ORAL ARGUMENT SCHEDULED FOR JANUARY 20, 2015 BRIEF FOR APPELLEE IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT NO. 14-1039 FIBERTOWER SPECTRUM HOLDINGS, LLC, APPELLANT, V. FEDERAL COMMUNICATIONS COMMISSION, APPELLEE. ON APPEAL FROM ORDERS OF THE FEDERAL COMMUNICATIONS COMMISSION JONATHAN B. SALLET GENERAL COUNSEL DAVID M. GOSSETT ACTING DEPUTY GENERAL COUNSEL JACOB M. LEWIS ASSOCIATE GENERAL COUNSEL MAUREEN K. FLOOD COUNSEL FEDERAL COMMUNICATIONS COMMISSION WASHINGTON, D.C. 20554 (202) 418-1740 USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 1 of 67 CERTIFICATE AS TO PARTIES, RULINGS, AND RELATED CASES 1. Parties. All parties, intervenors, and amici in this case are listed in the Brief of Appellant. 2. Rulings under review. FiberTower Spectrum Holdings LLC, 28 FCC Rcd 6822 (2013), reconsideration denied, FiberTower Spectrum Holdings LLC, 29 FCC Rcd 2493 (2014). 3. Related cases. This case has not previously been before this Court or any other court. We are aware of no pending cases related to this one. USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 2 of 67 i TABLE OF CONTENTS TABLE OF AUTHORITIES .......................................................................... iii  GLOSSARY ................................................................................................... vii  JURISDICTION ................................................................................................ 1  QUESTIONS PRESENTED ............................................................................. 2  STATUTES AND REGULATIONS ................................................................ 3  COUNTERSTATEMENT ................................................................................ 3  I.  Statutory And Regulatory Framework ....................................................... 3  II.  Factual Background ................................................................................... 7  A.  The 2008 And 2010 Extensions ............................................................ 7  B.  The Bureau Order ................................................................................. 9  C.  The Commission Order ....................................................................... 13  D.  The Reconsideration Order ................................................................. 17  SUMMARY OF ARGUMENT ...................................................................... 17  STANDARDS OF REVIEW .......................................................................... 21  ARGUMENT .................................................................................................. 23  I.  The Commission Reasonably Found That FiberTower Had Not Satisfied The Substantial-Service Requirement ............................... 23  A.  FiberTower’s Argument That The Commission’s Substantial-Service Rules Are Inconsistent With The Communications Act Is Not Properly Raised, And Is In Any Event Meritless ............................................................................ 23  B.  The Commission Reasonably Interpreted Its Substantial- Service Rules To Require Construction Of Facilities And Provision Of Service To The Public ................................................... 29  USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 3 of 67 ii C.  FiberTower’s Contention That It Constructed Links For 42 Of Its 689 Licenses Has Been Waived And In Any Event Does Not Demonstrate Substantial Service .............................. 37  II.  The Commission Reasonably Denied FiberTower’s Request For A Waiver Of The Substantial-Service Rules ..................................... 40  A.  The Commission Reasonably Held That Granting FiberTower’s Waiver Request Would Discourage Compliance With The Agency’s Construction Requirements ....................................................................................... 40  B.  The Commission Did Not Treat FiberTower Differently Than Similarly Situated Licensees ...................................................... 48  III.  The Commission Reasonably Denied FiberTower’s Request For An Extension Of The Deadline To Demonstrate Substantial Service ................................................................................... 52  CONCLUSION ............................................................................................... 56  USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 4 of 67 iii TABLE OF AUTHORITIES CASES  Auer v. Robbins, 519 U.S. 452 (1997) ...................................................... 22, 30 Bartholdi Cable Co. Inc. v. FCC, 114 F.3d 274 (D.C. Cir. 1997) .................................................................................... 26, 38 BDPCS, Inc. v. FCC, 351 F.3d 1177 (D.C. Cir. 2003) ..................................................................................................... 21, 45 BellSouth Corp. v. FCC, 162 F.3d 1215 (D.C. Cir. 1999) ..................................................................................................... 43, 46 Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) ............................................................. 22 City of Arlington, Texas v. FCC, 133 S. Ct. 1863 (2013) .......................................................................................................... 22 * Comcast v. FCC, 526 F.3d 763 (D.C. Cir. 2008) ............................... 20, 48, 54 Delta Radio, Inc. v. FCC, 387 F.3d 897 (D.C. Cir. 2004) ..................................................................................................... 45, 46 Eagle Broad. Group, Ltd. v. FCC, 563 F.3d 543 (D.C. Cir. 2009) ........................................................................................... 48 * Environmentel, LLC v. FCC, 661 F.3d 80 (D.C. Cir. 2011) ............................................................................................... 26, 37, 38 Fresno Mobile Radio, Inc. v. FCC, 165 F.3d 965 (D.C. Cir. 1999) .................................................................................... 25, 29 Global Crossing Telecomms., Inc. v. FCC, 259 F.3d 740 (D.C. Cir. 2001) .................................................................................... 22 In re FiberTower Services Corp. et al., Case No. 12-44027-DML-11 (Bankr. N.D. Tex.)....................................................... 10 LaRose v. FCC, 494 F.2d 1145 (D.C. Cir. 1974) ............................................ 47 MCI Worldcom Network Servs., Inc. v. FCC, 274 F.3d 542 (D.C. Cir. 2001) ............................................................................ 22 Morris Commc’ns, Inc. v. FCC, 566 F.3d 184 (D.C. Cir. 2009) .............................................................................................. 21, 40 Motor Vehicle Mfrs. Ass’n of the U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) ............................................ 21 USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 5 of 67 iv Nat’l Tel. Co-op. Ass’n v. FCC, 563 F.3d 536 (D.C. Cir. 2009) ..................................................................................................... 21 Omnipoint Corp. v. FCC, 213 F.3d 720 (D.C. Cir. 2000) ............................................................................................................ 43 Qwest Corp. v. FCC, 482 F.3d 471 (D.C. Cir. 2007) ..................................... 38 Rural Cellular Ass’n v. FCC, 588 F.3d 1095 (D.C. Cir. 2009) ..................................................................................................... 26 Rural Cellular Ass’n v. FCC, 685 F.3d 1083 (D.C. Cir. 2012) ..................................................................................................... 22 Sw. Bell Tel. Co. v. FCC, 116 F.3d 593 (D.C. Cir. 1997) .............................................................................................................. 1 Talk Am., Inc. v. Mich. Bell Tel. Co., 131 S. Ct. 2254 (2011) .................................................................................................... 22, 30 U.S. Airwaves, Inc. v. FCC, 232 F.3d 227 (D.C. Cir. 2000) ..................................................................................................... 29, 39 USAir, Inc. v. Dept. of Transp., 969 F.2d 1256 (D.C. Cir. 1992) ........................................................................................... 39 STATUTES  5 U.S.C. § 706(2)(A) ....................................................................................... 21 47 U.S.C. § 301 ................................................................................................. 3 47 U.S.C. § 303(r) ............................................................................................. 3 * 47 U.S.C. § 309(j)(4)(B) ........................................ 3, 18, 20, 23, 26, 27, 28, 29 47 U.S.C. § 402(b)(5) ........................................................................................ 2 47 U.S.C. § 405(a) ........................................................................................... 25 REGULATIONS  47 C.F.R. § 1.106(b)(2) ............................................................................ 17, 51 47 C.F.R. § 1.115(b)(1) ................................................................................... 38 47 C.F.R. § 1.115(k) ........................................................................................ 37 47 C.F.R. § 1.925(b)(3) ................................................................................... 41 47 C.F.R. § 1.925(b)(3)(i) ................................................................................. 6 47 C.F.R. § 1.925(b)(3)(ii) ................................................................................ 6 USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 6 of 67 v 47 C.F.R. § 1.946(e)(1) ........................................................................ 6, 11, 53 47 C.F.R. § 1.946(e)(2) ................................................................................... 15 47 C.F.R. § 1.946(e)(3) ................................................................................... 54 47 C.F.R. § 24.203(a) ............................................................................... 27, 33 47 C.F.R. § 90.665(c) ...................................................................................... 27 47 C.F.R. § 101.3 .............................................................................................. 5 * 47 C.F.R. § 101.17 ............................................................... 4, 6, 27, 32, 36, 40 47 C.F.R. § 101.17(a) ...................................................................................... 24 47 C.F.R. § 101.17(b) ........................................................................................ 6 47 C.F.R. § 101.67 ..................................................................................... 4, 24 47 C.F.R. § 101.526 ........................................................................................ 24 * 47 C.F.R. § 101.527 ............................................................. 4, 5, 27, 32, 36, 40 47 C.F.R. § 101.527(a) .................................................................................... 24 47 C.F.R. § 101.527(b) .................................................................................... 32 47 C.F.R. § 101.527(c) ............................................................................... 6, 32 ADMINISTRATIVE DECISIONS  Amendment of Part 101 of the Commission’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 Licenses, 26 FCC Rcd 11614 (2011) ................................................... 24, 36 Amendment of Part 101 of the Commission’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 Licenses, 27 FCC Rcd 9735 (2012) ............................................... 24, 36, 47 * Amendment of the Commission’s Rules Regarding the 37.0-38.6 GHz and 38.6-40.0 GHz Bands, 12 FCC Rcd 18600 (1997) .................................. 