Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-14-01039/USCOURTS-caDC-14-01039-0/pdf.json

Parties Involved:
Federal Communications Commission
Appellee
FiberTower Spectrum Holdings, LLC
Appellant
Fixed Wireless Communications Coalition, Inc.
Intervenor for Appellant

Document Text:

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued January 20, 2015 Decided April 3, 2015

No. 14-1039

FIBERTOWER SPECTRUM HOLDINGS, LLC, FIBERTOWER

CORPORATION,

APPELLANT

v.

FEDERAL COMMUNICATIONS COMMISSION,

APPELLEE

FIXED WIRELESS COMMUNICATIONS COALITION, INC.,

INTERVENOR

On Appeal of Orders of the 

Federal Communications Commission

Pratik A. Shah argued the cause for appellant. With him on

the briefs were Tom W. Davidson, Douglas I. Brandon, Hyland

Hunt, Z.W. Julius Chen, Matthew A. Scarola, and Joseph M.

Sandri.

Maureen K. Flood, Counsel, Federal Communications

Commission, argued the cause for appellee. With her on the

brief were Jonathan B. Sallet, General Counsel, David M.

Gossett, Acting Deputy General Counsel, and Jacob M. Lewis,

Associate General Counsel. Richard K. Welch, Deputy

Associate General Counsel, entered an appearance.

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Before: ROGERS and SRINIVASAN, Circuit Judges, and

WILLIAMS, Senior Circuit Judge.

Opinion for the court filed by Circuit Judge ROGERS.

ROGERS, Circuit Judge: This appeal challenges orders of

the Federal Communications Commission denying applications

to renew 689 wireless spectrum licenses in the 24 gigahertz

(“GHz”) and 39 GHz bands for failure to meet the “substantial

service” performance standard during the license term. It

succeeds only in part. FiberTower Spectrum Holdings, LLC,

and FiberTower Corporation (hereinafter “FiberTower”)

contend that the Commission’s interpretation of the performance

standard as requiring some actual construction in each license

area conflicts with the Commission’s statutory mandate in 47

U.S.C. § 309(j)(4)(B). Because this argument was not presented

to the Commission, see 47 U.S.C. § 405(a), it is not properly

before the court and we do not address it. FiberTower also

contends that the Commission’s interpretation of “substantial

service” is inconsistent with that standard as originally

promulgated by the Commission. Review of the text of the

regulations and the rulemaking record demonstrates this

argument is not well founded. FiberTower, however, further

contends that the Commission erred in applying its “substantial

service” interpretation to forty-two licenses because their

renewal applications stated construction had occurred. This

error requires a remand, and we vacate the orders denying

renewal of those forty-two licenses. As a result, we also vacate

the orders denying extension and waiver, so the Commission can

rule on those requests based on an accurate understanding of the

record.

I.

The Communications Act of 1934, as amended, establishes

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a system for licensing the use of radio spectrum, and vests in the

Commission the exclusive authority to grant radio licenses. See

47 U.S.C. § 301. The licenses do not “create any right, beyond

the terms, conditions, and periods of the license.” Id. The

Commission is authorized to prescribe restrictions and

conditions necessary to carry out its duties, see id. § 303(r), and

for licenses awarded by auction, see id. § 309(j)(1), it must

adopt

performance requirements, such as appropriate

deadlines and penalties for performance failures, to

ensure prompt delivery of service to rural areas, to

prevent stockpiling or warehousing of spectrum by

licensees or permittees, and to promote investment in

and rapid deployment of new technologies and

services.

Id. § 309(j)(4)(B).

Under Commission rules, licenses in the 24 and 39 GHz

bands, at issue here, are awarded for ten years, and the licensee

must demonstrate “substantial service” in the area covered by

the license by the time of renewal. See 47 C.F.R. §§ 101.67,

101.17, 101.527; In the Matter of Amendment of the Comm’n’s

Rules Regarding the 37.0-38.6 GHz and 38.6-40.0 GHz Bands,

12 FCC Rcd. 18600, ¶ 46 (1997) (“39 GHz Order”). The

Commission has defined “substantial service” as “service which 

is sound, favorable, and substantially above a level of mediocre

service which just might minimally warrant renewal.” 47 C.F.R.

