. 1985)

(quoting Thomas Radio Co. v. F.C.C., 716 F.2d 921, 924 (D.C.

Cir. 1983)). "[T]his burden is a heavy one ..." but "it is

carried when an agency arbitrarily waives a deadline in one

case but not in another." Id. (citing WAIT Radio v. F.C.C.,

459 F.2d 1203, 1207 (D.C. Cir. 1969)); see also BellSouth, 162

F.3d at 1222. Mountain Solutions contends it has met this

burden, focusing primarily upon the fact that, of the high

bidders in the original C block auction which requested

waiver of the second down payment deadline, only it was

denied a waiver.

Mountain Solutions' contention that it was treated arbitrarily and capriciously is unpersuasive. Of the bidders

granted partial waivers, only Mountain Solutions (by its own

admission) lacked funds to make the second down payment on

the due date (or one day later). Indeed, when the Bureau

was initially confronted with a similar circumstance by Carolina PCS I Limited Partnership, the Bureau denied its

waiver request. The Bureau reversed itself only after Carolina had submitted affidavits indicating that it had a firm

financial commitment from its lending institution equal to the

amount of its second down payment on or about the due

date.9 See In the Matter of Carolina PCS I Ltd. Partnership

__________

8 Section 24.819 since has been replaced by 47 C.F.R. s 1.925

(1999).

9 Carolina petitioned for a waiver rather than making a late

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Request for Waiver of Section 24.711(a)(2) of the Comm'n's

Rules, 12 F.C.C.R. 22938, p 14 (1997). Mountain Solutions,

by contrast, had no firm financial commitment as of the

September 24th due date. Although Mountain Solutions, like

Carolina, sought to allay Commission concerns about financial

viability by proffering a firm financing commitment, the

salient distinction remains: Carolina had adequate financing

to make a timely second down payment on the due date;

Mountain Solutions did not. The Bureau repeatedly relied in

its February 4th orders granting partial waivers to other

bidders on the Commission's position that

the integrity and functioning of the auction process is

dependent on having payment obligations on winning

bids promptly met. Timeliness of such payments is a

necessary indication to the Commission that the winning

bidder is financially able to meet its obligations on the

license and intends to use the license for the provision of

services to the public. In the Second Report and Order

in the competitive bidding docket, the Commission noted

that this requirement would also deter defaults by discouraging insincere or financially unqualified bidders

from 'shopping' a winning bid in order to obtain financing

for a down payment.

Southern Communications Systems, Inc, 12 F.C.C.R. 1532

p 6. Other bidders receiving waivers demonstrated their

financial qualifications both by the circumstances surrounding

the failure to meet that payment deadline and by tendering

payment immediately upon being notified of their delinquency

or mistake. See, e.g., Longstreet Communications, 12

F.C.C.R. 1549, p 7; Roberts-Roberts, 12 F.C.C.R. 1825, p 7.

By contrast, the Commission noted, "Mountain Solutions has

failed to demonstrate its financial viability at the time its

second down payment was due." Commission Order, 13

F.C.C.R. 21983, p 16.

For these reasons, the rationale articulated by the Commission is not so insubstantial as to render its denial of Mountain

Solutions' waiver request an abuse of discretion. See, e.g.,

__________

payment due to "investor uncertainty about the terms under which

a payment might be accepted." Id. p 15.

BellSouth, 162 F.3d at 1222. Given the salient distinction

relied on by the Commission and supported by the record

between the circumstances surrounding Mountain Solutions'

failure to meet its second down payment obligation and those

surrounding the failure of other bidders granted partial waivers, this is not a case in which the Commission has failed to

explain its different treatment of similarly situated parties.

See Melody Music v. F.C.C., 345 F.2d 730, 732 (D.C. Cir.

1965). Having established a more lenient payment structure

for designated entities, which by definition usually faced

problems of accessing financial resources, the Commission

could reasonably focus on the importance of meeting payment

deadlines to deter such entities from abusing the lenient

structure by " 'shop[ping]' a winning bid in order to obtain

financing for a payment." Commission Order, 13 F.C.C.R.