4, 5, 27, 28, 30, 31, 32, 34, 35 USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 7 of 67 vi * Amendments to Parts 1,2,87 and 101 of the Commission’s Rules to License Fixed Services at 24 GHz, 15 FCC Rcd 16934 (2000) ....................... 4, 5, 6, 24, 27, 31, 32, 33 ART Licensing Corp., 23 FCC Rcd 14116 (WTB 2008) ................................................................................... 7, 8, 9, 35, 41, 47 Consolidated Request for Limited Waiver of Construction Deadline for 132 WCS Licenses, 21 FCC Rcd 14134 (WTB 2006) ..................................................................... 49 FCI 900, Inc., 16 FCC Rcd 11072 (WTB 2001) ............................................. 49 In the Matter of Martin W. Hoffman, 12 FCC Rcd 5224 (1997) ................................................................................................. 47 Scott D. Reiter, 25 FCC Rcd 3974 (2010) ...................................................... 33 Warren C. Havens, 19 FCC Rcd 12994 (WTB 2004) ............................................................................................................ 49 OTHER AUTHORITIES  Order Granting Preliminary Injunction, In re FiberTower Network Servs. Corp., et al., Debtors v. FCC, Adv. No. 12-4104 (Bank. N.D. Tex., Sept. 27, 2012) ............................................................................................. 11 * Cases and other authorities principally relied upon are marked with asterisks. USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 8 of 67 vii GLOSSARY Bureau or Wireless FCC’s Wireless Telecommunications Bureau Bureau FCC or Commission Federal Communications Commission GHz Gigahertz WCS Wireless Communications Service USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 9 of 67 IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT NO. 14-1039 FIBERTOWER SPECTRUM HOLDINGS, LLC, APPELLANT, V. FEDERAL COMMUNICATIONS COMMISSION, APPELLEE. ON APPEAL FROM ORDERS OF THE FEDERAL COMMUNICATIONS COMMISSION BRIEF FOR APPELLEE JURISDICTION The Federal Communications Commission (“FCC” or “Commission”) released its initial Order on May 7, 2013. See FiberTower Spectrum Holdings LLC, 28 FCC Rcd 6822 (2013) (JA 590-610) (“Order”). Appellant FiberTower Spectrum Holdings, LLC (“FiberTower”) sought administrative reconsideration, thereby tolling the period within which FiberTower was required to seek judicial review. E.g., Sw. Bell Tel. Co. v. FCC, 116 F.3d 593, 596-97 (D.C. Cir. 1997). The Commission denied FiberTower’s petition for reconsideration on February 27, 2014. See FiberTower Spectrum Holdings LLC, 29 FCC Rcd 2493 (2014) (JA 711-725) (“Reconsideration Order”). USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 10 of 67 2 FiberTower filed its notice of appeal in this Court on March 28, 2014. The Court has jurisdiction to review both the Order and the Reconsideration Order under 47 U.S.C. § 402(b)(5). QUESTIONS PRESENTED The Commission’s rules require licensees in the 24 GHz and 39 GHz spectrum bands to provide “substantial service” by the end of their ten-year license term, unless extended. If they do not, their licenses automatically cancel by operation of law. FiberTower held 689 licenses in the 24 GHz and 39 GHz bands for more than a decade, but when the deadline (which had been extended once) arrived to demonstrate substantial service, FiberTower was providing no service whatsoever. In the Order on appeal, the Commission rejected FiberTower’s substantial-service showings for each of those licenses, and denied its request to further waive or extend the deadline for demonstrating substantial service. The questions presented are: 1. Whether the Commission acted consistently with the Communications Act and its own rules when it found that FiberTower failed to provide substantial service under its licenses; and USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 11 of 67 3 2. Whether the Commission lawfully exercised its discretion to deny FiberTower’s requests to waive or extend the deadline for demonstrating substantial service. STATUTES AND REGULATIONS The pertinent statutory provisions and regulations are set forth in the addendum to this brief. COUNTERSTATEMENT I. STATUTORY AND REGULATORY FRAMEWORK The Communications Act of 1934, as amended, establishes a system for licensing the use of radio spectrum, vests in the Commission the exclusive authority to grant radio licenses, and provides that “no such license shall be construed to create any right, beyond the terms, conditions, and periods of the license.” 47 U.S.C. § 301. The Commission has authority under the Communications Act to “prescribe such restrictions and conditions, not inconsistent with law, as may be necessary to carry out the provisions of this chapter….” 47 U.S.C. § 303(r). For licenses awarded by auction, the Commission 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.” 47 U.S.C. § 309(j)(4)(B). USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 12 of 67 4 Consistent with Congress’s directive, the Commission has imposed “build-out” requirements on wireless licenses to ensure that spectrum is used effectively and that service is deployed rapidly. Those requirements differ across spectrum bands. Licenses in the 24 GHz and 39 GHz bands (the bands at issue in this case) are awarded for ten years, and the licensee must demonstrate “substantial service” in the area covered by the license at the time of renewal. Order, ¶ 3 (JA 591); 47 C.F.R. §§ 101.67, 101.17, 101.527.1 For the 24 GHz band, the Commission defined “substantial service” as “a service that is sound, favorable, and substantially above a level of mediocre service which might minimally warrant renewal.” 24 GHz Order, 15 FCC Rcd at 16951 (¶ 38). The Commission has applied the same definition to the 39 GHz band. See 39 GHz Order,12 FCC Rcd at 18623-26 (¶¶ 41-50). As the Commission has explained, this broad standard “permit[s] flexibility in system design and market development” while “ensuring that service is being provided to the public.” Id., 12 FCC Rcd at 18624 (¶ 46); see 1 The FCC has licensed the 24 GHz and 39 GHz bands for point-to-point, point-to-multipoint, and multipoint-to-multipoint fixed wireless technologies. Licensees in the 39 GHz band are also permitted to offer mobile services. See Amendments to Parts 1,2,87 and 101 of the Commission’s Rules to License Fixed Services at 24 GHz, 15 FCC Rcd 16934 (2000) (“24 GHz Order”); Amendment of the Commission’s Rules Regarding the 37.0-38.6 GHz and 38.6-40.0 GHz Bands, 12 FCC Rcd 18600 (1997) (“39 GHz Order”). USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 13 of 67 5 id., 18624 (¶¶ 41-42), 18625 (¶ 47); 24 GHz Order, 15 FCC Rcd at 16951 (¶ 38). Licensees in the 24 GHz and 39 GHz bands can satisfy the substantial- service requirement if they comply with one of the “safe harbors” established by the Commission. 24 GHz Order, 15 FCC Rcd at 16951 (¶ 38). Those safe harbors include “a showing of four links[2] per million population within a service area or service to an area that has very limited access to either wireless or wireline telecommunications services.” Id.; see 39 GHz Order, 12 FCC Rcd at 18625 (¶ 46). “[T]his list is not exhaustive,” and “the substantial service requirement can be met in other ways.” 24 GHz Order, 15 FCC Rcd at 16951-52 (¶ 38); see 39 GHz Order, 12 FCC Rcd at 18624-25 (¶ 46). To demonstrate substantial service, a 24 GHz licensee must, “at a minimum, provide the Commission with a description of its current service in terms of geographic coverage and population served or links installed” on a license-specific basis. 24 GHz Order, 15 FCC Rcd at 16953 (¶ 42); see 47 C.F.R. § 101.527. This requirement “ensure[s] that the licensee is using the spectrum efficiently to provide service to the public.” 24 GHz Order, 15 FCC Rcd at 16953 (¶ 42). The Commission’s rules similarly require 39 GHz 2 A “microwave link” is a “communications circuit between two points.” See 47 C.F.R. § 101.3. USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 14 of 67 6 licensees to provide, for each license, a “description of [its] current service in terms of geographic coverage,” a “description of [its] current service in terms of population served,” and a “description of [its] investments in its system(s),” including the “type of facilities constructed and their operational status.” 47 C.F.R. § 101.17. If the holder of a 24 GHz or 39 GHz license fails to demonstrate “substantial service,” the license automatically cancels by operation of law. See 47 C.F.R. §§ 101.17(b), 101.527(c); 24 GHz Order, 15 FCC Rcd at 16951 (¶ 38). However, where a wireless licensee shows that its “failure to meet the construction or coverage deadline is due to involuntary loss of site or other causes beyond its control,” the Commission can extend the construction period. See 47 C.F.R. § 1.946(e)(1). The Commission also may waive the rules associated with wireless licenses, including construction deadlines, where either (1) “[t]he underlying purpose of the rule(s) would not be served or would be frustrated by application to the instant case, and that grant of the requested waiver would be in the public interest;” or (2) “[i]n view of the unique or unusual circumstances of the instant case, application of the rule[s] would be inequitable, unduly burdensome, or contrary to the public interest, or the applicant has no reasonable alternative.” 47 C.F.R. § 1.925(b)(3)(i),(ii). USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 15 of 67 7 II. FACTUAL BACKGROUND At the time of the Order, FiberTower provided wireless backhaul service to more than 5,000 customer locations in thirteen markets throughout the United States. Order, ¶ 2 (JA 590-591). Wireless backhaul service transports voice and data from a wireless carrier’s cell site (i.e., a tower) to its local switch (i.e., the computer that routes voice and data traffic), and between the local switch and the carrier’s larger nationwide network. Id. FiberTower provided those services using more than 3,000 microwave licenses in the 11, 18, and 23 GHz bands. Id. FiberTower also held 635 licenses in the 39 GHz band and 103 licenses in the 24 GHz band. This case involves 689 of FiberTower’s 738 licenses in the 24 GHz and 39 GHz bands. A. The 2008 And 2010 Extensions In October 2006, ART Licensing (a wholly owned subsidiary of FiberTower) sought waivers of and extensions of time to comply with the substantial-service requirement set forth in section 101.17 of the FCC’s rules for 214 of its 39 GHz licenses. See ART Licensing Corp., 23 FCC Rcd 14116, 14118-20 (¶¶ 5-8) (WTB 2008) (“FiberTower MO&O”). The licenses, which FiberTower acquired through a 2006 merger, had been awarded in 1996 and 1997. Id., 11418 (¶ 4). As such, the deadline for demonstrating substantial service was then fast approaching. In the alternative, FiberTower asked the USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 16 of 67 8 Commission to find that it had demonstrated substantial service for all 214 of the subject licenses. Id., 14120-21 (¶¶ 9-11). Upon review, the FCC’s Wireless Telecommunications Bureau concluded that FiberTower satisfied the substantial-service requirement for 31 of the 214 licenses. Id., 14122-23 (¶ 13). In the areas covered by the 183 remaining licenses, FiberTower “ha[d] not constructed any 39 GHz links.” Id., 14123 (¶ 14). FiberTower conceded that fact, but asserted that “non- license-specific” activities, such as “establishing billing systems” and “back office systems to support national operations,” satisfied the substantial- service requirement. Id. The Wireless Bureau disagreed, holding that “in the absence of any actual operation of…stations,” those activities “cannot support a finding of substantial service.” Id. The Wireless Bureau nonetheless concluded that an extension would “be in the public interest” based on the Bureau’s anticipation that FiberTower could provide a potential “backhaul solution” for licensees in spectrum bands that had recently been auctioned, licensed, or put into use (i.e., the 700 MHz, Advanced Wireless Service-1, and Broadband Radio Service/Educational Radio Service bands). Id., 14126 (¶ 20). Predicting that “services in these bands would develop robustly,” the Wireless Bureau extended the deadline to USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 17 of 67 9 construct FiberTower’s 39 GHz licenses until June 1, 2012. Id., 14125-26 (¶¶ 20-21). Two years later, FiberTower asked the Wireless Bureau to extend the construction deadline for its licenses in the 24 GHz band to June 1, 2012, commensurate with the deadline extension granted for its licenses in the 39 GHz band. The Wireless Bureau granted that request on October 7, 2010. See FiberTower Spectrum Holdings LLC, 27 FCC Rcd 13562, 13653 (¶ 4) (WTB 2012) (“Bureau Order”) (JA 469).3 B. The Bureau Order On May 14, 2012, FiberTower sought an additional three-year extension of time (until June 1, 2015) to demonstrate substantial service for 689 of its licenses in the 24 GHz and 39 GHz spectrum bands.4 See Bureau Order, ¶ 5 (JA 469). Alternatively, FiberTower sought a “limited waiver” of the substantial-service deadline to allow the same. See id. In support of its requests, FiberTower argued that “circumstances beyond its control” had prevented it from providing substantial service by the then-applicable 3 In 2009 and 2011, the Wireless Bureau similarly extended the deadline to construct FiberTower’s other 39 GHz licenses to June 1, 2012. 