§§ 22.940(a)(1)(i), 24.203(d), 101.527(a); see In the Matter of

Amendments to Parts 1, 2, 87 and 101 of the Comm’n’s Rules to

License Fixed Services at 24 GHz, 15 FCC Rcd. 16934, ¶ 38

(2000) (“24 GHz Order”). One way a licensee can show

“substantial service” is by complying with one of several “safe

harbors,” which include “a showing of [construction and

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operation of] four [microwave] links per million population

within a service area or service to an area that has very limited

access to either wireless or wireline telecommunications

services.” 24 GHz Order, ¶ 38; see 39 GHz Order, ¶ 46. 

A failure to demonstrate substantial service by the renewal

deadline “will result in forfeiture of the license.” 47 C.F.R. §

101.527(c); see id. § 101.17(b). The Commission may grant an

extension of the deadline for showing substantial service if the

licensee shows that its failure to provide substantial service “is

due to involuntary loss of site or other causes beyond its

control.” Id. § 1.946(e)(1). The Commission may also waive

the substantial service requirement entirely when “[t]he

underlying purpose of the rule(s) would not be served or would

be frustrated . . . [and] a grant of the requested waiver would be

in the public interest,” or when “application of the rule(s) would

be inequitable, unduly burdensome or contrary to the public

interest, or the applicant has no reasonable alternative.” Id. §

1.925(b)(3).

FiberTower provides “wireless backhaul” — i.e., the

transmission of voice and data between cell towers and regional

or national networks — to cellular companies and public

agencies. It owns over 3,000 licenses in the 11 GHz, 18 GHz,

and 23 GHz bands, and acquired through a merger in 2006 over

seven hundred licenses in the 24 GHz and 39 GHz bands, see In

re Matter of ART Licensing Corp., 23 FCC Rcd. 14116, ¶ 4

(WTB Oct. 2, 2008) (“2008 Bureau Order”); In re Matter of

FiberTower Spectrum Holdings LLC, 27 FCC Rcd. 13562, ¶ 2

(WTB Nov. 7, 2012) (“Bureau Order”). The 24 GHz and 39

GHz bands are used to provide backhaul service for mobile

broadband networks, and FiberTower’s licenses in these bands

cover most of the continental United States. See id. Shortly

after acquiring the 24 and 39 GHz licenses FiberTower obtained

an extension of the 2008 substantial service deadlines for its 39

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GHz licenses to June 1, 2012. The Wireless

Telecommunications Bureau, see 47 C.F.R. §§ 0.131(a), 0.331,

found that the public interest “would best be served by”

extending the deadline for the 39 GHz licenses, 2008 Bureau

Order, ¶ 21, because the Bureau anticipated that mobile

broadband services, which rely on wireless backhaul, would

“develop robustly” in the coming years, id. ¶ 20. The Bureau

also cautioned that it did “not believe that a finding of

substantial service can be made without a demonstration of

actual construction or operation in the licensed area during the

license term.” Id. ¶ 16. In October 2010, the Bureau granted the

same extension to June 1, 2012 for FiberTower’s 24 GHz

licenses.

In May 2012, FiberTower filed for an extension or a waiver

of the 2012 deadline with respect to 699 licenses. Two weeks

later, FiberTower also filed substantial service showings for

each license. In November 2012, the Bureau found that

FiberTower had not satisfied the substantial service requirement. 

See Bureau Order, ¶ 18. Ten licenses in which the Bureau

found there had been “some level of actual construction as of the

deadline,” id. ¶ 2, were not terminated, but the other 689

licenses were because FiberTower’s “antecedent activities” —

investing in new technology, developing its own back-office

operations, acquiring equipment and property, and making its

spectrum available for lease on the secondary market — could

not alone “constitute substantial service.” Id. ¶ 22 (citing In the

Matter of Amendment of Part 101 of the Comm’n’s Rules to

Facilitate the Use of Microwave for Wireless Backhaul and

Other Uses and to Provide Additional Flexibility to Broadcast

Auxiliary Service and Operational Fixed Microwave Licensees,

27 FCC Rcd. 9735, ¶ 104 (2012) (“Wireless Backhaul Order”);

26 FCC Rcd. 11614, ¶ 114 (2011)). Concluding that

FiberTower’s failure to “build out” its licenses was a “business

decision” within its control, the Bureau denied an extension. 

