In the United States Court of Appeals for the Tenth Circuit. No COUNCIL TREE INVESTORS, INC. and BETHEL NATIVE CORPORATION, Petitioners, v.

Transcription

1 Appellate Case: Document: Date Filed: 07/30/2012 Page: 1 In the United States Court of Appeals for the Tenth Circuit No COUNCIL TREE INVESTORS, INC. and BETHEL NATIVE CORPORATION, Petitioners, v. FEDERAL COMMUNICATIONS COMMISSION and UNITED STATES OF AMERICA, Respondents, PETITION FOR REVIEW OF ORDERS OF THE FEDERAL COMMUNICATIONS COMMISSION BRIEF OF AMICI CURIAE IN SUPPORT OF RESPONDENTS SUBMITTED BY CTIA THE WIRELESS ASSOCIATION, THE TELECOMMUNICATIONS INDUSTRY ASSOCIATION, AND MOBILE FUTURE Michael Altschul Senior Vice President & General Counsel CTIA THE WIRELESS ASSOCIATION th Street, N.W., Suite 600 Washington, D.C (202) (202) (fax) Counsel for CTIA - The Wireless Association David H. Solomon* Bryan N. Tramont Russell P. Hanser WILKINSON BARKER KNAUER, LLP 2300 N Street, N.W., Suite 700 Washington, D.C (202) (202) (fax) DSolomon@wbklaw.com ( ) *Counsel of Record for Amici Curiae *Additional counsel listed inside cover July 30, 2012

2 Appellate Case: Document: Date Filed: 07/30/2012 Page: 2 Danielle Coffey Vice President, Government Affairs TELECOMMUNICATIONS INDUSTRY ASSOCIATION 10 G Street N.E., Suite 550 Washington, D.C (202) Counsel for the Telecommunications Industry Association

3 Appellate Case: Document: Date Filed: 07/30/2012 Page: 3 CORPORATE DISCLOSURE STATEMENT Pursuant to Federal Rule of Appellate Procedure 26.1, CTIA The Wireless Association ( CTIA ), the Telecommunications Industry Association ( TIA ), and Mobile Future submit the following corporate disclosure statements: CTIA is a Section 501(c)(6) not-for-profit corporation organized under the laws of the District of Columbia and represents the wireless communications industry. Members of CTIA include service providers, manufacturers, wireless data and Internet companies, and other industry participants. CTIA has not issued any shares or debt securities to the public, and CTIA has no parent companies, subsidiaries, or affiliates that have issued any shares or debt securities to the public. TIA is a Section 501(c)(6) not-for-profit corporation organized under the laws of the State of Illinois. It represents the global information and communications technology sector through standards development, advocacy, tradeshows, business opportunities, market intelligence, and world-wide environmental regulatory analysis. TIA has not issued any shares or debt securities to the public, and has no parent companies, subsidiaries, or affiliates that have issued any shares or debt securities to the public. Mobile Future is a Section 501(c)(4) corporation organized under the laws of the District of Columbia. It represents technology and communications

4 Appellate Case: Document: Date Filed: 07/30/2012 Page: 4 companies, consumers, and a diverse group of non-profit organizations. Mobile Future has not issued any shares or debt securities to the public, and has no parent companies, subsidiaries, or affiliates that have issued any shares or debt securities to the public. ii

5 Appellate Case: Document: Date Filed: 07/30/2012 Page: 5 STATEMENT OF IDENTITY, INTEREST IN CASE, AND SOURCE OF AUTHORITY TO FILE OF AMICI CURIAE CTIA The Wireless Association ( CTIA ), the Telecommunications Industry Association ( TIA ), and Mobile Future have strong interests in promoting the integrity and finality of the FCC s auction program and ensuring that the Court does not overturn the results of the Federal Communications Commission s ( FCC s ) spectrum license Auction 73. That auction closed March 18, 2008, with net winning bids totaling about $19 billion. Rescission of Auction 73 would harm not only the participants in the wireless service ecosystem consumers, wireless service providers, and equipment manufacturers but also the U.S. economy overall. Indeed, rescinding Auction 73 would significantly disrupt one of the core drivers of investment and innovation in the country. Access to spectrum is a fundamental precondition to the provision of wireless services. If Auction 73 were rescinded, existing licensees would no longer have legal authority to use 700 MHz spectrum and would have to cease operating on the relevant spectrum, potentially resulting in the shutdown of advanced 4G services to millions of Americans. Unwinding Auction 73 would also strand enormous capital investments in wireless infrastructure and consumer devices and would force companies to terminate significant spectrum leases and other secondary market transactions. Simply put, the outcome Petitioners seek would undermine the fundamental bases of our deeply interconnected wireless iii

6 Appellate Case: Document: Date Filed: 07/30/2012 Page: 6 broadband world. More broadly, without some certainty that they will be able to hold and utilize spectrum purchased at auction, wireless service providers simply will not be willing or able to justify future spectrum investments. CTIA, TIA, and Mobile Future are therefore participating in this proceeding to urge this Court not to undo Auction 73. CTIA, TIA, and Mobile Future are uniquely situated to provide this Court with information and insight regarding the staggering adverse consequences that would result from unwinding Auction 73. The member companies of these organizations represent the entire range of businesses in the wireless services industry, including wireless carriers and their suppliers, as well as manufacturers and providers of wireless data products and services. The member companies cover the gamut of small, medium and large entities operating throughout the domestic wireless economy. Through this brief, these entities are speaking with one voice to preserve the finality of Auction 73. CTIA, TIA, and Mobile Future are authorized to state that all parties have consented to their participation as amici curiae in support of the Respondents. Fed. R. App. P. 29(a). iv