4 Months later, FiberTower filed a supplement that purported to reduce its extension request to 18 months. See Order, ¶ 5 (JA 592-593). USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 18 of 67 10 deadline, notably “a lack of a national market for microwave backhaul and access service,” and “a continuing lack of viable equipment.” Id. Two weeks after filing its extension and waiver requests, FiberTower submitted construction notifications that purported to demonstrate substantial service for the 689 24 GHz and 39 GHz licenses. Like FiberTower’s 2008 extension request, those notifications asserted that FiberTower had demonstrated substantial service through activities antecedent to build-out, such as “designing and proposing network builds,” and “engaging in equipment development.” Id., ¶ 6 (JA 470). While its extension and waiver requests were pending before the FCC, FiberTower filed a petition for relief under Chapter 11 of the Bankruptcy Code.5 Order, ¶ 7 (JA 593-594). FiberTower’s licenses in the 11, 18, 23, 24, and 39 GHz bands were at issue in the bankruptcy proceeding. Id. On FiberTower’s request, the bankruptcy court granted a preliminary injunction that enjoined the Commission from “granting, transferring, assigning, or selling FiberTower’s 24 GHz and 39 GHz licenses to any entity other than 5 In re FiberTower Services Corp. et al., Case No. 12-44027-DML-11 (Bankr. N.D. Tex.). USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 19 of 67 11 FiberTower or FiberTower’s designee” pending FiberTower’s exhaustion of its administrative and judicial remedies.6 In a November 7, 2012 Order, the Wireless Bureau rejected the substantial-service showing FiberTower had filed for each of its 689 licenses. Bureau Order, ¶¶ 19-22 (JA 473-474). The Wireless Bureau held that the service requirements for 24 GHz and 39 GHz licenses “presume[] construction of at least some facilities and some sort of actual service”; thus, the “antecedent activities” relied upon by FiberTower, which “d[id] not involve construction of any facilities whatsoever,” could not satisfy that standard. Id., ¶ 22 (JA 474). The Wireless Bureau also denied FiberTower’s request for an extension of time, holding that FiberTower failed to demonstrate that circumstances beyond its control prevented it from constructing its licenses. See id., ¶¶ 23- 30 (JA 475-478); 47 C.F.R. § 1.946(e)(1). The Wireless Bureau found that FiberTower was not impeded by a lack of demand for wireless backhaul 6 Order Granting Preliminary Injunction, In re FiberTower Network Servs. Corp., et al., Debtors v. FCC, Adv. No. 12-4104 (Bank. N.D. Tex., Sept. 27, 2012). The bankruptcy court made clear that nothing in its order “shall stay or otherwise affect proceedings before the Commission, adjudicatory or otherwise, or stay or otherwise affect any appeal from any order of the Commission which proceedings or appeals precede the transfer, assignment or sale of the FCC Licenses to any entity other than Debtors or Debtors’ assignee or designee.” USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 20 of 67 12 given record evidence showing that the wireless backhaul market “ha[d] been developing steadily” and that FiberTower “ha[d] been an active provider of wireless backhaul services” using its licenses in the 11, 18, and 23 GHz bands. Id. ¶ 25 (JA 475-476); see id., ¶ 32 (JA 479). The Wireless Bureau separately found that FiberTower did not face an equipment shortage, citing hundreds of substantial-service showings filed by FiberTower and other licensees and FiberTower’s own “acknowledge[ment] that it ha[d] acquired a substantial amount of commercially viable network equipment for deployment in the 24 GHz and 39 GHz bands.” Id., ¶ 27 & n.79 (JA 476- 477). Finally, the Wireless Bureau denied FiberTower’s request to waive the June 1, 2012 substantial-service deadline. Id., ¶¶ 31-34 (JA 478-480). The Wireless Bureau held that providing FiberTower more than the 11-15 years it had already had to construct its 24 GHz and 39 GHz licenses would be inconsistent with the underlying purpose of the substantial service requirement, “which is to ensure meaningful construction of licenses and to prevent warehousing of spectrum.” Id., ¶ 32 (JA 479). It further held that requiring FiberTower to demonstrate substantial service was not unduly burdensome or contrary to the public interest because “[o]ther licensees…buil[t] out their licenses,” and FiberTower’s own estimate of the USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 21 of 67 13 cost to construct all of the licenses (about $10-$12 million) “[wa]s a fraction” of the $300 million that FiberTower purportedly spent to acquire licenses and develop facilities in the 24 GHz and 39 GHz bands. Id., ¶ 33 (JA 479-480). In denying FiberTower’s requests, the Wireless Bureau emphasized that its decision “d[id] not affect any of the licenses that FiberTower uses currently to provide service to customers; those licenses remain in full force and effect.” Id., ¶ 35 (JA 480). The Wireless Bureau also clarified that it “w[ould] take no action to reassign the spectrum covered under [the subject licenses] to any applicant” while the bankruptcy court’s preliminary injunction remained in effect. Id., ¶ 37 (JA 481). Nevertheless, FiberTower’s Chapter 11 reorganization plan was contingent on maintaining its 24 GHz and 39 GHz licenses. Order, ¶ 33 (JA 605-606). In light of the Wireless Bureau’s denial of the company’s waiver and extension requests, FiberTower ceased all operations on April 30, 2013 after reaching a transition agreement with its wireless backhaul customers. Id., ¶ 12 (JA 596-597) C. The Commission Order On December 7, 2012, FiberTower asked the full Commission to reverse the Wireless Bureau’s denial of its extension and waiver requests and its rejection of FiberTower’s substantial-service showings. USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 22 of 67 14 In a May 7, 2013 Order, the Commission upheld the Wireless Bureau’s finding that FiberTower had not demonstrated substantial service under the FCC’s rules. Order, ¶¶ 38-40 (JA 608-609). Having “explicitly approved” the Wireless Bureau’s interpretation of substantial service to require the construction of some facilities, the Commission “reject[ed] FiberTower’s attempt to collaterally attack existing Commission policy,” which the Commission found the Wireless Bureau applied correctly in FiberTower’s case. Id., ¶ 39 (JA 608-609). The Commission also affirmed the Wireless Bureau’s denial of FiberTower’s extension request. Order, ¶¶ 18-23 (JA 599-602). The Commission found that “the explosive growth in demand for mobile broadband services since 2008,” combined with FiberTower’s failure to build out its 24 GHz and 39 GHz licenses even in “markets where [it] had existing customers and demand for its services,” undercut FiberTower’s claim that a lack of demand for wireless backhaul should excuse the June 1, 2012 construction deadline. Id., ¶ 19 (JA 599-600). And like the Wireless Bureau, the Commission found no record support for FiberTower’s claim that it lacked access to viable equipment, noting that FiberTower’s own pleadings asserted that the company “ha[d] more than 400 24 GHz systems sitting in its warehouse,” and that it had “purchased sufficient equipment to build another USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 23 of 67 15 44 [39 GHz] links…, with an option to purchase equipment to build another 210 links.” Id., ¶ 21 (JA 600). Finding that “FiberTower’s other explanations d[id] not withstand scrutiny,” the Commission concluded that FiberTower did not construct its licenses for “financial reasons.” Id., ¶ 23 (JA 601-602). A declaration by FiberTower’s president filed in the bankruptcy proceeding stated that the “capital expenditures” needed to satisfy the substantial-service requirement “were prohibitive due to [FiberTower’s] inability to raise capital.” Id.7 Explaining that its rules “expressly prohibit granting an extension when the failure to construct was caused by a lack of financing,” the Commission affirmed the Wireless Bureau’s determination that FiberTower was not eligible for an extension of time to construct its licenses. Id.; 47 C.F.R. § 1.946(e)(2). Additionally, the Commission found no merit to FiberTower’s claim that the company was similarly situated to licensees that had received extensions of time to complete construction. Order, ¶¶ 24-29 (JA 602-605). 7 See Declaration of Kirk Van Waganen in Support of Chapter 11 Petitions and First Day Motions, In re FiberTower Network Services Corp. et. al., Case No. 12-440027-DML-11 (Bankr. N.D.Tex.) (filed July 17, 2012) ¶¶ 19-21 (JA 257-258) (explaining that after FiberTower received “termination notices” from two large customers, “expenditures were limited to on-going operations with capital investment restricted to projects with short-term paybacks”). USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 24 of 67 16 The Commission held that those cases were distinguishable from this one, where there was “a viable market, equipment, and technology that would have allowed FiberTower to build,” and no “flaw in the [FCC’s] rules” that would have “hindered deployment.” Id., ¶ 25 (JA 602-603). Finally, the Commission affirmed the Wireless Bureau’s denial of FiberTower’s waiver request. Id., ¶¶ 30-37 (JA 605-608). The Commission rejected as “inappropriate” FiberTower’s argument that, by avoiding relicensing delays, grant of a waiver “would actually result in more expeditious use of the spectrum.” Id., ¶ 34 (JA 606). Because “[a]ny licensee” could make this argument, the Commission “would never enforce buildout requirements” under this standard – a “result” that “would remove any incentive licensees had to meet the buildout deadlines” in the FCC’s rules. Id. Nor was the Commission persuaded by FiberTower’s argument that absent a waiver, the substantial-service requirement would have “forced [it] to build ‘inefficient stop-gap systems with no commercial viability.’” Id., ¶ 36 (JA 607). Unlike recipients of prior staff-level waivers, which had faced the choice of “deploy[ing] stop-gap equipment or build[ing] nothing,” FiberTower had “constructed facilities” and enjoyed “a customer base, experience providing wireless backhaul services, and access to equipment.” Id. USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 25 of 67 17 D. The Reconsideration Order FiberTower filed a timely petition for administrative reconsideration of the Order. On February 17, 2014, the Commission denied that petition because it “raise[d] claims that either could have and should have been raised at an earlier stage in the proceeding, or repeat[ed] claims that the Commission has thoroughly considered and rejected.” Reconsideration Order, ¶ 11 (JA 714-715); see 47 C.F.R. § 1.106(b)(2). The Commission further found that the petition failed to demonstrate “any material error” in the Order. Id. The Commission observed that “[w]henever [it] imposes buildout requirements, there is always a possibility that some licensees will not meet those requirements, and they will have to suffer the consequences of that failure.” Id., ¶ 29 (JA 722-723). “Here,” where “FiberTower had 11-15 years to demonstrate substantial service” but “chose not to build for financial reasons,” the Commission “believe[d] that a decision to grant FiberTower yet more time would constitute a failure of [its] processes.” Id. SUMMARY OF ARGUMENT The Commission reasonably determined that FiberTower had not complied with rules that require the holder of a 24 GHz or 39 GHz license to use that license to provide substantial service to the public by the end of the license term. FiberTower’s licenses were awarded as long as 15 years before USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 26 of 67 18 their eventual termination, yet the company never built facilities for those licenses, let alone initiated service to the public. No service is not service, much less substantial service. The Commission also appropriately exercised its discretion to deny waiver of the rules or extension of the deadline for demonstrating substantial service. Having already granted FiberTower one extension, the Commission reasonably determined that any public-interest benefits that would result from granting FiberTower additional relief were outweighed by the spectrum warehousing that could result from the agency’s failure to enforce its build-out requirements. 