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Case number 20-1142 et al.

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PSSI Global Services LLC, a state of Nevada limited liability company, Appellant, versus Federal Communications Commission.

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Mr. Diaz-Gavin for the Appellant, PSSI Global Services LLC.

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Mr. Wright for the Small Satellite Operator, Appellant.

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Ms.

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Boyzel for the Appellee.

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Mr. Garangia for the Wireless Intervenors.

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Mr. Warners for the Intervenor, SES AmeriCom Inc.

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Good morning.

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Before we get started, I just have one housekeeping matter.

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The parties filed a sealed appendix in this case, but the briefs were not filed under seal and no one has requested to conduct this oral argument under seal or as a closed proceeding.

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And so we are operating under on the basis that there will be nothing referenced from the sealed appendix during argument.

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We don't intend to reference anything from the sealed appendix.

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And we expect that the parties will not either reference anything, at least specific information, identifiable information from the sealed appendix.

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And so that's the basis upon which we are proceeding.

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And if any party disagrees with proceeding in that fashion, they should let us know at this time.

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Otherwise, we will go forward.

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Does anyone have an objection to that?

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OK, hearing none, we'll hear from, I guess, Mr. Gavin.

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Thank you, Your Honor.

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I've reserved a minute and a half for rebuttal.

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May it please the court.

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My name is Stephen Diaz and I'm representing the Appellant Petitioner, PSI Global.

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My argument will focus on two statutes, section 316 of the Communications Act and the Orbit Act.

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I will address them in turn.

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Although under section 316, the commission can modify a license

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This court has made clear in community television and subsequent cases that such authority does not extend to the FCC's making a fundamental change in that license based upon the Supreme Court's holding in MCI versus AT&T.

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The verb to modify, the Supreme Court said, means to change moderately or in minor fashion and has a connotation of increment or limitation.

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In fact, the order has so fundamentally changed PSSI's transportable licenses, the authorizations for the satellite trucks,

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that are essential for providing live events programming so as to threaten the transportable business.

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In community, this court confirmed a modification because the licensees begin and end the trend under very similar terms.

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One channel digital for one channel analog, not so here.

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The order takes away 60% of the spectrum available for operation of the transportables

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and imposes multiple technical limitations in the spectrum that remains.

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This is a fundamental change, precisely what the court said was impermissible in community and cell code.

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PSSI cannot provide the same level of services when 60% of the spectrum was taken away.

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As can be seen from- If the council, if the commission makes a finding that this is not a fundamental change

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of as a factual matter and they explain that finding and the evidence that they are basing that finding upon, then that is something that we owe deference to unless it's not based upon substantial evidence.

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Is that correct?

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Your honor, I think that there is substantial evidence that shows the contrary, that there has been a substantial change in the license.

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But I guess you would agree that as a legal matter, we would review that for substantial evidence.

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As a legal matter, you could review that for substantial evidence, yes.

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This is the case, Mr. Gavin, that your side could have some substantial evidence, the FCC could have some substantial evidence, and in that situation, we have to rule for the FCC.

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No, not necessarily, Your Honor, because we have to go back to what is the statutory interpretation of Section 316, and as I indicated, the decisions of this Court

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based upon the Supreme Court holding in MCI versus AT&T is that there cannot be a fundamental change in what is the license.

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And there has been- But I think Judge Wilkins was asking about questions of fact, factual disputes.

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As to the, we are presenting substantial evidence that demonstrates that our- But again, Mr. Gavin, I think the standard, and please correct me if I'm wrong,

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is when it comes to a factual dispute, has the FCC provided substantial evidence?

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And I could be wrong here, but let's take, for an example, a factual dispute.

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You say that you won't be able to continue servicing your customers and the FCC says that you will.

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And in fact, your customers, everybody from Disney to Viacom,

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says that you will.

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So if the FCC has put before us substantial evidence that you'll be able to continue doing what you used to do in terms of servicing your customers, then on the dispute of whether or not that's true or not, we have to agree with the FCC if they provide a substantial evidence.

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Do you agree with that?

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Your honor, I return to my point that I think that we haven't gotten to the, this is not a situation where we're giving deference to the commission's judgment because they have ignored the, they have ignored the dictate of the statute that a modification is not a fundamental change.

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So Mr. Gavin, I agree it's for this court to decide the meaning of fundamental,

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of finding the meaning of modification.

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And our presidents tell us that in order to define that meaning, we look to the distinction between a modification and a fundamental change.

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But in order to take that test and apply it to certain facts, we have to figure out what the facts are.

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One fact might be you can continue doing everything you did before.

