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FREEMAN ENGINEERING ASSOCIATES v. FEDERAL COMMUNICATIONS COMMISSION AND UNITED STATES AMERICA </h1> <p class="docCourt"> </p> <p> January 7, 1997 </p> <p class="case-parties"> <b>FREEMAN ENGINEERING ASSOCIATES, INC., ET AL., APPELLANTS/PETITIONERS<br><br>v.<br><br>FEDERAL COMMUNICATIONS COMMISSION AND UNITED STATES OF AMERICA, APPELLEES/RESPONDENTS</b><br><br> </p> <div class="caseCopy"> <div class="facLeaderBoard"> <script type="text/javascript"><!-- google_ad_client = "ca-pub-1233285632737842"; /* FACLeaderBoard */ google_ad_slot = "8524463142"; google_ad_width = 728; google_ad_height = 90; //--> </script> <script type="text/javascript" src=""> </script> </div class="facLeaderBoard"> <div class="numbered-paragraph"><p><br> Appeal and Petitions for Review of Orders of the Federal Communications Commission</p></div> <div class="numbered-paragraph"><p> Before: Ginsburg, Sentelle and Rogers, Circuit Judges.</p></div> <div class="numbered-paragraph"><p> Sentelle, Circuit Judge</p></div> <div class="numbered-paragraph"><p> FOR PUBLICATION</p></div> <div class="numbered-paragraph"><p> FOR THE DISTRICT OF COLUMBIA CIRCUIT</p></div> <div class="numbered-paragraph"><p> Argued November 12, 1996</p></div> <div class="numbered-paragraph"><p> US WEST, Inc., et al.,</p></div> <div class="numbered-paragraph"><p> Intervenors</p></div> <div class="numbered-paragraph"><p> Consolidated with Nos. 95-1055, 95-1060, 95-1065, 95-1074</p></div> <div class="facAdFloatLeft"> <script type="text/javascript"><!-- google_ad_client = "ca-pub-1233285632737842"; /* FACContentLeftSkyscraperWide */ google_ad_slot = "1266897617"; google_ad_width = 160; google_ad_height = 600; //--> </script> <script type="text/javascript" src=""></script> </div class="facLeaderBoard"> <div class="numbered-paragraph"><p> Opinion for the Court filed by Circuit Judge Sentelle.</p></div> <div class="numbered-paragraph"><p> Five appellants/petitioners appeal from and seek review of a Federal Communications Commission ("FCC" or "Commission") order which dismissed their applications for "pioneer's preferences." Appellants/ petitioners claim that the dismissal of their applications was not only arbitrary and capricious, but was also influenced by improper ex parte contacts. As an initial matter, we conclude that these claims are properly before us as timely filed petitions for review. Upon considering the petitions, we grant one and deny the rest.</p></div> <div class="numbered-paragraph"><p> I. Background</p></div> <div class="numbered-paragraph"><p> Until the early 1990s, the FCC employed only lotteries and comparative hearings to assign licenses for radio communications services. Concerned that innovation was being stifled by the uncertainty of this licensing process, the FCC adopted "pioneer's preference" rules in 1991. Establishment of Procedures to Provide a Preference to Applicants Proposing an Allocation for New Services, 6 F.C.C.R. 3488, 3492 Para(s) 32 (1991) [hereinafter Pioneer's Preference Order]. Under these rules, an applicant that demonstrates "that it (or its predecessor-in-interest) has developed an innovative proposal that leads to the establishment of a service not currently provided or a substantial enhancement of an existing service" may receive a pioneer's preference when the Commission adopts rules governing the new or enhanced service. 47 C.F.R. 1.402(a). A preference "effectively ... guarantee[s] the innovating party a license in the new service (assuming it is otherwise qualified) by permitting the recipient of a pioneer's preference to file a license application without being subject to competing applications." Pioneer's Preference Order, 6 F.C.C.R. at 3492 Para(s) 32. A party that does not receive a pioneer's preference may obtain a license for the relevant service only by competing on a separate track with other applicants for the remaining licenses. The Commission expected that this revised licensing process, by giving preferential treatment to telecommunications pioneers, would "help to ensure that innovators have an opportunity to participate either in new services that they take a lead in developing or in existing services to which they wish to apply new technologies." Id. at 3488 Para(s) 1.</p></div> <div class="numbered-paragraph"><p> When the Commission adopted the pioneer's preference rules, it explained that "the key determinant of whether a pioneer's preference would be awarded is the degree to which a proposed service or technology is "new' or "novel.' " Id. at 3493 Para(s) 43. An applicant "must demonstrate ... that it (or its predecessor-in-interest) has developed the capabilities or possibilities" of a new service or technology "or has brought them to a more advanced or effective state." 