1. The Commission’s rules require licensees in the 24 GHz and 39 GHz spectrum bands to provide “substantial service” by the end of the license term. If they do not, their licenses automatically cancel by operation of law. The Commission reasonably balanced the objectives set forth in section 309(j)(4)(B) of the Communications Act, 47 U.S.C. § 309(j)(4)(B), when it promulgated that performance requirement. By providing licensees an incentive to construct their licenses and provide some service to the public by a date certain, the substantial-service rules promote the deployment of new technologies and services, ensure the delivery of service in rural areas, and prevent spectrum warehousing. USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 27 of 67 19 Before the Commission and this Court, FiberTower makes the extraordinary argument that a licensee that provides no service can satisfy the agency’s requirement that it provide substantial service. This argument finds no support in the statute or the Commission’s orders and rules. It also has been expressly rejected by the Commission on multiple prior occasions for being inconsistent with the agency’s longstanding goal of ensuring the prompt delivery of service to the public. Absent enforceable performance requirements that mandate license holders to deploy facilities and provide service, licensees like FiberTower could hold exclusive rights to spectrum indefinitely, without ever putting that spectrum to productive use. The Commission thus reasonably found that FiberTower’s investment in general activities such as research and development, without more, was insufficient to demonstrate substantial service. The Commission also correctly found that FiberTower had not demonstrated substantial service for each of the 689 licenses at issue here. 2. The Commission did not abuse its discretion when it denied FiberTower’s request for a waiver of the substantial-service rules. Indeed, policy considerations strongly militate against the grant of a waiver here: were the Commission to reward FiberTower’s voluntary business decision not to build out its licenses after granting a prior extension, the agency would USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 28 of 67 20 promote the type of spectrum warehousing that section 309(j)(4)(B) of the Communications Act and the substantial-service requirement seek to prevent. 3. Nor did the Commission abuse its discretion when it denied FiberTower’s request for an extension of time to comply with the substantial- service rules. FiberTower failed to demonstrate that it missed the substantial- service deadline due to circumstances beyond its control, such as lack of equipment or lack of demand for wireless backhaul service. Rather, as the Commission explained, FiberTower ran into financial difficulties – which under the FCC’s rules do not justify an extension of a construction deadline. 4. Finally, FiberTower failed to demonstrate that the Commission applied its waiver and extension policies inconsistently. The extensions upon which FiberTower relies were granted by the FCC’s staff, but a party cannot challenge a Commission order based on its alleged inconsistency with staff- level decisions. See Comcast v. FCC, 526 F.3d 763, 769 (D.C. Cir. 2008). In all events, the Commission reasonably explained that FiberTower was not similarly situated with the licensees that received staff-level extensions. Those decisions extended construction deadlines where all licensees in a spectrum band faced the choice of deploying antiquated equipment or deploying nothing at all. That was not the case here, where FiberTower had hundreds of commercial-grade 24 GHz systems sitting in its warehouse, and USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 29 of 67 21 FiberTower (along with several other licensees) had successfully demonstrated substantial service in the 39 GHz band. STANDARDS OF REVIEW FiberTower bears a heavy burden to establish that the Order on appeal is “arbitrary, capricious [or] an abuse of discretion.” 5 U.S.C. § 706(2)(A). Under this “highly deferential” standard, this Court presumes the validity of agency action. E.g., Nat’l Tel. Co-op. Ass’n v. FCC, 563 F.3d 536, 541 (D.C. Cir. 2009). The Court must affirm unless the Commission failed to consider relevant factors or made a clear error in judgment. E.g., Motor Vehicle Mfrs. Ass’n of the U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). This Court’s application of the arbitrary-and-capricious standard is particularly deferential when reviewing an agency decision declining to waive a generally applicable rule. “[R]eview of an agency’s denial of a waiver” may result in reversal “only when ‘the agency’s reasons are so insubstantial as to render that denial an abuse of discretion.’” Morris Commc’ns, Inc. v. FCC, 566 F.3d 184, 188 (D.C. Cir. 2009) (quoting BDPCS, Inc. v. FCC, 351 F.3d 1177, 1181-82 (D.C. Cir. 2003) (citation omitted)). Insofar as FiberTower challenges the Commission’s interpretation of USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 30 of 67 22 section 309(j)(4)(B) – a provision of the agency’s organic statute – the Court applies the framework of Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). E.g., City of Arlington, Texas v. FCC, 133 S. Ct. 1863, 1868 (2013). Under Chevron, the Court must first determine “whether Congress has directly spoken to the precise question at issue” and, if so, “give effect to the unambiguously expressed intent of Congress.” 467 U.S. at 842-43. When “the statute is silent or ambiguous” on the relevant issue, however, the Court should defer to the Commission’s “permissible construction of the statute.” Id. at 843; see Global Crossing Telecomms., Inc. v. FCC, 259 F.3d 740, 744 (D.C. Cir. 2001). Similarly, this Court gives a “high level of deference” to the Commission’s interpretation of its own orders and regulations. MCI Worldcom Network Servs., Inc. v. FCC, 274 F.3d 542, 548 (D.C. Cir. 2001); see Auer v. Robbins, 519 U.S. 452, 461 (1997). The Court accepts the agency’s interpretation “unless [it] is plainly erroneous or inconsistent with the regulations 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.” Rural Cellular Ass’n v. FCC, 685 F.3d 1083, 1093 (D.C. Cir. 2012) (quoting Talk Am., Inc. v. Mich. Bell Tel. Co., 131 S. Ct. 2254, 2261 (2011) (internal quotation marks, citations, and alteration omitted)). USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 31 of 67 23 ARGUMENT I. THE COMMISSION REASONABLY FOUND THAT FIBERTOWER HAD NOT SATISFIED THE SUBSTANTIAL-SERVICE REQUIREMENT FiberTower contends that the Commission erred when it interpreted its substantial-service rules to require 24 GHz and 39 GHz licensees to provide some actual service by the end of the license term. This argument, which is waived in part, lacks merit. The Commission’s interpretation of substantial service reasonably balances the various objectives in section 309(j)(4)(B) of the Communications Act. It also finds support in the Commission’s orders and rules. Applying this standard, the Commission correctly found that FiberTower failed to demonstrate substantial service for each of the 689 licenses at issue here. A. FiberTower’s Argument That The Commission’s Substantial-Service Rules Are Inconsistent With The Communications Act Is Not Properly Raised, And Is In Any Event Meritless For licenses awarded by auction, the Commission must promulgate “performance requirements, such as appropriate deadlines and penalties for performance failures,” to serve three goals: (1) “to ensure prompt delivery of service to rural areas,” (2) “to prevent stockpiling or warehousing of spectrum,” and (3) “to promote investment in and rapid deployment of new technologies and services.” 47 U.S.C. § 309(j)(4)(B). The Commission USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 32 of 67 24 complied with that mandate by adopting rules that require the holders of 24 GHz and 39 GHz licenses to demonstrate “substantial service” by the end of a ten-year license term. 47 C.F.R. §§ 101.17(a), 101.67 (39 GHz); 101.526, 101.527(a) (24 GHz). Under that standard, a licensee must show that it uses its license to provide a level of service “which is sound, favorable, and substantially above a level of mediocre service which just might minimally warrant renewal.” 47 C.F.R. §101.527(a); see 24 GHz Order, 15 FCC Rcd at 16951 (¶ 38). Both the Wireless Bureau and the Commission have explained that the substantial-service standard “presumes construction of at least some facilities and some sort of actual service.” Bureau Order, ¶ 22 (JA 474); see Order, ¶ 39 (JA 608-609); Amendment of Part 101 of the Commission’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 Licenses, 26 FCC Rcd 11614, 11660-61 (¶¶ 113-14) (2011) (“Wireless Backhaul Order”); id., 27 FCC Rcd 9735, 9772-73 (¶¶ 100-104) (2012) (“Wireless Backhaul 2nd R&O”). 1. FiberTower contends that interpreting the substantial-service requirement to mandate some construction “is at odds with Section 309(j)(4)(B).” Br. 28. FiberTower’s argument is not properly before the Court because it was not raised before the Commission. It is meritless, in any event. USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 33 of 67 25 Before the Commission, FiberTower argued that the Wireless Bureau’s interpretation of the substantial-service requirement had “a number of adverse consequences contrary to the public interest.” Order, ¶ 38 (JA 608) (citing FiberTower Application for Review at 20). It nowhere asserted that the interpretation was inconsistent with the statute. Because FiberTower never “mentioned” section 309(j)(4)(B), not “even in passing,” the full Commission “was [not] given a reasonable ‘opportunity to pass’ upon the argument” for purposes of section 405(a) of the Communications Act. Fresno Mobile Radio, Inc. v. FCC, 165 F.3d 965, 972 (D.C. Cir. 1999); 47 U.S.C. § 405(a) (providing that the filing of a petition for reconsideration with the FCC is a “condition precedent to judicial review” of any “questions of fact or law upon which the Commission…has been afforded no opportunity to pass”). FiberTower points only to a substantial-service showing filed with the Wireless Bureau, which argued that “[i]nformation regarding a license renewal applicant’s overall investment in its wireless network and service is…extremely important to determining whether the applicant has satisfied [the] substantial service requirement.” Br. 29 (citations omitted). But this statement nowhere raises the “statutory argument” in FiberTower’s brief, id., because it does not assert that accounting for network investment is required by section 309(j)(4)(B) or any other provision of the Communications Act. USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 34 of 67 26 Moreover, FiberTower cannot avoid section 405(a)’s bar by presenting a claim to the Wireless Bureau and not to the Commission. As this Court has held, “raising an issue before a designated authority is not enough to preserve it for review before this Court; a party must raise the issue before the Commission as a whole.” Environmentel, LLC v. FCC, 661 F.3d 80, 84 (D.C. Cir. 2011); see also Bartholdi Cable Co. Inc. v. FCC, 114 F.3d 274, 279 (D.C. Cir. 1997) (“[i]t is ‘the Commission’ itself that must be afforded the opportunity to pass”). FiberTower’s statutory argument is therefore barred by section 405(a). 