WPC7 2BJZCourier3|h"Kx6X@`7X@HP LaserJet 5Sii PostScriptHPLAS5SI.PRSx  @\G"DpX@ Y3  @-  -@Њ#Xw PE37|XP#2KXE CourierCG Times"i~'^09CSS999S]+9+/SSSSSSSSSS//]]]Ixnnxg]xx9?xgxx]xn]gxxxxg9/9MS9ISISI9SS//S/SSSS9?/SSxSSIP!PZ9+ZM999+999999S9S/xIxIxIxIxIlnIgIgIgIgI9/9/9/9/xSxSxSxSxSxSxSxSxSxSxIxSxRxSxSxS]SxIxIxInInInZnIxigIgIgIgIxSxSxSxZxSxZxS9/9S999Su]ZZxSg/gCg9g9g/xSbxSxSxSxSxn9n9n9]?]?]?]ZgFg/gMxSxSxSxSxSxSxxZgIgIgIxSg9xS]?g9xSi+SS88WuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxN/>/>/>/x]SSSSx]x]x]x]xSxSx]SSxSxSf]xSxSxSxIxIxWxIx{nInInInISSSWS]a?/?]?9?]]WW]n/nKn9nCn/x]xx]x]SSxxIxIxI]?]?]?]WnUn9nax]x]x]x]x]x]xxWnInInIx]n9x]]?n9xSz+SS8-8WuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxN\4  pG;a$G,',مG\  P6G;P`y.X80,ɒX\  P6G;P "i~'^09CSS999S]+9+/SSSSSSSSSS//]]]Ixnnxg]xx9?xgxx]xn]gxxxxg9/9MS9`XX`SK``-3`Su``K`XKS``}``SP!PZ9+ZM999+999999S9S/xIxIxIxIxIlnIgIgIgIgI9/9/9/9/xSxSxSxSxSxSxSxSxSxSxIxSxRxSxSxS]SxIxIxInInInZnIxigIgIgIgIxSxSxSxZxSxZxS9/9S999Su]ZZxSg/gCg9g9g/xSbxSxSxSxSxn9n9n9]?]?]?]ZgFg/gMxSxSxSxSxSxSxxZgIgIgIxSg9xS]?g9xSi+SS88WuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxN:5\4  pG;qa$G,',مG\  P6G;P `y.X80,ɒX\  P6G;P om)P2,,P\  P6G;P \po'N2,,[N*f9 xr G;X\b#E,',KE*f9 xr G;X"i~'^'-8CCph---C[#-#%CCCCCCCCCC--[[[C{SSX`SS``-;XKpX`S`SCK`SpSKK3%38C-CC;C;%CC%%;%`CCCC33%C;X;;35%5H-#H8---#------C-C%SCSCSCSCSCuXX;S;S;S;S;-%-%-%-%XC`C`C`C`C`C`C`C`CK;SC`C`C`CK;`CSCSCSCSCX;X;XHX;`PS;S;S;S;`C`C`C`H`C`H`C-%-C---CeCHHX;K%K0K-K+K%XCMXCXC`C`C}XS3S3S3C3C3C3HHK0K%K8`C`C`C`C`C`CpXKHK3K3K3`CK-XCC3K-KCP#CC,,W]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]ddddddddddddddddddddddddddddddddddddddddN0PP0EC3CCCCCC%+eeC(+eeCe(--KKCu..PCCPe0PP0HeeCCu-KCp("XXXXee{CePMHC[PPC27 K-`/)K=5"i~'^'-KCCp---CK#-#%CCCCCCCCCC--KKKC}`X``XShh3ChX}`hSh`KX````X-%-MC-CK;K;-CK%-K%pKCKK;3-KC`CC;55E-#EM---#------C-K%`C`C`C`C`C``;X;X;X;X;1%1%1%1%`KhChChChC`K`K`K`K`C`C`KgChC`C`CQK`C`C`C`;`;`E`;`cX;X;X;X;hChChChEhChKhM3%3K3-3KlKEEhKX%X\4  pG;qa$G,',مG\  P6G;P `y.X80,ɒX\  P6G;P om)P2,,P\  P6G;P \po'N2,,[N*f9 xr G;X\rb#E,',KE*f9 xr G;Xsa$I,',',I4  pG;N9$,@9\  P6G;@Pqa$G,',مG\  P6G;P "i~'^'-5CCph---CK#-#%CCCCCCCCCC%%KKK;{`XX`SK``-3`Su``K`XKS``}``S-%-=C-MFFMBrequirements, which are based on population coverage and channel usage,  p\+regardless of incumbent presence. If certain channels remain unconstructed but  p\authorized to an [sic] another entity for this three-year period, the EA licensee is  p\estopped not only from utilizing the channel(s) directly but also from acquiring it  p\from the holder of the authorization due to [the FCC's] prohibition against the transfer of unconstructed facilities.  Xp(#  X3December 15, 1995 Order, 11 F.C.C.R. at 1524.  ppThe FCC denied CCI's application in the same order. Rather than determining whether  W CCI satisfied section 90.629's requirements, the FCC concluded that granting "requests for  W {extended implementation authority currently pending ... would conflict with [the FCC's] goal of  X!3 W 9uniformly implementing wide-area licensing." Id. at 1526. CCI filed this appeal without petitioning the FCC for reconsideration.  X3II. Discussionă A. Exhaustion of Administrative Remedies  pnpAs an initial matter, we must address the FCC's contention that we are barred from  W 'reviewing CCI's claims by section 405 of the Communications Act, 47 U.S.C.  405 (1994),  XT3 W which "codif[ies] the judicially-created doctrine of exhaustion of administrative remedies," City  X?3 W of Brookings Mun. Tel. Co. v. FCC, 822 F.2d 1153, 1163 (D.C. Cir. 1987) (internal quotation marks and citations omitted). This section provides, in relevant part:  pXpThe filing of a petition for reconsideration shall not be a condition precedent to judicial  plreview of any such order, decision, report, or action, except where the party seeking such  preview ... relies on questions of fact or law upon which the Commission ... has been afforded no opportunity to pass.