21983, p 17. The Commission also could reasonably rely on

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strict enforcement of the deadlines to provide an "early

warning" that a winning bidder unable to comply with the

payment deadlines may be financially unable to meet its

obligation to provide service to the public. See id.

Mountain Solutions' reliance upon the Commission's decision to allow NextWave to use proceeds acquired in violation

of statutory foreign ownership limitations to meet its second

down payment is somewhat misplaced. The Commission

granted NextWave's application conditioned on implementation of a restructuring plan that would bring NextWave into

compliance with the Commission's foreign ownership rules.

In granting an extension of time, the Commission took into

consideration the fact that external events might well cause it

to revise its ownership rules. While Mountain Solutions and

NextWave were both seeking an exception from Commission

rules, granting a waiver by allowing a timely down payment

in violation of foreign ownership restrictions entails a different set of considerations than those involved in the decision to

waive a payment deadline while a bidder secures financing.

Thus, NextWave does not appear any more similarly situated

to Mountain Solutions than do those licensees who were

granted second down payment deadline waivers in light of the

inadvertence of their mistakes.

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More problematic is Mountain Solutions' contention that

the Commission's restructuring proceeding, while Mountain

Solutions' waiver request was pending, was a de facto waiver

of its C block obligations, effectively designed to assure that

no C block bidder would find itself in Mountain Solutions'

situation. The Commission received numerous requests for

some form of debt relief.10 As part of the restructuring

proceeding, the Commission afforded licensees three alternatives to continuing to make payments for the licenses. The

alternatives were designed to "provide limited relief for C

block licensees having difficulty meeting their financial obligations to the Commission...."11 Thus, Mountain Solutions

asserts, all C block bidders were given an amnesty option,

under which they could return their C block licenses and face

no additional monetary penalties from the Commission, or at

most a 10% penalty, while Mountain Solutions was offered no

similar relief. Although, as Mountain Solutions concedes in

its brief, not all of the entities that took advantage of the

relief offered under the restructuring had filed waiver requests, Mountain Solutions notes that all other licensees that

had missed their second payment deadlines and received

__________

10 See In the Matter of Amendment of the Comm'n's Rules

Regarding Installment Payment Fin. For Personal Communications Services (PCS) Licensees, Second Report and Order and

Further Notice of Proposed Rulemaking, 12 F.C.C.R. 16436, p p 11,

14-15 (1997) ("Restructuring Order"). Some C block auction winners had been able to make timely first and second down payments,

or had successfully obtained waivers in that regard, but faced

financial difficulties in complying with the terms of the ten-year

schedule for paying the balance due. Id.

11 Restructuring Order, 12 F.C.C.R. 16436, p 6. The three

alternatives were: (1) Disaggregation: returning 15 MHz of PCS

spectrum to the Commission with a corresponding 50% reduction in

outstanding debt; (2) Amnesty: returning PCS licenses to the

Commission with forgiveness of all outstanding C Block debt; and

(3) Prepayment: applying 70% of the down payment amount from

surrendered licenses toward prepayment of any remaining licenses,

as well as the ability to use any additional financing to prepay any

licenses. Id.

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waivers were allowed to make elections. Consequently,

Mountain Solutions contends that the Commission abused its

discretion by offering C block licensees amnesty, with a

relatively modest penalty, while refusing to allow Mountain

Solutions additional time to submit its second down payment,

leaving it potentially liable for substantial default penalties.

There remains, nonetheless, the salient distinction that only

Mountain Solutions, unlike the licensees granted restructuring relief, was in default for missing its second down payment

at the time of the restructuring. As the Commission noted in

its Order denying Mountain Solutions' application for review,

the entities offered restructuring relief "had met their second

down payment obligations, bec[o]me licensees, and signed

note and security agreements with the Commission." Commission Order, 13 F.C.C.R. 21983, p 23.