2. Were the Court to reach FiberTower’s argument, it would fail. The Commission “enjoys broad discretion” when balancing statutory goals. Rural Cellular Ass’n v. FCC, 588 F.3d 1095, 1103 (D.C. Cir. 2009). The Commission’s substantial-service standard for 24 GHz and 39 GHz licensees reasonably balances the relevant statutory objectives set forth in section 309(j)(4)(B). To “promote investment in and rapid deployment of new technologies and services,” 47 U.S.C. § 309(j)(4)(B), the Commission eschewed “specific build-out benchmarks” that would require licensees to construct “a fixed number of links” per geographic area or population served at certain USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 35 of 67 27 milestones during the license term – every two years, for example.8 39 GHz Order, 12 FCC Rcd at 18623-24 (¶¶ 43-45); see also 24 GHz Order, 15 FCC Rcd at 16951 (¶ 37) (“this standard is sufficiently flexible to foster expeditious development and deployment of systems” in the 24 GHz band). The Commission instead permitted licensees to make “a showing tailored to their particular type of operation” at the time of renewal. 39 GHz Order, 12 FCC Rcd at 18623 (¶ 42). At the same time, “to ensure prompt delivery of service to rural areas” and “to prevent stockpiling or warehousing of spectrum by licensees,” 47 U.S.C. § 309(j)(4)(B), the Commission required licensees to demonstrate that they were providing “substantial service” by the end of the license term. 47 C.F.R. §§ 101.17, 101.527. “This approach,” the Commission explained, “will permit flexibility in system design and market development, while 8 See, e.g., 47 C.F.R. § 24.203(a) (providing that Personal Communication Service licensees “must serve with a signal level sufficient to provide adequate service to at least one-third of the population in their licensed area within five years of being licensed and two-thirds of the population in their licensed area within ten years of being licensed”); 47 C.F.R. § 90.665(c) (providing that Private Land Mobile Service licensees must, three years from the date of license grant, construct and place into operation a sufficient number of base stations to provide coverage to at least one-third of the population of the MTA; further, each MTA licensee “must provide coverage to at least two-thirds of the population of the MTA five years from the date of license grant”). USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 36 of 67 28 ensuring that service is being provided to the public.” 39 GHz Order, 12 FCC Rcd at 16951-52 (¶ 46). FiberTower claims that the Commission ignored the company’s “extensive research and development activities” and its “establishment of a national construction platform,” which in FiberTower’s view advanced the statutory objective of promoting “investment in new technologies and services.” Br. 29. See 47 U.S.C. § 309(j)(4)(B). The statute, however, looks not only to investment, but to “deployment” as well. Id. It also directs the Commission to “ensure prompt delivery of service to rural areas,” and to protect against “stockpiling or warehousing of spectrum by licensees.” Id. It follows that investment which does not lead to the deployment of new technologies or the delivery of service (to rural areas and otherwise) is insufficient to further the goals set forth in the statute. In fact, allowing licensees like FiberTower to hold their licenses indefinitely, without providing any service to the public, can have “deleterious effects on the development of mobile broadband” and other new services. Order, ¶ 37 (JA 607-608); see id., ¶¶ 34-35 (JA 606-607); Reconsideration Order, ¶ 26 (JA 721-722); Bureau Order, ¶¶ 32, 34 (JA 479, 480). Likewise, ignoring FiberTower’s decade-long failure to provide service would be inconsistent with section 309(j)(4)(B)’s directive that licensees meet USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 37 of 67 29 specified “performance requirements,” including “appropriate deadlines,” and face “penalties for performance failures.” 47 U.S.C. § 309(j)(4)(B). FiberTower contends that the Commission disregarded “investment in and rapid deployment of new technologies and services.” Br. 28-29. It did not. Even if the Commission made that objective subordinate to other section 309(j)(4)(B) objectives, however, that would be entirely permissible under this Court’s precedent. “When an agency must balance a number of potentially conflicting objectives…judicial review is limited to determining whether the agency’s decision reasonably advances at least one of those objectives and its decisionmaking process was regular.” Fresno Mobile Radio, 165 F.3d at 971; U.S. Airwaves, Inc. v. FCC, 232 F.3d 227, 234 (D.C. Cir. 2000) (“The Commission reasonably can treat fairness and integrity as ‘essential’ goals and yet…choose to sacrifice some degree of fairness or integrity in order to gain other important objectives.”). Conversely, the Commission was not required to exalt investment in new technologies and services over other statutory objectives, as FiberTower contends it must. B. The Commission Reasonably Interpreted Its Substantial-Service Rules To Require Construction Of Facilities And Provision Of Service To The Public In addition to its statutory argument, FiberTower also claims that “the Commission’s construction-only application of th[e] [substantial-service] USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 38 of 67 30 standard to FiberTower’s renewal request is irreconcilable with the rule as promulgated.” Br. 30. In FiberTower’s view, the “flexibility” provided by the substantial-service standard forecloses a construction requirement. Id., 37-40. FiberTower has mischaracterized Commission precedent: the FCC’s policies and rules provide licensees a great deal of flexibility in the timing and the amount of construction required to demonstrate substantial service, but those rules have never eliminated altogether the construction requirement. The Commission’s reasonable interpretations of its own rules and policies are entitled to special deference. Talk Am. Inc., 131 S. Ct. at 2261; Auer, 519 U.S. at 461. 1. In promulgating the substantial-service standard for the 39 GHz band in the 39 GHz Order, the Commission recognized that “the types of services available from 39 GHz providers is tremendously varied.” 39 GHz Order, 12 FCC Rcd at 18623 (¶ 42). To “permit flexibility in system design and market development,” id., 18623, 18624 (¶¶ 42, 46), the Commission decided not to apply the then-existing general requirement to construct one link within 18 months of licensure to this band, id., 18622 (¶¶ 39-40), and declined to replace it with “specific build-out benchmarks” that would require 39 GHz licensees to construct “a fixed number of links” per geographic area USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 39 of 67 31 or population served at certain temporal milestones during the license term, id., 18623-24 (¶¶ 43-45). However, waiving interim benchmarks is not the same as waiving a construction mandate altogether – and the Commission expressly declined to adopt the latter approach in the 39 GHz Order, 12 FCC Rcd 18626 (¶ 50) (“We are not persuaded by the arguments of some commenters that a build- out requirement should not be imposed because potential users of the 39 GHz band, such as broadband [Personal Communications Service] licensees, are subject to other construction requirements.”). Thus, while licensees are not required to satisfy pre-determined construction benchmarks, 39 GHz Order, 12 FCC Rcd at 18623-24 (¶¶ 43-45), they are required to demonstrate some construction “with a showing tailored to their particular type of operation” at the time of license renewal. Id.,18623 (¶ 42). The Commission then “review[s] licensees’ showings on a case-by-case basis,” 24 GHz Order, 15 FCC Rcd at 16952 (¶ 38), to determine whether the licensee has satisfied the substantial-service standard given the “particular type of service offered.” 39 GHz Order, 12 FCC Rcd at 18624-25 (¶ 46). That is precisely what occurred in FiberTower’s case. See Bureau Order, ¶¶ 19-22 (JA 473-474); Order, ¶¶ 38-40 (JA 608-609). USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 40 of 67 32 The Commission’s view of substantial service is firmly grounded in the text of the FCC’s substantial-service rules for 24 GHz and 39 GHz licensees. See 47 C.F.R. §§ 101.17; 101.527. Rule 101.527, which is entitled “Construction Requirements for 24 GHz Operations,” provides that “[e]ach licensee must, at a minimum file…[a] report, maps, and other supporting documents describing its current service in terms of geographic coverage and population served,” 47 C.F.R. § 101.527(b) (emphasis added). That rule also makes clear that the failure to demonstrate that “substantial service is being provided” will result in forfeiture of the license, 47 C.F.R. § 101.527(c) (emphasis added). Similarly, in demonstrating “substantial service,” 39 GHz licensees are required to provide, for each license, a “description of [its] current service in terms of geographic coverage,” a “description of [its] current service in terms of population served,” and a “description of [its] investments in its system(s),” including the “type of facilities constructed and their operational status.” 47 C.F.R. § 101.17 (emphasis added). In both bands, the Commission has suggested that a “substantial service showing…might consist of four links per million population within a service area.” 39 GHz Order, 12 FCC Rcd at 18625 (¶ 46); 24 GHz Order, 15 FCC Rcd at 16951 (¶ 38). With respect to 24 GHz licenses, the Commission also “consider[s] factors” such as whether there is “service” to (1) “niche USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 41 of 67 33 markets or…populations outside of areas serviced by other licensees,” (2) “populations with limited access to telecommunications services,” and (3) “a significant portion of the population or land of the licensed area.” 24 GHz Order, 15 FCC Rcd at 16951 (¶ 38). The fact that the list – which focuses on the licensee’s provision of “service” – may not be “exhaustive,” id., does not, however, demonstrate that the “substantial service” requirement can be satisfied by activities that result in no service at all. Nor is the Commission’s view inconsistent with the performance requirements that apply to other spectrum bands. The rules cited on pages 33- 34 of FiberTower’s brief merely list “substantial service” as an alternative to the specific build-out benchmarks described in each rule. See, e.g., 47 C.F.R. § 24.203(a) (“Licensees…must serve…at least one-third of the population in their licensed area within five years of being licensed and two-thirds of the population in their licensed area within ten years of being licensed” or “in the alternative, provide substantial service to their licensed area within the appropriate five- and ten-year benchmarks.”). In other words, “substantial service,” as used in those rules, does not waive construction of facilities or provision of service, it simply accords greater flexibility in the amount of construction and service required to satisfy the rules. See, e.g., Scott D. Reiter, 25 FCC Rcd 3974, 3979 (¶ 16) (2010) (for purposes of Rule USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 42 of 67 34 24.203(a), “demonstration of a level of coverage below the construction requirement benchmark when coupled with the provision of actual service can lend some support to a demonstration of substantial service”) (emphasis added).9 2. FiberTower further claims that the Commission’s substantial- service requirement is incompatible with the fact that “the vast majority of investment necessary to establish a nationwide backhaul network is required far in advance of the customer order and associated specific link builds.” Br. 36. But the substantial-service requirement “takes these practicalities into account.” 