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Delta Radio, Inc. v. Federal Communications Commission

November 5, 2004


Appeal of an Order of the Federal Communications Commission

Before: Sentelle, Tatel and Roberts, Circuit Judges.

The opinion of the court was delivered by: Sentelle, Circuit Judge

Argued September 13, 2004

Delta Radio, Inc. ("Delta") appeals from a Federal Communications Commission's ("FCC" or "Commission") order denying its request for a waiver of the payment deadline of its winning auction bid. See Memorandum Opinion and Order, In re Application of Delta Radio, Inc., 18 FCC Rcd 16,889 (2003) ("Order"). In the Order, the FCC held that lack of finality and "other intervening events" did not excuse late payment, either singly or in combination. Delta Radio contends that the FCC abused its discretion by failing to give Delta's waiver application a "hard look," inconsistently applying a strict waiver policy, and denying the waiver when there was still an outstanding application for review and the attacks of September 11, 2001 had affected the economy. Because the FCC adequately considered Delta's arguments and applied its waiver policy consistently, we affirm the order of the Commission.

I. Background

Delta's appeal arises from its winning bid for an FM broadcast construction permit in an FCC auction. In 1998, the Commission adopted rules governing the post-auction processing of broadcast applications. See Implementation of Section 309(j) of the Communications Act -- Competitive Bidding for Commercial Broadcast and Instructional Fixed Services, 13 FCC Rcd 15,920 (1998) (" Implementation "). These rules are designed to "ensure that only serious, financially qualified applicants receive licenses and construction permits, and to expedite provision of service to the public." In re Application of Abundant Life, 17 FCC Rcd 4006, 4008 (2002).

At several stages in the auction process participants are required to make payments to ensure their continued financial capability and sincerity. Before bidders may participate, they must submit an upfront payment to be held on deposit with the FCC until the end of the auction. 47 C.F.R. § 1.2106; 47 U.S.C. § 309(j)(8)(C); Implementation at 15,-951. Within ten days of being notified that it is the high bidder, the auction winner must deposit a 20% down payment to prove that it is still financially capable of building a station. 47 C.F.R. at § 1.2107(b); Implementation at 15,983. The final payment deadline is set by Public Notice once the FCC has dismissed all petitions to deny the high bidder's application. 47 C.F.R. at §§ 1.2109(a), 73.5006(d). If the auction winner is late but makes its final payment within a ten-day grace period, it will be charged an additional 5% late fee. Id. at § 1.2109(a). After ten days, the high bidder is considered in default, subject to an additional penalty charge, and the FCC may offer the permit to the next highest bidder or hold a new auction. Id. at § 1.2109(b).

The FCC considers timely payment important for several reasons: it contributes to the overall integrity of the auction process, Abundant Life, 17 FCC Rcd at 4012; serves as an "objective indicator" of a winning bidder's financial qualifications, id.; and evidences the sincerity and financial capability of the winning bidder to actually "build out" its system to ensure prompt service reaches the public. See In re Mountain Solutions, Ltd., 133 FCC Rcd 21,983, 21,993 (1998).

In April 1995, Delta and Mondy-Burke Broadcasting Network ("MBN") filed mutually exclusive applications for an FM broadcast construction permit in Greensville, Missouri. This permit was to be awarded by an auction ending October 8, 1999. Public Notice, "Closed Broadcast Auction No. 25 Closes," 14 FCC Rcd 17,186 (1999). Delta placed the winning bid of $397,000 and made its post-auction down payment of $79,400. See Letter to Mr. Larry G. Fuss and Mr. Barry D. Wood, Esq. from Peter H. Doyle, Chief, Audio Division, Office of Broadcast License Policy, Media Bureau, 17 FCC Rcd 19,029, 19,032 (2002). On December 10, 1999, MBN filed a petition to deny Delta's application, arguing that Delta had violated FCC ownership rules, was not financially qualified, and did not intend to build the Greenville Station but only to block competitors from doing so. The FCC denied the petition on May 17, 2000. MBN filed an application for review of that denial on June 15, 2000. While this application was still pending and the permit had not yet been granted, the September 11 terrorist attacks on the United States occurred, triggering a sudden downturn in the national economy.

