Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-93-01222/USCOURTS-caDC-93-01222-0/pdf.json

Parties Involved:
Federal Communications Commission
Respondent
McCaw Cellular Communications, Inc.
Intervenor
McElroy Electronics Corporation
Petitioner
United States of America
Respondent

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 29, 1994 Decided May 9, 1995

No. 93-1220

COMMITTEE FOR EFFECTIVE CELLULAR RULES,

PETITIONER

v.

FEDERAL COMMUNICATIONS COMMISSION AND

UNITED STATES OF AMERICA,

RESPONDENTS

BELLSOUTH CORPORATION, ET AL.,

INTERVENORS

Consolidated with

Nos. 93-1222, 93-1233

-

On Petition for Review of Orders of the

Federal Communications Commission

-

Lewis J. Paper argued the cause for petitioner Committee for Effective Cellular Rules.

William D. Silva argued the cause for petitioners JAJ Cellular and McElroy Electronics

Corporation. With him on the briefs were Louis Gurman and Coleen M. Egan.

Roberta L. Cook, Counsel, Federal Communications Commission, argued the cause for respondent.

With her on the brief were William E. Kennard, General Counsel, Daniel M. Armstrong, Associate

General Counsel, and John E. Ingle, Deputy Associate General Counsel, Federal Communications

Commission, Anne K. Bingaman, Assistant Attorney General, Catherine G. O'Sullivan and Andrea

Limmer, Attorneys, U.S. Department of Justice. Renee Licht, Counsel, Federal Communications

Commission, entered an appearance.

Jim O. Llewellyn entered an appearance for intervenor BellSouth Corporation. Ray M. Senkowski

entered an appearance for intervenor McCaw Cellular Communications, Inc. Eliot J. Greenwald

entered an appearance for intervenor Syracuse Telephone Company. Leon T. Knauer entered an

appearance for intervenor US WEST NewVector Group, Inc.

Before: EDWARDS, Chief Judge; GINSBURG and TATEL, Circuit Judges.

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Opinion for the Court filed by Circuit Judge TATEL.

TATEL, Circuit Judge: Once again, we have before us a challenge to the Federal

CommunicationsCommission'sregulations governing the licensing of cellular radio telephone service.

In 1987, we sustained, in large part, the Commission's initial distribution of cellular licenses

throughout the country. See Maxcell Telecom Plus, Inc. v. FCC, 815 F.2d 1551 (D.C. Cir. 1987).

Six years later, we directed the Commission to reinstate several applications for licenses to provide

cellular service in areas that the existing licensees were not serving, i.e., the "unserved areas." See

McElroy ElectronicsCorp. v. FCC, 990 F.2d 1351 (D.C. Cir. 1993). The Commission had dismissed

those applications because it had not yet established standards and procedures for awarding licenses

for the unserved areas. The Commission has now established those standards and procedures through

newlyissued regulations. Among other things, these new regulations modify existing cellular licenses

in a way that effectively increases the area covered by incumbent licensees, thus diminishing the area

available to future licensees. It is the latter consequencethe shrinking of the unserved areasthat

has triggered this challenge to the Commission's cellular radio telephone regulatory scheme.

Petitioner, the Committee for Effective Cellular Rules, is an organization whose members are

interested in filing applicationsfor licensesto provide cellularservice in unserved areas. We find that

the Committee has associational standing to pursue this appeal, but we deny its petition for review.

The FCC did not act arbitrarily and capriciously when it amended its regulations through a

notice-and-comment rulemaking, nor did it exceed its statutory authority when it implemented a

global change to the technicalrequirementsfor cellular licenses, even though that change resulted in

the modification of all existing cellular licenses and significantly reduced the unserved areas that

petitioner's members are interested in serving. We do not reach the challenges raised in consolidated

cases by McElroy Electronics Corporation and JAJ Cellular, the same petitioners to whom we

granted relief in McElroy Electronics, because the issues that they raise here are not yet ripe for

review.

I.

The Commission licensed the first wave of cellular radio telephone systems in 1981. It

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divided the nation into urban and rural geographic markets, referred to as "metropolitan statistical

areas" ("MSAs") and "ruralservice areas" ("RSAs"). The Commission established competing cellular

systems within each market by dividing the cellular spectrum into two frequency blocks, allocating

one block to a wireline carrier, such as the local telephone company, and the other to a non-wireline

carrier. The Commission distributed these initial licenses through a streamlined competitive "paper

hearing" or a lottery, depending on the size of the market.

