Star Wireless, LLC v. Federal Communications Commission and United States of America

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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued March 13, 2008 Decided April 22, 2008
No. 07-1190
STAR WIRELESS, LLC,
PETITIONER
v.
FEDERAL COMMUNICATIONS COMMISSION AND
UNITED STATES OF AMERICA ,
RESPONDENTS
On Petition for Review of an Order of the
Federal Communications Commission
John F. Cooney argued the cause for petitioner. With him
on the brief were Emilio W. Cividanes and Ronald M. Jacobs.
Joseph R. Palmore, Deputy General Counsel, Federal
Communications Commission, argued the cause for respondents.
With him on the brief were Thomas O. Barnett, Assistant
Attorney General, U.S. Department of Justice, Robert B.
Nicholson and Robert J. Wiggers, Attorneys, Matthew B. Berry,
General Counsel, Federal Communications Commission, Daniel

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M. Armstrong, Associate General Counsel, and Laurel R.
Bergold, Counsel.
Before: HENDERSON , ROGERS and BROWN , Circuit Judges.
Opinion for the Court by Circuit Judge ROGERS .
ROGERS , Circuit Judge: Star Wireless, LLC (“Star”),
challenges the imposition of a monetary forfeiture for violating
the Federal Communications Commission’s “anti-collusion
rule,” 47 C.F.R. § 1.2105(c). The principal issue is whether the
Commission’s interpretation of its rule was not “ascertainably
certain” when the relevant interactions between Star and
Northeast Communications of Wisconsin (“Northeast”)
occurred. Star also contends that the Commission’s application
of the rule was arbitrary and capricious because the harm
addressed by the rule did not occur and its application thus
violated Star’s commercial speech rights. We deny the petition.
I.
Under the Communications Act, the Commission has the
authority to grant licenses through a competitive bidding process
to applicants seeking to use the electromagnetic spectrum. See
47 U.S.C. §§ 301, 308-09. Among the goals of this process are
“promoting economic opportunity and competition . . . .
recovery for the public of a portion of the value of the public
spectrum resource . . . and avoidance of unjust enrichment
through the methods employed to award uses of [the
electromagnetic spectrum].” Id. §§ 309(j)(3)(B); (C). The
Commission’s auction process for electromagnetic spectrum
includes various stages. As relevant, participants are required to
fill out a “short-form” application providing preliminary
information. 47 C.F.R. § 1.2105(a). The Commission may
require applicants for a license to submit an “upfront payment,”

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to be applied against any payment made as part of a winning
bid, id. § 1.2106 (“upfront payment rule”); when these payments
are not made, the Commission’s regulations provide that this
party “will be ineligible to bid [and] its application will be
dismissed,” id. § 1.2106(c).
The Commission’s anti-collusion rule is aimed, in part, at
“strengthen[ing] confidence in the . . . bidding process.” In the
Matter of Implementation of Section 309(j) of the
Communications Act – Competitive Bidding, 9 FCCR 2348,
2386 (1994) (“Anti-Collusion Rule Purposes”). The rule
prohibits:
all applicants for licenses in any of the same
geographic license areas [who are not members of a
joint bidding arrangement identified on the short-form]
from cooperating or collaborating with respect to,
discussing with each other, or disclosing to each other
in any manner the substance of their own, or each
other’s, or any other competing applicants’ bids or
bidding strategies, or discussing or negotiating
settlement agreements, until after the down payment
deadline.
47 C.F.R. § 1.2105(c)(1). For purposes of the anti-collusion
rule, the term applicant is defined to include “all controlling
interests in the entity submitting a short-form application to
participate in an auction.” Id. § 1.2105(c)(7)(i).
On March 20, 2002, the Commission issued a public notice
announcing procedures to be used in “Auction 44" for licenses
in the 698-746 MHZ band. Public Notice, Auction of Licenses
in the 698-746 MHZ Band Scheduled for June 19, 2002, 17
FCCR 4935 (2002) (“March 20 Public Notice”). Star filed to
bid for all 740 licenses to be auctioned, and appointed David G.

