FCC Defends Auction Procedures in D.C. Circuit Argument
Two judges seemed supportive of FCC auction rules in oral argument Friday at the U.S. Circuit Appeals Court for the District of Columbia. Alvin Lou Media is challenging the commission’s handling of an auction for a permit to build an AM radio station in Las Vegas. In the argument, Judges Douglas Ginsburg and Judith Rogers seemed to defend the FCC. Judge Brett Kavanaugh mostly kept quiet.
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The FCC procedures in the radio permit auction allowed an unqualified rival bidder to game the system, to Alvin Lou’s detriment, said the appellant’s attorney, Dennis Kelly. The FCC failed to do an engineering analysis of companies’ proposals before the auction, allowing the competitor, Powell Meredith Communications, to submit a proposal that “never” could have been carried out, because of probable “destructive interference” to other radio stations, Kelly said. Alvin Lou had to drop out of the competition because it believed it would be outbid by Powell Meredith, Kelly said.
The FCC should have disqualified the other bidder before the auction, Kelly said. He said the FCC was required, under a rule from the days when it held comparative hearings to award permits, to do a proper engineering analysis and eliminate the bidder immediately after.
FCC attorney Grey Pash said the commission’s auction rules direct the agency to wait on conducting an engineering analysis until after the auction. The idea is to hasten deployment of radio services, he said. If the FCC decides after the auction that the winner’s proposal won’t work, the agency denies the license and penalizes the company, he said. Alvin Lou is asking the FCC to hold a comparative hearing in addition to an auction, Pash said. But doing both would be “incredibly inefficient” and inconsistent with Congress’s goal of ensuring fast spectrum build-out, he said. “It takes the FCC long enough as it is to deal with these applications,” he said.
Ginsburg appeared skeptical of Alvin Lou’s position on the FCC’s auction rules. The commission’s use of two thresholds -- one for whether a prospective bidder can take part in an auction and the other for whether the winner should get the license -- “seems like an entirely reasonable interpretation of the statute,” he said. The FCC isn’t ignoring a company’s qualifications, but bringing it up at the grant stage, he said. Just because a system can be abused, that doesn’t mean it’s not rational, Ginsburg added. He compared Alvin Lou’s complaint to suing the police over a stolen car because the police didn’t post an officer close enough to prevent the theft.
Rogers also seemed to reject Alvin Lou’s position that the FCC needed to check whether each proposal was technically feasible before the auction. The FCC isn’t “doing it that way anymore,” she said.
Rogers asked whether Alvin Lou had standing to appeal, since it had quit the auction. Kelly said dropping out was the only way Alvin Lou could participate in a new auction that it expected to follow. If the company had bid in the original auction and lost, he said, the FCC probably would have barred it from bidding a second one.
Ginsburg asked whether the FCC necessarily would have done a second auction if Alvin Lou had been the runner-up in the first. Commission rules allow granting a license to a second-place bidder if the FCC disqualifies the winner, he noted. But Kelly said the FCC has preferred to rerun auctions. It does that to start fresh, Pash said. Kavanaugh asked whether this practice is unfair to the No. 2 bidder from the first auction. Pash said he “wouldn’t call it” unfair, just a reality of the commission’s process. It’s “not a perfect system,” but neither was the old system of comparative hearings, he said.