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One fact might be you can't do things that you used to do.

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And that's a disputed fact.

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We have to figure out, well,

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uh who's right and you say you're right FCC says it's right and I believe that so long as the FCC produces substantial evidence and puts it before us that they're right then we have to agree with the FCC on that disputed fact right your honor if we are if we are dealing with simply

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have I presented substantial evidence or has counsel for the FCC presented substantial evidence, the cases will, you will defer to the FCC on substantial evidence.

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Okay, and in terms of the evidence that you produced and put before the FCC, let's exclude the evidence that you've put before us as a reviewing court that you did not originally

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provide to the FCC.

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If we're only talking about information you provided to the FCC, I understand you told the FCC about the Iowa State football game.

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That's true.

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Any other, which they say the guard band satisfies, put that to a side for a second.

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Any other evidence that you provided to the FCC that would show

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that when you're limited to 4.0 to 4.2, you can't do what you used to do?

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Your honor, first of all, the very basic, at several points during the proceeding, we noted that the difficulty of being able to coordinate, to do frequency coordination, for example, in order to be able to

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make the connection for our satellite.

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We had argued that before.

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The particular example that the commission has questioned is the Miami Hard Rock Stadium example that we used and included and is before the court.

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That's simply an illustration of the points that we were making previously.

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That's not something new.

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That's not a new argument that we raised.

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Yeah, no, I know it's not a new argument, but I'm just, I'm not asking about what arguments you made to the FCC.

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I'm trying to figure out, aside from the Ipsadixit that you submitted to the FCC, what evidence, what data did you provide them, other than take your word for it?

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Your Honor, among other things, we provided them evidence during the course of the difficulties of being able to

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Protect the signal because of filtering we provided example of our in I believe it was in May of May of 2019 and again in comments after we've done a formal test the difficulty of being able to protect the signal because of the Electronic interference that was coming the power interference.

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I mean, that's the biggest the biggest problem is the power level You're putting a satellite signal that's coming down to earth at

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Uh at a level of 0.1 to the 19th decimal point a number so small that i'm not sure that i've even That goes to the interference problem, right?

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That goes your that goes your honor to two things it goes to the interference problem, but it also goes to the the the the difficulty of operating in an environment where your signal is so saturated by the

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Signals that are being emitted by the 5g transmitter.

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So it's not just it's not just it's not so much a frequency issue as it is a power saturation level issue if I'm remembering right you told the FCC that you could sustain a loss of 200 megahertz And now you say you can't sustain a loss of 300 megahertz I Guess What where can I go in the record?

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to find that you produced evidence, more than just your say so, that there's something about that extra 100 megahertz that allows you to service your current and future customers in a way that you wouldn't be able to if you lost that extra 100.

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Well, Your Honor, if I could start to take us all the way back, we initially said that the ideal solution for the C-band was no spectrum.

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I get that, but I think at some point you eventually said that it could sustain a loss of 200.

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We said at some point that we could sustain a loss of 200 because the band alliance, the band existing group of satellite consortia,

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had put 200 megahertz onto the table.

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And we felt that in order to try to make this post move forward, but we did provide evidence even at the 200 level, those studies that I refer to on the interference problem were for the filtering.

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And I believe that we also, I will go back to the record, your honor, but I will note that we raised the argument of the difficulty of being able to coordinate

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where you lose the frequency pair for the uplink satellite that is linked to the downlink satellite.

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So we raised that point to the commission, and I could go back and supplement the record for you.

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And I'll stop asking questions now.

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Maybe in your rebuttal, if you can give me the JA pages that talk about those two experiments that you submitted or whatnot.

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OK, thank you, Your Honor.

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Thank you.

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Your Honor, I had an argument that I wanted to raise in addition to this regarding the Orbit Act.

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If I have time.

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Briefly, please.

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I'll just ask you, why doesn't North Point take that off the table?

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Because, Your Honor, as we noted in North Point 1 specifically, the commission, this court said that the facts would be different if it was a service where there was currently international and global services

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being provided, which is specifically the case for which there's substantial evidence in the record.

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The interpretive question is, what does the phrase used for mean?

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Does it refer to the old use or the new use?

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And we said the commission could permissively construe that to refer to the new use.

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And the new use here is not satellite.

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Well, you said, Your Honor, in North Port 1, Your Honor, you said that the

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Well, North Point 2, which was decided two weeks later and involved a service which was strictly a domestic service, the 12 gigahertz MVDDS service, which involved a band where there was nobody currently using the band for international service.