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Behenna (“Behenna”) as its authorized bidder. Northeast filed
to bid for 734 licences, and appointed Patrick D. Riordan
(“Riordan”) as one of its authorized bidders. Neither Northeast
nor Star listed each other as cooperating or collaborating on their
short-forms. On June 7, 2002, the Commission publicly
identified applicants, including Star, that were qualified to bid.
Northeast, which had not submitted an upfront payment, was not
among them. Public Notice, Auction of Licenses for 698-746
MHZ Band, 17 FCCR 10,700, 10,708-13, 10,732 (2002).
On August 28, 2002, Star began bidding on licenses in
California and Florida. That same day, Behenna left Riordan a
voice-mail, requesting that Riordan call him back only if
Northeast was not participating in the auction. On August 29,
2002, at approximately 9:18 am, Eastern time, Riordan called
Behenna, and they talked for approximately six minutes.
Behenna asked if Northeast was interested in any markets, and
Riordan identified four or five Wisconsin markets as being of
interest. Less than forty minutes after this conversation, Star
began to bid for licenses in specific Wisconsin markets
identified by Riordan, abandoning its prior bids for licenses in
California and Florida. By the end of the auction, Star was the
highest bidder in three of the Wisconsin markets discussed with
Northeast.
On September 6, 2002, before the end of the auction
process, Star informed the Commission of Behenna’s and
Riordan’s interactions on August 28 and 29. By letter from its
counsel, Star explained that Behenna had “mistakenly believed
that the Commission’s anti-collusion rules allowed
communications with an entity that had filed a short-form
application but was later deemed not qualified to participate in
an auction.” Letter from E. Ashton Johnston, Esq. & Paul W.
Jamieson, Esq., to Marlene H. Dortch, Secretary of the
Commission (Sept. 6, 2002). On August 27, 2003, the

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Commission issued a Notice of Apparent Liability (“NAL”) for
violation of the anti-collusion rule, proposing forfeiture of
$100,000.
The Commission issued Forfeiture Notices on September
22, 2004, based on its findings that Star and Northeast had
“engaged in collusive conduct during a Commission-conducted
auction in 2002, in willful and repeated violation of section
1.2105(c).” In re Application of Star Wireless, LLC, 19 FCCR
18,626, 18,626 (2004); accord In re Application of Northeast
Communications of Wisconsin, Inc., 19 FCCR 18,635, 18,635
(2004). Finally, on May 4, 2007, the Commission affirmed its
findings of willful violations in denying Star’s application of
review and Northeast’s petition for reconsideration, but reduced
the forfeitures for each company to $75,000 because neither had
engaged in previous violations of Commission rules. In the
Matter of Star Wireless, LLC and Northeast Communications of
Wisconsin, Inc., 22 FCCR 8943, 8943-44 (2007) (“Order on
Review”). Observing that neither its rules nor the public notices
for Auction 44 had conditioned the term “applicant” upon the
outcome of review of the short-form applications or receipt of
upfront payments, the Commission found that Northeast
remained an applicant despite not having made an upfront
payment. Observing further that “the plain language of the anti-
collusion rule clearly states that applicants are prohibited from
discussing not only their own bids and bidding strategies but
also those of any other applicants that applied to bid in the same
auction markets,” id. at 8947, the Commission rejected
arguments that the rule was vague, inconsistent, or
unconstitutional, finding that Star and Northeast had ample
notice and engaged in precisely such prohibited discussions.
The Commission explained that the anti-collusion rule protected
“the integrity of the Commission’s auctions,” that it “exist[ed]
only during the time period between the short-form application
filing deadline and the post-auction down payment deadline,”

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and that it “protect[ed] a valid governmental interest without
infringing unduly on the First Amendment rights of auction
participants.” Id. at 8951-52. In the Commission’s view, Star’s
and Northeast’s interaction “present[ed] a good example of a
reason the Commission clearly prohibits certain communications
under the anti-collusion rule: an applicant that is not qualified to
bid in an auction nevertheless secretly influences a bidding
applicant to obtain the licenses it desires.” Id.
Star petitions for review. The court will deny a petition for
review of an order by the Commission unless it is “arbitrary,
capricious, an abuse of discretion, or otherwise not in
accordance with law.” 5 U.S.C. § 706(2)(A). The
Commission’s interpretation of its own rules is “entitled to
controlling weight unless it is plainly erroneous or inconsistent
with the regulation.” Ballard v. Comm’r of Internal Revenue,
544 U.S. 40, 70 (2005) (internal quotation omitted).
II.
In assessing forfeitures against regulated entities, the
Commission is required to provide “adequate notice of the
substance of the rule.” PMD Produce Brokerage Corp. v.
USDA, 234 F.3d 48, 52 (D.C. Cir. 2000). The court must
consider “whether by reviewing the regulation[] and other public
statements issued by the agency, a regulated party acting in good
faith would be able to identify, with ascertainable certainty, the
standards with which the agency expects parties to conform.”
Trinity Broad. of Fla., Inc. v. FCC, 211 F.3d 618, 628 (D.C. Cir.
2000) (internal quotations omitted).
Star contends that the Commission’s interpretation of the
anti-collusion rule was not “ascertainably certain” at the time of
its communications with Northeast because the plain text of the
rule does not specify whether Northeast remained an applicant

