D.C. Circuit (Mostly) Favors FCC in Satellite Spectrum Auction Dispute

NTCH’s petition for review was denied by a D.C. Circuit panel ruling per curiam. NTCH is a competitor of Dish Network and had attempted to challenge three FCC decisions it alleged were unfairly favorable to Dish. NTCH is represented by Fletcher, Heald & Hildreth.

The court noted the three actions that NTCH opposed.  First, the FCC “‘modified’ Dish Network Corporation’s licenses in the ‘Advanced Wireless Services-4 Band’…to authorize the company to develop a stand-alone terrestrial network that could support wireless broadband services”; second, the FCC “‘waived’ certain technical restrictions on these modified licenses, though it conditioned the waivers on Dish’s commitment to bid a certain sum of money in a public auction for adjacent spectrum in the so-called ‘H-Block’; and third, the FCC “designed and conducted ‘Auction 96,’ in which Dish bid as promised and won the H Block licenses.”

While the court rejected review of the first and third actions, the court conceded that “the Commission wrongly dismissed NTCH’s challenges to the waiver orders for lack of administrative standing” and remanded for review.   

The shift and modification of the AWS-4 spectrum band were critical for the development of wireless broadband in the United States, the court recounted.  While the band was originally allocated to satellite communications providers, the FCC opened AWS-4 spectrum to use with terrestrial communications networks over time, as satellite technology fell out of favor.  Simultaneously, the FCC took measures to protect satellite systems who had previously used the spectrum.  

NTCH’s challenges arise from what it viewed as “a ‘backroom deal’ amounting to a ‘cash-for-waiver quid pro quo’” between the FCC and Dish.  The court recounted that the FCC modified Dish’s license to allow it to offer terrestrial services with reduced restrictions, allegedly in exchange for Dish’s bid an upcoming spectrum auction. Dish won all licenses available at the auction. NTCH did not register for the auction but alleged that the auction was designed to favor Dish.  NTCH then filed challenges to the license modification and auction procedures with the FCC. These applications were rejected five years later.  The FCC stated that NTCH failed to “specify with particularity” the errors.

NTCH’s petition to the FCC before the D.C. Circuit raises three points: “(1) the Commission’s decision was arbitrary and capricious because the Commission failed to consider reasonable alternatives and because the decision lacked support in the record; (2) §309(j) of the Communications Act compelled the Commission to auction off the terrestrial rights as “initial licenses”; and (3) the Commission’s changes to Dish’s licenses were so substantial that they exceeded its authority to modify licenses under §316.”

The court found that the FCC’s decision to modify Dish’s license was logical and reasonable. With regard to the auction, NTCH argues that the FCC’s auction procedure gave Dish “an undeserved ‘windfall’ and neglected to ‘recover for the public’ a ‘portion of the value of the public spectrum resource.’” However, the court deferred to the FCC, holding that the agency has the authority to “‘forgo an auction,’ so long as it acts ‘in the public interest.’” The FCC decided that the modification was the “best and fastest method for bringing this spectrum to market.”

NTCH successfully challenged the order granting Dish a waiver of restrictions on the AWS-4 spectrum. The FCC argued that “NTCH lacked administrative standing because it failed ‘to demonstrate any direct causal link’ between the waiver and ‘any actual or concrete injury to NTCH.’” NTCH countered that granting the waivers foiled its effort to participate in the auction by favoring Dish, but the FCC noted that NTCH never participated in the auction and therefore could not have won anything in the auction. However, the court held that the “Commission misunderstood NTCH’s alleged injury. NTCH claims that the Commission deprived it not of a license itself, but rather of a fair and valid auction process.” The court determined that “under our caselaw, the Commission still caused NTCH’s harm.” For example, “The Commission’s actions still caused that injury because the bidder ‘would have bid more had it known that financial terms more favorable than those announced at the time of the auction would later be offered to winning bidders’…NTCH has standing because it ‘would have’ participated in Auction 96 if it had not anticipated that the Commission’s grant of the waivers would skew the auction in Dish’s favor.” As a result, the court has vacated the FCC’s order dismissing NTCH’s application for review and remanded for further proceedings.

The case was heard by a panel comprising of Circuit Judges Tatel, Garland, and Griffith.  NTCH is represented by Fletcher, Heald & Hildreth.