Furthermore, contrary to Mountain Solutions' contention,

the Commission did not improperly articulate a new rule in

distinguishing between Mountain Solutions and the entities

granted partial waivers. Mountain Solutions maintains that

the "determinative factor" in granting waivers was the late

tendering of payment, and that Mountain Solutions was disadvantaged because it was unaware of this "rule". As noted,

however, in granting waivers the Bureau relied primarily on

the inadvertent nature of the mistakes causing the missed

deadline; the late tendering of payment was an additional but

not a determinative factor in demonstrating the financial

viability of the bidders. See, e.g., Longstreet Communications, 12 F.C.C.R. 1549, p 7; Roberts-Roberts, 12 F.C.C.R.

1825, p 7. To the extent that Mountain Solutions contends

that the Bureau was obliged to provide notice before giving

weight, in considering a waiver petition, to a bidder's access

to funds as of the second down payment date, the contention

is unpersuasive. The Commission has long noted the importance it attaches to timely payment.12

__________

12 As early as its Second Report and Order, In the Matter of

Implementation of Section 309(j) of the Communications Act,

Second Report & Order, 9 F.C.C.R. 2348 (1994) ("Second Report

and Order"), the Commission explained that a timely down payment

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Mountain Solutions' contention that the Commission abused

its discretion by not giving Mountain Solutions the benefit of

two rule changes made subsequent to the filing of Mountain

Solutions' waiver petition is also unpersuasive. In February

1997, the Commission extended the deadline for second down

payments from five to ten business days following license

approval. See 47 C.F.R. ss 24.711(a)(1)(2) (1998), 1.2107(b),

1.2109(a). In December 1997, after having denied Mountain

Solutions' waiver request in September, the Commission

adopted a rule allowing an additional ten-business-day grace

period for second down payments, albeit with a 5% penalty.

47 C.F.R. ss 24.711(a)(1)(2) (1998), 1.2107(b), 1.2109(a). In

explaining these changes, the Commission "recognize[d] that

applicants may encounter certain difficulties when trying to

arrange financing and make substantial payments under

strict deadlines." In the Matter of Amendment of Part I of

the Comm'n's Rules, 12 F.C.C.R. 5686, p 61 (1997). Because

rulemakings are generally prospective, MCI v. F.C.C., 10 F.3d

__________

requirement would deter defaults "by discouraging insincere or

financially unqualified bidders from 'shopping' a winning bid in

order to obtain financing for a down payment." Longstreet Communications, 12 F.C.C.R. 1549, p 6 (citing Second Report and

Order, 9 F.C.C.R. at 2382). Contrary to Mountain Solutions' contention, such concerns were not limited to the timely submission by

bidders of a first down payment; the Second Report and Order

noted generally that "strong incentives," such as deadlines and

penalties for down payments, "must be in place to deter frivolous

bids or unqualified bidders...." 9 F.C.C.R. 2348, p 197. In any

event, even if the Commission had not previously articulated the

policy rationale that formed the primary basis for granting or

denying the waiver requests, the Commission's exercise of its wide

discretion in denying Mountain Solutions' waiver request on this

rationale, which was clearly and evenhandedly articulated in the

February 4th orders granting partial waivers and in the denial of

Mountain Solutions' request, was in the nature of an adjudicatory

decision rather than the announcement of a new rule. See, e.g.,

F.C.C. v. WOKO, Inc., 329 U.S. 223, 227-228 (1946); City of Chicago

v. Fed. Power Comm'n, 385 F.2d 629. 647-638 (D.C. Cir. 1967);

Leedom v. Int'l Brotherhood of Elec. Workers, Local Union No.

108, 278 F.2d 237, 241-244 (D.C. Cir. 1960).

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842, 846 (D.C. Cir. 1993); see also, e.g., AT & T v. F.C.C., 978

F.2d 727, 732 (D.C. Cir. 1993); Gersman v. Group Health

Ass'n., Inc., 975 F.2d 886, 897-98 (D.C. Cir. 1992), there

would appear to be no basis for the court to fault the

Commission for failing to give Mountain Solutions the benefit

of its new rule. Furthermore, had the Commission applied

its more lenient payment rule retroactively, Mountain Solutions still would not have gained the thirty days that it

requested in its emergency petition for a waiver. Even

assuming that Mountain Solutions may have come within the

new twenty-business-day grace period as a consequence of its

October 17, 1997, supplemental filing, the Commission did not

abuse its discretion in refusing to deem as a sufficient basis

for waiver Mountain Solutions' inability to secure financing as

of the deadline then in effect.