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The Bureau also concluded the public interest would not be

served by waiving the substantial service requirement. See also

Bureau Order, ¶ 39.

The Commission affirmed, upon consideration of

FiberTower’s Application for Review and Petition for

Reconsideration. In the Matter of FiberTower Spectrum

Holdings LLC, 28 FCC Rcd. 6822 (2013) (“Order”); 29 FCC

Rcd. 2493 (2014) (“Reconsideration Order”). The Commission

endorsed the Bureau’s conclusion, based on prior Commission

decisions, that FiberTower’s antecedent activities without actual

construction could not satisfy the substantial service

requirement. See Order, ¶ 39 & n.156 (citing Wireless Backhaul

Order, ¶ 104). Agreeing also that FiberTower’s decision not to

construct links was a voluntary business decision, the

Commission rejected FiberTower’s claims that the market for

wireless backhaul was underdeveloped and that there was a lack

of viable equipment, noting the “explosive growth in demand for

mobile broadband services since 2008, and [a] corresponding

demand for backhaul,” Order, ¶ 19, and denied FiberTower’s

request for extension of the deadline, id.; see also id. ¶ 21. And

concluding that the need to enforce construction requirements

outweighed any delays in relicensing and the investments

FiberTower had made, the Commission concluded a waiver was

unwarranted. Id. ¶¶ 34–37. See also Order, ¶ 45;

Reconsideration Order, ¶ 39. FiberTower appeals.

II.

FiberTower’ statutory challenge flounders under 47 U.S.C.

§ 405(a), which provides:

The filing of a petition for reconsideration shall not be

a condition precedent to judicial review . . . except

where the party seeking such review . . . relies on

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questions of fact or law upon which the Commission,

or designated authority within the Commission, has

been afforded no opportunity to pass.

FiberTower contends that the Commission’s construction

requirement as a part of demonstrating “substantial service” is

“at odds with” the statutory goal in 47 U.S.C. § 309(j)(4)(B) of

promoting “investment in” new technologies. Appellant’s Br.

28. But FiberTower failed to make this argument in its

Application for Review to the Commission, never citing §

309(j)(4)(B) and instead arguing that the construction

requirement was an “ill-conceived policy” with “adverse

consequences contrary to the public interest.” Application for

Review, In the Matter of FiberTower Corp., at 20, File No.

5207557, Dec. 7, 2012. Neither did FiberTower present this

statutory argument in its Petition for Reconsideration.

FiberTower’s suggestions that it nonetheless afforded the

Commission an “opportunity to pass” on its statutory argument

are unpersuasive. First, FiberTower states that “[a] core premise

of FiberTower’s application for review was that the

Commission’s policy of disregarding leasing and other activities

hindered ‘legitimate investment’ and the ‘develop[ment] [of] the

licensed spectrum.’” Reply Br. 4 (quoting Application for

Review, at 21–22) (alterations in original). But the Application

for Review characterized that argument only as illustrating why

the build-out requirement was “contrary to the public interest,”

Application for Review, at 20, not that the requirement was

contrary to § 309(j)(4)(B). The language suggests the sort of

claim that would normally give rise to judicial review only for

whether the agency’s action was arbitrary or capricious. 

Second, FiberTower refers to a “white paper” submitted as a

supplement to its Application for Review that explained why its

antecedent activities “were consistent with Section 309(j)’s

mandate of promoting investment and deployment of new

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technologies and services — underscoring that FiberTower’s

argument was anchored in the statute.” Reply Br. 5. Again, this

is not an argument that the “build out” requirement violates §

309(j)(4)(B), and “[t]he Commission need not sift pleadings and

documents to identify arguments that are not stated with clarity

by a petitioner.” Bartholdi Cable Co., Inc. v. FCC, 114 F.3d

274, 279 (D.C. Cir. 1997) (internal quotation marks omitted);

see also 47 C.F.R. § 1.115(b)(1). Third, FiberTower states that

the rulemaking proceedings in which the Commission adopted

the substantial service rules “were inextricably intertwined with

Section 309(j).” Reply Br. 5. Even so, FiberTower failed to

alert the Commission to the statutory argument that it seeks to

present for the first time on appeal.