To foster the rapid expansion of cellularservice, theCommission created a simple and flexible

regulatory system. Within any individual MSA or RSA, an applicant established the boundaries of

itssystemby drawing the area it proposed to serve on a map of the market area. This delineated area,

referred to as the Cellular Geographic Service Area ("CGSA"), was identified simply as the area

"defined by the applicant as the area intended to be served." 47 C.F.R. § 22.903(a)(1987). Once a

cellular system was licensed, FCC rules protected its signal within the CGSA from electrical

interference from the signals of other cellular systems. See id. § 22.903(b)(1987). With respect to

MSAs, the Commission required only that each CGSA cover a minimum of 75% of the market and

that the carrier provide reliable service to at least 75% of the territory within the CGSA that it

proposed to serve. See id. The "reliability" of cellular service depends upon the strength of the radio

signal, measured in terms of what are known as "dBus." The strength of the signal declines as the

distance from the transmitter increases. In order to predict which areas of the CGSA would receive

reliable service, the Commission instructed licensees to calculate their coverage according to a "39

dBu contour." This contour reflected the Commission's judgment regarding the point at which a

cellular signal became too weak to provide reliable service. See id. §§ 22.903(c), 22.504 (1987). We

sustained this general regulatory scheme in Maxcell Telecom Plus, 815 F.2d at 1556.

Consistent with its policy of encouraging the rapid and efficient expansion of cellular service,

the Commission adopted new regulationsin 1987 which permitted initial licenseesto offer service to

unserved areas in their markets without competition for five years after the grant of the first

construction permit in each MSA. See Amendment of Commission's Rules for Rural Cellular

Service, 2 F.C.C.R. 2306, 2308-09 (1987); 47 C.F.R. § 22.31(a)(1)(i)(1987). According to this

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so-called "five year fill-in policy," the Commission would not permit third parties to file applications

for unserved areas until the five year period expired. See 47 C.F.R. § 22.31(a)(1)(i). This policy

generally worked as the Commission anticipated: existing licensees expanded their systems by

building more cell sites, thus providing service over a broader area. Cellular licensees continued to

calculate the served areas on the basis of the 39 dBu contour.

In the early 1990s, the Commission entered the second phase of its effort to facilitate

nationwide cellular service. In a rulemaking proceeding, it sought to identify the areas that remained

without cellular service and to establish rules for awarding a second wave of cellular licenses for

unserved areas. See Amendment of Part 22 of the Commission's Rules to Provide for Filing and

Processing of Applicationsfor Unserved Areasin the Cellular Service and to Modify OtherCellular

Rules, Notice of Proposed Rule Making, 5 F.C.C.R. 1044, 1044, 1047-49 (1990). Recognizing that

some existing licensees were probably not serving their entire CGSAas we note above, the

Commission had only required coverage of 75% of the CGSAthe Commission also proposed

modifying existing CGSAs to make them coterminous with the 39 dBu contour, thereby limiting the

incumbent's license to the area that it actually served. Id. at 1047.

After a period of notice and comment, the FCC issued its First Report and Order, defining

an "unserved area," subject to a second wave of licensing, as an area outside an existing CGSA. See

Amendment of Part 22, First Report and Order and Memorandum Opinion and Order on

Reconsideration, 6 F.C.C.R. 6185, 6200-01 (1991). Because of virtually unanimous objection from

commenters, the Commission did not redefine CGSAs as coterminous with a 39 dBu contour, as it

had originally proposed. According to the commenters, the formula used to generate the 39 dBu

contour calculated reliable signalstrength based on outdated equipment and technologicalstandards.

See Amendment to Part 22, Further Notice of Proposed Rulemaking, 6 F.C.C.R. 6158, 6158 (1991);

Amendment to Part 22, Second Report and Order, 7 F.C.C.R. 2449, 2452 n.11 (1992). And most

important for this case, the commenters argued that the 39 dBu contour underestimated the areas

receiving reliable cellularservice, claiming that a contour based on a weakersignalthat is, a contour

further from the transmitterwould more accurately identify the areas receiving reliable service.

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Further Notice of Proposed Rulemaking, 6 F.C.C.R. at 6158.

The Commission responded to these concerns with a Further Notice of Proposed

Rulemaking, inviting comments regarding a new method for determining the boundaries of CGSAs

according to a lower signalstrength. Id. at 6158-59. In the Second Report and Orderthat followed,

theCommission adopted a new method for determining theCGSAof existing cellular license holders.