39 GHz Order, 12 FCC Rcd at 18625 (¶ 48). In promulgating the substantial-service requirement, the Commission “recognize[d] that licensees must have sufficient time…to develop market plans, secure necessary financing, develop and incorporate new technology in their systems, accommodate equipment manufacturers’ production schedules, 9 For similar reasons, FiberTower’s complaint that the Commission took no account of “‘just-finalized’ leases” and its “‘spectrum-in-a-box’ programs” misses the mark. Br. 43. FiberTower does not assert that the leases had resulted in service to the public, only that they “would” do so in the future. Id. Likewise, FiberTower represents only that its “‘spectrum-in-a-box’ programs” furnish “a platform capable of rapid expansion and deployment as demand materialized.” Id. The substantial-service standard requires a licensee to show that the spectrum covered by its license is actually being used to provide service to the public. Absent that demonstration, the activities described in FiberTower’s brief are not “evidence” of service. USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 43 of 67 35 and build a customer base,” i.e., the same types of activities described in FiberTower’s brief. Compare 39 GHz Order, 12 FCC Rcd at 18625 (¶ 48) with Br. 35-36. To give licensees “a sufficient opportunity to construct their systems,” which must be completed “far in advance of the customer order,” Br. 36, the Commission “combine[d] the showing[s] traditionally required for build-out and…renewal…into one showing at the time of renewal.” 39 GHz Report, 12 FCC Rcd at 18625 (¶ 47). In other words, rather than insisting on interim benchmarks, see n.8, above, the Commission accommodated 24 GHz and 39 GHz licensees’ investment and customer acquisition timelines by providing the full term of the license (a period of ten years) to complete the construction required to demonstrate substantial service. 3. FiberTower asserts that the Commission “changed course” when it affirmed the Wireless Bureau’s holding that substantial service requires the construction of some transmission links. Br. 37; see id., 39. That argument is baseless. In 2008, the Wireless Bureau expressly warned FiberTower that the “non-license-specific” activities it repeatedly describes in its brief “cannot support a finding of substantial service in the absence of any actual operation of [its] stations.” FiberTower MO&O, 23 FCC Rcd at 14123-24 (¶¶ 14-15). Later, the Commission “explicitly approved” the Wireless Bureau’s view, Order, ¶ 39 (JA 608-609), and declined to “modify [its] substantial service USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 44 of 67 36 rules and policies” to consider the standard satisfied by “preparatory activities…where there is no actual service being provided to the public.” Wireless Backhaul Order, 26 FCC Rcd at 11660-61 (¶¶ 113-14); see Wireless Backhaul 2nd R&O, 27 FCC Rcd at 9772-73 (¶¶ 100-104). Unsurprisingly then, FiberTower has not identified a single instance where a licensee in the 24 GHz and 39 GHz bands that provided no actual service was found to have satisfied the substantial-service requirement. Order, ¶ 39 (JA 608-609) (quoting Bureau Order, ¶ 22) (JA 474)).10 * * * * * The Commission’s rules for the 24 GHz and 39 GHz spectrum bands require substantial service to the public, not substantial investment by the licensee. FiberTower and its predecessors were given more than a decade to provide service to the public. FiberTower failed to provide any service whatsoever, so the Commission reasonably concluded that FiberTower’s investment – no matter how extensive – was by itself insufficient to satisfy the substantial-service requirement. 10 FiberTower further argues that it was “left to guess what [it] must do to ensure renewal of its licenses” because the substantial-service standard is “circular.” Br. 41-42. This claim is not credible given that the Commission repeatedly informed licensees in the 24 GHz and 39 GHz bands, including FiberTower, that a successful substantial-service demonstration requires the provision of some service to the public. See also 47 C.F.R. §§ 101.17, 101.527. USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 45 of 67 37 C. FiberTower’s Contention That It Constructed Links For 42 Of Its 689 Licenses Has Been Waived And In Any Event Does Not Demonstrate Substantial Service Independent of its complaints about the Commission’s interpretation of the substantial-service standard, FiberTower contends that the Order is based on the “material factual mistake” that “FiberTower had not engaged in any construction or any actual service.” Br. 22. This argument is waived and lacks merit in any event. 1. FiberTower claims that the Commission erred in finding that the company failed to provide substantial service for 42 of its 689 24 GHz and 39 GHz licenses. Br. 7 n.3 & 43. In making this assertion, FiberTower relies on the “separate substantial-service showing” it filed for each of its licenses, which (the company contends) demonstrated that it “had links built and operating for at least 28 of the 24 GHz licenses and at least 14 of the 39 GHz licenses at issue.” Id., 43; see id., 7 n.3. FiberTower asserts that the Commission “entirely overlooked that evidence.” Id., 43. But to call the Commission’s attention to those showings – and to preserve this issue for appeal – FiberTower had to present this argument in its application for review to the Commission. Environmentel, 661 F.3d at 84; 47 C.F.R. § 1.115(k). It did not. As the Commission explained, FiberTower’s application for review “d[id] not identify the specific USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 46 of 67 38 license areas that the Bureau’s order improperly terminated nor detail the facilities that FiberTower had constructed in them.” Order, n.133 (JA 606). Instead, FiberTower merely asserted generally 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. FiberTower Application for Review at 23 (filed Dec. 7, 2012) (JA 560). It is well settled that the Commission “need not sift pleadings and documents to identify arguments that are not stated with clarity by a petitioner.” Bartholdi Cable, 114 F.3d at 279.11 And section 1.115(b)(1) of the FCC’s rules quite clearly provides that “[t]he application for review shall concisely and plainly state the questions presented for review.” 47 C.F.R. § 1.115(b)(1). FiberTower’s generic and ambiguous reference to “a significant amount of construction,” without any identification as to which licenses this applied, did not provide the Commission a sufficient “opportunity to pass” on the argument FiberTower now presses before this Court. Environmentel, 661 F.3d at 84; Qwest Corp. v. FCC, 482 F.3d 471, 478 (D.C. Cir. 2007). 11 FiberTower filed 689 exhibits (i.e., one for each license). Each exhibit was approximately 20 pages in length. USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 47 of 67 39 “Confronted only with” the “broad claim” that the company had engaged in some (unidentified) construction with regard to some of its (unspecified) licenses, “the Commission had no notice of” FiberTower’s “specific objections” regarding the 42 licenses identified in its brief. U.S. Airwaves, 232 F.3d at 236. Litigants “‘may not sandbag agencies by withholding legal arguments…until they reach the courts of appeal,’” Id. (quoting USAir, Inc. v. Dept. of Transp., 969 F.2d 1256, 1260 (D.C. Cir. 1992)). FiberTower should therefore be held to have waived its argument that the Commission erred in rejecting the company’s substantial-service showings for those 42 licenses. 2. Were the Court to reach the merits, FiberTower’s argument would still fail. As the Commission explained in the Order, “substantial service must be demonstrated on a license-by-license basis,” so “the relevant test is whether there was any service using the spectrum included in the license, rather than a general expenditure for network infrastructure in a license area.” Order, ¶ 39 n.155 (JA 608-609). FiberTower did not pass that test, because in both its substantial-service filings and its application for review, it claimed only that it had constructed facilities in the areas served by the 42 licenses, without further demonstrating the extent of those facilities or that those USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 48 of 67 40 facilities served customers or provided internal service.12 But that was its burden. See 47 C.F.R. §§ 101.17, 101.527. II. THE COMMISSION REASONABLY DENIED FIBERTOWER’S REQUEST FOR A WAIVER OF THE SUBSTANTIAL-SERVICE RULES FiberTower claims that even if it was not providing service, it was entitled to a waiver of the substantial-service requirement. The Commission’s decision to deny FiberTower’s waiver is entitled to great deference, Morris Commc’ns, Inc., 566 F.3d at 188, and FiberTower has failed to demonstrate that the Commission abused its substantial discretion. A. The Commission Reasonably Held That Granting FiberTower’s Waiver Request Would Discourage Compliance With The Agency’s Construction Requirements To obtain a waiver of the performance requirements in sections 101.17 and 101.527 of the Commission’s rules, FiberTower was required to demonstrate that: “(i) “[t]he underlying purpose of the rule(s) would not be served or would be frustrated by application to the instant case, and that a 12 See, e.g., FiberTower Application for Review at 23 (“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.”) (JA 560); Construction Notification for License WMF846 (filed May 31, 2012), Attachment A at 8 (“As of the date of this filing, FiberTower currently has one link built and operating at a seminary in the St. Louis, Missouri, metropolitan area, the geographic area of this license.”) (JA 211). USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 49 of 67 41 grant of the requested waiver would be in the public interest,” or (ii) “[i]n view of unique or unusual factual circumstances of the instant case, application of the rule(s) would be inequitable, unduly burdensome or contrary to the public interest, or the applicant has no reasonable alternative.” 47 C.F.R. § 1.925(b)(3). FiberTower failed both prongs of this test, and the Commission reasonably denied its waiver request. 