Time Warner Entertainment Co., L.P. v. FCC, 144 F.3d 75

(D.C. Cir. 1998), on which FiberTower relies, is inapposite. In

that case, the court held that its reasoning in an earlier remand

had given the Commission an “opportunity to pass” on an issue,

even though the issue had not been raised in a petition for

reconsideration. Id. at 81–82. The court observed that the logic

of its prior decision meant it was unreasonable for the

Commission not to respond on remand. Id. The court viewed

the Commission’s position that the issue had been conceded in

a pre-remand filing to be “a disingenuous gimmick used to avoid

a principled response to our remand.” Id. at 81. Here, by

contrast, no other party brought the § 309(j)(4)(B) argument to

the Commission’s attention. And, unlike in Time Warner,

FiberTower has not pointed to record evidence that the

Commission realized FiberTower’s § 309(j)(4)(B) argument was

before it. It is true that the court in Time Warner noted the

Commission is afforded the required “opportunity to pass” on an

issue “necessarily implicated by the argument made to the

Commission,” giving as an example when a petitioner claimed

that another party’s conduct violated the Communications Act

without stating that Commission policies to the contrary also

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conflicted with the Communications Act. Id. at 80 (discussing

MCI Telecomm. Corp. v. FCC, 10 F.3d 842 (D.C. Cir. 1993);

Nat’l Ass'n for Better Broad. v. FCC, 830 F.2d 270 (D.C. Cir.

1987)). But FiberTower’s argument to the Commission was that

the “build out” policy was unwise, and that argument did not

“necessarily impl[y]” that the policy was also legally

impermissible.

Because FiberTower failed to present its § 309(j)(4)(B)

argument to the Commission, the Commission never had an

opportunity to pass on it, and FiberTower thereby failed to

exhaust its administrative remedies. The argument that the

construction requirement conflicts with § 309(j)(4)(B) is

therefore barred under § 405(a) and not properly before the

court. See Fresno Mobile Radio, Inc. v. FCC, 165 F.3d 965, 972

(D.C. Cir. 1999); Bartholdi Cable, 114 F.3d at 279–80.

III.

FiberTower also challenges the Commission’s interpretation

of “substantial service” as requiring construction as a matter of

law, on the ground that it conflicts with the rule originally

promulgated by the Commission, and as applied to forty-two

license renewal applications, where substantial service showings

stated construction had occurred.

A.

In adopting the substantial service standard as the condition

for license renewal in the 39 GHz and 24 GHz bands, the

Commission emphasized the need for “flexibility in meeting

the[] performance requirement” and rejected proposals to

require a specific number of constructed links per market

population or geographic area, because “such a build-out

requirement would be unduly restrictive and burdensome.” 39

GHz Order, ¶¶ 42, 43; see 24 GHz Order, ¶¶ 37–38. In

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FiberTower’s view, by interpreting “substantial service” to

include a rigid construction requirement, the Commission

adopted the very inflexible build-out requirements that it

rejected during the rulemaking.

The regulations define “24 GHz Service” as involving

constructed links. See 47 C.F.R. § 101.3. In the 39 GHz band,

a “substantial service showing should include, but not be limited

to” descriptions of “current service in terms of geographic

coverage; . . . population served, as well as any additional

service provided during the license term,” and the “licensee’s

investments in its system(s) (type of facilities constructed and

their operational status is required).” Id. § 101.17(a)(1), (2), (3). 

Similar materials suffice for the 24 GHz band: “at a minimum,”

a “report, maps and other supporting documents describing [the

licensee’s] current service in terms of geographic coverage and

population,” with the report to include “a description of the

licensees’ [sic] investments in its operations.” Id. §

101.527(b)(1). Nothing in the text indicates that nonconstruction activities alone will suffice to show substantial

service. It is true that the regulations contemplate the

submission of information about activities other than

construction, but that only suggests that non-construction

activities are relevant, not that they alone can constitute

substantial service.

The rulemakings show that in discussing the standard for the

39 GHz band, the Commission acknowledged that the types of

services available from 39 GHz providers are “tremendously

varied.” 39 GHz Order, ¶ 42. It decided not to apply to this

band the then-existing general requirement to construct one link

within 18 months of licensure, id. ¶ 39, and declined to replace

it with “a specific build-out benchmark.” Id. ¶ 43 (emphasis

added). The performance standards that it rejected as too rigid

involved specific build-out requirements — “four links per 100

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square kilometers . . . within 18 months,” “a specific number of

links, increasing over time, per geographic area,” or “a specific

number of link installations based on the market’s population.” 

