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GLH Communications, Inc. v. Federal Communications Commission

United States Court of Appeals, District of Columbia Circuit

July 16, 2019

GLH Communications, Inc., Appellant
Federal Communications Commission, Appellee

          Argued January 9, 2019

          On Appeal of Orders of the Federal Communications Commission

          Donald J. Evans argued the cause for appellant. With him on the briefs was Keenan P. Adamchak.

          David M. Gossett, Deputy General Counsel, Federal Communications Commission, argued the cause for appellee. With him on the brief were Thomas M. Johnson Jr., General Counsel, Jacob M. Lewis, Associate General Counsel, and Pamela L. Smith, Counsel. Richard K. Welch, Deputy Associate General Counsel, entered an appearance.

          Before: Rogers, Srinivasan, and Pillard, Circuit Judges.



         In 2001, GLH Communications, Inc., a cellular telephone company, acquired a number of radio spectrum licenses from Leap Wireless International, another cellular telephone company. Leap had originally purchased a handful of those licenses from the Federal Communications Commission under an installment payment program. When GLH acquired the licenses, it assumed the obligation to make the installment payments. GLH, though, failed to make the payments for some of the licenses, prompting the Commission to cancel those licenses and reauction the underlying spectrum to new providers.

         In administrative proceedings before the Commission, GLH challenged both the Commission's decision to cancel the licenses and its refusal to give GLH a credit against its debt for the proceeds of the reauction. The Commission rejected GLH's arguments, and GLH now appeals. We conclude that the Commission acted appropriately in cancelling GLH's licenses for failure to make the installment payments and in refusing to apply the reauction proceeds against GLH's debt.


         The Federal Communications Commission has exclusive authority to grant licenses to use radio spectrum, and must, as a general matter, employ an auction system to assign licenses. See 47 U.S.C. §§ 307(a), 309(j). Congress identified various purposes that the Commission must seek to promote when designing an auction system. See id. § 309(j)(3). One of those purposes is ensuring that licenses are disseminated "among a wide variety of applicants, including small businesses." Id. § 309(j)(3)(B).

         To that end, the Commission developed an installment plan program, under which qualifying small businesses can pay winning auction bids in installment payments made over the term of the license. Such a program, the Commission reasoned, would enhance the ability of small businesses to participate in spectrum auctions by reducing the up-front costs of a license. The structure, however, comes with a condition: any licenses won with an installment bid "shall be conditioned upon the full and timely performance of the licensee's payment obligations under the installment plan." 47 C.F.R. § 1.2110(g)(4). If an installment-payment licensee misses a payment (and does not make up the payment within two quarter-long grace periods), the licensee "shall be in default, its license shall automatically cancel, and it will be subject to debt collection procedures." Id. § 1.2110(g)(4)(iv).

         In 1996, the Commission auctioned off a number of licenses covering radio spectrum to be used for cellular telephone service. Two of the winning bidders in that auction were (i) NTCH, the parent company of GLH at the time, and (ii) a subsidiary of Leap Wireless International.

         Three years later, NTCH and Leap agreed to trade some of the licenses each had won in the auction. Although the NTCH licenses included in the deal had been fully paid at the time of the auction, six of the Leap licenses had been purchased using the installment program. In order to secure Commission approval of the assignment of those licenses, GLH assumed both the security agreements executed by the Leap subsidiary when it won the licenses and also the obligation to make all remaining installment payments. At the same time, Leap agreed to pay GLH the funds necessary to make the installment payments each quarter.

         The arrangement evidently worked without complication for a couple of years. But in January 2003, Leap failed to make its payment to GLH, and GLH then failed to make the next installment payment to the Commission, due on January 31, 2003. Under the Commission's two-grace-period rule, GLH had until July 31, 2003 to cure the payment delinquency. But instead of curing the delinquency, GLH filed a waiver request, in which it explained the circumstances of the missed payment and asked the Commission for a two-year waiver of its debt collection rules and payment deadlines to "allow GLH additional time to try to satisfy its obligations." Request of GLH Communications, Inc. for Temporary Waivers of Installment Payment Deadlines (47 C.F.R. § 1.2110(g)(4)) and Debt Collection Rules (47 C.F.R. § 1.1901 et seq.), at 6 (Apr. 16, 2003), J.A. 42.

         On July 18-approximately two weeks before the end of GLH's grace period-the Commission's Auctions and Industry Analysis Division released an order denying GLH's request for a waiver of the payment deadlines. See In re Request of GLH Commc'ns, Inc. for Temporary Waivers of Installment Payment Deadlines, 18 FCC Rcd. 14, 695 (2003), J.A. 76. The Division explained that "strict enforcement of the installment payment rules enhances the integrity of the auction and licensing process," and determined that GLH had not shown any unique circumstances rendering enforcement of the deadline inequitable. Id. ¶ 11; see id. ¶¶ 7-18.

         When the deadline arrived, GLH had paid its outstanding obligations on only two of the six licenses. The remaining four licenses automatically cancelled under the governing regulation. 47 C.F.R. § 1.2110(g)(4). After the cancellation, GLH filed a petition for reconsideration of the Division's Order denying a waiver. In addition to the arguments made in its waiver request, GLH contended that the Commission had been required by a statute, 47 U.S.C. § 312(c), to provide a hearing before cancelling the licenses, and further argued that, if the Commission decided to proceed with cancellation, it should return the payments GLH had previously made.

         While GLH's rehearing petition was pending, the Commission reauctioned the spectrum covered by GLH's cancelled licenses to new buyers. The Commission's Wireless Telecommunications Bureau then released an order denying the petition for rehearing. See In re GLH Commc'ns, Inc., 22 FCC Rcd. 2411 (2007), J.A. 104. With respect to GLH's waiver request, the Bureau's Order largely repeated the reasoning of the Division. See id. ¶¶ 12-22. With respect to GLH's new arguments, the Bureau determined that § 312(c)'s hearing requirement does not apply to automatic ...

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