It replaced the earlier system, in which the licensee delineated its own service area, with a

mathematicalformula that defined the CGSA in terms of areas actually receiving cellular service, and

it lowered the required signal strength from 39 dBus to 32 dBus. Second Report and Order, 7

F.C.C.R. at 2452-54. According to the Commission, the application of this revised approach would

be simple, objective and consistent. Id. at 2450; see 47 C.F.R. § 22.903(a)(1992). In order to avoid

operating with two methods for determining CGSAs, the Commission modified the authorizations

of existing cellular systems to redefine the boundaries of their CGSAs in accordance with these

amendments. Second Report and Order, 7 F.C.C.R. at 2456. The amended rules became effective

on July 16, 1992, 90 days after the publication of the Second Report and Order. Id.

These amendments had a significant impact. The Commission's recognition that reliable

cellular service existed at a lower signal strength generally increased the size of the incumbent

licensees'CGSAs, thus accomplishing theCommission's objective ofrapidlyand efficientlyexpanding

cellular service. At the same time, the unserved areas available for licensing in the second wave

contracted, thus stimulating this litigation.

In a petition for reconsideration of the Commission's rules, the Committee for Effective

Cellular Rules, which had participated in the rulemaking and whose members wanted to obtain

licenses for the unserved areas as they had existed before the current rulemaking, challenged the

Commission's statutory authority to modify the licenses of existing cellular systems through a

rulemaking, claiming that the Commission avoided the general adjudicatory process for modifying

licenses in the Communications Act of 1934, 47 U.S.C. §§ 151 et seq. (1988 & Supp. V 1993). It

also argued that the amendments were inconsistent with the Commission's old rules and prior

assurances to third parties interested in filing applications for unserved areas. Denying the

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Committee's petition, the FCC ruled that it had the authority to promulgate rules of general

application and that procedurally and substantively valid generic rules could properlymodify existing

licenses. See Amendment of Part 22, Memorandum Opinion and Order on Reconsideration, 8

F.C.C.R. 1363, 1364 (1993)("Reconsideration Order").

Several years earlier, even before the Commission began the rulemaking that culminated in

the Second Report and Order, JAJ and McElroy filed unserved area applicationsfor the Los Angeles

and Phoenix markets. McElroy also applied for the Minneapolis-St. Paul market. Although McElroy

and JAJ calculated that the five year fill-in period had expired in those markets, the Commission's

Common Carrier Bureau dismissed their applications "without prejudice" because the Commission

had not yet issued a date certain for filing or established the procedures for awarding licenses for the

unserved areas. Cellular Applications for Unserved Areas in MSAs/NECMAs, 4 F.C.C.R. 3636,

3636-37 (Com. Car. Bur. 1989). The Commission affirmed the Bureau. First Report and Order, 6

F.C.C.R. at 6190-92.

McElroy and JAJ petitioned this court for review of the Commission's dismissal of their

applications. While those petitions were pending, the Commission issued its Second Report and

Orderin which it lowered the signalstrength for measuring CGSAs from 39 to 32 dBus. Concerned

that this action would adversely affect their license applications should they be reinstated by this

court, McElroy and JAJ filed petitions for reconsideration of the Second Report and Order asking

the Commission to exempt the unserved areas for which they had applied in Los Angeles, Phoenix

and Minneapolis-St. Paul from the scope of the new regulations. The Commission denied their

requests. Reconsideration Order, 8 F.C.C.R. at 1364.

Acting on McElroy and JAJ's pending petitions for review of the dismissal of their

applications, this court subsequently instructed the Commission to reinstate those applications nunc

pro tunc. See McElroy Electronics, 990 F.2d at 1367. We held that, although the Commission may

have intended to postpone the filing of applications for unserved areas until it issued further

notification of a date certain for filing, it had not made this clear when it issued the five year fill-in

rules. Id. at 1353, 1363. We concluded that "even a careful reader of the order in question could not

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have been expected to understand that a further announcement by the Commission was a condition

precedent to any applicant's filing of an unserved area application." Id. at 1353.

The Committee, JAJ and McElroy filed petitionsin this court for review of the Commission's

Second Report and Order and Reconsideration Order. The Committee argues, as it did before the

Commission, that the agency exceeded its authority by modifying existing licenses in a rulemaking.

McElroy and JAJ, whose applications the Commission has now reinstated, also argue that the

Commission has impermissibly applied its new rules to them.

II.