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1 The Commission is unpersuasive in maintaining that Star
waived its right to contend that it was not given sufficient notice of the
anti-collusion rule’s scope. See Time Warner Entm’t Co. v. FCC, 144
F.3d 75, 81 (D.C. Cir. 1998).
after failing to make the required upfront payment. At the time
of the auction, Star maintains, the upfront payment rule could be
reasonably interpreted as resulting in immediate dismissal of an
application by an entity that did not make the required payment.
Star relatedly contends that neither Auction 44 materials nor
previous Commission publications sufficiently set forth the
Commission’s interpretation of the interaction of the anti-
collusion and upfront payment rules.1
Even assuming Star has advanced plausible alternative
interpretations of the anti-collusion rule that would make its
application to Northeast uncertain, the Commission
convincingly responds that the regulated community was on
notice regarding the relevant scope of the anti-collusion rule.
Multiple Commission documents regarding Auction 44 noted
the applicability of the anti-collusion rule to “applicants for the
same geographic license area,” March 20 Public Notice, 17
FCCR at 4944; accord Public Notice, Auction of Licenses for
698-746 MHZ Band: Status of FCC Form 175 Applications to
Participate in the Auction, 17 FCCR 9415, 9418 (May 24,
2002). Additionally, before any public announcements
regarding Auction 44 were issued, Commission staff had
provided guidance explicitly noting that the anti-collusion rule
extended to applicants who “filed a short-form . . . . even though
[they are] not [] bidder[s] in the auction.” Letter to Robert
Pettit, Esq., from Margaret W. Wiener, Chief, Auctions and
Industry Analysis Division, of the Commission, 16 FCCR
10,080, 10,080 (WTB 2000) (“Robert Pettit”). The Commission
listed Robert Pettit as one of the sources explaining the scope of

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the anti-collusion rule in a public notice regarding Auction 44
issued prior to the discussions at issue between Star and
Northeast. March 20 Public Notice, 17 FCCR at 5008.
Star’s attempts to obscure the clarity of Robert Pettit’s
guidance are unavailing. Intervening changes to the anti-
collusion rule after Robert Pettit’s issuance, see In the Matter of
Amendment of Part 1 of the Commission’s Rules –- Competitive
Bidding Procedures, 16 FCCR 17,546, 17,546 (2001), were
unrelated to Robert Pettit’s conclusion. In any event, Robert
Pettit was cited by the Commission as authority concerning the
scope of the anti-collusion rule in the March 20 Public Notice,
a publication specifically related to Auction 44 issued after the
rule-change. This constituted sufficient notice to Star that the
anti-collusion rule still applied to short-form filers that did not
make an upfront payment. Star’s reliance on Satellite
Broadcasting Co. v. FCC, 824 F.2d 1, 3, & n.4 (D.C. Cir. 1987),
is also misplaced, as Robert Pettit was an official interpretation
issued by the Commission’s staff under delegated authority,
which has “the same force and effect . . . [as] other actions of the
Commission.” 47 U.S.C. § 155(c)(3). Further, Star points to no
Commission documents or any authority that contradicted
Robert Pettit’s conclusion. The minor potential ambiguities
contained in Auction 44 materials issued after March 20, 2002,
were insufficient to bring into question Robert Pettit’s definitive
interpretation of the anti-collusion rule. As presented by Star’s
brief, subsequent Commission pronouncements at most included
reminders of the anti-collusion rule that could be interpreted as
being directed only to “bidders” rather than “applicants” but, on
their face, still applied to Star and could not be rationally
construed as altering the Commission’s prior articulation of the
anti-collusion rule. We note that the Commission has clarified
its instructions with regard to the anti-collusion rule, see, e.g.,
Auction of 700 MHZ Band Licenses Scheduled for January 24,
2008, 22 FCCR 18,141, 18,149 (2007), but this change does not