1. When FiberTower filed its waiver request, the company had already received extensions of time (until June 1, 2012) to demonstrate substantial service for its 24 GHz and 39 GHz licenses. Those extensions were based on the Wireless Bureau’s belief that wireless broadband services in newly licensed and auctioned spectrum bands would increase demand for FiberTower’s wireless backhaul services. See FiberTower MO&O, 23 FCC Rcd at 14125-26 (¶¶ 20-21). The Wireless Bureau’s prediction materialized: Commission data showed “considerable deployment of wireless broadband” following the grant of the earlier extensions. Bureau Order, ¶ 32 (JA 479). Yet FiberTower still had not built out the vast majority of its 24 GHz and 39 GHz licenses; instead, with the June 1, 2012 deadline approaching, it sought another extension or waiver of the substantial-service requirement. Given that FiberTower declined to construct facilities even though market conditions were favorable, Order, ¶¶ 22, 36 (JA 600-601, 607), the Commission had USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 50 of 67 42 little assurance that FiberTower would construct facilities if provided additional relief. The Commission thus reasonably found that waiving the substantial-service rules in FiberTower’s case “would be inconsistent with the underlying purpose of the substantial-service requirement,” which is to “provide a clear and expeditious accounting of spectrum use by licensees to ensure that service is indeed being provided to the public.” Order, ¶ 34 (JA 606) (internal quotation marks omitted); see Bureau Order, ¶ 32 (JA 479). The Commission also upheld the Wireless Bureau’s conclusion that FiberTower failed to satisfy the second prong of the waiver standard. Order, ¶ 35 (JA 606-607). Notwithstanding “the investment and activities it had undertaken,” FiberTower (unlike other licensees) made “the [business] decision not to build out its licenses” when the time came to demonstrate substantial service. Id.; see id., ¶ 23 (JA 601-602); Bureau Order, ¶ 33 (JA 479-480); Reconsideration Order, ¶ 29 (JA 722-723). The Commission found “nothing inequitable or unduly burdensome” in requiring FiberTower to “buil[d] out those licenses if it wanted to keep them.” Order, ¶ 35 (JA 606- 607). The Commission’s determination was especially reasonable given that the amount required to construct facilities capable of demonstrating substantial service (which FiberTower estimated to be $10-$12 million) USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 51 of 67 43 “[wa]s a fraction of the approximately $300 million” FiberTower claimed to have already spent on the licenses. Bureau Order, ¶ 33 (JA 479-480); see Order, ¶ 35 (JA 606-607). 2. FiberTower claims the Commission “ignored evidence” that “FiberTower was the licensee in the best position to build out a robust, nationwide wireless backhaul network capable of supporting mobile broadband operations,” Br. 47; id., 48-49, and “dismissed the benefits to the public interest from these activities,” id., 52-53. But FiberTower “cannot satisfy the public interest requirement…merely by ‘equat[ing] its own business interest with the public interest.’” Omnipoint Corp. v. FCC, 213 F.3d 720, 724 (D.C. Cir. 2000) (quoting BellSouth Corp. v. FCC, 162 F.3d 1215, 1225 (D.C. Cir. 1999)). Irrespective of its professed expertise and investment, FiberTower failed to provide any service – much less substantial service – prior to the June 1, 2012 deadline, even though that deadline was itself the result of a lengthy prior extension. The Commission reasonably concluded that FiberTower’s latest promise to build out its licenses was “insufficient” and too “speculative” to justify a waiver. Order, ¶ 37 (JA 607-608); see Reconsideration Order, ¶¶ 26-27 (JA 721-722). As important, the Commission found that any public interest benefits resulting from FiberTower’s latest promise to provide service were USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 52 of 67 44 outweighed by the “disincentives to timely buildout” created by granting a waiver request that lacked “adequate justification.” Order, ¶ 37 (JA 607-608). “Here,…FiberTower had 11-15 years to demonstrate substantial service” yet “it chose not to build for financial reasons.” Reconsideration Order ¶ 29 (JA 722-723). If the Commission were to credit FiberTower’s “after-the-fact promise[]” to construct facilities, FiberTower and other licensees “would no longer have any incentive to meet the original buildout deadline because they could obtain an extension by promising to build a system in the near future.” Reconsideration Order, ¶ 26 (JA 721-722); see Order, ¶ 34 (JA 606); Bureau Order, ¶ 34 (JA 480). This would “delay…service to carriers and the public,” which the Commission found is “not in the public interest.” Reconsideration Order, ¶ 26 (JA 603). According to FiberTower, the Commission’s “concern” that grant of a waiver would undermine the agency’s build-out requirements “misses the mark,” because it allegedly “conflates what a licensee claims with what a licensee proves about market conditions and its ability to build.” Br. 50. Before the agency, however, FiberTower failed to prove that “market conditions,” or any other factor, hindered its ability to demonstrate substantial service for the subject licenses. Order, ¶ 22 (JA 600-601). Instead, the Commission found that FiberTower’s failure to construct its licenses was USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 53 of 67 45 attributable to “financial reasons,” specifically, its “inability to raise capital.” Id., ¶ 23 (JA 601-602). FiberTower further asserts that the Commission erred in considering its “voluntary business decisions” in denying a waiver. Br. 50-51. But this Court has specifically found that “[t]he FCC rightly refuses to grant waivers when [a licensee’s] action is ‘the sort [its] rules are intended to deter.’” Delta Radio, Inc. v. FCC, 387 F.3d 897, 903 (D.C. Cir. 2004) (quoting BDPCS, 351 F.3d at 1182). That is certainly the case here, where granting a waiver to a licensee that “ma[de] the voluntary business decision not to build out a license before the applicable construction deadline” would “eviscerate the Commission’s construction requirements.” Bureau Order, ¶ 34 (JA 480); see Order, ¶¶ 34, 37 (JA 606, 607-608). Nor was there any basis to credit FiberTower’s “self-imposed hard deadline” as evidence of its “readiness to fulfill any substantial-service obligation.” Br. 50. Having twice failed to comply with the deadline in the Commission’s rules, the agency was not persuaded that FiberTower would USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 54 of 67 46 meet its own deadline if given a third opportunity to demonstrate substantial service. See Bureau Order, ¶ 34 (JA 480); Order, ¶¶ 34-37 (JA 606-608).13 FiberTower argues that the reasoning behind the Commission’s denial of its waiver request eliminates the possibility of waiver in every case. Br. 45- 47. Not so. As this Court has recognized, an agency’s “refusal to grant” any specific waiver “does not necessarily mean that the Commission has created a ‘no-waiver’ policy.” BellSouth, 162 F.3d at 1225; see also Delta Radio, 387 F.3d at 901 (FCC’s denial of appellant’s waiver request did not “‘trump[]’ the possibility of granting waivers altogether”). Both the Commission and the Wireless Bureau denied FiberTower’s waiver request based on the specific facts of its situation – in particular, FiberTower’s failure to provide substantial service despite prior extensions and its “business decision” to service its debt rather than build out its licenses. See Order, ¶¶ 30-37 (JA 605-607); Bureau Order, ¶¶ 31-34 (JA 478-480); Reconsideration Order, ¶¶ 26, 29 (JA 721- 722, 722-723). Had circumstances been different, FiberTower might have been eligible for a waiver. Indeed, the Wireless Bureau had previously granted FiberTower additional time to construct its 39 GHz and 24 GHz 13 Notwithstanding FiberTower’s asserted expertise with wireless backhaul, Br. 48-50, there was “no guarantee that FiberTower would be able to provide service” when the company emerged from bankruptcy because its debt holders made no “commitment to provide funding for FiberTower’s proposed small cell network.” Reconsideration Order, ¶ 26 (JA 721-722). USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 55 of 67 47 licenses in 2008 and 2010, respectively, based on a different set of facts then present. See FiberTower MO&O, 23 FCC Rcd at 14125-26 (¶¶ 20-21); Bureau Order ¶ 3 (JA 468-469). Finally, the Commission did not “ignore[] its ‘obligation…to minimize conflict between its policies…and the bankruptcy statutes.’” Br. 51 (quoting In the Matter of Martin W. Hoffman, 12 FCC Rcd 5224, 5229 & n.9 (1997)). The Bankruptcy Code does not require the Commission “to act in a manner that would ‘unduly interfere’ with the Commission’s mandate to ensure that licenses are ‘used and transferred consistently with the Communications Act.’” Bureau Order ¶ 36 (JA 481) (quoting LaRose v. FCC, 494 F.2d 1145, 1146 n.2 (D.C. Cir. 1974)). It follows that the Commission was not obligated to provide FiberTower “an additional extension of time” in this case, where the grant of relief would have interfered with the agency’s “duty to provide a ‘clear and expeditious accounting of spectrum use by licensees to ensure that service is being provided to the public.’” Id. (quoting Wireless Backhaul 2nd R&O, 27 FCC Rcd at 9773-74 (¶ 104)). For the same reason, the Commission did not “dismantl[e]” FiberTower. Br. 51. FiberTower suffered a self-inflicted wound by making its “Chapter 11 reorganization plan…contingent upon…maintaining its 24 and 39 GHz licenses.” Order ¶ 10 (JA 596). That voluntary business decision USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 56 of 67 48 forced FiberTower to cease operations after the Wireless Bureau denied its waiver and extension requests. Order ¶ 33 (JA 605-606). The Commission reasonably found that it should not be required to “abandon the important policy interests behind [its] buildout requirements” simply “to accommodate FiberTower’s financial choices.” Id. B. The Commission Did Not Treat FiberTower Differently Than Similarly Situated Licensees FiberTower contends that the Commission’s denial of its waiver was inconsistent with the agency’s treatment of similarly situated licensees. Br. 54-59. This argument is baseless. Before the agency, and again in this Court, FiberTower relies almost exclusively on staff-level decisions granting waivers and extensions of the Commission’s build-out requirements. Id. However, it is well established that “an agency is not bound by the actions of its staff if the agency has not endorsed those actions.” Comcast, 526 F.3d at 769 (internal quotation marks and citations omitted); see Eagle Broad. Group, Ltd. v. FCC, 563 F.3d 543, 554 (D.C. Cir. 2009). A litigant must point to conflicting Commission-level decisions to establish a claim of discriminatory treatment by the agency. In any event, FiberTower’s reliance on the agency’s staff-level decisions is unavailing because FiberTower is not similarly situated to the licensees that received waivers and extensions in those cases. USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 57 of 67 49 The staff-level decisions discussed on pages 54-55 and 60 of FiberTower’s brief14 involved extensions of construction deadlines where “the choice all licensees faced was to either deploy stop-gap equipment or build nothing.” Order ¶ 36 & n.142 (JA 607); see Bureau Order ¶ 28 & n.83 (JA 477). That was not the case in the 24 GHz and 39 GHz bands, where the record showed that FiberTower and other licensees had successfully built out licenses. FiberTower, for example, “had constructed facilities as early as 2008.” Order ¶ 36 (JA 607); see id., ¶ 21 (JA 600). It also “had a customer base, experience providing wireless backhaul services, and access to equipment.” Order ¶ 36 (JA 607). Furthermore, the Commission’s records 14 In Consolidated Request for Limited Waiver of Construction Deadline for 132 WCS Licenses, 21 FCC Rcd 14134, 14139-40 (¶ 10) (WTB 2006), “participation by almost all of the licensees in the [Wireless Communications Service] industry in th[e] proceeding” demonstrated “that the technical and equipment challenges in this band [were] widespread,” which justified an extension of the applicable construction deadline for all licensees. Likewise, in Warren C. Havens, 19 FCC Rcd 12994, 13000-01 (¶ 15) (WTB 2004), an extension was warranted because “[t]he two companies that originally manufactured…equipment” for the 220 MHz band “no longer d[id] so,” which “frustrated licensees’ efforts to meet the [Commission’s] construction requirements.” Finally, in FCI 900, Inc., 16 FCC Rcd 11072, 11077 (¶ 7) (WTB 2001), the Wireless Bureau extended the applicable construction deadline for all 900 MHz Major Trading Area licensees