7 Appellate Case: Document: Date Filed: 07/30/2012 Page: 7 STATEMENT OF AUTHORSHIP AND FINANCIAL CONTRIBUTIONS No counsel for a party authored this brief in whole or in part, and no such counsel, no party, and no person other than the amici curiae, their members, or their counsel made a monetary contribution specifically intended to fund the preparation or submission of this brief. See Fed. R. App. P. 29(c)(5). The amici curiae note that Intervenor Cellco Partnership d/b/a Verizon Wireless, as a member of CTIA The Wireless Association, pays annual dues to CTIA. v

8 Appellate Case: Document: Date Filed: 07/30/2012 Page: 8 TABLE OF CONTENTS CORPORATE DISCLOSURE STATEMENT... i STATEMENT OF IDENTITY, INTEREST IN CASE, AND SOURCE OF AUTHORITY TO FILE OF AMICI CURIAE... iii STATEMENT OF AUTHORSHIP AND FINANCIAL CONTRIBUTIONS... v STATEMENT OF RELATED CASES... viii GLOSSARY... ix TABLE OF AUTHORITIES... x COUNTERSTATEMENT OF THE FACTS... 1 SUMMARY OF ARGUMENT... 6 ARGUMENT... 9 I. EVEN IF THE PROCEDURAL BARS TO THE PETITIONERS RELIEF COULD BE OVERCOME, RESCISSION OF AUCTION 73 IS NOT WARRANTED... 9 A. The Administrative Procedure Act Does Not Mandate Vacatur of Auction B. Upsetting the Results of Auction 73 Would Have Significant Disruptive Consequences for the Public Interest, Consumers, and the Wireless Economy Rescission of Auction 73 Would Harm Innocent Consumers, Wireless Providers, and Equipment Manufacturers Rescission of Auction 73 Would Undermine Important Interests Served By the Finality of Spectrum Auctions...24 II. THE D BLOCK WAIVER ORDER AND THE WAIVER RECONSIDERATION ORDER ARE LAWFUL...26 vi

9 Appellate Case: Document: Date Filed: 07/30/2012 Page: 9 III. PETITIONERS HAVE YET AGAIN FAILED TO BRING A PROPER APPEAL TO CHALLENGE AUCTION A. Petitioners Failed to Seek Timely Review of the Application of the DE Rules to Auction B. Petitioners Are Precluded From Relitigating the Issue of Whether Auction 73 Should Be Unwound...30 CONCLUSION...32 CERTIFICATE OF COMPLIANCE WITH RULE 32(a) CERTIFICATE OF DIGITAL SUBMISSION STATUTES, RULES, AND REGULATIONS CERTIFICATE OF SERVICE vii

10 Appellate Case: Document: Date Filed: 07/30/2012 Page: 10 STATEMENT OF RELATED CASES There are three cases related to the instant appeal: Council Tree Commc ns v. FCC, 503 F.3d 384 (3d Cir. 2007); Council Tree Commc ns v. FCC, 324 F.App x 3 (D.C. Cir. 2009); and Council Tree Commc ns v. FCC, 619 F.3d 235 (3d Cir. 2010). viii

11 Appellate Case: Document: Date Filed: 07/30/2012 Page: 11 GLOSSARY 4G LTE APA Auction 66 Auction 73 DE FCC FCC Br. GDP J.A. MHz Pet r Br. Fourth Generation ( 4G ) Long Term Evolution ( LTE ), a technical standard that defines a type of high-speed wireless broadband communications Administrative Procedure Act The Advanced Wireless Service Spectrum License Auction The 700 MHz Spectrum License Auction Designated Entity Federal Communications Commission Respondents Brief Gross Domestic Product Joint Appendix Megahertz Petitioners Brief ix

12 Appellate Case: Document: Date Filed: 07/30/2012 Page: 12 Cases TABLE OF AUTHORITIES* Allen v. McCurry, 449 U.S. 90 (1980)...30 Allied-Signal, Inc. v. U.S. Nuclear Regulatory Comm n, 988 F.2d 146 (D.C. Cir. 1993)...11 B-S Steel of Kansas, Inc. v. Texas Industries, Inc., et al., 439 F.3d 653 (10th Cir. 2006)...31 Cent. & Sw. Servs., Inc. v. EPA, 220 F.3d 683 (5th Cir. 2000)...11 Council Tree Commc ns v. FCC, 503 F.3d 384 (3d Cir. 2007)... viii *Council Tree Commc ns v. FCC, 619 F.3d 235 (3d Cir. 2010)... viii, 3 Council Tree Commc s v. FCC, 324 F. App x 3 (D.C. Cir. 2009)... viii, 4 Council Tree Investors, Inc. v. FCC, 131 S.Ct (2011)... 4 Hatch v. Boulder Town Council, 471 F.3d 1142 (10th Cir. 2006)...30 ICC v. Brotherhood of Locomotive Eng rs, 482 U.S. 270 (1987)...29 Idaho Farm Bureau Fed n v. Babbitt, 58 F.3d 1392 (9th Cir. 1995)... 11, 12 Kenman Engineering v. City of Union, 314 F.3d 468 (10th Cir. 2002)...29 Kennecott Utah Copper Corp. v. Dep t of Interior, 88 F.3d 1191 (D.C. Cir. 1996)...27 x

13 Appellate Case: Document: Date Filed: 07/30/2012 Page: 13 Lemonds v. St. Louis County, 222 F.3d 488 (8th Cir. 2000)...29 Mitchell v. City of Moore, Okla., 218 F.3d 1190 (10th Cir. 2000)...30 Murdock v. Ute Indian Tribe of Uintah & Ouray Reservation, 975 F.2d 683 (10th Cir. 1992)...31 Nat Ass n of Reversionary Prop. Owners v. Surface Transp. Bd., 158 F.3d 135 (D.C. Cir. 1998)...29 Nat l Org. of Veterans Advocates, Inc. v. Sec y of Veterans Affairs, 260 F.3d 1365 (Fed. Cir. 2001)...11 Plotner v. AT&T Corp., 224 F.3d 1161 (10th Cir. 2000)...31 Pub. Citizen Health Research Grp. v. U.S. Dep t of Labor, 557 F.3d 165 (3d Cir. 2009)...11 Qwest Corp. v. FCC, 258 F.3d 1191 (10th Cir. 2001)...11 The Hecht Co. v. Bowles, 321 U.S. 321 (1944)...10 Weinberger v. Romero-Barcelo, 456 U.S. 305 (1982)...10 Statutes and Regulations 28 U.S.C. 1254(1) U.S.C U.S.C C.F.R (f)...5, C.F.R U.S.C. 309(j)(3)(A)...13 xi