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mean that its previous warnings were not sufficient to put the
regulated community on notice concerning the scope of the rule.
III.
Star’s other contentions do not require extended discussion.
Challenging the Commission’s application of the anti-collusion
rule as arbitrary and capricious, Star contends that its
communication with Northeast did not cause the harm against
which the rule was directed, and consequently the rule’s
application penalized “constitutionally protected commercial
speech.” Petitioner’s Br. at 28. Star also maintains that the
Commission provided no explanation for treating it differently
from similarly situated entities exempted from application of the
anti-collusion rule. However, as the Commission observes,
general bright-line prophylactic measures, such as the anti-
collusion rule, are appropriate when “the probability of abuse in
transactions between related organizations is significant enough
that it is more efficient to prevent the opportunity for abuse from
arising than it is to try to detect actual incidents of abuse.”
Biloxi Reg’l Med. Ctr. v. Bowen, 835 F.2d 345, 350 (D.C. Cir.
1987); accord Weinberger v. Salfi, 422 U.S. 749, 776 (1975).
Star asserts that its communications with Northeast could
not have resulted in lower immediate auction prices. But Star
ignores the potential for certain types of collusion to undermine
Commission auctions in ways that do not immediately result in
lower prices being paid. Forbidding participants in the auction
process from communicating directly serves the goal of
preventing such collusion, and thus “strengthen[s] confidence in
the [] bidding process,” Anti-Collusion Rule Purposes, 9 FCCR
at 2386. As the Commission noted, the interactions of Star and
Northeast are a “good example,” Order on Review, 22 FCCR at
8951, of behavior that could undermine the Commission’s
auction processes: Star learned with certainty which markets

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Northeast was focusing on, significantly narrowing the field
from the initial 734 licenses in which Northeast had publicly
expressed an interest. This insight gave Star an informational
advantage over other auction participants; such insider dealing,
especially if widespread, could reduce non-colluding parties’
incentive to participate in future auctions. It is true that the anti-
collusion rule includes a series of exemptions whereby entities
not competing in the same market may contact each other,
allowing communications that could arguably undermine the
integrity of the auction process in various ways. However, an
agency need not address all problems at once. See U.S. Cellular
Corp. v. FCC, 254 F.3d 78, 86 (D.C. Cir. 2001). Instead, its
rules may solve first those problems it prioritizes.
Finally, Star contends that the Commission’s levying of a
forfeiture violated the Communication Act, which “provides that
the [Commission] may impose a forfeiture only on an entity that
‘willfully or repeatedly failed to comply with . . . any rule,
regulation, or order issued by the Commission.’” Petitioner’s Br.
at 35 (quoting 47 U.S.C. § 503(b)(1)(B)). To the extent Star
seeks to challenge the Commission’s finding that it engaged in
“repeated” violations, the Commission did not rely on the
number of violations by Star in the Order on Review; while the
2004 Forfeiture Order against Star discussed repeated behavior,
it specifically noted that “even if the behavior constituted only
one violation . . . forfeiture is still appropriate,” 19 FCCR at
18,632. To the extent Star seeks to challenge the Commission’s
interpretation of statutory text and legislative history in arriving
at its definition of “willful” as meaning “consciously” rather
than “with intent,” Star did not preserve the issue. Neither Star
nor Northeast raised this issue before the Commission, and we
therefore do not address it. See Coal. for Noncommercial Media
v. FCC, 249 F.3d 1005, 1009 (D.C. Cir. 2001) (citing 47 U.S.C.
§ 405); see also Rogers Radio Commc’ns Servs., Inc. v. FCC,
751 F.2d 408, 413 n.14 (D.C. Cir. 1985). Although the Order

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on Review relied on a definition of “willful,” this does not mean
that the Commission would have necessarily understood that its
pre-existing definition was being challenged. See Time Warner
Entm’t Co., 144 F.3d at 81. Insofar as Star would claim the
definition of “willful” was mistaken, it should have provided
the Commission an opportunity to re-examine its definition
rather than now inviting this court to engage in a “freewheeling
policy inquiry,” Verizon Tel. Cos. v. FCC, 292 F.3d 903, 910
(D.C. Cir. 2002). Star’s position that it would have been futile
to challenge the Commission’s definition “[g]iven the
[Commission’s] 40-year history of applying the same
interpretation,” Petitioner’s Reply Br. at 18, is unconvincing
because Star points to nothing concrete to support its claim of
futility, see Action for Children’s Television v. FCC, 564 F.2d
458, 469 (D.C. Cir. 1977), such as a plain desire by the
Commission to “rapidly expedit[e]” a review process,
Omnipoint Corp. v. FCC, 78 F.3d 620, 635 (D.C. Cir. 1996).
See also Chadmoore Commc’ns, Inc. v. FCC, 113 F.3d 235,
239-40 (D.C. Cir. 1997).
Accordingly, we deny the petition for review.

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