The FCC raises a threshold challenge to the Committee'sstanding to seek review ofits orders

before this court and argues that McElroy and JAJ's petitions are not ripe for review. With respect

to the Committee, the FCC argues that it is not an "aggrieved" person who may seek judicial review

of an agency action, see 5 U.S.C. § 702 (1988); 28 U.S.C. § 2344 (1988), emphasizing that an

organization's participation in the rulemaking before an agency does not satisfy the requirements of

standing. See, e.g., American Legal Found. v. FCC, 808 F.2d 84, 89 (D.C. Cir. 1987). On the basis

of the affidavitsfiled by members of the Committee, which have not been challenged by the FCC, we

are satisfied that the Committee has standing to sue on behalf of its members.

An organization may sue on behalf of its members if it satisfies the three requirements of

"associational standing." It must demonstrate that "its members would otherwise have standing to

sue in their own right," that "the interests it seeks to protect are germane to the organization's

purpose," and that "neither the claim asserted nor the relief requested requires the participation of

individual members in the lawsuit." Hunt v. Washington State Apple Advertising Comm'n, 432 U.S.

333, 343 (1977). The Committee clearly satisfies the second and third requirements of this test: its

interest in overturning the Commission's new rules regarding the measurement of areas served by

existing licensees certainly relates, or is "germane," to its organizational purpose "to maximize the

opportunities for its members to file applications for Unserved Areas in existing cellular markets,"

Affidavit of Marcus K. Dalton, a founder of CECR, Reply Br., Addendum D; see Humane Soc'y of

the United States v. Hodel, 840 F.2d 45, 56 (D.C. Cir. 1988); and the claim made by the Committee

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and the reliefthat it seeksrespectively a broad facial challenge to the Second Report and Order and

vacatur thereofdo not require the participation of individual members.

To satisfy the first requirement of the test, a member of the Committee would have standing

to sue if he or she could demonstrate "actual or imminent" "injury-in-fact" that is "fairly traceable"

to the challenged decision and "likely" to be "redressed by a favorable decision." Lujan v. Defenders

of Wildlife, 112 S. Ct. 2130, 2136 (1992) (internal quotation marks and citations omitted). Although

no members of the Committee have yet filed applications for unserved areas, several have submitted

affidavitsstating their intention to do so if the Commission recreatesthe 39 dBu contour for CGSAs.

Their inability to file applications to compete for the often larger and, thus, more profitable areas

considered "unserved" under the old rules constitutes actual economic injury sufficient to establish

"injury-in-fact." See, e.g., Clarke v. Securities Indus. Ass'n, 479 U.S. 388, 403, 397 & n.13 (1987)

(recognizing that alteration of competitive conditions has probable economic impact which satisfies

"injury-in-fact" test); FCC v. Sanders Bros. Radio Station, 309 U.S. 470, 477 (1940) (one "likely

to be financially injured" by agency action hasstanding to challenge that action). This injury is clearly

traceable to the Second Report and Order, which expanded the CGSA of existing cellular licenses,

and reduced the areas considered "unserved." It is redressible by this court should we determine that

the Commission acted beyond its authority.

We thus find that an individual member would have constitutional standing. In addition, the

interest sought to be protected here, agency compliance with the statutory licensing procedures in

the Communications Act, clearly falls within "the zone of interests," Association of Data Processing

Serv. Orgs., Inc. v. Camp, 397 U.S. 150, 153 (1970), protected by that Act. See United States v.

Storer Broadcasting Co., 351 U.S. 192, 199-200 (1956) (petitioner "aggrieved" and hasstanding to

challenge FCC rulemaking which limited concentration of stations under single control and, thus,

rendered petitioner ineligible for additional licenses); JEM Broadcasting Co. v. FCC, 22 F.3d 320,

326 (D.C. Cir. 1994) (holding that "actual or potential license applicants" would fall within class

affected by FCC's "hard look" rules, assuch they would be "aggrieved" within meaning of 28 U.S.C.

§ 2344, and thus they would have standing to challenge "procedural lineage" of such rules).

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Accordingly, the Committee has associational standing to maintain this appeal.