14 Appellate Case: Document: Date Filed: 07/30/2012 Page: U.S.C. 402(a) U.S.C. 706(2)...10 Pub. L. No , 6401, 126 Stat. 156, (2012)...25 Federal Agency Decisions 700 MHz Construction And Reporting Requirements, 26 F.C.C.R (WTB 2011)...20 Auction of 1.4 GHz Band Licenses Scheduled for February 7, 2007, 21 F.C.C.R (2006)... 3 Auction of Broadband PCS Spectrum Scheduled for May 16, 2007, 22 F.C.C.R. 433 (2007)... 3 Auction of Phase II 220 MHz Service Spectrum Scheduled for June 20, 2007, 22 F.C.C.R (2007)... 3 Connect America Fund, 26 F.C.C.R (2011)...15 Connecting America: The National Broadband Plan (Mar. 16, 2010)... 15, 24 Implementation of the Commercial Spectrum Enhancement Act, 21 F.C.C.R (2006)...2, 3 *Implementation of the Commercial Spectrum Enhancement Act, 27 F.C.C.R. 908 (2012)...5, 28 Service Rules for the , and MHz Bands, 22 F.C.C.R (2007)... 4 *Service Rules for the , and MHz Bands, 22 F.C.C.R (2007)... 3 *Waiver of Section (b)(3)(iv)(A) of the Commission s Rules for the Upper 700 MHz Band D Block License, 22 F.C.C.R (2007)... 5 xii

15 Appellate Case: Document: Date Filed: 07/30/2012 Page: 15 Other Authorities FCC Auctions Summary...24 Hearing on the FCC s Fiscal 2013 Budget Request Before the H. Subcomm. on Financial Services and H. Gen l Gov t Comm. on Appropriations at 1 (Mar. 19, 2012)...24 * Authorities principally relied upon are marked with an asterisk. xiii

16 Appellate Case: Document: Date Filed: 07/30/2012 Page: 16 In the United States Court of Appeals for the Tenth Circuit No COUNCIL TREE INVESTORS, INC. and BETHEL NATIVE CORPORATION, Petitioners, v. FEDERAL COMMUNICATIONS COMMISSION and UNITED STATES OF AMERICA, Respondents, PETITION FOR REVIEW OF ORDERS OF THE FEDERAL COMMUNICATIONS COMMISSION BRIEF OF AMICI CURIAE IN SUPPORT OF RESPONDENTS COUNTERSTATEMENT OF THE FACTS In 2008, the FCC conducted Auction 73, in which it offered for sale 1,099 licenses for authority to operate on spectrum in the 700 MHz spectrum band, i.e., MHz. Auction 73 made available spectrum licenses in five distinct spectrum blocks (the A-E Blocks) covering a variety of geographic areas. Net winning bids in the auction the proceeds paid to the government totaled about $19 billion. Winning bidders immediately began to plan their network deployments, build infrastructure, and offer services. Equipment manufacturers began designing and manufacturing next-generation wireless devices to operate on that spectrum. Cell tower companies acquired sites and constructed towers to provide robust coverage. Now, after four years of investment, millions of

17 Appellate Case: Document: Date Filed: 07/30/2012 Page: 17 American consumers enjoy services provided over this licensed spectrum, using devices designed for operation on their providers spectrum holdings. Petitioners here seek to discard these efforts and start over by having the Court rescind Auction 73. The relief they request would strand billions of dollars in investments, force the cessation of 4G LTE high-speed wireless broadband service utilizing the 700 MHz spectrum band to consumers (many of whom rely exclusively on wireless offerings in this spectrum band), and deeply impair the functionality of millions of devices that have been designed and deployed in reliance on Auction 73 s results. As the FCC explains at length, the time for seeking rescission or even judicial review of Auction 73 passed long ago. Petitioners argue that such relief is required because the FCC conducted Auction 73 under certain Designated Entity ( DE ) rules 1 that were invalidated two years after the auction closed. Petitioners argument, however, is not properly before this Court. The FCC adopted the DE rules in question (by amending previous rules) in See Implementation of the Commercial Spectrum Enhancement Act, 21 F.C.C.R (2006) ( DE Second Report & Order ). As amended, the DE rules, among other things, prohibited DE licensees from entering into arrangements with 1 The FCC s DE rules provide preferences to small or disadvantaged bidders in spectrum auctions. See FCC Br

18 Appellate Case: Document: Date Filed: 07/30/2012 Page: 18 one or more entities for the lease or resale (including under a wholesale arrangement) of, on a cumulative basis, more than 50 percent of the spectrum capacity of [a license]. Id. at In 2007, the FCC applied the revised DE rules, including this Impermissible Material Relationship Rule, to Auction 73. See Service Rules for the , and MHz Bands, 22 F.C.C.R. 8064, 8067 (2007) ( 700 MHz First Report & Order ). 2 Petitioners did not seek judicial review of the 700 MHz First Report & Order. That order became final and no longer subject to judicial review five years ago. In 2010, Petitioners succeeded in their appeal of the DE Second Report & Order with regard to two of the DE rules. See Council Tree Commc ns, Inc. v. FCC, 619 F.3d 235 (3d Cir. 2010) ( Council Tree III ). The court concluded that the two rules were promulgated in violation of the notice and comment requirements of the Administrative Procedure Act ( APA ), vacated the rules, and remanded to the FCC. Id. at The court declined, however, to rescind FCC Auctions 66 and 73. That approach, it held, would not only entail unwinding transactions worth more than $30 billion involving the federal government and 2 The FCC also applied these rules to several other spectrum auctions. See FCC Br. 12; see also Auction of 1.4 GHz Band Licenses Scheduled for February 7, 2007, 21 F.C.C.R , n.19 (2006); Auction of Broadband PCS Spectrum Scheduled for May 16, 2007, 22 F.C.C.R. 433, 438 n.19 (2007); Auction of Phase II 220 MHz Service Spectrum Scheduled for June 20, 2007, 22 F.C.C.R. 3404, 3409 n.16 (2007). 3