47 C.F.R. Section(s) 1.402(a). Elaborating on this point, the Commission indicated that it would not award a preference for a new technology that is not "associated with a licensable service." Pioneer's Preference Order, 6 F.C.C.R. at 3492 37. In addition, the applicant "must accompany its preference request with either a demonstration of the technical feasibility of the new service or technology or an experimental license application, unless [such an] application has previously been filed for that new service or technology." 47 C.F.R. Section(s) 1.402(a). Finally, a pioneer's preference will be granted "only where [FCC] rules, as adopted, are a reasonable outgrowth of the [applicant's] proposal and lend themselves to the grant of a preference." Id.</p></div> <div class="numbered-paragraph"><p> The Commission has applied its pioneer's preference rules to a number of services, including personal communications services ("PCS"). PCS is a family of mobile or portable radio communications services "that free individuals from the constraints of the telephone wire and allow them to send and receive communications while away from their homes or offices." Adams Telecom, Inc. v. FCC, 38 F.3d 576, 579 (D.C. Cir. 1994). The Commission has divided the PCS family into two service categories: (1) narrowband (900 MHz) PCS, and (2) broadband (2 GHz) PCS.</p></div> <div class="numbered-paragraph"><p> The appellants/petitioners in this case-QUALCOMM Incorporated ("QUALCOMM"); Advanced MobilComm Technologies, Inc. jointly with Digital Spread Spectrum Technologies, Inc. ("AMT/DSST"); Freeman Engineering Associates, Inc. ("Freeman"); Viacom International, Inc. ("Viacom"); and Advanced Cordless Technologies, Inc. ("ACT")-filed pioneer's preference applications in the initial PCS rulemaking proceeding, GEN Docket No. 90-314. The Commission received a total of ninety-six preference requests in this proceeding. The GEN Docket proceeding was eventually reserved for broadband PCS preference requests. A separate proceeding, ET Docket No. 92-100, was established for narrowband PCS pioneer's preference applications.</p></div> <div class="numbered-paragraph"><p> In November 1992, the Commission released its tentative decision concerning the pioneer's preference requests filed in the broadband proceeding. Amendment of the Commission's Rules to Establish New Personal Communications Services: Tentative Decision and Memorandum Opinion and Order, 7 F.C.C.R. 7794 (1992) [hereinafter Tentative Decision]. In the Tentative Decision, the Commission affirmed a decision by the Commission staff to dismiss thirty-nine preference applications for failure to provide the information required by the pioneer's preference rules. Id. at 7809-13 WW 37-49. The Commission also tentatively decided to grant pioneer's preferences to American Personal Communications ("APC"), Cox Enterprises, Inc. ("Cox"), and Omnipoint Communications, Inc. ("Omnipoint"). Id. at 7797-7804 WW 6-23.</p></div> <div class="numbered-paragraph"><p> The Commission's Tentative Decision also reached tentative conclusions with respect to appellants'/petitioners' pioneer's preference applications. As to ACT's proposal, the Commission first noted that ACT's proposed CT-2 service was a "candidate[] for the 900 MHz spectrum proposed in the Notice for narrowband PCS." Id. at 7806 Para(s) 27. The Commission then concluded that ACT's proposal was not innovative in that CT-2 service had already been developed and "implemented in various parts of the world." Id. Thus, the Commission tentatively denied ACT's preference request. Id. Freeman's preference request was tentatively denied for failure to "demonstrate the feasibility of the technology." Id. at 7805 Para(s) 25. The Commission tentatively rejected Viacom's preference application on the ground that it was not innovative, but rather was merely a "compilation[] or aggregation[] of existing communications technologies or systems." Id. at 7805 Para(s) 26. As for AMT/DSST's proposal, the Commission recognized that it appeared "innovative," but deemed it unworthy of a preference for two reasons. First, AMT/DSST had not developed its technology "to the point of field testing." Id. at 7807 Para(s) 30. Further, the spectrum scheme AMT/DSST proposed was "substantially different than that which [the Commission] proposed." Id. Finally, the Commission tentatively rejected QUALCOMM's preference request on the grounds that its proposed technology was "essentially ... identical to that which it already ... developed for use in the 800 MHz cellular bands" and that it had not "developed and tested 2 GHz equipment." Id. at 7807 Para(s) 32.