With respect to McElroy and JAJ's petitions for review, we agree with the Commission that

the issues they raise are not "ripe." McElroy and JAJ claim that by denying their petitions to exclude

the markets for which they had applied from the application of the new rules, the Commission

impermissibly applied its new rules retroactively and violated their Ashbacker right to a competitive

hearing. We do not read the FCC's rejection of McElroy and JAJ's petitions for reconsideration to

resolve the issues that they now raise. First, this court had not ordered the reinstatement of their

applications at the time the Commission issued the Reconsideration Order, so the agency had not

addressed the matters that were subsequently remanded to it by the court. Second, since oral

argument in this case, the Commission, acting in response to this court's ruling in McElroy

Electronics, decided that petitioners could submit applications based on the old 39 dBu contour,

although it also decided that other aspects of the new regulations would be applied retroactively. See

McElroy Electronics Corp., Memorandum Opinion and Order, slip op. 8-13,  F.C.C.R. 

(released March 23, 1995). Because the issues that McElroy and JAJ raised in their challenges to the

Reconsideration Order were not resolved by the Commission until it issued its recent decision, and

because that decision is not properly before us, we dismiss their petitions for review.

III.

Turning to the merits of the Committee's petition for review, we begin by observing that it

does not challenge the Commission's substantive determination that the lower signal strength of 32

dBus, calculated with the new mathematical formula, accurately identifies areas receiving reliable

cellular service. Instead, the Committee argues that the FCC acted in an "arbitrary" and "capricious"

manner, 5 U.S.C. § 706(2)(A) (1988), when it precluded the Committee's members from filing

applications for the larger unserved areas under the old rules and that the Commission exceeded its

statutory authority by modifying all existing cellular licenses to conform to its new 32 dBu formula

through a rulemaking procedure. See 5 U.S.C. § 706(2)(C) (1988). We reject the Committee's

challenges, holding that the FCC properly acted within itsrulemaking authority when it amended the

technicalstandardsfor determining reliable cellularservice in the Second Report and Order, a change

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which resulted in the redefinition of the CGSAs of all existing cellular licensees. See 47 U.S.C. §§

154(i), 303(r)(1988).

The Committee begins by contending that the Commission impermissibly departed from its

own regulationsregarding the filing of applicationsfor unserved areas and disregarded its assurances

to third parties that they would not be prejudiced by the agency's postponement of the filing of

unserved area applications. True, our McElroy Electronics decision found that the five year fill-in

regulation gave no notice of the Commission's intention to engage in further proceedings and ruled

that the petitioners could not be held to an interpretation of the regulation that the Commission

"intended but did not adequately express." 990 F.2d at 1366 (citation omitted). McElroy

Electronics, however, does not help the petitioner in this case because it did not preclude the

Commissionfromchanging itsrulesthrough a notice-and-comment rulemaking proceedingasit did

hereand because, unlike the petitioners in McElroy Electronics, the Committee and its members

had adequate notice of the Commission's intention to issue new standards.

We sustain the Commission's authority to change its standards in a rulemaking, as long as it

provides a reasoned explanation for doing so. See e.g., Florida Cellular Mobile Communications

Corp. v. FCC, 28 F.3d 191, 196-197 (D.C. Cir. 1994), cert. denied, 63 U.S.L.W. 3689 (U.S. Mar.

21, 1995) (affirming change in rules as reasoned response to Commission experience); Rainbow

BroadcastingCo. v. FCC, 949 F.2d 405, 409 (D.C. Cir. 1991) (emphasizing "wide latitude" afforded

agenciesto change their policiesthrough rulemaking). This flexibility is necessary to allow agencies,

particularly the FCC, to respond to rapidly changing "[t]echnological, commercial, and societal

aspects of the ... industry" as they fulfill their delegated duties. Rainbow Broadcasting, 949 F.2d at

409. In this case, the Commission postponed the filing of applications for unserved areas in order to

engage in a rulemaking to establish general rules for awarding unserved area licenses. The

Commission also introduced the 32 dBu contour in response to industry comments that the 39 dBu

contour underestimated the areas actually receiving reliable cellular service. Contrary to the

Committee's assertions, then, this case is not like NewSouth Media Corp. v. FCC, where we vacated

a Commission order after determining that the Commission had impermissibly deviated from itsrules

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with regard to a particular licensee. 685 F.2d 708, 718 (D.C. Cir. 1982). Unlike this case, in which

the Commission properly amended its existing rules, in New South Media, the Commission ignored

them altogether by removing broadcast licenses about to expire from the competitive hearing

procedures required for license renewal. Id. at 709-11, 715-16.