19 Appellate Case: Document: Date Filed: 07/30/2012 Page: 19 innocent third part[y] auction winners, but also upset[] what are likely billions of dollars of additional investments made in reliance on the results, and seriously disrupt[] existing or planned wireless service for untold numbers of customers. Id. at 257. Petitioners sought Supreme Court review, arguing that the Third Circuit was obligated to rescind Auctions 66 and 73, but the Supreme Court denied certiorari. See Council Tree Investors, Inc. v. FCC, 131 S.Ct (2011). While the Third Circuit litigation proceeded, Petitioners worked to manufacture additional procedural vehicles for challenging Auction 73. Having failed to appeal the 700 MHz First Report & Order, they attempted to appeal a subsequent FCC order even though it did not address application of the DE rules to Auction 73. See Service Rules for the , and MHz Bands, 22 F.C.C.R (2007) ( 700 MHz Second Report & Order ). The United States Court of Appeals for the District of Columbia Circuit dismissed that appeal as untimely, concluding that the later order did not reopen the DE rule issues decided in the 700 MHz First Report & Order. See Council Tree Commc s v. FCC, 324 F. App x 3 (D.C. Cir. 2009) ( Council Tree II ). In May 2011, after having lost in the D.C. Circuit and having been denied certiorari in Council Tree III, Petitioners seized on another unrelated matter to manufacture a new appeal, seeking the same result they were denied by the Third Circuit. Petitioners had sought reconsideration of a decision the FCC made late in 4

20 Appellate Case: Document: Date Filed: 07/30/2012 Page: , shortly before the start of Auction 73, to waive the Impermissible Material Relationship rule solely with respect to Auction 73 s D Block license a license dedicated to the experimental creation of a nation-wide public safety network. See Waiver of Section (b)(3)(iv)(A) of the Commission s Rules for the Upper 700 MHz Band D Block License, 22 F.C.C.R (2007) ( D Block Waiver Order ) (J.A. 6-19); Council Tree Petition for Reconsideration (December 7, 2007) ( Petition for Reconsideration ) (J.A ). After the Supreme Court denied certiorari in Council Tree III, Petitioners attempted to supplement their stillpending reconsideration petition, arguing that Auction 73 should be rescinded because the Impermissible Material Relationship rule should not have been applied to any of the auctioned licenses. See Supplement to Council Tree Petition for Reconsideration (May 18, 2011) ( May 2011Supplement ) (J.A ). In 2012, the FCC issued its order eliminating its 2006 amended DE rules consistent with the court s remedy in Council Tree III. Implementation of the Commercial Spectrum Enhancement Act, 27 F.C.C.R. 908 (2012) ( Waiver Reconsideration Order ) (J.A ). The Commission also dismissed Petitioners Petition for Reconsideration of the D Block Waiver Order as moot, and dismissed Petitioners May 2011 Supplement as untimely under the FCC s rules. Id. at 909 ( 4) (J.A. 13); see 47 C.F.R. 1.l06(f) ( The petition for reconsideration and any supplement thereto shall be filed within 30 days from the date of public 5

21 Appellate Case: Document: Date Filed: 07/30/2012 Page: 21 notice of the final Commission action. ). This appeal of the D Block Waiver Order and the Waiver Reconsideration Order followed. SUMMARY OF ARGUMENT Petitioners challenge to the FCC s D Block Waiver Order and the Waiver Reconsideration Order is their fourth attempt in three federal courts of appeals to unwind the results of Auction 73. As the FCC conclusively demonstrates, and as reinforced below, Petitioners forum shopping appeal is rife with procedural and legal failings and cannot be sustained. Even if this Court somehow finds in favor of Petitioners and concludes that (1) the orders under review are lacking, (2) it has jurisdiction over Auction 73, and (3) Petitioners claims that the auction should be rescinded are not barred under principles of claim and/or issue preclusion, this Court should not undo the results of Auction 73. The law is clear that, even if it were to rule in Petitioners favor, this Court retains discretion under the APA to decline to rescind Auction 73. This Court should exercise that discretion and reject Petitioners request to vacate Auction 73. As the Third Circuit recognized, rescission of the results of Auction 73 would result in massive uncertainty, waste, and frozen development. Council Tree III, 619 F.2d at 257. The reasons weighing against rescinding Auction 73 have only grown stronger in the two years since Council Tree III. Rescission would not only 6

22 Appellate Case: Document: Date Filed: 07/30/2012 Page: 22 unwind about $19 billion in transactions between the federal government and innocent third part[y] auction winners, Council Tree III, 619 F.3d at 258, but also disrupt multiple aspects of the wireless sector, which is now a critical source of growth in the U.S. economy. Consumers would face major disruptions if Auction 73 were rescinded. Americans already are heavily using the advanced and innovative 4G LTE broadband services provided over the auctioned spectrum. The practical import of the outcome that Petitioners seek would be the cessation of 4G wireless broadband service to millions of Americans service that consumers expect to function at all times, particularly in emergencies. The operations and activities of numerous service providers and licensees would also be thwarted if Auction 73 were to be overturned. Many service providers participated in the auction, which produced 101 winners, most of them designated entities. These winning bidders were blameless participants in the auction and have relied on the results and the finality of multiple court decisions to make massive network investments investments that would be stranded if the auction were overturned. Rescission also would upset numerous completed and pending secondary market transactions in which Auction 73 winners have made spectrum available to other service providers. 7