Id. ¶¶ 43, 44, 45. The Commission explained that the specificity

of those construction requirements did “not adequately take into

account the differences among licensees,” id. ¶ 44, such as

varying market size, population density, and services offered, id.

¶¶ 44–46. But in providing examples for what might satisfy

substantial service, the Commission still described activities that

involved link construction. See 24 GHz Order, ¶ 38; 39 GHz

Order, ¶¶ 42 & n.97, 46. For instance, its “examples of

presumed substantial service” were “based on a specific number

of links per population.” Id. ¶ 42. The one “showing tailored to

a particular type of operation” it described involved “giv[ing]

greater weight to a high capacity link than is recognized by the

specific build-out option.” Id. ¶ 42 n.97. In addition, the

Commission rejected “the arguments of some commenters that

a build-out requirement should not be imposed” at all. Id. ¶ 50. 

The Commission did not state that the flexibility it sought in

adopting “substantial service” as the performance standard

extended to allowing license renewal where there had not been

any construction. Rather, the Commission described its

approach as a “build-out/renewal requirement[]” that would

“give licensees a sufficient opportunity to construct their

systems.” 39 GHz Order, ¶¶ 47, 49. 

FiberTower’s reference to other regulations that contrast

“substantial service” with specific build-out requirements is also

unavailing. Although these regulations list different types of

“performance or build-out requirement[s]” — to include “e.g.,

a requirement that the licensee construct and operate one or

more specific facilities, cover a certain percentage of geographic

area, cover a certain percentage of population, or provide

substantial service,” 47 C.F.R. § 1.9020(d)(5); see id. §

1.9030(d)(5) (same); id. § 90.155(d) (similar); id. § 90.685(b)

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(similar); id. § 24.203(a), (b) (similar) — they draw the same

distinction the Commission drew in the 39 GHz Order and 24

GHz Order between substantial service and a specific amount of

construction.

The fact that, as FiberTower points out, neither the

regulations nor the rulemakings for the 39 or 24 GHz bands

include a statement that construction of at least one link is

required is of no moment. The Commission’s interpretation is

consistent with the text of the regulations and rulemaking

records. And courts are to “defer to an agency’s interpretation

of its regulations, even in a legal brief, unless the interpretation

is ‘plainly erroneous or inconsistent with the regulation[s]’ or

there is any other ‘reason to suspect that the interpretation does

not reflect the agency’s fair and considered judgment on the

matter in question.” Talk America, Inc. v. Mich. Bell Tel. Co.,

131 S. Ct. 2254, 2261 (2011) (quoting Chase Bank USA, N.A. v.

McCoy, 562 U.S. 195, 208 (2011) (quoting Auer v. Robbins, 519

U.S. 452, 461 (1997))); see Rural Cellular Ass’n v. FCC, 685

F.3d 1083, 1093 (D.C. Cir. 2012). FiberTower has not shown

that the Commission’s interpretation of the substantial service

requirement is inconsistent with the regulatory text or the

original rulemakings.

B.

FiberTower also contends that the Commission misapplied

its substantial service interpretation with respect to forty-two

license renewal applications. For those licenses, FiberTower

submitted substantial service showings stating that links had

been constructed and service was being provided in the license

area. For example, the substantial service showing for license

WMF848 stated that “FiberTower so far has one link built and

operating at a school in Kansas City, Missouri, the geographic

area of this license.” FiberTower Spectrum Holdings, LLC,

Substantial Service Showing, FRN 0019211895, at 8 (June 1,

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2012). Neither of the challenged orders indicate an awareness

of these construction notifications. The Bureau’s substantial

service analysis was predicated on the finding that there was no

“construction of any facilities whatsoever” in any of the

terminated license areas. Bureau Order, ¶ 22. The

Commission, in turn, adopted the Bureau’s conclusion that

“FiberTower was seeking a finding of substantial service

without any construction of facilities,” Order, ¶ 38, and acted on

the basis of its understanding that the Bureau “did not take

action against any license where construction had been reported,

whether or not the construction met a safe harbor,” id. ¶ 33

n.133.