Nor did the Committee's members labor under the same confusion over the filing date for

unserved area applications as McElroy, JAJ and the others whose applicationsthis court ordered the

Commission to reinstate nunc pro tunc. Common Carrier Bureau and Commission statements

regarding those applicants gave the Committee and its members the adequate notice of the

Commission's intention to postpone the acceptance of unserved area applications that we found

missing in McElroy Electronics. Upon dismissing the "prematurely" filed applications, the Bureau

indicated that theCommissionwould commence a rulemaking "to considerthe appropriate processing

and selection procedures, as well assubstantive requirements, for applications proposing to serve any

areasthat remain unserved, either in MSAs or RSAs, at the termination of a particular market'sfill-in

period." Cellular Applications for Unserved Areas in MSAs/NECMAs, 4 F.C.C.R. at 3636. The

Commission made the same point in its Notice of Proposed Rulemaking where it sought comment

on the proposed rules regarding unserved area applications, stating that it had "determined not to

accept applicationsto serve post-fill-in unserved areas untilthe completion ofthe instantRuleMaking

proceeding." 5 F.C.C.R. at 1045.

We find it difficult to understand exactly what the Committee thinks is "arbitrary" and

"capricious" about this rather standard, if protracted, rulemaking. We have constantly admonished

the Commission that " "an applicant should not be placed in a position of going forward with an

application without knowledge of requirements established by the Commission.' " McElroy

Electronics, 990 F.2d at 1358 (quoting Maxcell Telecom Plus, 815 F.2d at 1558). Indeed, following

the First Report and Order, the Committee itself, pointing out that the preparation of unserved area

applicationsrequired the expenditure ofsubstantialresourcesthat would bewasted iftheCommission

altered the technical requirements for unserved area applications, asked the Commission to defer

setting the filing windowsfor unserved area applications until it completed itsrulemaking. Any other

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result, in the words of the Committee, would be "like moving a race course while the horses are

running." Pet. for Recons. of the First Report and Order at 16, Dec. 2, 1991,Joint Appendix at 219.

The Commission's postponement of the acceptance of applications was thus both reasonable and

generally beneficial to potential applicants, including petitioner's members.

We are not persuaded by the Committee's argument that it relied on the Common Carrier

Bureau's assurance that it would permit McElroy, JAJ and the other dismissed applicants to reapply

"without prejudice." Cellular Applications for Unserved Areas in MSAs/NECMAs, 4 F.C.C.R. at

3636. The Committee claims that its members understood "without prejudice" to imply that the

Commission would not alter the substantive rulesregarding the identification of unserved areas and,

in particular, that the rights of third parties would not be diminished by the results of the rulemaking.

We find it hard to believe that the Committee could read so much into a phrase that is commonly used

only to denote that no bar exists to refiling an application at the appropriate time and in the

appropriate manner. See, e.g., CHARLESA.WRIGHT& ARTHURR.MILLER,FEDERALPRACTICE AND

PROCEDURE § 2367, at 319 (1995) (dismissalwithout prejudice in federal court "meansthat it permits

the initiation of a second action"). We do not understand the Commission to have intended any other

meaning. In fact, when the Common Carrier Bureau dismissed the applications for unserved areas

"without prejudice," it specifically stated that the dismissed applicants could refile at a later date "in

accordance with whatever substantive requirements and procedures the Commission ultimately

adopts." CellularApplicationsfor Unserved Areasin MSAs/NECMAs, 4 F.C.C.R. at 3636. Echoing

theBureau, theCommission stated that "[b]ecause the applicationswere dismissed without prejudice,

applicants have the right to re-file their applications in accordance with the rules and procedures we

adopt today." First Report and Order, 6 F.C.C.R. at 6191. "[N]or," the Commission continued,

"have the applicants been cut off from applying for any areas and frequencies for which they are

eligible." Id.

The Commission properly changed the definition of CGSAs through notice-and-comment

rulemaking. It acted clearly and reasonably when it postponed the acceptance of unserved area

applications until it had determined the technical requirements for those applications. Since the

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Committee and its members had adequate notice of the Commission's intention to postpone the

acceptance of filing unserved area applications until it had established the rules for accepting and

processing those applications, the Commission'ssubsequent amendment of itsrules was not arbitrary

or capricious.

IV.