23 Appellate Case: Document: Date Filed: 07/30/2012 Page: 23 Similarly, equipment manufacturers have relied heavily on the Auction 73 results in developing and deploying multiple models of advanced handsets, tablets, aircards, and other devices that operate on the 700 MHz spectrum block. These devices would be disrupted or even rendered useless on 700 MHz spectrum by rescission. Permitting Petitioners to re-open Auction 73 after their challenges properly have been rejected in other forums would also undercut the stability and certainty that are crucial to the success of future FCC spectrum auctions and U.S. spectrum policy generally. In any case, however, rescission of Auction 73 is not properly before this Court to begin with. The only question properly presented is whether the Commission lawfully dismissed Council Tree s Petition for Reconsideration and May 2011 Supplement. Those dismissals were proper, and the orders under review should stand. Further, nothing in the D Block Waiver Order or Waiver Reconsideration Order gives this Court jurisdiction to consider Petitioners long-stale claim that Auction 73 should be rescinded. As Petitioners concede, the Commission decided to apply its DE rules to Auction 73 in April 2007 in the 700 MHz First Report & Order. Pet r Br. 25. That order became final and no longer subject to judicial review in June The D Block Waiver Order and the Waiver Reconsideration 8

24 Appellate Case: Document: Date Filed: 07/30/2012 Page: 24 Order did not reopen the window for Petitioners to seek judicial review of that decision. Indeed, Petitioners attempt to link the D Block Waiver Order to their broader concerns regarding Auction 73 came more than three years after the auction closed and only after the Third Circuit refused to rescind the auction. Even if Petitioners challenge to the conduct of Auction 73 was timely, their claim would be barred by principles of claim and issue preclusion. Petitioners fully litigated in the Third Circuit their claim that Auction 73 should be rescinded. For all of these reasons, the petition for review should be dismissed or denied. ARGUMENT I. EVEN IF THE PROCEDURAL BARS TO THE PETITIONERS RELIEF COULD BE OVERCOME, RESCISSION OF AUCTION 73 IS NOT WARRANTED As the FCC ably demonstrates, and as reinforced below, the orders under review are lawful and should be affirmed. FCC Br Further, this appeal of the D Block Waiver Order and Waiver Reconsideration Order does not afford this Court jurisdiction to consider Petitioners long-stale claim for rescission of Auction 73. FCC Br Moreover, if this Court had jurisdiction to undo the results of Auction 73, Petitioners claims in this regard are barred by principles of claim preclusion. FCC Br Nevertheless, even if the Court were to rule in Petitioners favor on each of these issues, this Court would have discretion to 9

25 Appellate Case: Document: Date Filed: 07/30/2012 Page: 25 fashion a remedy other than unwinding the results of Auction 73. FCC Br As discussed herein, this Court should decline to vacate the results of Auction 73. A. The Administrative Procedure Act Does Not Mandate Vacatur of Auction 73 The Third Circuit has already ruled in Council Tree III that the Impermissible Material Relationship Rule was invalid under the APA, vacated the rule, and exercised its remedial discretion to remand the matter to the FCC without rescinding the auction. Council Tree III, 619 F.3d at The FCC implemented the court s order in the Waiver Reconsideration Order. This Court likewise has discretion to decline to rescind Auction 73, and there is no basis for it to second-guess the Third Circuit s result. Even if it otherwise sides with the Petitioners, nothing in the APA, 5 U.S.C. 706(2), requires this Court to alter the Council Tree III remedy by ordering the FCC to rescind the results of Auction 73, as Petitioners argue. Pet r Br Long-standing Supreme Court precedent, which Petitioners ignore, holds that language such as that found in Section 706(2) does not limit a court s discretion to fashion equitable remedies, including discretion regarding whether to vacate agency decisions. See The Hecht Co. v. Bowles, 321 U.S. 321, (1944) (holding that statutory language similar to the APA s does not displace courts jurisdiction in equity); Weinberger v. Romero-Barcelo, 456 U.S. 305, 313 (1982) (recognizing that courts retain discretion to fashion equitable remedies unless a 10

26 Appellate Case: Document: Date Filed: 07/30/2012 Page: 26 statute clearly restricts the courts jurisdiction in equity); see also FCC Br Moreover, the Hobbs Act, which serves as the basis for this Court s jurisdiction in this case, gives a reviewing court authority not only to set aside agency orders, but also to suspend them in whole or in part. 28 U.S.C. 2342; see also FCC Br In short, this Court clearly retains discretion under the APA and the Hobbs Act to remand FCC decisions without vacatur. Federal courts of appeals, including this Court, frequently remand agency decisions without vacatur. Indeed, this Court has remanded unlawful FCC action without vacating when vacatur would have serious, disruptive consequences. See Qwest Corp. v. FCC, 258 F.3d 1191, 1205 (10th Cir. 2001) (exercising discretion to remand without vacating universal service funding mechanism). Numerous other federal courts of appeals have also expressly recognized remand without vacatur as an appropriate and lawful remedy under the APA. 3 This Court should follow these prior examples and decline to rescind Auction See, e.g., Nat l Org. of Veterans Advocates, Inc. v. Sec y of Veterans Affairs, 260 F.3d 1365, (Fed. Cir. 2001) (allowing rule to remain in effect during remand (citing Allied-Signal, Inc. v. U.S. Nuclear Regulatory Comm n, 988 F.2d 146, 150, 151 (D.C. Cir. 1993)); Pub. Citizen Health Research Grp. v. U.S. Dep t of Labor, 557 F.3d 165, 191 (3d Cir. 2009) ( Where, as here, the only identified defect in a standard is the lack of an adequate statement of reasons, the appropriate course of action is to remand the matter to OSHA for further consideration and explanation, without disturbing the rule itself. (citations omitted)); Cent. & Sw. Servs., Inc. v. EPA, 220 F.3d 683, 692 (5th Cir. 2000) (remanding without vacatur because vacatur would be disruptive ); Idaho Farm (continued on next page) 11

