Court Considers Whether NorthPoint MVDDS License Should Be Reinstated

The case goes back to June 2002, when NorthPoint and its 68 local Broadwave affiliates asked the D.C. Circuit to reverse the FCC’s dismissal of their terrestrial license applications. The Commission dismissed those 3- year-old applications in April 2002, saying NorthPoint should bid for the desired spectrum in an auction. But it issued licenses without auction to several satellite providers that applied on the same day to share the same spectrum in the 12 GHz band (12.2-12.7 GHz). The FCC auctioned the 12 GHz spectrum in Feb. 2003 mostly to EchoStar, with NorthPoint not participating. If NorthPoint wins the case, EchoStar will have to return the spectrum to the FCC and NorthPoint will be able to “begin building our system using our low cost, innovative technology to create competition to cable and satellite services,” said NorthPoint CEO Sophia Collier.

NorthPoint attorney Michael Kellogg argued the FCC discriminated against his client by failing either to call for competing applications earlier as it did with satellite applicants or to grant NorthPoint’s requested licenses via waiver. He said the FCC authorized enough spectrum for 7 satellite and one terrestrial systems. But he said that spectrum could have accommodated 6 to 7 other terrestrial licenses. “Had the FCC permitted more terrestrial applicants to seek licenses, the Commission would most likely have allocated proportionately more spectrum for MVDDS, and less for NGSO-FSS,” he said in a brief: “By manipulating the process to work out sharing rules among NGSO-FSS applicants, while forcing MVDDS operators to file mutually exclusive applications, the FCC violated both its duty to avoid mutual exclusivity… and the nondiscrimination principles of Ashbacker Radio Corp. v. FCC.” Citing the Ashbacker case, Kellogg argued that all similarly situated applicants should be treated similarly, and Judge David Sentelle appeared sympathetic.

Sentelle asked what the remedy was and Kellogg said: “The remedy is to grant NorthPoint a license.” He repeatedly stressed that NorthPoint was “the only applicant who satisfied the technical requirement testing” under the Local TV Act. The act requires an “independent technical demonstration of any terrestrial service technology proposed by any entity that has filed an application to provide terrestrial service” in the 12 GHz band. Kellogg said no current MVDDS licensee was qualified for an MVDDS license because “none has made the necessary demonstration of its own technology.” Neither Sentelle and Judge David Tatel seemed to disagree. One observer pointed out after the argument that Sentelle’s interest in a remedy could be a good sign for NorthPoint: “Judges [usually] don’t ask what the remedy is until they think that it’s needed.”

Kellogg also said the ORBIT Act prohibited auction of “spectrum used for the provision of international or global satellite communications services.” He said because NGSO-FSS providers used the 12 GHZ spectrum to provide international satellite services, all auctions of that spectrum were prohibited. “It’s clearly the spectrum used for international satellite services,” he said. Sentelle interrupted: “But once you have the right to use the spectrum, you wouldn’t use it for satellite? They use it for satellite and you don’t. It’s a different use.” Kellogg responded: “We don’t use it for satellite… but it’s putting different words into the statute.”

On the technical side, judges focused on how significant the interference problem would be for DBS providers if MVDDS operators entered the band. Sentelle seemed skeptical about the significance of the problem. DBS attorney Richard Bress said DBS service provides 99.98% reliability, but he said MVDDS entrance would cause a 30% increase in interference. But Sentelle noted that 99.98% of reliability meant there was only .02% of time when DBS customers had bad signal, and a 30% increase would still mean a bad signal very little of the time.

Bress argued the FCC’s decision to authorize MVDDS service in the 12 GHZ spectrum band was “unlawful.” He said the FCC was “supposed to ensure” that MVDDS service didn’t interfere with DBS. When Tatel asked whether the FCC had done so, Bress said “no.” Tatel raised the question of how the Local TV statute should be interpreted. The satellite industry has said all responsibility to ensure there’s no harmful interference to DBS subscribers should be on MVDDS operators. But the FCC said such responsibility should belong to MVDDS for the first year, and after that it should be on DBS operators. Tatel seemed concerned that under the FCC rules, if MVDDS doesn’t fix the problem in the first year of operation, the system has to be shut off. Sentelle asked: “If a new customer puts a DBS dish, does it mean it can harm MVDDS subscribers” by forcing MVDDS operators to shut off their service? Bress said “yes.” The 3rd judge on the panel was Judith Rogers.

“DBS made the same arguments that have been repeatedly rejected,” NorthPoint’s Collier told us after the oral argument: “They are trying to stop competition by getting the court to believe that it [MVDDS entrance] would cause interference.”

FCC attorney Joel Marcus said “the FCC doesn’t agree that satellite providers were treated more favorably. They were treated differently.” Marcus said the ORBIT Act “simply codified the FCC’s existing licensing approach,” which is not to auction satellite licenses. Kellogg responded later that the FCC has auctioned 2 DBS satellite licenses. Marcus also said the NorthPoint application was denied because “it was filed prematurely… This court held repeatedly that when a license application is filed and the FCC hasn’t set the rules, the application should be dismissed… We don’t have rules for allocating terrestrial licenses [without auction] because Congress said it should be done by” auction.

“It’s very important that introduction of MVDDS won’t cause harmful interference,” FCC’s Marcus said. He said the Commission had found that such service would “have no effect on quality of picture a [DBS] customer receives.” Marcus also said the FCC had established a “safety valve” that allows individual DBS licensees or distributors to present evidence that the appropriate EPFD for a given service area should be different from the EPFD applicable in that zone. “There is enormous safety built into the FCC test,” he said: “Because the test is so inclusive, there wouldn’t be any effect on the signal.”

FCC’s Marcus said the remedy Kellogg has suggested would require the FCC to grant a nation-wide license instead of geographic licenses. But he said: “The FCC decided it’s in public interest to have geographic licenses.”