Advancing a second, independent basis for vacating the Second Report and Order, the

Committee argues that the Commission's decision to modify all existing licenses to conform to the

new 32 dBu contour disregarded the adjudicatory proceduresfor license modification set forth in the

Communications Act of 1934, 47 U.S.C. §§ 151 et seq., and Ashbacker Radio Corp. v. FCC, 326

U.S. 327 (1945). It points out that incumbent licensees presented no applications for license

modification, see 47 U.S.C. § 308(a)(1988), and that the Commission offered no opportunity for

competitive hearing before modifying the licenses, see id. § 309(e)(1988). The Commission rested

the modification of existing cellular licenses on its rulemaking authority, see Second Report and

Order, 7 F.C.C.R. at 2458; Reconsideration Order, 8 F.C.C.R. at 1364; Further Notice of Proposed

Rulemaking, 6 F.C.C.R. at 6158-59 &n.7, but theCommittee arguesthat theCommission improperly

"established the licensee itself by rule."

Obviously, the FCC cannot, merely by invoking its rulemaking authority, avoid the

adjudicatory procedures required for granting and modifying individual licenses. In Aeronautical

Radio, Inc. v. FCC, for example, we rejected a Commission action which "established the licensee

itself by rule," language that the Committee now quotesin support of its position. 928 F.2d 428, 451

(D.C. Cir. 1991). In that case, the Commission decided, through a rulemaking, to award a license

to a consortium of qualified and interested applicants rather than selecting a single licensee. Id. at

436. We found that the Commission exceeded its rulemaking authority by requiring interested

applicants to join a consortium and by denying them the opportunity to file individual competitive

applications. Id. at 451-53.

But that is not what happened here. Unlike its actions in Aeronautical Radio, the

Commission did not choose among contenders for a particular license in this rulemaking, but rather

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revised the technical specifications for all cellular licenses. In particular, the Commission adopted

a new methodology that would more accurately reflect the areas where existing cellular systems

provided reliable cellular service as well as those areas that remained unserved. Although it had

begun the rulemaking with the apparent intention of continuing to use the 39 dBu contour,see Notice

of ProposedRuleMaking, 5 F.C.C.R. at 1047, extensive public comments convinced theCommission

that the technology in the cellular industry had outpaced its 39 dBu contour method of calculation.

Describing the 39 dBu contour as only an "interim measure," the Commission engaged the industry

in a discussion of alternative methodsto define reliable cellular service. Further Notice of Proposed

Rulemaking, 6 F.C.C.R. at 6159. Its decision to adopt the 32 dBu formula reflects a policy decision

that reliable service was available at a lower signal strength and that the mathematical formula

provided a more reliable method for predicting areas served. This is precisely the type of decision

appropriately made in a rulemaking. See, e.g., Telocator Network v. FCC, 691 F.2d 525, 551 (D.C.

Cir. 1982) (recognizing that Commission appropriately employs its rulemaking power when issues

"involve legislative rather than adjudicative facts, and have prospective effect and classwide

applicability." (footnotes omitted)).

The Commission's technical changes in the definition of the CGSAs, adopted in a

notice-and-comment rulemaking, are not, as petitioner argues, invalid because they will result in the

modification of existing licenses and the shrinking of unserved areas. This principle is neither new,

see American Airlines, Inc. v. Civil Aeronautics Board, 359 F.2d 624 (D.C. Cir.), cert. denied, 385

U.S. 843 (1966), nor outdated, see Upjohn Co. v. Food and Drug Admin., 811 F.2d 1583 (D.C. Cir.

1987). In WBEN, Inc. v. United States, for example, the Second Circuit sustained Commission rules

altering radio operations during the transitional presunrise period, even though these amendments

resulted in the modification of all existing licenses. 396 F.2d 601, 617-18 (2nd Cir.), cert. denied,

393 U.S. 914 (1968). The court held that the FCC need not engage in evidentiary hearings required

for modification of a particular license, explaining that "when ... a new policy is based upon the

general characteristics of an industry, rationaldecision is not furthered by requiring the agency to lose

itselfin an excursion into detail that too often obscuresfundamental issuesrather than clarifiesthem."

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Id. at 618. See also California Citizens Band Ass'n v. United States, 375 F.2d 43, 50-52 (9th Cir.),

cert. denied, 389 U.S. 844 (1967) (sustaining proceeding that isrulemaking "in both formand effect"

which resulted in modification of Class D radio station licenses by limiting their operation).

WBEN relied on this court's decision in American Airlines Inc. v. Civil Aeronautics Board,

which rejected a challenge to a valid rulemaking proceeding that restricted passenger carriers'

authorization to provide a certain type of air cargo transportation. 359 F.2d 624, 625-26 (D.C. Cir.),

cert. denied, 385 U.S. 843 (1966). This change, in turn, arguably resulted in the modification of

aviation certificates. Id. at 626, 628. Despite a provision in the Federal Aviation Act which required

a hearing before modification of a particular certificate, id. at 628, we held that the Board's

rulemaking authority "is not to be shackled ... by importation of formalities developed for the

adjudicatory process and basically unsuited for policy rule making," id. at 629.

