Appeals Court Sides With FCC in Wireless License Default Case

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Just like a car repossession, a federal appeals court agrees with the FCC that the agency can take back spectrum to re-auction when a licensee doesn’t make the payments.

The case began in 2001, when wireless carrier GLH acquired several 700 MHz C-block spectrum licenses from Leap Wireless. Leap purchased the licenses from the Commission under an installment payment plan in 1996.

GLH assumed the obligation to make the installment payments, but failed to make them for some of the licenses. GLH sought a two-year waiver to get extra time to pay. The FCC said at the time there were no special circumstances that would warrant a waiver. So GLH made the payments for two of the six licenses in 2003. The remaining four were cancelled and the FCC re-auctioned them to different carriers.

In an FCC proceeding, 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 re-auction. GLH wanted its money back for the payments it made on the four licenses. The FCC said GLH wasn’t entitled to a refund.

GLH appealed in federal court, saying the agency’s decision to cancel the licenses was “arbitrary and capricious,” according to the decision. Arguments were heard before a three-judge panel in January, and the appeals court decision was released this week.

The Commission explained the auction system is designed to award each license, “to the party that placed the highest value on the spectrum.” But “allow[ing] licensees to keep their licenses after they had failed to comply with the Commission’s payment rules” would interfere with that goal by, “increas[ing] the incentive for bidders to make bids they could not pay and reduc[ing] opportunities for other bidders to win licenses.”

GLH argued that it didn’t take part in the auction, but got the licenses through assignment so the regular auction rules shouldn’t apply. The appeals court was not persuaded, and affirmed the Commission’s decision.

July 18, 2019

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