Opinion ID: 680967
Heading Depth: 2
Heading Rank: 1

Heading: The FCC's Interpretation of the Pioneer's Preference Regulations

Text: 16 An agency's interpretation of its own regulations is entitled to deference unless it is plainly erroneous or inconsistent with the regulation. K N Energy, Inc. v. FERC, 968 F.2d 1295, 1299 (D.C.Cir.1992) (internal quotation marks omitted). Moreover, reviewing courts will accord even greater deference to agency interpretations of agency rules than they do to agency interpretations of ambiguous statutory terms. Capital Network System, Inc. v. FCC, 28 F.3d 201, 206 (D.C.Cir.1994). The central question in this dispute is whether the FCC erred in its interpretation of the pioneer's preference filing regulations. The specific provision at issue is the requirement, in section 1.402(a), that an applicant 17 demonstrate that it (or its predecessor-in-interest) has developed the new service or technology; e.g., that it (or its predecessor-in-interest) has developed the capabilities or possibilities of the technology or service or has brought them to a more advanced or effective state. 18 47 C.F.R. Sec. 1.402(a) (emphasis added). 19 At oral argument, petitioners acknowledged that their applications described concepts rather than existing capabilities. They maintain that these descriptions demonstrated that they had developed the possibilities of new technologies or services and therefore satisfied the requirements of section 1.402(a). They argue, further, that any construction that mandates a demonstration of work already accomplished would be inconsistent with the subsequent sentence of the regulation, which requires that preference requests be accompanied by either a demonstration of the technical feasibility of the new service or an experimental license application. Id. They assert that this language confirms that an applicant must either have developed a new service or technology whose technical feasibility it is able to demonstrate or, as in their cases, have developed the possibilities of a new technology or service that it will have the opportunity to test upon the grant of an experimental license. 20 The FCC responds by emphasizing the regulation's use of the present perfect tense--has developed--to describe what it is that an applicant must demonstrate, noting that the subsequent reference to capabilities or possibilities merely elaborates on the basic requirement that the applicant must ha[ve] developed the new service or technology. It maintains that this language necessarily implies that development must have preceded the filing of an application; and as petitioners did not show in their applications that they had already created any tangible technology or service capabilities, they failed to meet this most fundamental requirement for a pioneer's preference. According to the Commission, this interpretation of the development requirement is consistent with the regulation's subsequent sentence because an experimental license application serves as an alternative for a showing of technical feasibility, not for a showing of development. 21 While petitioners' interpretation of section 1.402(a) is colorable, we find the Commission's construction--that a pioneer's preference application must demonstrate innovative work beyond the conceptualization of a new service--is clearly reasonable. It follows logically from the regulation's explicit requirement that an applicant demonstrate development and from the underlying goal of preferential licensing: to encourage investment of time and resources in research and development, not to enable those capable of beating the fastest path to the FCC office to control scarce public resources. The FCC's interpretation is also consistent with the regulation's requirement that an applicant either demonstrate its innovation's technical feasibility or apply for an experimental license. No matter how promising the development of a new service or technology may appear on the basis of engineering studies and laboratory work, actual field testing may be required before its technical feasibility can be established. 22 Petitioners also attack the Commission's interpretation of the regulation on the ground that a requirement that development work have already been accomplished could not have been discerned from the section's text; thus, they were deprived of adequate notice of the requirement. While it is true that applicants are entitled to expect rules defining the required content of applications that are reasonably comprehensible to men acting in good faith, Radio Athens, Inc. (WATH) v. FCC, 401 F.2d 398, 404 (D.C.Cir.1968), we do not require that the agency [make] the clearest possible articulation of application requirements. McElroy Elec. Corp. v. FCC, 990 F.2d 1351, 1358 (D.C.Cir.1993). Petitioners are not entitled to bright-line rules so long as they knew or should have known what the Commission expected of them. Id. The use of the present perfect tense--has developed--in the regulation and the reasons advanced by the FCC for the creation of the pioneer's preference program provided legally sufficient notice to petitioners of the likelihood that the Commission would require more than a concept before it would consider granting them a preferential license.B. Petitioners' Disparate Treatment Charge 23 Petitioners also claim that the FCC's dismissal of their applications was arbitrary and capricious because it had accepted, for notice and comment, similar applications that had been submitted prior to April 3, 1992. Although we find petitioners' complaint to be valid, we decline to reverse the Commission on this basis because the disparate treatment accorded those who had filed their applications before and after April 3 (early and late filers) did not prejudice petitioners. 