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In our case, this band is specifically being used to transmit programming to and from the United States, which appears to be a pretty evident

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international service.

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Congress's position was not just that you shouldn't auction this, it was not withstanding any other provision of law, it should not be.

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It's interesting that in North Point 1, the court noted that the commission had even noted that it construed the relevant language of Section 765F, the Orbit Act, to focus on whether the particular spectrum being assigned is used for international or global satellite communication services.

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They didn't even do that here, Your Honor.

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They just simply said, we have the authority to do so.

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Where spectrum is being consistent with your holding in North Point 1, where spectrum is actually being used for global and international service, as it is here, the auction is prohibited by the Orbit Act.

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We are out of time and we rest on our briefs on the other issues that we raised, but we request that the court vacate the order.

[00:16:01] Speaker 04:
All right, I'll give you a little bit of time on rebuttal.

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We'll hear from Mr. Wright.

[00:16:09] Speaker 07:
Thank you, your honor, and may it please the court.

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I'm representing the SSOs, which are the three smallest of the eight satellite operators licensed to use the C-band.

[00:16:21] Speaker 04:
Your voice is barely coming through.

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If you could turn up your mic or get closer to your mic, please, sir.

[00:16:29] Speaker 07:
I will do my best, Your Honor.

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I'm in my office, and our IT guy is going to turn up the mic, I hope.

[00:16:48] Speaker 04:
All right.

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Say something now, because I think it was getting better.

[00:16:52] Speaker 07:
Well, thank you, Your Honor.

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Let me dive in on modification.

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The question before the court is really a legal issue subject to Chevron standard.

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It's what the word modify means and whether it can bear the interpretation the commission has given us here, which is that it just means you can serve your existing customers.

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And we think that's plainly wrong where we've lost 60% of our spectrum.

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The question is whether licenses were modified.

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It's never been a question before.

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This is a completely unprecedented interpretation of Modify to say you look at whether you can serve your existing customers.

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And it's completely unfair to new entrants, such as my clients, who had to invest tens of millions of dollars before they could make a single docker.

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And we've detailed ABS's experience in some detail in our brief

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to show that it built a satellite that can provide service until 2042.

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And yet the commission is taking away 60% of what it can sell.

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And that seems to us to clearly be an unreasonable interpretation of the word modified.

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So we're challenging the existing customer standard here.

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And therefore the court doesn't need to get to the FCC argument about whether or not our clients could have sold more than 200 megahertz of spectrum in the next couple of decades.

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As we've explained in our brief, we think they're clearly wrong on that.

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But first and foremost, it's a legal issue.

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With respect to the facts,

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with respect to our clients, the commission has contradicted itself.

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It says that the CONUS model, where you self-sabotage service within the continent of the United States has essentially lost out to fiber.

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And then it blames us for doing an intercontinental approach under which we would bring

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of video and other services into and out of the United States, the different countries, and then rely on vigor in the United States.

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So again, I don't think the court needs to reach that issue, but modification means a change in incremental or minor fashion, as this court said in SELCO, and the focus should be on licenses,

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and taking away 60% of the license is more than a modification.

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Didn't the commission find that the remaining 200 megahertz would be enough, not only for existing customers, but for any reasonably expected future demand?

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So it said that.

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I would say as we showed that it clearly

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if an existing customer standard and then fell back to to saying well and and ussos are unlikely suppose suppose that finding a fact about current and reasonably expected future demand is not clearly erroneous why wouldn't that be more than enough to

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cinch up their case on the legal question.

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I mean, you're losing 60%, but turns out that doesn't matter much because any future demand can be met.

[00:20:55] Speaker 07:
Well, Your Honor, again, I'd stress that if you look at the reasoning for that, it contradicts itself.

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Basically, there's no future demand we would have to sell satellite service

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within the continental United States.

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That's not what we're planning to do and basically just ignore that.

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Let me turn to our fair notice, however, where the applicable standard of review is much less favorable to the commission.

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Now, again, let me say that this existing customer standard was unprecedented here.

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The commission has always made licensees in our position whole.

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They often move, as Mr. Gavin was saying, somebody who has six megahertz to six other megahertz and pays the relocation or has the new license and pays the relocation.

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And that's what we expected here.

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We have no reason to think

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that we wouldn't keep the same amount of spectrum one way or another or be compensating for our losses.

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And let me just say that the most recent case, the 24 gigahertz case from 2018 is very much like this case.

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The commission cleared broadcasters to make room for 5G.

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And it offered to pay them if they didn't want to get moved, but simply wanted to trade six gigahertz or six megahertz here versus megahertz there.

