APPEALS COURT HEARS CASE ON FCC'S CANCELLATION OF PCS LICENSES
U.S. Appeals Court, D.C., peppered attorneys for PCS bidder 21st Century Telesis and FCC Tues. on timing and notice requirements of automatic cancellation of carrier’s 19 licenses. 21st Century lost 19 PCS licenses after missing Jan. 27, 2000, late payment deadline, resulting in automatic cancellation under FCC rules. Carrier argued it should have had hearing before its licenses were cancelled and that condition stipulating automatic cancellation for nonpayment exceeded Commission’s statutory authority. But FCC attorney Stanley Scheiner argued that agency had to have such regulatory discretion on what happened in cases where bidders “abrogate” auction victories by not paying: “What they are saying is quite remarkable, because they are saying we can’t have a rule at all.”
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Much of 21st Century Telesis’s arguments focused on due process claims in cancellation of its licenses. PCS carrier said automatic license cancellation policy went against Sec. 312 of Communications Act, which requires FCC notification when licenses are modified. Aside from contending generally that its 5th Amendment due process rights were violated, 21st Century said Commission went against due process by failing to provide adequate notice of amounts company was required to pay after it restructured installment payment program for troubled PCS bidders in 1998. FCC, on other hand, contended that licenses had “express condition” that automatic cancellation would occur if payments weren’t made by end of 2nd of 2 automatic 90-day grace periods. Commission said it began sending payment notices to affected licensees when installment payment program was restructured and loan agreements changed, but that those restructured loan agreements themselves also made clear timing and amount of payments. FCC said conditioning licenses on ability to pay installment payments on time wasn’t covered under Sec. 312 and didn’t pose “the sort of individual and fact-intensive question” that would warrant evidentiary hearing. Judges Judith Rogers, Raymond Randolph and Stephen Williams heard arguments.
“The FCC had absolutely no statutory authority to revoke the licenses automatically,” Russell Lukas, attorney for 21st Century, told court Tues. He stressed that to revoke licenses in such cases, FCC must issue order to show cause and must show in hearing why cancellation should take place. “The Commission tries to misdirect the case by saying we are trying to challenge the timely payment condition,” Lukas said. “We are challenging the sanction that is imposed when the Commission attempts to impose a condition.”
But Scheiner countered that to argue Commission could cancel license only when there was hearing “and otherwise has no ability to effect a cancellation is too much. It means a license can’t be conditioned.” Part of arguments centered on procedural grounds on issues raised by 21st Century in petition for reconsideration, including in motion to file supplemental information. Petition for reconsideration has to present entire case and can’t be gauged to whether bureau or full Commission will handle it because that’s up to Commission decide at which level decision is to be made, Scheiner said. Sec. 405 of Communications Act covers time limits under which complete case must be made, he said. Judge Williams underscored importance of timeliness factor, casting it as potential threshold issue. Citing timing of when carrier would have exhausted its avenues for relief at FCC, he said to Lukas: “You may have lost out at that stage.” FCC’s Scheiner later said that when petition for reconsideration challenging license cancellation was presented to FCC it didn’t raise argument on lack of hearing. Such issues were presented outside of time limits of Sec. 405 in supplemental filing, he said. Scheiner said it wasn’t clear whether 21st Century missed payment deadline “because of a lack of notice or because it didn’t have the money.”
Judge Rogers questioned how FCC took public interest considerations into account as part of automatic cancellation decision. Carrier had sought waiver of FCC’s automatic cancellation provisions after licenses cancelled automatically in Jan. 2000. Missed payment was sufficient for licenses to cancel, after which waiver was sought, Scheiner said. When declining to grant waiver for that condition, Commission decided it wouldn’t be in public interest, he said. Cancellation occurred at end of 2nd 90- day grace period. Rogers questioned why Sec. 312 process requirements weren’t involved when license awarded at auction was cancelled. Scheiner said that rather than adjudicatory rulemaking, FCC had rulemaking in which it determined “what will happen unilaterally and to everyone” when conditions weren’t met.
Randolph questioned timing of challenge and supplemental material filed by 21st Century. He asked at which point 30- day clock to file petition for reconsideration began running after request for waiver of cancellation conditions was denied. Scheiner said FCC entertained waiver request even though it was made after licenses had cancelled. Judges also questioned details on what kinds of notice Commission provided to 21st Century on penalties for nonpayment. Lukas told court that 21st Century made repeated efforts -- without avail -- to contact FCC to clarify exact amount that was due before final payment deadline of Jan. 27, 2000. Lukas told reporters after hearing that discrepancies in what 21st Century owed vs. amounts in FCC public notices were off by as much as $80,000 at different times. “If they had responded, 21st Century may have been able to get the money together, although it was doubtful,” Lukas said. FCC’s Scheiner told court that 21st Century had acknowledged in past that if there was some ambiguity about amount owed, carrier must go by figure in public notice.
C-block licenses ultimately revoked by FCC from 21st Century were part of Jan. 2001 PCS re-auction of NextWave and other licenses that generated nearly $17 billion in bids. Following that auction, 21st Century Telesis had filed challenge to licenses won by Northcoast Communications, DCC PCS, MCG PCS II and Salmon PCS. Carrier urged FCC to deny granting those licenses until it had resolved its pending challenge, but Commission rejected that request. Automatic cancellation provisions of FCC’s former installment payment regime also were one of key issues in pending NextWave litigation, on which U.S. Supreme Court is expected to rule in next few months. While NextWave case involves intersection of bankruptcy law and Communications Act, 21st Century case doesn’t involve Chapter 11 proceeding. In NextWave case, govt. argued that missed payment was regulatory trigger for automatic cancellation but that FCC studied other public interest factors when deciding not to make exception for NextWave.