</p></div> <div class="numbered-paragraph"><p> Several months later, on July 23, 1993, the Commission released its order in the narrowband proceeding. Amendment of the Commission's Rules to Establish New Narrowband Personal Communications Services: First Report and Order, 8 F.C.C.R. 7162 (1993) [hereinafter First R&O]. ACT's preference request was denied in this order for the same reasons set forth in the Tentative Decision. First R&O at 7176 Para(s) 82. ACT petitioned for reconsideration of this order on November 3, 1993, seventy-three days after the deadline for seeking reconsideration had passed. The Commission rejected the reconsideration petition as untimely. Amendment to the Commission's Rules to Establish New Narrowband Personal Communications Services: Memorandum Opinion and Order, 9 F.C.C.R. 1309, 1317 (1994).</p></div> <div class="numbered-paragraph"><p> In the meantime, the Commission received numerous comments concerning its Tentative Decision. After receiving these comments, the Commission issued an order granting broadband pioneer's preferences to APC, Cox, and Omnipoint. Amendment of the Commission's Rules to Establish New Personal Communications Services: Third Report and Order, 9 F.C.C.R. 1337, 1339 (1994) [hereinafter Third R&O]. The Commission denied the remaining preference requests in the broadband proceeding. Id. at 1349-73 WW 81-301. Freeman's application was again denied for lack of "feasibility." Id. at 1365 Para(s) 221. The Commission denied AMT/DSST's application for "incompatib[ility] with the spectrum scheme adopted" as well as lack of "technical feasibility." Id. at 1359 WW 165-66. Viacom's application was denied on the ground that it was merely a "compilation[] of existing technologies." Id. at 1373 Para(s) 301. As for QUALCOMM, the Commission recognized that it had, in fact, done work at 2 GHz, but nonetheless concluded that no preference should be granted because the work was merely an adaptation of existing technology. Id. at 1369-70 Para(s) 266. ACT's pioneer's preference application was not mentioned in the Third R&O.</p></div> <div class="caseAdCopy"> <script type="text/javascript"><!-- google_ad_client = "ca-pub-1233285632737842"; /* Fac2Copy2 */ google_ad_slot = "0998899327"; google_ad_width = 300; google_ad_height = 250; //--> </script> <script type="text/javascript" src=""> </script> </div> <div class="numbered-paragraph"><p> AMT/DSST and QUALCOMM petitioned for reconsideration of the Third R&O. Freeman and Viacom did not. The Commission denied the petitions for reconsideration filed by AMT/DSST and QUALCOMM for the same reasons set forth in the Third R&O. Amendment of the Commission's Rules to Establish New Personal Communications Services: Memorandum Opinion and Order, 9 F.C.C.R. 7805, 7808 Para(s) 14, 7811 Para(s) 35 (1994) [hereinafter Reconsideration Order]. Though ACT's preference application was not mentioned in the Third R&O, it too petitioned for reconsideration of the order. The Commission rejected ACT's petition for reconsideration on the ground that ACT was "merely again seeking reconsideration of the denial of its preference [request] in the First R&O." Id. at 7807. All five parties appealed from and petitioned for review of the Commission's orders.</p></div> <div class="numbered-paragraph"><p> II. Analysis</p></div> <div class="numbered-paragraph"><p> A. Jurisdiction</p></div> <div class="numbered-paragraph"> <p> The Commission contends that we are without jurisdiction to hear the claims raised by ACT and Viacom because their petitions for review were untimely filed. Section 402(b) of the Communications Act provides that a party whose application for a license has been denied by the FCC may appeal to this court, as may a person aggrieved by the Commission's decision to grant or deny the license. 47 U.S.C. Section(s) 402(b). Such appeal must be taken "within thirty days from the date upon which public notice is given of the decision or order complained of." Id. Section(s) 402(c). As to any Commission order that is not appealable under Section(s) 402(b), a petition for review may be filed under Section(s) 402(a) to "enjoin, set aside, ...</p> </div> </div> </div> <div id="caseToolTip" class="caseToolTip" style="display: none;"> <div class="toolTipHead"> </div> <div class="toolTipContent"> <p> Our website includes the first part of the main text of the court's opinion. To read the entire case, you must purchase the decision for download. 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