(#  W 47 U.S.C.  405(a). The purpose of section 405 is to require complainants to give the FCC a  Xr$3 W "fair opportunity" to pass on a legal or factual argument before coming to this court. Washington  X]%3 W }Ass'n for Television & Children v. FCC, 712 F.2d 677, 681 ("WATCH") (D.C. Cir. 1983) (internal quotation marks and citations omitted). pThe Commission characterizes CCI's arguments as ")0*0*0*,"Ԍ p\+Xpessentially variations on the same theme"that because its request for extended  p\Mimplementation authority was filed before the FCC changed the applicable rule,  p\Mand because it complied with the requirements of the rule when the request was filed, the Commission was bound to grant the request.  Xp(#  W Brief for Appellee at 14. It then states that because these arguments were not presented to it, as  W required by section 405, we may not hear them. That section, however, incorporates  W "traditionally recognized exceptions to the exhaustion doctrine, [which permit] a reviewing court  W [to] consider arguments ... [that] would have been futile [for the petitioner] to raise before the  X13 W agency." Omnipoint Corp. v. FCC, 78 F.3d 620, 635 (D.C. Cir. 1996) (internal quotation marks and citations omitted).  ppWe agree with CCI that it would have been futile for it to have sought a reconsideration  X 3 W 9of the FCC's denial of its application. In its December 15, 1995 Order, the Commission explained:  p\XpWe initially established extended implementation authority for SMRs to facilitate  p\oconstruction of wide-area systems. We believe that the wide-area licensing plan  p\we adopt today will accomplish this result in a more uniform and expeditious  p\fashion. Consequently, we conclude that the availability of extended  p\<implementation authority in the 800 MHz SMR service is no longer necessary.  p\ In fact, we are concerned that both existing and future grants of extended  p\implementation authority would be contrary to the underlying goals of this  p\proceeding.... As a result, we believe that it is necessary not only to cease  p\acceptance of requests for extended implementation authority but also to accelerate the termination date of existing implementation periods....   W 11 F.C.C.R. at 152425. It then stated that it was denying the pending requests for extended implementation authority because the "grant of these requests would conflict with our  XR3goal of uniformly implementing wide-area licensing." Id. at 1526. At oral argument, the FCC's counsel explained that CCI's request was incompatible with the new licensing frame- work because of the sheer size of its proposed 2,312station, twenty-six-state system. Because the Commission had con- cluded that the grant of CCI's application would have frus- trated its ability to implement a new system of licensing that it believed would best serve the public interest, we are satisfied that it would have been futile for CCI to seek reconsideration. Its arguments are therefore properly before us. B. The Merits xIn challenging the FCC's denial of its application, CCI argues (1) that the FCC's denial constituted an impermissible "(0*0*0*,"Ԍ aE"V(#"ICV(#(#ԇ#P\  P6G; P## G\  P6G;مP#retroactive application of subsection 90.629(e); (2) that be- cause CCI met all the requirements of section 90.629 in force at the time, the Commission's denial was arbitrary and capri- cious; (3) that the denial was inconsistent with the treatment accorded other applicants for extended implementation au- thority; and (4) that the FCC erred in failing to consider its reply comments. We address these arguments in turn.  bD0"x1. Retroactivity xCCI contends that the FCC's denial of its application constituted an impermissible retroactive application of sub- section 90.629(e), which was not to take effect until March 18, 1996. CCI asserts that, in order to give the revised subsec- tion retroactive effect, it was incumbent on the FCC to "explain how it determined that the balancing of the harms and benefits favor[ed] giving [its] change in policy retroactive " 0*0*0*J "  bE"application," Brief for Appellant at 26 (quoting Yakima Val-  bE"ley Cablevision, Inc. v. FCC, 794 F.2d 737, 746 (D.C. Cir. 1986)). CCI has confused the law governing the retroactive appli-  bE@"cation of administrative rules developed, as in Yakima, in the course of an agency adjudication with those, such as subsec- tion 90.629(e), that an agency has adopted as the result of a rulemaking under the Administrative Procedure Act ("APA").  