Finally, Mountain Solutions contends that application of the

second down payment rule to it will not serve the purposes of

the rule "to deter default and ensure that winning bidders are

sincere and have the financial capability to build out their

systems," that the grant of Mountain Solutions' waiver would

have been in the public interest, and that the circumstances

surrounding Mountain Solutions' waiver, including the treatment accorded purportedly "similarly situated" bidders and

the devaluation of the licenses at issue, demonstrate that the

Commission's denial of a waiver was arbitrary and capricious.

With regard to devaluation, Mountain Solutions maintained in

its request for reconsideration that the terms of the reauctioning procedures were likely to result in lower bids, thereby

increasing the amount of any default penalty.13 Mountain

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13 See Mountain Solutions' Petition for Reconsideration of the

Fourth Report and Order at 2, In the Matter of Amendment of the

Comm'n's Rules Regarding Installment Payment Financing for

Personal Communications Services (PCS) Licenses (WT Docket

No. 97-82). Mountain Solutions contended that the C block licenses

had been "devalued" because (1) the Commission had changed the

financing options available to C-block bidders, (2) market conditions

had changed, and (3) the reauction did not include licenses held by

successful C block bidders in the initial auction that were in

bankruptcy proceedings. Id. at 3-6. Mountain Solutions contendUSCA Case #98-1503 Document #481342 Filed: 12/03/1999 Page 14 of 20
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Solutions represents in its brief that seven of its licenses were

sold in the reauction for between 5% and 9.75% of the net

price Mountain Solutions had bid in the initial auction. This

means, Mountain Solutions asserts, that it could be subject to

nearly $18 million in default penalties. See 47 C.F.R.

ss 24.704(a)(2) and 1.2104(g)(2).

Parsing each of Mountain Solutions' contentions for its

flaws does not detract from their combined strength, nor

from the possibility that the Commission could have viewed

Mountain Solutions' waiver request differently than it did.

The relief Mountain Solutions sought was not violative of

other rules, as, for example, in the case of NextWave. Mountain Solutions in fact secured the financing it needed within

the thirty-day period it requested in petitioning for a waiver

of the payment deadline, and, following the February 4th

orders granting partial waivers, it proffered an irrevocable

letter of credit adequate to cover the second down payment,

plus a 5% late payment penalty. As in the Carolina case,

there was confusion among Mountain Solutions' potential

investors about what the anti-collusion guidelines permitted.

See supra n.1. Furthermore, Mountain Solutions maintains

that its investors were uncertain whether a late-tendered

second down payment would be accepted or seized in satisfaction of default penalties. It also was unclear to bidders how

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ed that the Commission had contributed to the "devaluation" of the

C block licenses by deciding not to offer bidders in the C block

reauction the option of paying for their licenses on an installment

basis. See In the Matter of Amendment of the Comm'n's Rules

Regarding Installment Payment Fin., Fourth Report and Order,

13 F.C.C.R. 15743, p 50 (1998).

In the Fourth Report and Order, the Commission had recognized

that conditioning receipt of a license upon full payment would

require that a bidder have greater resources than had been the case

in auctions in which installment financing was available. See id.

Mountain Solutions contended that an additional impact would be

that bids would be lower because bidders could bid a greater

amount if payment could be made over time rather than in one

lump sum. See Mountain Solutions' Petition for Reconsideration at

3.

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they should proceed; Carolina, for example, was told not to

submit a late payment but to place funds in an escrow

account. Likewise, with respect to financial viability, submission of an irrevocable letter of credit might well afford

assurances comparable to escrowed funds.14

Because Mountain Solutions' bid occurred in the first auction under newly established procedures, there is nothing of

record to indicate that bidder or investor confusion constituted either bad faith or the type of misuse of licenses that was

of concern to the Commission. Indeed, the Commission

eventually recognized in establishing a more extensive grace

period that its second down payment rule required more

flexibility. Under the new grace periods, Mountain Solutions

apparently would have been able to make a timely second

payment. Inasmuch as Mountain Solutions was confronted

with the type of difficulty in financing that Congress had

anticipated and that the Commission acknowledged in establishing special procedures, and because the Commission came

to acknowledge that a more flexible payment schedule was

necessary and not inconsistent with other policy goals, the

Commission would have acted within its discretion to grant

Mountain Solutions a partial waiver.