27 Appellate Case: Document: Date Filed: 07/30/2012 Page: 27 B. Upsetting the Results of Auction 73 Would Have Significant Disruptive Consequences for the Public Interest, Consumers, and the Wireless Economy Vacatur of Auction 73 cannot be justified because it would fundamentally disrupt the U.S. wireless sector, one of the bright spots in the U.S. economy. See Allied-Signal, 988 F.2d at (finding vacatur inappropriate where such action would be quite disruptive ). A recent industry study found that [d]irect and indirect employment from the mobile community totaled over 2.4 million jobs, with direct employment by the nation s wireless carriers growing by almost 6 percent annually over the last four years ; it also concluded that [m]ore spectrum and the broad innovation it sparks will result in more jobs and growth throughout the U.S. economy. 4 Another analysis suggests that every 10 MHz of additional licensed spectrum made available for mobile broadband increases the U.S. Gross Domestic Product by $1.739 billion, employment by at least 7,000 jobs, and government revenues by $468 million. 5 By this metric, Auction 73 would have had (footnote continued) Bureau Fed n v. Babbitt, 58 F.3d 1392, (9th Cir. 1995) (remanding without vacating after inadequate APA notice on the basis that equity would be served by leaving the regulation in place while the agency follows the necessary procedures ). 4 See Mobile Future, 2011 Mobile Year in Review at 4, Dec ( 2011 Mobile Year in Review ) (footnote omitted), 5 See Roger Entner, The Wireless Industry: The Essential Engine of U.S. Economic Growth at 1 (May 2012), (continued on next page) 12

28 Appellate Case: Document: Date Filed: 07/30/2012 Page: 28 the effect of increasing GDP by about $9 billion, creating at least 36,400 jobs, and increasing government revenues by over $2.43 billion. Thus, rescission of the auction s results would have profound negative consequences for the American economy. These consequences would reach millions of innocent consumers who depend on wireless broadband services using the auctioned spectrum. Rescission would also harm the operations and business plans of hundreds, if not thousands, of blameless wireless service providers, manufacturers, and business users (including members of CTIA, TIA, and Mobile Future) that are relying on the auctioned licenses to build up the wireless sector of the economy. See Council Tree III, 619 F.3d at Rescission would also undermine important government policies aimed at promoting the development of new services using these licenses. See, e.g., 47 U.S.C. 309(j)(3)(A) (seeking development and rapid deployment of new technologies, products, and services for the benefit of the public ). In short, there is an overwhelming public interest in permitting consumers to continue to use, and service providers to continue to build out, operations that depend on these licenses. (footnote continued) content/uploads/2012/04/wireless-the-ubiquitous-engine-by-recon-analytics- 1.pdf. 13

29 Appellate Case: Document: Date Filed: 07/30/2012 Page: Rescission of Auction 73 Would Harm Innocent Consumers, Wireless Providers, and Equipment Manufacturers Rescission of Auction 73 would impose serious harms on a wide assortment of innocent parties currently relying on its results. Consumers. Unwinding the results of Auction 73, more than four years after its conclusion, would disrupt the provision of mobile broadband service to millions of U.S. consumers. Consumers already are heavily using the 4G LTE broadband services provided over the auctioned spectrum, as well as other spectrum. By the end of the second quarter of 2012, Verizon Wireless alone counted about 10.9 million LTE connections, and in the second quarter of 2012 it activated 3.2 million LTE-capable devices. 6 For example, Apple has sold millions of third-generation ipads relying on Auction 73 spectrum for 4G LTE service provisioned by Verizon Wireless and AT&T. 7 Without the 4G services provided through these devices, consumers ability to communicate for family, social, business, and emergency purposes would be compromised. Moreover, U.S. LTE networks are growing rapidly. As of March 2012, LTE networks covered over See Fierce Wireless, In slides: Verizon s Q2, Jul. 19, 2012, 7 See generally Apple, Press Release, Apple Reports Third Quarter Results, Jul. 24, 2012, Results.html. 14

30 Appellate Case: Document: Date Filed: 07/30/2012 Page: 30 million people and more than 196 United States cities. 8 By the end of the second quarter of 2012, the LTE network of Verizon Wireless alone covered over 230 million people in 337 markets. 9 LTE services provided over Auction 73 spectrum are expected to experience similarly dramatic growth for some time, as data usage skyrockets to accommodate growing reliance on mobile video service. Indeed, studies suggest that 4G LTE broadband users may consume nearly 30 times the data of the average smartphone user. 10 Rescission would seriously delay the development of wireless broadband service service that the FCC has repeatedly hailed as an essential ingredient to the nation s success in the twenty-first century. 11 It would likely take a 8 See TeleGeography, US remains at forefront of LTE service adoption, Mar. 15, 2012, 9 See Verizon, Verizon Reports Continued Double-Digit Earnings Growth and Strong Operating Cash Flow in Second-Quarter 2012, Jul. 19, 2012, 10 See Stefan Constantinescu, TeliaSonera: Smartphone users do 375 MB/month, 3G modem users do 5 GB/month, LTE users do 15 GB/month, IntoMobile, Nov. 17, 2010, 11 See FCC, Connecting America: The National Broadband Plan at xi (Mar. 16, 2010) ( Like electricity a century ago, broadband is a foundation for economic growth, job creation, global competitiveness and a better way of life. ) ( National Broadband Plan ), available at Connect America Fund, 26 F.C.C.R , (2011) (continued on next page) 15