24 We have recently reminded the FCC of the importance of treating similarly situated parties alike or providing an adequate justification for disparate treatment. McElroy Elec. Corp., 990 F.2d at 1365; see also Melody Music, Inc. v. FCC, 345 F.2d 730, 733 (D.C.Cir.1965) (FCC must do more than enumerate factual differences, if any, between appellant and the other cases; it must explain the relevance of those differences to the purposes of the Federal Communications Act). In this instance, the Commission has failed to do either. 25 In their petitions for reconsideration, five petitioners compared the substance of their preference applications to those of five early applicants that were accepted for notice and comment. The Commission conceded that it used a less stringent standard for determining whether early filers met the filing requirements than it did for late filers. It attempted to justify the disparate treatment by noting that at the time they applied for pioneer's preferences, the early filers had an unspecified amount of time within which to buttress or perfect their applications while late filers had no such opportunity because of the May 4, 1992, deadline. Preference Order, 7 F.C.C.R. at 7811. This distinction, however, does not suggest any logical basis for the different treatment accorded the early and late filers. Although the former had the advantage of being able to submit additional perfecting or supplemental information before the deadline, this does not explain why all of the applications should not have received similar treatment once the May 4 deadline had passed. As of that date, the FCC was in a position to judge each of the applications in accordance with a single standard. 26 At oral argument, counsel for the Commission suggested that the difference in treatment was more theoretical than real: Whereas the early filers had the opportunity after May 4 to press for the acceptance of their applications in the course of the notice and comment proceedings, the late filers had the equivalent opportunity in pursuing their petitions for reconsideration. Counsel stated, further, that in the end the Commission accorded each group the same treatment because, in its Preference Order, it simultaneously denied the early filers' applications and affirmed the dismissals of petitioners' applications. 27 That last statement was incorrect. In the Preference Order, the FCC dismissed with finality petitioners' applications, but only tentatively denied the early applications. See id. at 7804-05 (requests are tentatively denied for failure to submit either the preliminary results from an experiment or a sufficient showing of technical feasibility). They were not finally denied until February 3, 1994, almost 16 months after the issuance of the Preference Order. Third Report and Order, 9 F.C.C.R. 1337, 1356-68 (1994). Moreover, the FCC's explanations of its decisions in the final denial order affirm that the early filers had the opportunity to seek a reversal of the tentative denials. See, e.g., id. at 1356 (applicant has not provided any additional information to demonstrate an innovative contribution in [personal communications services] technology to warrant the grant of a pioneer's preference); 1357 (applicant did not respond to the order tentatively dismissing its application). While the early filers were ultimately held to the same standard as petitioners, they were nevertheless offered an opportunity to continue to plead their cases--an opportunity that was denied the latter. 28 There can be no question, then, that the Commission treated these similar pioneer's preference applicants differently. But, contrary to the position taken by petitioners, the Commission's error was its failure to dismiss the early filers' applications for the same reason that it later dismissed those of the late filers--not its failure to treat the latter as it had the former. This error, moreover, does not require us to vacate and remand the Commission's order dismissing petitioners' applications: A remand is unnecessary where, as here, the outcome of a new administrative proceeding is preordained. American Train Dispatchers Ass'n v. ICC, 26 F.3d 1157, 1163 (D.C.Cir.1994). The FCC is bound by its pioneer's preference rules. See Reuters Ltd. v. FCC, 781 F.2d 946, 950 (D.C.Cir.1986) ([I]t is elementary that an agency must adhere to its own rules and regulations.). Under section 1.402(a), as interpreted, the Commission may not grant a pioneer's preference to an applicant that fails to demonstrate in its application that it has developed more than the mere concept for a new communications service or technology. Consequently, a remand in this case would serve no purpose. C. Sufficiency of Explanation 29 Petitioners also challenge the FCC's order on the basis that the Commission did not adequately explain the reasons for its decision. The agency must articulate a satisfactory explanation for its action, Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 2866, 77 L.Ed.2d 443 (1983). Although the Chief Engineer's dismissal letters and the Commission's Preference Order provided only brief explanations of why petitioners' applications failed to satisfy the pioneer's preference filing requirements, those explanations were sufficient for us (and the parties) to understand the basis for the decision: Petitioners' applications described only concepts, not developed service or technological capabilities. No more than this is required. See id. (We will ... uphold a decision of less than ideal clarity if the agency's path may reasonably be discerned.) (internal quotation marks omitted).