bE"As we pointed out in Georgetown Univ. Hosp. v. Bowen, 821  bE"F.2d 750, 757 (D.C. Cir. 1987), aff'd on other grounds, Bowen  bE'"v. Georgetown Univ. Hosp., 488 U.S. 204 (1988), Xthe APA requires that legislative rules [i.e., rules (# Xadopted pursuant to the notice and comment procedures (#   Xof the APA, 5 U.S.C.  553] be given future effect only. (# X[Therefore], equitable considerations are irrelevant to the (# Xdetermination of whether the [agency's] rule may be (# Xapplied retroactively; such retroactive application is fore-(# Xclosed by the express terms of the APA.(# X(#  bEJ"See also Bowen, 488 U.S. at 216 (Scalia, J., concurring). By contrast, an agency may give retroactive effect to a new policy or rule adopted in the course of an adjudication so long as the resulting inequities are "counterbalanced by sufficient-  bE"ly significant statutory interests." Georgetown Univ. Hosp.,  bE"821 F.2d at 756 (citing Retail, Wholesale and Dep't Store  bE1"Union v. NLRB, 466 F.2d 380, 390 (D.C. Cir. 1972)); Yaki-  bE"ma, 794 F.2d at 74546. It follows from the above that if the FCC had applied subsection 90.629(e) retroactively in this case, that would be the end of the matter because a legislative rule may only be applied prospectively. We are not persuaded, however, that the subsection has been applied retroactively. In the first place, in explaining why it dismissed CCI's application, the Commission made no mention of the subsection. Rather, it stated that to grant the requested extended implementation authority "would be contrary to the underlying goals of this  bE"proceeding," December 15, 1995 Order, 11 F.C.C.R. at 1524, which were to put into effect a new system of competitive HH0*0*0*$ J 0*0*H bidding that would both improve efficiency and expedite the construction of new wide-area SMR systems. xBut more significantly, the subsection does not meet the test we commonly use to determine whether a rule has retroactive effect: it does not " "impair[ ] rights a party possessed when [it] acted, increase[ ] a party's liability for past conduct, or impose[ ] new duties with respect to transac-  bE0"tions already completed.' " DIRECTV, Inc. v. FCC,  bE"110 F.3d 816, 82526 (D.C. Cir. 1997) (quoting Landgraf v.  bE~"USI Film Prods., 114 S. Ct. 1483, 1505 (1994)). In this case, the Commission's action did not increase CCI's liability for past conduct or impose new duties with respect to completed transactions. Nor could it have impaired a right possessed  aE "by CCI because none vested on the filing of its application.   bE "Cf. Hispanic Info. & Telecomms. Network v. FCC, 865 F.2d 1289, 129495 (D.C. Cir. 1989) ("The filing of an application creates no vested right to a hearing; if the substantive standards change so that the applicant is no longer qualified,  bEV "the application may be dismissed."); Schraier v. Hickel, 419 F.2d 663, 667 (D.C. Cir. 1969) (filing of application that has not been accepted does not create a legal interest that restricts discretion vested in agency). Accordingly, we con- clude that section 90.629(e) did not have retroactive effect. xThe proper question, then, is whether the FCC acted arbitrarily or capriciously or otherwise contrary to law when it invoked the prospective change in policy as a sufficient reason for denying an application under a regulation that was at the time still in effect and whose conditions CCI had at least facially met.  bD"x2. Was the denial arbitrary and capricious? xThe scope of review under APA's "arbitrary and capri- cious" standard Xxis narrow and a court is not to substitute its judgment for V Xxthat of the agency. Nevertheless, the agency must ex-V Xxamine the relevant data and articulate a satisfactory V Xxexplanation for its action including a rational connection V XxV"0*0*0*:" Xbetween the facts found and the choice made. In review-(# Xing that explanation, [a court] must consider whether the (# Xdecision was based on a consideration of the relevant (# Xfactors and whether there has been a clear error of (# Xjudgment.... [A court] will, however, uphold a decision (# Xof less than ideal clarity if the agency's path may reason-(# Xably be discerned.