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But under Trinity Broadcasting, one of the most relevant fair notice cases, the commission does not do any deference when applying an unprecedented rule like the existing customer

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Rather, the issue is whether its interpretation of the statute was, quote, ascertainably certain, unquote.

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That's a 242F3 and 628.

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And in this case, you know, not only was it ascertainably certain that the commission was going to apply an existing customer standard, our clients had no reason at all to believe

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Mr. Wright, can you talk to me, can you tell me about your notice argument?

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If we assume that the FCC's order did not apply a blanket existing customers standard, but instead apply the standard that considers past customers, present customers, and reasonable expectation of future customers,

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found in the context of small satellite operators that there was no reasonable expectation of future customers.

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And so there as a shorthand for that fairly all-encompassing test referred to it as the existing customers test.

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If I think that's how the order is best read, did you have notice of that?

[00:24:21] Speaker 07:
No, Your Honor.

[00:24:22] Speaker 08:
And why not?

[00:24:25] Speaker 07:
Well, the Commission's best case is motioned.

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In every other case, the Commission hasn't looked into anything like this or thought about whether or not a licensee could get by with less spectrum.

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It's fully compensated then.

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And it's said this on many occasions because it recognizes the importance of investment-backed expectations.

[00:24:49] Speaker 07:
But motion

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Again, their best case is helpful for us.

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It's the only one where a licensee lost spectrum without compensation for losing that spectrum.

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But that case is so different than us.

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The commission decided to move a licensee from 28 megahertz to a 20 megahertz

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And the licensee was very happy about that because international coordination rules have rendered its 28 megahertz clock nearly useless.

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And so as the commission's order shows, it welcomed the change.

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And it was another company that complained to the commission that it shouldn't do that demotion.

[00:25:38] Speaker 07:
So in light of that background, the most notice we have

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concerning what the condition might do is it might say, okay, we're taking 300 or 500 megahertz and we're gonna give you 420 better megahertz of license spectrum somewhere else.

[00:26:02] Speaker 07:
If they do that, we wouldn't have to mind if they did what they've done so many times before and say, well, we're gonna move you somewhere else,

[00:26:13] Speaker 07:
We can't find it, so we'll give you vouchers to participate in the upcoming auction, or we'll compensate you in some other way.

[00:26:23] Speaker 07:
That's what we had fair notice of.

[00:26:28] Speaker 03:
And let me just say that... Why do you need fair notice that they might defend their order with

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the notion of existing customers as relevant to modification.

[00:26:46] Speaker 03:
I mean, that's just part of the justification they're using to explain why they're shifting spectrum.

[00:26:56] Speaker 03:
And it was crystal clear that the notice told you they were planning on shifting spectrum.

[00:27:05] Speaker 03:
Why isn't that good enough?

[00:27:08] Speaker 03:
And you could make whatever arguments you want,

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about why they shouldn't.

[00:27:14] Speaker 07:
They've just never done that before without making cards whole.

[00:27:18] Speaker 07:
And as we quoted in our brief, they've constantly said that in order to induce people to build out licenses.

[00:27:29] Speaker 03:
Just on the notice point, you said they've never done that without making people whole.

[00:27:36] Speaker 03:
I understand that's

[00:27:39] Speaker 03:
That's one of your substantive arguments, but just not seeing on notice, the whole point of this from the outset was to shift satellite spectrum into 5G spectrum.

[00:27:56] Speaker 03:
And everyone knew that's what was at issue.

[00:28:01] Speaker 03:
Everyone commented in the administrative proceedings about why that was a good or bad idea.

[00:28:09] Speaker 07:
Right, and our clients weren't obstructionists.

[00:28:12] Speaker 07:
We ultimately, we said, okay, but, and let me just point to one of the places with JA 339, the government suggests that we just said, go ahead and take our spectrum.

[00:28:25] Speaker 07:
Every time we said, it's okay to repurpose the CBA, Your Honors, or FCC, we added something like, but of course we expected

[00:28:37] Speaker 07:
that will be compensated for relinquishing our spectrum use rights.

[00:28:42] Speaker 07:
And as I say, that's just always happened.

[00:28:46] Speaker 07:
Most of the time, the commission has replaced it.

[00:28:49] Speaker 07:
It's getting harder to replace spectrum.

[00:28:52] Speaker 07:
So as I said in the most recent example, the 24 gigahertz case, they gave licensees

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an option to get a voucher to participate in the upcoming auction or to take cash.

[00:29:10] Speaker 07:
And, you know, we would have welcomed no resolution on that sort, but we just had no notice that we would lose spectrum without being made whole.