On March 7, 2002, the Media Bureau ("Bureau") released a Public Notice stating that Delta's final payment, as well as those of two other winning bidders, would be due on March 21, 2002. Public Notice, "FCC Announces it is Prepared to Grant Broadcast Construction Permits After Final Payment is Made," 17 FCC Rcd 4278 (2002). The other two winning bidders timely paid the balance of their bids. On April 4, at the end of the ten-day grace period, Delta submitted to the Bureau a petition for reconsideration and waiver requesting either rescission of the Public Notice triggering the deadline, or a temporary waiver of the payment deadline. It argued that several factors contributed to its inability to pay, including some created or exacerbated by the FCC itself. First, Delta claimed that it was unable to secure financing due to the uncertainty of its claim on the permit because MBN's application for review was still pending before the Commission. It also alleged that the FCC's delayed action on this application for review exacerbated the uncertainty surrounding the permit. Delta pointed next to the economic downturn following the attacks of September 11 as the reason its financing had fallen through and argued that this was so unique as to warrant a waiver. In the alternative Delta claimed the uniqueness of all these factors occurring simultaneously should be enough to support a waiver, even if the individual factors were not. Finally, it argued that the FCC had previously granted a "de facto" waiver to another Auction 25 participant by not setting the payment date until after the award became final, and thus it would not be fair to deny a waiver to Delta. The Bureau rejected Delta's petition on August 27, 2002 and offered the permit to MBN as the second-highest bidder, assessing a default penalty against Delta. Letter to Mr. Larry G. Fuss, et al., from Peter H. Doyle, Chief, Audio Division, Office of Broadcast License Policy, Media Bureau, 17 FCC Rcd 16,324 (2002).

On September 26, 2002, Delta applied for review of the Bureau's decision on the grounds that it used an improper standard of review and was again denied on October 2. Letter to Mr. Larry G. Fuss, et al., 17 FCC Rcd 19,029 (2002). Delta filed a petition for reconsideration with the FCC on November 1, 2002 that was denied August 20, 2003. Order, 18 FCC Rcd 16,889. The Commission held that the proper standard of review had been used. It further addressed Delta's concerns about lack of finality because of delay in responding to the application for review, the economic effects of September 11, and the presence of multiple factors at once arguably mitigating Delta's default. It also distinguished the cases Delta claimed were similar in which waivers had been granted and pointed to other similar bidders whose payment deadlines had not been waived. Delta sought timely appeal.

II. Analysis

We review the FCC's denial of a waiver in an "extremely limited" fashion, and will "vacate such denials only when the agency's reasons are so insubstantial as to render that denial an abuse of discretion." BDPCS, Inc. v. FCC, 351 F.3d 1177, 1181-82 (D.C. Cir. 2003) (internal quotation marks omitted). The FCC may grant a waiver when "special circumstances" warrant it and the waiver will "serve the public interest." Northeast Cellular Telephone Co., L.P. v. FCC, 897 F.2d 1164, 1166 (D.C. Cir. 1990). We will not compel the Commission to grant a waiver, however, as long as the request was given at least a "hard look" to ensure that the agency is not rigidly applying a rule where it is not in the public interest. See BDPCS, 351 F.3d at 1182; BellSouth Corp. v. FCC, 162 F.3d 1215, 1224 (D.C. Cir. 1999). This does not require that the agency "author an essay" in response to every allegation; rather, it must explain itself in enough detail so that a court can determine "the why and wherefore" of the denial --explaining, for example, why strict rule application serves the public interest. BellSouth, 162 F.3d at 1224-25. Given this limited review, we hold that the FCC did not abuse its discretion in failing to grant Delta a waiver of its payment obligations or in assessing the statutory default penalty when Delta failed to meet payment deadlines.

Delta first argues that the FCC was in error because it failed to grant the requested waiver of the payment deadline and default payment when Delta presented numerous reasons for such a waiver to be granted, including allegations that the Commission's own delay in action in the case made timely payment impossible. It insists that the FCC's policy goal of ensuring sincere and adequately financed bidders would be better served by a rule judging financial fitness based on a company's track record than by the current rule that emphasizes timely payment of auction obligations. This argument, however, misunderstands the nature of our review. We sit not to judge the wisdom of the FCC's payment rules but to determine whether ...

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