by 16 months because “digital voice equipment w[ould] not be commercially available in sufficient quantities in time to meet the five-year construction deadline” in the Commission’s rules. USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 58 of 67 50 showed that “[s]ystems utilizing many other 39 GHz band licenses ha[d] been successfully constructed.” Id. FiberTower complains that the Commission should not have relied on the construction of other 39 GHz systems, because there was no evidence “that those systems were anything other than save-builds,” rather than “commercially viable links.” Br. 55. But in reaching its conclusion, the Commission relied in part on “FiberTower’s own actions and admissions” – specifically, that “FiberTower met the substantial service requirements for a number of its 39 GHz systems as early as 2008,” Reconsideration Order ¶ 15 (JA 716-717); see Order ¶ 36 (JA 607), and had “built commercial grade systems at 24 GHz.” Reconsideration Order ¶ 15 & n.49 (JA 716-717). Moreover, FiberTower failed to show that the systems deployed by other 39 GHz licensees were actually inferior “save-builds.” Br. 55. Before the Commission, FiberTower’s “evidence” largely consisted of a single substantial-service filing made by another 39 GHz licensee (IDT) in 2011, which FiberTower submitted with its petition for administrative reconsideration of the Order. See FiberTower Petition for Reconsideration at 5-9, Exs. A-B (filed June 6, 2013) (JA 620-624, 640-651). After finding that FiberTower “could have provided this or comparable data earlier in the proceeding,” the Commission held that FiberTower’s evidence concerning USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 59 of 67 51 IDT was barred from consideration under the agency’s procedural rules. Reconsideration Order ¶ 17 (JA 718); 47 C.F.R. § 1.106(b)(2).15 Considering FiberTower’s submission on the merits, the Commission found it “so vague” that it left the agency “unable to reach any conclusion about the sufficiency of IDT’s buildout.” Reconsideration Order ¶ 16 (JA 717). The Commission could only surmise that “IDT constructed facilities prior to the [substantial-service] deadline, and FiberTower did not.” Id. IDT’s substantial-service showing also “sa[id] nothing” about whether IDT built its systems by choice or out of necessity. Id. Only the latter could justify a waiver under the staff-level precedent cited in FiberTower’s brief, however. See p.49, above. The Commission’s treatment of Wireless Communications Service (“WCS”) licensees also is distinguishable. Br. 57-58. WCS licensees received an extension of time to construct their licenses because “there were broader 15 Section 1.106(b)(2) of the FCC’s Rules provides: “[w]here the Commission has denied an application for review, a petition for reconsideration will be entertained only if one or more of the following circumstances are present: (i) [t]he petition relies on facts or arguments which relate to events which have occurred or circumstances which have changed since the last opportunity to present such matters to the Commission; or (ii) [t]he petition relies on facts or arguments unknown to petitioner until after his last opportunity to present them to the Commission, and he could not through the exercise of ordinary diligence have learned of the facts or arguments in question prior to such opportunity.” 47 C.F.R. § 1.106(b)(2). USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 60 of 67 52 issues with the service rules that delayed or prevented deployment in those bands.” Order ¶ 25 (JA 602-603); see Reconsideration Order ¶ 21 (JA 719). Specifically, “certain technical specifications…may have inadvertently hindered the ability of licensees to deploy mobile broadband services.” Reconsideration Order, ¶ 21 (JA 719). After the Commission made adjustments to accommodate mobile broadband deployment, it “restart[ed] the construction period…to give [WCS] licensees time to develop equipment under the revised technical rules.” Id. A similar flaw is not present in the service rules for the 24 GHz and 39 GHz bands. See id.; Order ¶ 25 (JA 602- 603). Because extension requests were granted WCS licensees and denied FiberTower on entirely different grounds, the fact that WCS licensees held their licenses longer than FiberTower is wholly irrelevant. Br. 58-59. III. THE COMMISSION REASONABLY DENIED FIBERTOWER’S REQUEST FOR AN EXTENSION OF THE DEADLINE TO DEMONSTRATE SUBSTANTIAL SERVICE As an alternative to its request for a waiver, FiberTower asked for a three-year extension of the substantial-service deadline for its 24 GHz and 39 GHz licenses, which the company later purported to reduce to 18 months. The Commission affirmed the Wireless Bureau’s denial of that request, finding that FiberTower had not shown that its failure to meet the deadline was “due to involuntary loss of site or other causes beyond its control,” as USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 61 of 67 53 required by the Commission’s rules. Order ¶ 18 (JA 599) (citing 47 C.F.R. § 1.946(e)(1)). Based on evidence that “the use of microwave for wireless backhaul was increasing,” FiberTower “was an active provider of wireless backhaul services,” and “that there had been considerable deployment of wireless broadband since FiberTower received its last extension in 2008,” Order ¶ 19 (JA 599-600), the Commission reasonably affirmed the Wireless Bureau’s “conclu[sion] that the state of the wireless backhaul market was not a valid reason to grant an extension.” Id., ¶ 22 (JA 600-601). FiberTower claims that just because “the need for wireless backhaul generally has grown significantly since 2008,” it “does not follow” that “there was a viable market for wireless backhaul in the 24 and 39 GHz bands everywhere in the Nation.” Br. 60-61. If that was the case, FiberTower should have identified the specific markets where demand lagged. It did not. Moreover, FiberTower failed to build out its 24 GHz and 39 GHz licenses even in “markets where [it] had existing customers and demand for its services” using its 11, 18, and 23 GHz licenses, which “demonstrate[d]” to the Commission “that FiberTower’s failure to build…was in fact a voluntary USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 62 of 67 54 business decision,” not the result of lackluster demand for wireless backhaul service. Order ¶ 19 (JA 599-600); see Bureau Order ¶ 25 (JA 475-476).16 FiberTower’s reliance on the Wireless Bureau’s grant of an extension of the substantial-service deadline to 2 Lightspeed LP is equally misplaced. Br. 61-63. As set forth above, p.48, FiberTower cannot rely on staff-level decisions to set forth a claim of discrimination. See Comcast, 526 F.3d at 769. And even if that decision could be relevant to a discrimination claim, both the Wireless Bureau and the Commission explained why FiberTower was not similarly situated to the licensee that received an extension in that case. See Bureau Order ¶ 29 (JA 479); Order ¶ 26 (JA 603). 2 Lightspeed had “built out the majority of its licenses” but was “impeded” from meeting the substantial- service deadline “when one of the two key partners in the venture was medically incapacitated.” Bureau Order ¶ 29 (JA 478). In requesting an extension, 2 Lightspeed explained how “the partner’s medical incapacity played a role in [its] ability to build out all of its licenses.” Id., ¶ 29 & n.90 (JA 478). Contrast that with FiberTower, which “made no attempt to 16 FiberTower contends that “[a]ny pre-2006 inactivity…should not be attributed to [it]” because it “had not acquired any of the licenses at issue until 2006.” Br. 57. But the Commission’s rules expressly provide that “[e]xtension requests will not be granted for failure to meet a construction or coverage deadline because the licensee undergoes a transfer of control.” 47 C.F.R. § 1.946(e)(3). USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 63 of 67 55 construct the vast majority of its licenses prior to the June 1, 2012 [substantial-service] deadline” and did not even mention the departure of its Senior Vice President of Network Operations and its Chief Financial Officer in its April 30, 2012 extension request. Order ¶ 26 (JA 603). FiberTower first raised that issue in a September 20, 2012 supplement, which still “provided no information about the circumstances under which those employees left” nor explained “how the departure of those employees affected its ability to meet its substantial-service requirements.” Id.; see Bureau Order ¶ 29 (JA 478). FiberTower’s assertion that these distinctions are immaterial strains credulity. Br. 62. FiberTower claims that it constructed “a far great number of licenses overall” and “proposed an extension schedule that was far more aggressive than 2 Lightspeed’s.” Id. A far greater number of FiberTower’s licenses (more than 600) also remained unconstructed (versus four for 2 Lightspeed). Bureau Order (¶ 29) (JA 478). Granting an extension to FiberTower thus would have created a more serious conflict with the Commission’s goal of “ensur[ing] that service is being provided to the public” than granting an extension to 2 Lightspeed. Order ¶ 34 (JA 606). Further, while 2 Lightspeed explained that the departure of its principal stymied construction because of the company’s relatively small size, USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 64 of 67 56 FiberTower simply made the conclusory statement that “[t]hese departures…had a significant, negative impact on FiberTower’s ability to meet its substantial service-deadline.” Supplement 4 at 8 (JA 428). Without more, this explanation, like “FiberTower’s other explanations[,] d[id] not withstand scrutiny” and “c[ould not] form the basis for justifying an extension.” Order ¶ 23 (JA 601-602). CONCLUSION For the reasons set forth herein, the appeal should be dismissed in part and otherwise denied on the merits. Respectfully submitted, JONATHAN B. SALLET GENERAL COUNSEL DAVID M. GOSSETT ACTING DEPUTY GENERAL COUNSEL JACOB M. LEWIS ASSOCIATE GENERAL COUNSEL /s/ Maureen K. Flood MAUREEN K. FLOOD COUNSEL FEDERAL COMMUNICATIONS COMMISSION WASHINGTON, D.C. 20554 (202) 418-1740 December 1, 2014 USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 65 of 67 IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT FIBERTOWER SPECTRUM HOLDINGS, LLC, APPELLANT, v. FEDERAL COMMUNICATIONS COMMISSION, APPELLEE. NO. 14-1039 CERTIFICATE OF COMPLIANCE Pursuant to the requirements of Fed. R. App. P. 32(a)(7), I hereby certify that the accompanying Brief for Appellee in the captioned case contains 11,891 words. /s/ Maureen K. Flood Maureen K. Flood Counsel Federal Communications Commission Washington, D.C. 20554 (202) 418-1740 (Telephone) (202) 418-2819 (Fax) December 1, 2014 USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 66 of 67 IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT FIBERTOWER SPECTRUM HOLDINGS, LLC, ) APPELLANT ) ) v. ) No. 14-1039 ) FEDERAL COMMUNICATIONS COMMISSION, ) APPELLEE ) CERTIFICATE OF SERVICE I, Maureen K. Flood, hereby certify that on December 1, 2014, I electronically filed the foregoing FINAL Brief for Appellee with the Clerk of the Court for the United States Court of Appeals for the D.C. Circuit by using the CM/ECF system. Participants in the case who are registered CM/ECF users will be served by the CM/ECF system. Hyland Hunt Harry F. Cole Pratik A. Shah Fletcher, Heald & Hildreth Akin Gump Strauss Hauer & Feld 1300 N. 17th Street 1333 New Hampshire Avenue, N.W. Suite 1100 Washington, D.C. 20036 Arlington, VA 22209 Counsel for: FiberTower Spectrum Counsel for: Fixed Wireless Holdings, LLC Communications Coalition, Inc. Joseph M. Sandri Douglas I. Brandon Winstar Communications, Inc. McCaw Cellular Communications, 1615 L Street, N.W. Inc. Suite 1260 1150 Connecticut Ave. N.W. Washington, D.C. 20036 4th Floor Counsel for: FiberTower Spectrum Washington, D.C. 20036 Holdings, LLC Counsel for: FiberTower Spectrum Holdings, LLC /s/ Maureen K. Flood USCA Case #14-1039 Document #1524727 Filed: 12/01/2014 Page 67 of 67