[00:29:23] Speaker 07:
And it certainly, it just wasn't ascertainably certain.

[00:29:28] Speaker 07:
The commission has now repurposed spectrum

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many, many times without ever doing this.

[00:29:35] Speaker 07:
And again, I say that the commission's best case of motion, which is in fact nothing like this.

[00:29:44] Speaker 07:
Let me turn, if I may, to the commission also, while not compensating the SSOs in any way, the commission compensated the other five operators

[00:30:01] Speaker 07:
with 15 billion and we presented the FCC with this clearly superior alternative that they just brushed off because I don't think they had a good answer under which every operator could get fairly compensated for the loss of spectrum.

[00:30:18] Speaker 07:
Every operator can get their relocation costs covered including relocation costs to do things quickly.

[00:30:26] Speaker 07:
And the,

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the larger operators with existing services could get a proportionate profit from doing all this.

[00:30:39] Speaker 07:
And that could have been done for 6.4 billion rather than 15 billion.

[00:30:44] Speaker 07:
And so

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Of course, our main concern is that the mission has given a war chest to our competitors, some of whom are failing and now have 9.7 billion and 10 or 12 new satellites that they can probably use to move into the intercontinental market.

[00:31:06] Speaker 07:
And this was just unreasonable.

[00:31:12] Speaker 07:
The commission's explanation for this

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was that it would be a gamble not to pay 9.7 billion in simply pure payments to do something the larger satellite operators said they could do, relocate by 2023.

[00:31:32] Speaker 07:
The only answer we got to our proposal was that it would be a gamble.

[00:31:40] Speaker 07:
And the commission has explained in its brief that the gamble

[00:31:44] Speaker 07:
was that Intel, SAT, and SES might bring, quote, a lawsuit to challenge the Commission's legal authority to reduce its spectrum.

[00:31:53] Speaker 07:
And the SEC adds, quote, the Commission is confident it would have prevailed in any such suit.

[00:32:00] Speaker 07:
So there is a reasonable alternative

[00:32:03] Speaker 07:
that would have saved the government $8.6 billion and kept that money from our competitors.

[00:32:12] Speaker 07:
And the commission's answer is that they were afraid that there'd be a lawsuit that had no merit.

[00:32:22] Speaker 07:
And so I think that's just not a reasonable explanation.

[00:32:29] Speaker 07:
The commission also suggests that there would have been an auction delay if it had adopted our reasonable alternative.

[00:32:37] Speaker 04:
Mr. Wright, you're over time.

[00:32:39] Speaker 04:
So I'm just going to ask you to bring it to a conclusion unless my colleagues have questions for this part of the argument.

[00:32:49] Speaker 07:
Certainly.

[00:32:49] Speaker 07:
Let me just say,

[00:32:51] Speaker 07:
The concern about auction delays is unfounded.

[00:32:54] Speaker 07:
SES and Intel said and come to this court and said, you need to stay watching because 8.6 billion is not enough.

[00:33:15] Speaker 04:
All right, thank you.

[00:33:16] Speaker 04:
We'll give you some time on rebuttal.

[00:33:19] Speaker 04:
So I believe next up is counsel for the commission.

[00:33:24] Speaker 01:
Good morning.

[00:33:24] Speaker 01:
May it please the court, Ashley Boyzell for the Federal Communications Commission.

[00:33:29] Speaker 01:
What the commission did here was exercise its broad spectrum management authority to repurpose underutilized spectrum in order to facilitate the immense and undisputed public benefits of rapid 5G deployment.

[00:33:42] Speaker 01:
The commission undertook this critically important effort

[00:33:44] Speaker 01:
based in part on Congress's direction to allocate mid-band spectrum for 5G, and also based on representations by the satellite incumbents, including the small satellite petitioners, that they could provide their services in the reduced 200 microhertz allocation with compression and other readily available technology.

[00:34:03] Speaker 01:
The commission's action here, both in terms of the 316 modifications of specific licenses and the setting of the accelerated relocation incentive payment

[00:34:13] Speaker 01:
was in service of the public interest and Warren's deference.

[00:34:16] Speaker 01:
And I think that the panel's questions suggest that you understand that what the commission did here was apply a comparable service standard that looked both to the level of existing customers as well as evidence that went to the credible likely future business.

[00:34:33] Speaker 01:
And the commission expressly found that the upper 200 megahertz allocation would accommodate both the existing level of business

[00:34:41] Speaker 01:
and the incumbent's ability to expand their business in the future.