To conclude that the Commission abused its discretion in

denying Mountain Solutions a waiver, however, would require

retroactive application of the Commission's second ten-day

grace period, an unusual procedure for rulemaking, see, e.g.,

MCI v. F.C.C., 10 F.3d at 846, and thus hardly a basis to find

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14 Mountain Solutions indicated that its proffered letter of

credit would have been irrevocable for thirty days and could

immediately have been drawn upon by Mountain Solutions for

payment to the Commission upon the grant of Mountain Solutions'

licenses. While the Commission distinguished a letter of credit

from the placing of funds into an escrow account on the basis that

Mountain Solutions did not actually relinquish control of the funds

so that they could have been drawn upon absent action by Mountain

Solutions, the letter of credit would nonetheless have demonstrated

Mountain Solutions' ability to pay the required funds. See, e.g.,

U.C.C. s 5-103(1)(a) (1999); 50 Am. Jur.2d Letters of Credit s 3

(1992); Black's Law Dictionary 813-814 (5th ed. 1979).

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an abuse of discretion here. Nothing suggests that the

Commission would have been any more receptive to waiver

requests based upon inability to secure payment for failure to

meet its revised payment deadlines than it was to such

requests under its original deadline rules. In amending its

payment rule the Commission continued to associate strict

enforcement of payment deadlines with preservation of "the

integrity of the auction and licensing process by ensuring that

applicants have the necessary financial qualifications."

Amendment of Part I of the Comm'n's Rules, 12 F.C.C.R.

5686, p 61. As a result, finding an abuse of discretion would

not be based on an alteration of the Commission's approach

toward payment deadlines, but rather would amount to a

requirement that the Commission make retroactive the exact

number of grace period days presently allowed.

The abuse of discretion standard presents a heavy burden

for a petitioner in this court. See, e.g., BellSouth, 162 F.3d at

1222. Recognizing the limits of our proper role, see WOKO,

329 U.S. at 228, the court has defined the outer limits of such

discretion but left to the decision-maker the determination of

which of the permissible alternative outcomes should apply in

a particular case. Cf. Kickapoo Tribe of Indians of the

Kickapoo Reservation in Kansas, et al. v. Babbitt, 43 F.3d

1491, 1497 (D.C. Cir. 1995). Because the Commission explained its reasoning in denying Mountain Solutions' waiver

request, gave fair notice of the importance it attached to

meeting payment dates, and acted consistently under the then

applicable procedures, we hold that it did not abuse its

discretion in denying Mountain Solutions' waiver request.15

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15 Because we do not find the Commission's denial of its waiver

request arbitrary and capricious, we need not address the question

of remedy. Thus, we do not reach Mountain Solutions' contention

that rescission of its bids from the original auction and return of

any monies paid for the licenses on which it bid is appropriate in

view of the devaluation of bids for its licenses and the fundamental

restructuring relief afforded to others. Furthermore, if remedy

were at issue, we would not address Mountain Solutions' request for

rescission because this relief was not sought from the Commission;

nor was the argument presented to the Commission in relation to

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III.

The default penalty rule provides that "when a winning

bidder defaults on a license, the bidder becomes subject to a

default payment equal to the difference between the amount

bid and the winning bid the next time the license is offered by

the Commission, plus a payment equal to three percent of the

subsequent winning bid or the amount bid, whichever is

lower." Commission Order, 13 F.C.C.R. 21983, p 24 (citing

47 C.F.R. ss 24.704(a)(2), 1.2104(g)(2)). In denying Mountain

Solutions' application for review of the Bureau's denial of its

waiver request, the Commission noted first, that it "will

assess an initial default deposit of between three percent and

twenty percent of the defaulted bid amount where a winning

bidder of licensee defaults and the defaulted license has yet to

be reauctioned," and second, that, "[i]f additional payment is

required, following the reauction of licenses, a second order

will assess such payment." Commission Order, 13 F.C.C.R.