The Commission responds on appeal that FiberTower’s as

applied challenge is barred because FiberTower failed to present

this argument to the Commission. FiberTower stated in its

Application for Review that:

The Bureau erred as a matter of fact when it found that

no facilities have been built-out in FiberTower’s

licensed areas. The record demonstrates that, as of

June 1, 2012, a significant amount of construction had

occurred in many of FiberTower’s license areas that the

Bureau identified for termination.

Application for Review, at 23. This statement would appear to

alert the Commission to FiberTower’s claim of factual error, and

afford the Commission an “opportunity to pass” on the issue, as

required by § 405(a). It also “concisely” and “plainly” states the

question for review, as the Commission’s rules require. 47

C.F.R. § 1.115(b)(1). The Commission points out, not

unreasonably, that the statement of error in FiberTower’s

Application for Review was generic and failed to identify the

specific licenses that FiberTower claims were erroneously

canceled. After all, FiberTower submitted a large number of

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applications for license renewal with substantial service

showings, and in seeking Commission review, FiberTower could

have listed by license number the forty-two license areas in

which it claimed there had been actual construction. To state the

obvious, it was in FiberTower’s interest to facilitate the

Commission’s ability to locate these licenses.

But the Commission overstates its position in maintaining

that it “‘had no notice of’ FiberTower’s ‘specific objections.’” 

Appellee’s Br. 39 (quoting U.S. Airwaves, Inc. v. FCC, 232 F.3d

227, 236 (D.C. Cir. 2000)). The exhaustion cases on which the

Commission relies involved arguments that had not been made

at all in the Application for Review or Petition for

Reconsideration. See Environmentel, LLC v. FCC, 661 F.3d 80,

84 (D.C. Cir. 2011); Qwest Corp. v. FCC, 482 F.3d 471, 478

(D.C. Cir. 2007); U.S. Airwaves, 232 F.3d at 236; Bartholdi

Cable, 114 F.3d at 279. Here, FiberTower alerted the

Commission to its argument of factual error in the Application

for Review. Because the Commission requires that substantial

service showings be made on a license-by-license basis, see

Order, ¶ 39 n.155, it ill behooves the Commission to imply that

it can cancel licenses for failure to show any construction

without reviewing each substantial service showing. To the

extent the Commission maintains on appeal that the forty-two

license renewal applications do not adequately demonstrate

substantial service because they failed to “demonstrat[e] the

extent of [the constructed] facilities or that those facilities served

customers or provided internal service,” Appellee’s Br. 39–40,

that was not the basis on which the Commission denied the

renewal applications and cannot provide the basis for upholding

the Commission’s action. See SEC v. Chenery Corp., 318 U.S.

80, 94 (1943).

We therefore vacate the Commission’s orders denying 

renewal applications for the forty-two licenses for which

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FiberTower submitted substantial service showings stating there

had been construction. “An agency action is arbitrary and

capricious if it rests upon a factual premise that is unsupported

by substantial evidence.” Ctr. For Auto Safety v. Fed. Highway

Admin., 956 F.2d 309, 314 (D.C. Cir. 1992). Upon remand the

Commission can determine whether there was substantial

service for those licenses.

IV.

FiberTower’s other challenges relate to the denials of its

requests for an extension or waiver of the substantial service

deadline beyond June 1, 2012. In view of our conclusion in Part

III.B, supra, we vacate the orders denying these requests, so that

the Commission may rule on FiberTower’s requests in light of

an accurate understanding of the license renewal record. 

Although the burden for challenging the Commission’s denial

of waiver and extension is heavy, see Morris Commc’ns, Inc. v.

FCC, 566 F.3d 184, 188 (D.C. Cir. 2009), the Commission has

acknowledged that the proportion of licenses that have been

built out may be relevant to its extension analysis. See Order,

¶ 26 (discussing 2 Lightspeed LP, File Nos.

0005222510–0005222513 (July 23, 2012)).

Accordingly, we affirm in part and we remand for the

Commission to determine whether there was substantial service

for the forty-two licenses in which FiberTower stated there had

been construction, and to consider anew FiberTower’s requests

for an extension or waiver of the substantial service requirement

based on an accurate understanding of the renewal record.

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