[00:34:46] Speaker 01:
That Comparable Service Standard is consistent with the text of the Communications Act, and it's consistent with this court's precedent in cases like Community Television and SoCo Partnership and California Metro.

[00:34:59] Speaker 01:
With respect to the textual argument, Ms.

[00:35:03] Speaker 08:
Boyzell, on that point that you just made about how the order considered a potential future customers, reasonable expectations of them, is there anything in the auto innovators brief in terms of what that brief suggests this court should do?

[00:35:23] Speaker 08:
Is there anything that you disagree with?

[00:35:25] Speaker 01:
Yes, we think that what the amicus are asking for

[00:35:29] Speaker 01:
is a determination by this court about the legality of an existing customer standard.

[00:35:35] Speaker 01:
And that is not what the commission applied here.

[00:35:37] Speaker 01:
The commission applied a comparable service standard.

[00:35:39] Speaker 01:
And since the question of the legality of an existing customer standard alone is not squarely presented here, we don't think that the court needs to reach that question.

[00:35:49] Speaker 01:
Instead, as I said, the commission applied this comparable service standard, which ensured that the satellite incumbents and the earth station incumbents

[00:35:58] Speaker 01:
could provide substantially the same service after the modification.

[00:36:04] Speaker 08:
I guess you're not defending the existing customer standard.

[00:36:07] Speaker 08:
You're saying you don't want us to rule it out for the future.

[00:36:12] Speaker 08:
But I guess I would be curious why.

[00:36:14] Speaker 08:
I know you don't think we should reach it, but why would it be wrong to rule it out for the future?

[00:36:22] Speaker 08:
It does seem like an arbitrary and capricious standard.

[00:36:28] Speaker 01:
Well, I think there may be opportunities in the future to address that question squarely.

[00:36:32] Speaker 01:
But as I said, that's not what the commission did here.

[00:36:35] Speaker 01:
And to the extent the court may have concerns about the commission's consideration of things like reliance or investment, I think that the court can take solace, A, in the fact that the commission looked at those factors here.

[00:36:47] Speaker 01:
And B, those are the kinds of considerations that would typically play a part in a public interest analysis.

[00:36:52] Speaker 01:
And 316 is tethered to public interest determinations.

[00:36:57] Speaker 08:
So I think that the- So in this case, Ms.

[00:36:59] Speaker 08:
Boisell, if you had, and I'm sorry if you're hearing some construction work nearby.

[00:37:04] Speaker 08:
In this case, if you had said to the smallest satellite operators, we are not going to look at any potential future customers.

[00:37:15] Speaker 08:
We are only going to look at your existing customers.

[00:37:19] Speaker 08:
Would that have been arbitrary and capricious in this case?

[00:37:24] Speaker 01:
Well, I think that we can see that it's appropriate to look at evidence in the record of reasonably credible future business prospects, particularly for newer entrants.

[00:37:36] Speaker 01:
Although I quarrel with the characterization of these small satellite operators as new entrants, they've had market access for quite some time.

[00:37:44] Speaker 01:
As to the

[00:37:47] Speaker 01:
the existing customer and existing service standard that appears in this order, I think Judge Walker, some of your questions seemed to understand that the existing customer and existing service information was particularly salient here because there was evidence in the record that the market was declining.

[00:38:04] Speaker 01:
And as a result of the fact that there were these long-standing satellite incumbents in a declining market, the existing customers were particularly relevant and salient data point in ensuring

[00:38:17] Speaker 01:
that the incumbents could continue to provide substantially the same service after the modification as they could before.

[00:38:22] Speaker 01:
I want to move with the court's indulgence to the accelerated relocation payment amount.

[00:38:34] Speaker 01:
As a preliminary matter, I think that it might help to contextualize that amount against the commission's specified objectives.

[00:38:43] Speaker 01:
And it set forth those objectives

[00:38:45] Speaker 01:
in the discussion of this amount in paragraphs 211 to 226 of the order.

[00:38:50] Speaker 01:
And it made clear that what it was trying to do was maximize the likelihood that these satellite incumbents would voluntarily opt in to clear both themselves and thousands of earth stations on an accelerated basis.

[00:39:05] Speaker 01:
And in addition to that objective, it wanted to ensure no service disruption, that the amount was an amount that the incoming overlay licensees were willing to pay

[00:39:13] Speaker 01:
and that it increased the value of the transition overall to the public.

[00:39:18] Speaker 01:
This $9.7 billion figure achieved all of those objectives.

[00:39:23] Speaker 01:
And the commission reasonably explained why it was engaged in a line drawing exercise with no precise answer based on imperfect information because the large satellite incumbents had no incentive to divulge what they would accept.