(# X(#  bD0"Motor Vehicle Mfrs. Ass'n of the United States, Inc. v. State  bE"Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) (internal quotation marks and citations omitted). CCI maintains that we must find the Commission's denial of its application to be arbitrary and capricious because the agency neither determined whether the company had satis- fied section 90.629's requirements for extended implementa- tion nor explained why it was not required to do so. In addressing the equities, CCI stresses that in reliance on that section (which was still in effect when the FCC denied its application), the company had invested significant time, effort, and capital in designing a unique SMR system comprised of thousands of stations and in securing the cooperation of the licensees of stations participating in the system. Finally, CCI contends that it was not on notice that its application would be incompatible with the new rule because, when the FCC proposed changes in its licensing scheme in November 1994, it spoke of eliminating extended implementation author- ity only on the lower 80 channels and on SMR systems  bE)"licensed after August 9, 1994. Further NPRM, 10 F.C.C.R. at 7996, 8029. Because none of the licenses involved in its application were issued after that date, CCI states that it was only on notice that the fourteen channels located in the lower 80 might be affected by the new rule.  bE"CCI's reading of Further NPRM is far too narrow. When the notice is viewed in its entirety, it becomes clear that the central purpose of the proposed rulemaking was to create a new framework for wide-area SMR licensing that was likely to affect the FCC's policy with respect to existing and pend- ing authorizations for extended implementation. Further- more, CCI was placed on specific notice that in furtherance of that goal, the Commission not only proposed to deny applica- H?0*0*0*$A8>9Z0*0*H tions relating to licenses in the lower 80 and those awarded after August 9, 1994, but that it had under consideration the  bEL"curtailment of existing grants of authority. See id. at 7997  bE"("[W]e request comment on how existing licensees with ex- tended implementation periods should be treated.... We  bE@"ask commenters to discuss whether existing licensees with extended implementation periods should be given that full period to construct their systems ....") (emphasis added). Thus, when CCI filed its application seven months after the  bE"issuance of Further NPRM, it should have been aware that the FCC was embarking on a fundamental restructuring of wide-area SMR licensing procedures that made it imprudent to assume that the agency would continue to grant extensions  bEr"under section 90.629. Cf. Adelphia Communications Corp. v.  bE "FCC, 88 F.3d 1250, 125758 (D.C. Cir. 1996) (because petition- er had notice that the Commission might change its rules, the new rule "d[id] not impair any substantive right upon which Adelphia was entitled to rely.") xOn the other hand, the grant of CCI's application would have significantly frustrated the interests that were to be advanced by the new rule, especially in view of the size of its proposed system. As the FCC explained, the purpose of the rule was to create a new, flexible scheme for SMR service "that [would] allow for more efficient licensing, eliminate unnecessary regulatory burdens on both existing and future licensees, and thereby enhance the competitive potential of  bE"SMR services in the mobile services marketplace." Further  bE/"NPRM, 10 F.C.C.R. at 7973. Having concluded that both existing and future grants of extended implementation au- thority would be "contrary to the underlying goals" of this  bE""rulemaking, December 15, 1995 Order, 11 F.C.C.R. at 1524, it was entirely reasonable for the Commission to deny CCI's application.  