Our review of the Commission's rulemaking in the instant case satisfies us that the

Commission established a rule of general applicability when it lowered the required signal strength

for cellular systemsto 32 dBusin response to the technical developmentsin the cellular industry. As

in American Airlines, we find "no individual action here masquerading as a general rule." Id. at 631.

It is because the Commission has this authorityto establish rules of general applicability,

such as the technical requirements of licensesthat the Committee's argument that the Commission

should have conducted individual adjudications undersections 308 and 309 beforemodifying existing

cellular licenses fails. Those provisions govern a licensee's request for modification of a particular

license. They do not deprive the Commission of its authority to pursue a rulemaking "necessary for

the orderly conduct of its business." Storer Broadcasting, 351 U.S. at 202-03. 

The Committee, argues however, that the Commission sidestepped the procedural

requirements ofsections 308 and 309 by "apparent[ly] rel[ying]" on section 309(c)(2)(A), 47 U.S.C.

§ 309(c)(2)(A) (1988), which exempts applications for "a minor change in the facilities of an

authorized station" from the ordinary process for license modification. Id. The Committee uses the

word "apparent"withgood cause,fortheCommissionnevermentions section 309(c)(2)(A) anywhere

in its Second Report and Order. The Committee points to the phrase "de minimis" in a footnote in

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the Second Report and Order, claiming that this supports its argument that the Commission relied

on section 309(c)(2)(A). See Second Report and Order, 7 F.C.C.R. at 2456 n.35. Although the

Commission does not directly respond to this argument, we do not read itsreference to "de minimis"

to refer to the expansion of existing licensees' CGSAs resulting from the change in signal strength

from 39 to 32 dBus, but rather to the routine and relatively minor "de minimis extensions" of cellular

systems that the Commission granted when incumbent licensees' signals reached areas just beyond

their MSA boundaries and such extensions were necessary to provide reliable service within their

MSAs. See Reconsideration Order, 8 F.C.C.R. at 1369. In the footnote to the Second Report and

Order cited by the Committee, the FCC wasindicating no more than that these de minimis extensions

would remain valid, but would now be measured by the new 32 dBu standard. See Second Report

and Order, 7 F.C.C.R. at 2456 n.35. The Committee's suggestion that the Commission relied on

section 309(c)(2)(A) for the authority to modify existing cellular licenses is thus without merit.

Nor, finally, are we persuaded bytheCommittee's argument that the Commission violated the

command ofAshbackerRadioCorp., which requiresthe FCCto treat mutually exclusive applications

equally. 326 U.S. at 333. Ashbacker rights are not triggered where, as here, no mutually exclusive

applications are pendingthe Committee's members had no applicationsfor unserved areas pending

when it challenged the Commission's rulemakingand where the Commission, in a properly

developed notice-and-comment rulemaking, makes a generally applicable change to the technical

specifications of all cellular licenses. Cf. Maxcell Telecom Plus, 815 F.2d at 1561 (compliance with

"cut-off procedure," designed to further "orderly administration," required before application

considered "bona fide " and protected byAshbacker); Reuters Ltd. v. FCC, 781 F.2d 946, 951 (D.C.

Cir. 1986) (Ashbacker "applies not to prospective applicants, but only to parties whose applications

have been declared mutually exclusive."). While the Commission's ultimate determination, that the

lower 32 dBu signal strength accurately measured reliable cellular service, resulted in the reduction

of the areas the Commission considered "unserved," it did not preclude members of the Committee

and other potential applicants from applying for the newly defined "unserved" areas. It is thisthe

ability to compete on an equal basisthat is the essence of Ashbacker.

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V.

For the foregoing reasons, we deny the Committee's petition for review. The FCC properly

engaged in notice-and-comment rulemaking to revise the technical standards for determining those

areas receiving reliable cellular service, and the resulting modification of existing cellular licenses to

conformto the new standardsfellwellwithin itsrulemaking authority. Because we find this authority

sufficient, we need not addressthe Commission's argument that its power to modify existing licenses

is also grounded in section 316 of the Communications Act. See 47 U.S.C. § 316 (1988). We do

not reach the merits of McElroy and JAJ's petitions for review because we find the issues that they

present were not resolved in the Commission orders before us today. Their petitions for review are

dismissed.

So ordered.

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