[00:39:37] Speaker 01:
So the commission started by evaluating the upper bound and as it explained,

[00:39:42] Speaker 01:
that upper bound was a conservative estimate of the market value of acceleration to the overlay licensees.

[00:39:48] Speaker 01:
And then it selected a number close to that upper bound because, again, it was looking to maximize the likelihood of voluntary accelerated clearing on the understanding that that would result in social and economic benefits on an order of magnitude greater than the market valuation of acceleration to the overlay licensees.

[00:40:06] Speaker 01:
And some estimates suggested that that would mean $15 billion a year

[00:40:11] Speaker 01:
for each year of acceleration, so $30 billion total, hundreds of thousands of jobs, American leadership in 5G with attendant national security interests.

[00:40:20] Speaker 01:
So I want to push back against this narrative that in selecting that number, the commission advocated its responsibility to the public interest.

[00:40:29] Speaker 01:
That's simply untrue.

[00:40:30] Speaker 01:
There are different ways to enrich the public.

[00:40:33] Speaker 01:
And the commission ensured that the treasury revenue was accrued via the public auction.

[00:40:39] Speaker 01:
and that the public also reaped enormous social and economic benefits aside from the Treasury revenue.

[00:40:47] Speaker 01:
With respect to some of the representations by petitioners council, as I said, I think the panel understands that the commission relied on substantial evidence in the record in determining that both PSSI and the small satellite operators could continue to provide service in the reduced 200 megahertz allocation.

[00:41:09] Speaker 01:
PSSI failed to offer sufficient evidence to suggest that its ability to run its business would be eliminated.

[00:41:16] Speaker 01:
And the small satellite operators failed to overcome countervailing evidence in the record that the market was in decline or to demonstrate that they would be able to lure their customers away from their larger satellite competitors.

[00:41:32] Speaker 01:
With respect to notice, I think Judge Katz and some of your questions indicated that

[00:41:39] Speaker 01:
You understand that it may not be the case here that particularized notice was required.

[00:41:42] Speaker 01:
Of course, it's our position that it wasn't, that this is not a sanction, and that there was adequate notice that the commission could exercise its broad spectrum management authority in this manner.

[00:41:53] Speaker 01:
And with respect to the small satellite operators and the evidence that they submitted, I also want to point out, as I did in my introductory remarks, that they actually favored the reduction to the 200 megahertz allocation

[00:42:09] Speaker 01:
and that Judge Walker, I think it was you who remarked that PSSI had also suggested that it would be okay with a reduction of spectrum here.

[00:42:19] Speaker 01:
If the panel has no further questions, I'm happy to address other issues, but otherwise.

[00:42:27] Speaker 04:
I don't know.

[00:42:32] Speaker 04:
Judge Francis, Judge Walker.

[00:42:34] Speaker 08:
I have a question on the small satellite operators standing.

[00:42:38] Speaker 08:
I don't think they have standing to challenge the payments from one company to another company.

[00:42:45] Speaker 08:
But what about their standing to challenge pretty much everything else?

[00:42:52] Speaker 08:
Would you agree that they have standing to raise all the other funds that they raise?

[00:42:57] Speaker 01:
Well, we certainly didn't take the position in our brief that they lack standing.

[00:43:00] Speaker 01:
But this court can, of course, reach that conclusion in its own judgment.

[00:43:04] Speaker 01:
And I certainly don't want to be in the position of persuading you that they do.

[00:43:09] Speaker 01:
But again, that's not a position that we took in our brief.

[00:43:12] Speaker 08:
OK, that's fine.

[00:43:12] Speaker 08:
I'm good.

[00:43:20] Speaker 01:
If there are no further questions, then we ask that the commission's order be affirmed in its entirety.

[00:43:28] Speaker 04:
All right.

[00:43:29] Speaker 04:
Thank you, counsel.

[00:43:32] Speaker 04:
And we will hear then, I guess, from the wireless interveners.

[00:43:37] Speaker 02:
Yes.

[00:43:37] Speaker 02:
Thank you, Peter Carrangio, for the wireless interveners.

[00:43:40] Speaker 02:
And we appreciate the court granting us time.

[00:43:44] Speaker 02:
I'd like to begin, Judge Walker, with your question about the amicus.

[00:43:48] Speaker 02:
And this is an important issue to us because

[00:43:52] Speaker 02:
Our clients have an extremely strong interest in having this order affirmed.