bD"x3. Disparate treatment xWe have long held that an agency must provide an ade- quate explanation before it treats similarly situated parties  bES"differently. Petroleum Communications, Inc. v. FCC, 22 F.3d 1164, 1172 (D.C. Cir. 1994) (and cases cited therein). "0*0*0*:"  bE"This rule was developed to prevent an agency from, inter  bE"alia, "vacillat[ing] without reason in its application of a stat-  bEN"ute or the implementing regulations." New Orleans Channel  bE"20, Inc. v. FCC, 830 F.2d 361, 366 (D.C. Cir. 1987). CCI contends that the FCC acted arbitrarily and capri- ciously because the agency's treatment of its application was inconsistent with that accorded other similarly situated appli- cants. According to the company, the Commission granted hundreds of requests for extended implementation periods  bE"between May 13, 1993, when it issued Further NPRM, and December 15, 1995, when the FCC denied its request. In particular, CCI points to two applications that the FCC received on May 8, 1995 (just five weeks prior to CCI's application) and granted twenty-three days later, on May 31. The first of these was filed by Spectrum Resources, Inc., which requested five years to construct eleven SMR stations in four states. The second, filed by Spectrum Resources of the Northeast, Inc., sought five years to build four stations in two states. CCI failed to mention, however, that the letters  bE "granting these applications contained the following caveat:  aE ""The five year extended implementation period ... is granted  aEJ"conditionally on the outcome of the Further Notice of Pro- posed Rule Making, PR Docket No. 93144." Letters dated May 31, 1995, from Terry L. Fishel, Chief, Land Mobile  bE<"Branch, Federal Communications Commission, reprinted in Supplement to Deferred Joint Appendix at 486 and 492 (emphasis in original). On the record before us, it is not possible to determine whether those conditional authorizations were withdrawn fol-  bE!"lowing the issuance of the December 15, 1995 Order. But even if the Commission did not revoke the extensions, we find CCI's contention without merit because the applicants were not "similarly situated." CCI's application covered 2,312 stations in twenty-six states while the others' were limited, respectively, to eleven stations in four states and four stations in two states. Furthermore, the FCC granted the relatively modest Spectrum requests at a time when it was still reexam- ining its position regarding the grant of extended implemen- tation authority. Therefore, it cannot be said that the Com- H0*0*0*K$FUU:0*0*H mission acted inconsistently when, six months later and after the new policy had been adopted, the Commission took it into account in deciding to deny CCI's application.  bD"x4. Reply comments xCCI's final contention is that once the FCC requested  bE"comments on its application, see Public Notice, DA 951613 (July 19, 1995), it was entitled to an opportunity to reply to them even though the notice made no provision for a re- sponse. CCI provides no support for that proposition and has not shown that it was prejudiced by the agency's failure to consider its response. Accordingly, we find this contention without merit.  aE "i  III. Conclusionă xFor the reasons set forth above, the FCC's order denying CCI's application for extended implementation authority is  bE "x``V&Affirmed.ă "F 0*0*0*"  bE"Silberman, Circuit Judge, concurring: I concur in the majority's disposition of the merits. As to the exhaustion issue, I agree that Chadmoore's argument is not barred by its failure to raise it in a petition for reconsideration before the Commission. In so concluding, however, I would prefer to  bE"rely on MCI Telecomm. Corp. v. FCC, 10 F.3d 842 (D.C. Cir. 1993), rather than on the futility exception, which is a stretch here.