TR Daily Court: FCC Did Not Fundamentally Modify Market Access Grants, Licenses
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Friday, December 18, 2020

Court: FCC Did Not Fundamentally Modify Market Access Grants, Licenses

In rejecting legal challenges to the FCC’s C-band order, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit rejected the argument of small satellite operators (SSOs) and another company that the Commission had unlawfully fundamentally modified their respective market access grants and licenses.

The court issued an 18-page opinion today in PSSI Global Services L.L.C v. FCC (consolidated cases beginning at 20-1142) addressing the appeals of SSOs ABS Global Ltd., Empresa Argentina de Soluciones Satelitales S.A., Hispamar Satélites S.A., and Hispasat S.A., as well as of PSSI, a satellite transmission company. The FCC order, which was adopted in February (TR Daily, Feb. 28), approved the reallocation of 300 megahertz of the lower 3.7-4.2 gigahertz band, 280 MHz of which is being auctioned for 5G services.

The panel issued a two-paragraph judgment on Dec. 8 rejecting the appeals (TR Daily, Dec. 8). The judgment also dismissed SES Americom, Inc.’s challenge to the FCC’s C-band order. SES had filed the appeal only as a precaution, and it is accepting accelerated relocation payments.

"The FCC concluded that reallocating spectrum from satellite to 5G use would promote the public interest by creating billions of dollars of economic growth. … The SSOs do not dispute that determination. Instead, they contend that the change to their market access grants was too fundamental to qualify as a modification under § 316(a)(1). Further, they argue that the FCC arbitrarily restricted their future business opportunities and excluded them from receiving compensation from the future 5G providers. Finally, they claim that the FCC impermissibly sanctioned them without prior notice. We disagree with all of this," said today’s opinion, which was written by Circuit Judge Gregory G. Katsas and joined by Circuit Judges Robert L. Wilkins and Justin R. Walker.

"The SSOs argue that reducing their available spectrum by sixty percent [was] a fundamental change in their grants of market access. But the FCC found that the remaining spectrum ‘exceeds any reasonable estimate of [the SSOs’] needs,’ … so ‘any opportunities [the SSOs] might be losing as a result of the Commission’s actions are, on a practical level, de minimis,’ id. at 22,821. The SSOs object that the FCC considered only how much spectrum satellite operators would need to continue servicing existing customers. In fact, the FCC determined that the remaining spectrum would allow all operators—including the SSOs—to serve their likely future customers as well."

"In a declining market for satellite transmission … the SSOs currently provide ‘little to no service’ in the C-band within the United States," the opinion said. "Moreover, they have made few efforts to develop such services … and they have failed to show an ‘ability to lure existing customers away from their contracts with other providers or to explain how they had planned to obtain new customers … . During the rulemaking, two SSOs affirmatively supported the reallocation. They commented that ‘300 megahertz of C-band spectrum could be made available for 5G … through the use of non-proprietary, readily available compression technology’ without impairing the SSOs’ operations. … The SSOs [in the case] cite no persuasive contrary evidence."

"The FCC’s finding that 200 MHz will support the SSOs’ present and likely future transmission needs forecloses any claim that the agency exceeded its authority to modify existing station licenses," the court said. "This finding establishes that the SSOs will be able to provide essentially the same services after the transition as before. They will just be required to do so through different means—by utilizing the upper 200 MHz of the C-band rather than the entire 500 MHz."

"The SSOs briefly invoke three other provisions of the Communications Act, but none helps their case," according to the court. "Section 312(a) restricts the FCC’s ability to revoke licenses, but a reduction in spectrum that leaves licensees with enough capacity to meet current and future needs does not remotely constitute a revocation. Section 303(y)(2)(C) requires the FCC to ensure that its spectrum allocation does not ‘result in harmful interference among users.’ But nothing in that provision bars the FCC from reducing harmful interference by reconfiguring the frequency band assigned to incumbent licensees. Section 309(j)(8)(G) permits the FCC to hold a reverse auction and share a portion of its proceeds with licensees to ‘encourage a licensee to relinquish voluntarily some or all of its licensed spectrum usage rights.’ The SSOs contend that this provision, by its negative implication, requires the FCC to provide compensation if it takes away any spectrum from existing licensees. But § 309(j)(6)(C) forecloses that inference, by stating that nothing in § 309(j) shall ‘diminish the authority of the Commission under the other provisions of this chapter to regulate or reclaim spectrum licenses.’ As explained above, § 316(a)(1) permits the license modifications at issue.