31 Appellate Case: Document: Date Filed: 07/30/2012 Page: 31 significant period of time to re-auction the spectrum at issue and even longer to bring it back into use. Council Tree III, 619 F.3d at 257. The U.S. Government may have to refund the auction proceeds about $19 billion to the auction winners, even though those funds have already been used for other purposes. Spectrum leases and assignments involving auction winners and third parties would have to be unwound, with expensive litigation almost inevitably resulting. The FCC also would have to adopt rules for a new auction of the affected spectrum, which would impose delays of months if not years. Then the FCC would have to re-auction the 700 MHz spectrum after further proceedings. Finally, the new auction s winners would need to undertake substantial effort to put that spectrum to work, further delaying American consumers access to the 4G LTE services they want and need. As the Third Circuit recognized, such a process would result in massive uncertainty, waste, and frozen development. Council Tree III, 619 F. 2d at 257. Wireless Providers and Manufacturers. Similarly, service providers and equipment manufacturers that acquired spectrum in Auction 73 would be unfairly penalized if the auction were overturned. Many members of CTIA, TIA, and Mobile Future bid in Auction 73. The winning bidders were blameless participants (footnote continued) (stating federal goal of ensur[ing] universal availability of modern networks capable of providing advanced mobile voice and broadband service ). 16

32 Appellate Case: Document: Date Filed: 07/30/2012 Page: 32 in the auction. They have relied on the Auction 73 results to implement business plans and to make major investments based on the spectrum licenses won in the auction. This reliance was based on an assumption that the rules establishing Auction 73 were final and that the auction results would never be re-opened particularly not in response to an untimely challenge asserted more than three years after the auction closed. In fact, the FCC adopted construction (or build-out ) requirements for these licenses, see 47 C.F.R , that effectively have mandated significant investment by licensees in building out their networks investment that will have been for naught if the Auction 73 results are overturned four years after the end of the auctions. At least sixteen wireless licensees have deployed or are deploying operational LTE networks covering tens of millions of consumers using the spectrum won during Auction These licensees include small rural providers 12 See, e.g., Global Mobile Suppliers Association, Status of the LTE Ecosystem, at 4-7 (July 3, 2012) (listing the status of U.S. deployments) ( Status of the LTE Ecosystem ), see also Nemont Communications, Inc., 700 MHz Performance Status Report, at 1 (filed Jan. 6, 2012), search&filekey= &attachmentkey= &attachmentind=licatta ch; David Miller, Interim 700 MHz Status Report, at 2-3 (filed Jan. 13, 2012) (offering M2M services for critical infrastructure), search&filekey= &attachmentkey= &attachmentind=licattac (continued on next page) 17

33 Appellate Case: Document: Date Filed: 07/30/2012 Page: 33 such as Cellcom (which offers highspeed broadband service to the Hannahville Indian Community in Michigan) 13 and Panhandle Telephone Cooperative, Inc. (whose network covers 30,000 people in Oklahoma), 14 mid-size carriers such as (footnote continued) h; AlasConnect, 700 MHz Performance Report (filed Feb. 17, 2012), search&filekey= &attachmentkey= &attachmentind=licatta ch; Bascom Long Distance, 700 MHz Performance Status Reports Narrative Report (filed Jan. 9, 2012), search&filekey= &attachmentkey= &attachmentind=licatta ch; Blue Valley Telecommunications, Inc., Lower 700 MHz Wireless Status Report (filed Dec. 31, 2011), search&filekey= &attachmentkey= &attachmentind=licattac h; Central Texas Telephone Investments, LP, 700 MHz Performance Status Report (filed Jan. 12, 2012), search&filekey= &attachmentkey= &attachmentind=licatta ch; Chevron USA, Progress Report for Stations WQIZ525, WQIZ526, and WQIZ527 (filed Jan. 12, 2012) ( As of June 13, 2011, Chevron was operating 28 fixed transmitters at 13 offshore platforms in the Gulf of Mexico, covering 9805 square miles. ), search&filekey= &attachmentkey= &attachmentind=licatta ch. 13 Cellcom, Press Release, Cellcom Provides High-Speed Internet to Hannahville Community (June 13, 2012), 14 Status of the LTE Ecosystem at 6; Panhandle Telephone Cooperative, 700 MHz Interim Status Report, at 1-2 (filed Jan. 1, 2012), (continued on next page) 18

34 Appellate Case: Document: Date Filed: 07/30/2012 Page: 34 U.S. Cellular (which currently offers 4G LTE service to one-quarter of its 5.5 million customers), 15 and national wireless carriers such as AT&T and Verizon Wireless. 16 For example, on July 26, 2012, AT&T announced that it had added new 4G LTE coverage in Worcester, Massachusetts, and West Palm Beach, Miami, and Fort Lauderdale, Florida, and had expanded its existing LTE coverage to counties near Washington, D.C., Baltimore, Maryland, and Boston, Massachusetts. 17 AT&T operates two 4G LTE networks, one using 700 MHz (footnote continued) search&filekey= &attachmentkey= &attachmentind=licattac h. 15 Maisie Ramsay, US Cellular Snaps Up Actel 700 MHz Licenses, Wireless Week, July 17, 2012 ( US Cellular Snaps Up Actel 700 MHz Licenses ), 16 See, e.g., Verizon Wireless Press Release, Verizon Wireless 4G LTE Network Will Be Available To More Than 2/3 Of U.S. Population Starting April 19 (Apr. 17, 2012), available at 16c.html; AT&T, AT&T s 4G Evolution, available at (last visited July 24, 2012). 17 See July 26, 2012, press releases at AT&T, News Release Archives, beginning_year=2012&ending_month=6&ending_year=2012 (last visited July 27, 2012). 19