21983, p p 24-25. No second order is in the record before the

court. While Mountain Solutions did not seek reconsideration of the denial, it did seek reconsideration of the Fourth

Report and Order on reauctioning procedures.16 See supra

n. 13.

Mountain Solutions contends that it should not be liable for

any default penalties based on the price paid for its licenses

at reauction. Because, in its view, the Commission has

granted a de facto waiver of the default penalty rules as they

relate to prices subsequently bid at reauction to every other

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the order under review. United Transp. Bd. v. Surface Transp.

Bd., 114 F.3d 1242, 1244 (D.C. Cir. 1997); 47 U.S.C. s 405(a).

16 On November 12, 1998, the Bureau announced its intent to

include Mountain Solutions' licenses in a reauction on March 23,

1999. Mountain Solutions states in its brief on appeal that it filed

an application for review, which was pending at time of briefing in

the court. Mountain Solutions also filed petitions with the Commission and in this court seeking a stay of the reauction. The petition

before the Commission remained pending as of briefing, and the

court denied the request. See Mountain Solutions v. FCC, 1999

WL 229027 (D.C. Cir. Mar. 22, 1999).

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C block applicant that timely made its first payment, the

Commission's restructuring of C block debt and allowing C

block licensees to return some or all of their license without

default penalties "indicates how inequitable it would be for

the [Commission] to strictly enforce its default penalty rules

against [Mountain Solutions]." Further, Mountain Solution

maintains, the Commission's restructuring of the C block

auction process "dictate[d] lower spectral values on any

reauction occurring subsequent to those changes," and its

promulgation of the default penalty rules never considered

that bidders would be subject to spectral devaluation caused

by a post-auction restructuring of the process. Without

benefit of the Commission's analysis, Mountain Solutions'

position that it should not be liable for a default penalty

created in part by the Commission's decision to change the

rules for reauction after Mountain Solutions had been a

successful bidder under a prior regime, has some persuasive

force. But therein lies the problem; we have yet to hear

from the Commission.

Indeed, the Commission responds that Mountain Solutions'

request for injunctive relief is not ripe. The Commission

explains that:

[it] has not issued any order imposing [any portion of the

default penalty beyond the initial 3% penalty assessed]

on Mountain Solutions. There is no administrative order

to which Mountain Solutions must comply, nor does

Mountain Solutions face any sanctions for noncompliance.

Acknowledging that no order imposing the balance of the

default penalties has issued, Mountain Solutions protests that

this is purely a ministerial matter given the Commission's

statements of intent (in other proceedings), and that the

denial of a waiver, combined with the reauction of seven of

Mountain Solutions' licenses at specified prices, provides sufficient basis for the court to grant equitable relief.

We take the Commission at its word. While the Commission's order denying Mountain Solutions' waiver request imUSCA Case #98-1503 Document #481342 Filed: 12/03/1999 Page 19 of 20
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plied that Mountain Solutions ultimately could be liable for

the difference in amount between its own winning bids and

the winning bids upon reauction, Commission Order, 13

F.C.C.R. 21983, p p 24-25, the Commission did not state that

this necessarily would be the case. Rather, the Commission

required Mountain Solutions to pay a 3% penalty prior to the

reauction of its licenses, and stated only that "[i]f additional

payment is required, following the reauction of licenses, a

second order will assess such payment." Id. at p 25. To

date, no such order has issued. Nor has the Commission

suggested that it is without authority to waive all or a part of

Mountain Solutions' potential default penalties.17 Consequently, the question of whether equitable relief may be

granted is not ripe. See, e.g., Diamond Shamrock Corp. v.

Costle, 580 F.2d 670, 673 (D.C. Cir. 1978).

Accordingly, we deny the petition insofar as it challenges

the denial of the waiver request and we dismiss as unripe that

part of the petition seeking injunctive relief.

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17 See 47 CFR ss 1.2104(g)(2); 24.704(a)(2).

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