"Our analysis above all but forecloses the SSOs’ related contentions that the FCC arbitrarily modified their market access grants and denied them compensation," the court continued, adding that "the FCC reasonably declined to require successful 5G bidders to compensate the SSOs for a reduction in spectrum that imposed on them at most ‘speculative claims of future loss.’ … Finally, the SSOs object that the FCC declined to provide adequate advance notice for adopting what they describe as the ‘sanction’ of assessing their spectrum needs by reference to existing customers. But as we have shown, the FCC considered all satellite operators’ future as well as current needs, which was more than enough to protect the SSOs’ interests under these circumstances."

The court noted that "PSSI claims that its licenses to transmit within the C-band uplink have been fundamentally changed. But the FCC concluded that earth stations—including PSSI’s mobile ones— will be able to ‘provide the same services’ to their customers after the license modification. … That finding was supported by substantial evidence. PSSI contends that the reduction in spectrum prevents it from transmitting from certain major event venues. For example, PSSI claims that its stations, when positioned at Hard Rock Stadium in Miami, have sufficient ‘line of sight’ to transmit only to satellites operating in the lower 300 MHz of the C-band. But PSSI did not raise this argument before the FCC. There, PSSI argued that the proposed reallocation would leave insufficient overall capacity to meet its transmission needs. The FCC addressed that concern at length, explaining why data compression and other technology—which PSSI may install and be reimbursed for—would ensure that the remaining spectrum is adequate for satellite operators and their customers. PSSI’s line-of-sight concern is distinct; it concerns the elimination of specific frequencies, not the reduction of overall capacity. Because PSSI gave the FCC no ‘opportunity to pass’ on its line-of-sight concern, we may not address it."

"PSSI further claims that the Order will allow 5G base stations to operate at high power levels, which will increase interference with its own return reception from the satellites to which it is transmitting. But it is unclear whether PSSI’s return reception will indeed suffer. PSSI relies primarily on its recent experience at an Iowa State football game, where it lost return reception because a nearby cell phone tower was operating within the C-band under an experimental license. But after that incident, the FCC adopted many new protections against interference," the court said. "Moreover, any incidental interference with PSSI’s return reception would not cause the kind of fundamental change that might exceed the FCC’s modification power."

The opinion said other challenges to the FCC’s order also lack merit.

"The SSOs contend that the relocation payments to be made to the large satellite operators (LSOs) are arbitrarily high and inflict a competitive injury on the SSOs. The FCC did not contest the SSOs’ constitutional standing to challenge these payments to third parties, but we have an independent duty to consider the issue," the court said, adding that the SSOs lack standing as a competitor to raise the issue. "Moreover, even if the SSOs did directly compete with the LSOs, they made no concrete showing that the Order is likely to cause them a financial injury," it said.

"PSSI’s further claims also lack merit," the court said, noting that the company had argued that (1) "the 5G auction violates the ORBIT Act"; (2) "the Order was not a logical outgrowth of the NPRM"; and (3) "the FCC did not consider the potential for 5G base stations to interfere with its nearby mobile stations."

FCC Chairman Ajit Pai welcomed today’s opinion. "Far from the assertion that the @FCC's #CBand decision was ‘wrong on the law,’ the court affirmed the FCC in all respects," he tweeted. "A big victory for the agency and, more importantly, for America's #5G leadership."

Stephen Díaz Gavin, an attorney for PSSI at Rimon P.C., told TR Daily that while "PSSI knew after the Court issued its Judgment on December 8th that the Court had denied PSSI’s petition for review, it is nevertheless disappointed in the opinion.

"PSSI has invested millions of dollars to provide the highest quality production services to its customers and now will not be able to operate as it has in the past," he added. "Transportable C-band antennas like those on PSSI’s vehicles are entitled to the same protections as fixed antennas in the Report and Order. However, it will not be possible to get such protection when PSSI is at venues with new 5G transmitters operating at power levels authorized by the Report and Order, which will overwhelm signals from the satellites to the Transportables. We anticipate that there will be many complaints filed by C-band Transportable operators before some of the conflicting interpretations of the rules are reconciled.

"Given the technical nature of C-band service, PSSI had tried to provide some real-world examples to the Court of an argument that PSSI had made in the rulemaking: Real world, practical problems like frequency coordination, interference, and mitigation will make it impossible to provide reliable service to clients," he added. "Many event locations will no longer have transponders available in the remaining 40% of the spectrum that clear frequency coordination. The Court unfortunately interpreted that as a new argument, when it was simply an illustration of the problem previously presented.

"Further, it should be pointed out that in taking the 4 GHz ‘downlinks’ the Commission has also taken the corresponding 6 GHz ‘uplinks’ as well," Mr. Díaz Gavin said. "There are many important event locations (Hard Rock Stadium is just one example) where Transportables will no longer be able to operate."

A representative for the SSOs did not respond to a request for comment. —Paul Kirby, [email protected]

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