35 Appellate Case: Document: Date Filed: 07/30/2012 Page: 35 licenses awarded in Auction 73 and one using other spectrum licenses. 18 AT&T s 4G LTE operations cover 51 markets and 74 million people in the United States. 19 Service providers network investments in reliance on Auction 73 s results have been enormous. Utilization of new spectrum requires a complex web of planning, engineering, construction, marketing, and operational activities. FCCmandated reports filed by 700 MHz licensees illustrate the wide range of activities that service providers have undertaken to build out their networks. See 700 MHz Construction And Reporting Requirements, 26 F.C.C.R (WTB 2011). For example: Licensees have cleared their licensed spectrum from other service providers that may be operating on it. 20 Licensees have developed plans to determine service coverage See Bill Ray, New ipad 4G data connection will only work in America, Mar. 8, 2012, The Register, 19 AT&T, AT&T 4G LTE Get 4G Speed With AT&T 4G LTE & 4G HSPA+ (see Coverage tab), (last visited July 27, 2012). 20 See, e.g., Bluegrass Wireless, Wireless Communications Services Status Report of Efforts to Meet Performance Requirements (Dec. 8, 2011), search&filekey= &attachmentkey= &attachmentind=licattach. 21 See, e.g., Custer Telephone Cooperative, Inc., 700 MHz Performance Status Report (Jan. 9, 2012) search&filekey= &attachmentkey= &attachmentind=licatta ch. 20

36 Appellate Case: Document: Date Filed: 07/30/2012 Page: 36 Licensees have planned for and constructed network infrastructure, including transmission towers and communications links within the network, known as backhaul. 22 Licensees have selected technology vendors for LTE equipment. 23 Licensees have built and operated test sites for network operation. 24 Licensees have built commercial sites. 25 Unwinding Auction 73 would undercut these massive efforts to use and develop the Auction 73 spectrum. Rescission also would upset numerous completed and pending transactions between Auction 73 winners and other service providers, implicating millions, if 22 See, e.g., Cross Telephone Company, LLC, 700 MHz Performance Status Report (Jan. 4, 2012), search&filekey= &attachmentkey= &attachmentind=licattac h. 23 See, e.g., VTel Wireless, Inc., 700 MHz Performance Status Report (Jan. 13, 2012), search&filekey= &attachmentkey= &attachmentind=licattac h. 24 See, e.g., Public Service Telephone Company, Important Dates, ( Public Service Wireless has turned up a Pre-LTE (Long Term Evolution) base station manufactured by IP Wireless in our Reynolds area. The new service, still in the testing phase, can extend high speed wireless data service up to 10 miles from the City of Reynolds. ). 25 See, e.g., Buggs Island Telephone Cooperative, 700 MHz Performance Status Report January 2012 (filed Jan. 13, 2012), search&filekey= &attachmentkey= &attachmentind=licattac h. 21

37 Appellate Case: Document: Date Filed: 07/30/2012 Page: 37 not billions, of dollars. The FCC s Universal Licensing System database ( ULS ) indicates that over 250 licenses obtained in Auction 73 are being leased to third parties. 26 In addition, more than forty-five transfers of control or assignments of Auction 73 licenses have been consummated since that auction was completed. 27 Other license transactions are awaiting FCC approval. 28 If these deals were unwound because the underlying licenses were invalidated, extensive litigation would almost surely ensue, potentially deterring future investment in wireless services. The harms imposed by rescission of Auction 73 would affect rural and urban areas and the carriers that serve them alike. Wireless providers are using the spectrum auctioned in Auction 73 to deliver mobile broadband services to rural areas, using licenses that they won by participating in Auction 73. For example, through its LTE in Rural America program, Verizon Wireless has leased some of its Auction 73 licenses to deploy and operate an LTE network that is available to over 2.6 million people in rural communities spread across 82,000 square miles in 26 See FCC, Universal Licensing System application database, available at 27 See id. 28 See, e.g., US Cellular Snaps Up Actel 700 MHz Licenses. 22

38 Appellate Case: Document: Date Filed: 07/30/2012 Page: 38 multiple states. 29 Rescission of Auction 73 would penalize these and other service providers, who have proceeded in good faith throughout the process and who, as the Third Circuit agreed, should not be punished years after the auction has concluded. See Council Tree III, 619 F. 2d at 258. Rescission of Auction 73 would disrupt the operations and expectations of equipment manufacturers as well. Manufacturers (including members of CTIA, TIA, and Mobile Future) have relied heavily on the Auction 73 results in developing and deploying network equipment and devices that operate on this spectrum. Working with service providers, manufacturers have made massive investments to provide network infrastructure and multiple models of advanced handsets, tablets, aircards, and other devices that use these frequencies. In fact, there are more than 190 commercially available LTE devices that have been developed for use with 700 MHz spectrum. 30 If the results of Auction 73 were overturned, this vast array of equipment could not be used for 4G LTE service on the 700 MHz spectrum until the licenses were re-auctioned. 29 See Global Mobile Suppliers Association, GSA Evolution to LTE Report, at 4 (July 11, 2012), hp4. 30 See Status of the LTE Ecosystem at 2. 23

39 Appellate Case: Document: Date Filed: 07/30/2012 Page: Rescission of Auction 73 Would Undermine Important Interests Served By the Finality of Spectrum Auctions More broadly, rescission of Auction 73 in the wake of the investments and commitments described above would undercut the FCC s spectrum auction regime itself, with negative consequences for consumers, providers, and the nation. The spectrum auctions conducted by the Commission since 1994 have played a central role in making the United States the leader in global wireless innovation. Upending auctions years after they have closed would undermine the very foundation of U.S. wireless communications policy. Since 1994, private entities have bid in FCC auctions for licenses conferring legal rights to operate on specific bands of the radio spectrum in defined geographic areas. Auctions for public spectrum promoted competitive wireless markets, prompting continual upgrades that first delivered mobile phones and, now, mobile broadband. National Broadband Plan at 5. The FCC has conducted 81 auctions since 1994, 31 awarding over 30,000 licenses, and raising over $50 billion for the U.S. Government See FCC Auctions Summary, (last visited July 26, 2012). 32 See Hearing on the FCC s Fiscal 2013 Budget Request Before the H. Subcomm. on Financial Services and H. Gen l Gov t Comm. on Appropriations at 1 (Mar. 19, (continued on next page) 24