Opinion ID: 185276
Heading Depth: 2
Heading Rank: 3

Heading: Are the regulations reasonable?

Text: 26 Airwaves argues that the rule is invalid for two related reasons. First, it contends that the Commission failed to relate its offering of post-auction refinancing options to its own stated goals. Second, it argues that regardless whether the Commission embraced fairness as a goal, the rule is simply so unfair that it must be deemed arbitrary and capri- cious. 27 Under the arbitrary and capricious standard, this court does not substitute its judgment for that of the administrative agency. See Motor Vehicles Mfrs. Ass'n of the United States, Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). A regulatory decision in which the Commission must balance competing goals is therefore valid if the agency can show that its resolution reasonably advances at least one of those objectives and [that] its decisionmaking process was regular. Fresno Mobile Radio, Inc. v. FCC, 165 F.3d 965, 971 (D.C. Cir. 1999). Because Airwaves does not challenge the regular- ity of the Commission's decisionmaking process, the issue now before us is whether the Commission reasonably justified its regulations with reference to at least one of its avowed goals. See Restructuring Order at p 2. 28 The C-block menu withstands review under this standard: The Commission justified each of the menu options and its MTA-by-MTA selection principle with reference to one or more of its stated goals. In particular, the Commission justified each of its menu options as enabling C block licensees to remain participants in the wireless market, which it found would hasten the delivery of new services to the public and promote efficient use of the spectrum. Re- consideration Order at p 10; see Restructuring Order at pp 43, 45 (disaggregation); id. at p 53 (amnesty); Reconsider- ation Order at p 40 (prepayment). In addition, the Commis- sion justified the prepayment option as a way of minimizing conflicts between the agency's roles as creditor and as regu- lator. See Reconsideration Order at p 40. The Commission explained disaggregation, as it did the provision for MTA-by- MTA election, in part as an effort to help small licensees plan their businesses rationally. See Restructuring Order at p 45; Reconsideration Order at p 19. 29 Airwaves challenges the Commission's rationale in two respects. Its first point proceeds from the observation that the Commission deemed essential two and only two of its stated goals, namely, maintaining the integrity of the auction process and ensuring fairness to all market participants. Restructuring Order at p 3. Airwaves claims that it is unrea- sonable for the Commission to adopt any policy that under- mines a goal that the agency itself has styled essential. This is an unduly cramped reading of the orders, however. The Commission reasonably can treat fairness and integrity as essential goals and yet recognize that they are matters of degree. Thus, the Commission may choose to sacrifice some degree of fairness or integrity in order to gain other impor- tant objectives. Several of the goals that the Commission lists in addition (and therefore potentially in opposition) to fairness and integrity--such as competition, speedy deploy- ment of services to the public, efficient use of the spectrum, and participation of small businesses in the market--are mandated by statute. See 47 U.S.C. § 309(j)(3). A more reasonable construction of the Commission's statement that fairness and integrity are essential goals, therefore, is that in its view they must be included (along with those specified in the statute) among the goals to be balanced. This by no means requires that they trump all other goals in every case where there is conflict. 30 Airwaves also argues that, aside from the orders' failure to advance the Commission's essential goals, they also fail to advance the other goals the Commission invoked as justifica- tions for the menu options. For example, Airwaves argues that, contrary to the Commission's claims, the rule will retard rather than hasten the availability of services to consumers; instead of forcing a reauction that would transfer spectrum to competent and solvent firms, the rule allows precisely those companies that have demonstrated financial irresponsibility and undue optimism about their financial capabilities to retain their spectrum. New buyers at auction may, as the petitioner asserts, be more likely to effectuate a rapid build- out of wireless systems, but the Commission is reasonably of the view that starting the licensing process all over again would delay build-out. We defer to the agency regarding a predictive matter, such as this, within its expertise. See Fresno Mobile Radio, 165 F.3d at 971. 31 In a similar vein, Airwaves complains that, contrary to the Commission's expectation, the rule will not promote the par- ticipation of small businesses in the wireless industry; that goal would be better effected by redistributing licenses to small businesses in a new auction than by reinforcing the current concentration of C-block licenses in relatively few hands. The petitioner's position is again plausible, but it is also reasonable, again, for the Commission to expect that small businesses generally will be better situated to face their larger competitors in the wireless industry if those that already have licenses are able to build their businesses in at least some markets. Again, we defer to the Commission's expertise regarding such predictive issues. 32 Notwithstanding the Commission's reasoned justification, the rule might still be arbitrary and capricious if, as Airwaves claims, it is sufficiently unfair. We agree with the petitioner that the Commission systematically downplays the inequity of the rule: it clearly grants a substantial windfall not only to distressed but also to healthy companies that bought licenses in the initial auction. Those companies can now discard the licenses they have found, with the benefit of hindsight, to be less valuable--without incurring the ordinary penalty for default and, indeed, while recouping some of the payments they have already made. At the same time they can retain the licenses they have found to be more valuable, subject only to the requirement that they elect a single menu option within each MTA. Further, the rule allows them not only to concen- trate their resources in the most desirable markets but to apply to the spectrum they retain some of the payments they had made on spectrum they returned. Obviously, those who were outbid in the original auction would have bid more than they actually did--and might have bid enough to win licens- es--had they known that the Commission later would make such options available. 33 Having established that the Commission changed the rules in a way that could not be foreseen, the question is whether, under the circumstances, that was so unfair as to be arbitrary and capricious. We start from the intuitive premise that an agency cannot, in fairness, radically change the terms of an auction after the fact. At the same time, an agency must be allowed to adjust its policies to changing circumstances, with- in the framework of rules it established in advance of the auction. In this case the Commission determined that the statutory goals of speeding the delivery of service to the public and of facilitating the participation of small businesses in the wireless market required it to liberalize the financial terms available to C-block licensees. See Reconsideration Order at pp 7-8. Competing goals do not absolve the agency of its duty to losing bidders, of course, but the Commission was careful to temper its liberalization accordingly. The agency did not simply forgive agreed-upon payments, much less grant the winning bidders' more sweeping requests for relief. Rather, under each of the menu options it imposed upon every distressed licensee a substantial penalty--in every case at least 30% of the down payment for a returned license, and up to 60% in the case of a licensee choosing disaggregation without prepayment. 34 Considering the dramatic and unexpected business rever- sals faced by C-block licensees, and post-auction conditions in the wireless market, we think the Commission reasonably exercised its discretion to balance fairness to losing bidders with the needs of the market and with the public interest. We therefore conclude that the orders under review are consistent with the Commission's stated goals, and that such unfairness as they worked does not render them arbitrary and capricious. 35