[00:43:56] Speaker 02:
In our view, it's critical to free up much needed 5G spectrum that our customers are demanding, and that will enable a raft of innovative services that will promote telemedicine, telework, which we're all doing now, Internet of Things, and a number of new other innovations yet to be imagined.

[00:44:16] Speaker 02:
So we have a strong interest in seeing this order affirmed, but we also

[00:44:20] Speaker 02:
have a strong long-term interest because we are licensees and we have no appetite for granting the FCC a blank check on Section 316 Modification Authority as the amicus alleges and as the SSOs allege,

[00:44:38] Speaker 02:
And we simply don't think that this order did that.

[00:44:42] Speaker 02:
First of all, I think the critical point on that is the arguments from the other side rest on a misreading of the order.

[00:44:49] Speaker 02:
They assert without basis that the commission applied a singular existing customer standard, which is simply not true.

[00:44:59] Speaker 02:
And I would point the court to paragraphs 32 of the order, paragraph 139 of the order, paragraph 196 of the order,

[00:45:08] Speaker 02:
where it is crystal clear that the Commission not only considered existing customers, of which there were practically none, but also looked at reasonable business opportunities.

[00:45:17] Speaker 02:
And we think that's important because it reflects a recognition, which is appropriate, of investment backed expectations where there are such expectations.

[00:45:27] Speaker 02:
And so, for example,

[00:45:28] Speaker 02:
Our clients have put enormous investments into their spectrum holdings.

[00:45:36] Speaker 02:
Hundreds of millions of dollars, in fact, they're subject to build out obligations.

[00:45:41] Speaker 02:
So yes, if the commission tried to sort of take away, you know, substantially all of their spectrum, we think that would be an issue.

[00:45:51] Speaker 02:
But I think the critical point here is these Section 316 questions are not analyzed in a vacuum.

[00:46:00] Speaker 02:
They are undergirded by a fact-intensive analysis, which I think has come out in the questions during the earlier colloquies.

[00:46:10] Speaker 02:
And moreover, that fact-specific approach is supported by this court's precedent.

[00:46:16] Speaker 02:
We cited in our intervener brief a case called PNR Temer, which said, look, when we're looking at this stuff, we go beyond the form of the license.

[00:46:25] Speaker 02:
We're not just looking at the words in a license.

[00:46:28] Speaker 02:
We have to look at the real-world impacts.

[00:46:32] Speaker 02:
Or as Judge Kastler said, I think the phrase you aptly used in the earlier case was, what are the facts on the ground?

[00:46:38] Speaker 02:
And I think when one looks at the facts on the ground, that really is fatal to both PSSI and the SSOs for two reasons.

[00:46:46] Speaker 02:
First, they each conspicuously fell short in meeting their burden approved before the commission.

[00:46:53] Speaker 02:
They tried to throw in a bunch of additional post-order evidence in connection

[00:47:00] Speaker 02:
which this court denied in the form of declarations, which tried to clean up things.

[00:47:07] Speaker 02:
But frankly, we don't think they even would have moved the needle if they had been considered.

[00:47:11] Speaker 02:
But in any event, as this court knows, post-record evidence like that is inadmissible effectively.

[00:47:18] Speaker 02:
Secondly, as this court has recognized, the substantial evidence standard is fatal to these arguments.

[00:47:25] Speaker 02:
The factual underpinnings of the Commission's 316 analysis

[00:47:30] Speaker 02:
are well supported in the record, and under that very deferential standard, the commission must prevail.

[00:47:38] Speaker 02:
The other point I would make on the amicus brief arguments is, and we made this point as well in our intervena brief,

[00:47:47] Speaker 02:
You don't look at these issues in a factual vacuum, as if to say that the Commission can just ignore the APA.

[00:47:54] Speaker 02:
Of course, everything the Commission does is constrained by the APA.

[00:47:58] Speaker 02:
That means the Commission has to look to reliance interests in virtually any context, whether you look at that through the lens of what is a modification or not a modification.

[00:48:08] Speaker 02:
or whether you look at that through the lens of, is it in the public interest?

[00:48:12] Speaker 02:
And we've cited cases.

[00:48:15] Speaker 02:
This is black letter law.

[00:48:16] Speaker 02:
The commission has to, like any agency, look at reliance interests.

[00:48:20] Speaker 02:
It has to explain its decisions cogently.

[00:48:22] Speaker 02:
And we believe it did all those things here.

[00:48:26] Speaker 02:
So we simply have no concerns about what the order set forth as a relevant standard and what that means for future cases.

[00:48:36] Speaker 02:
that the order should be construed as setting forth a holistic analysis that is heavily immersed in the facts.

[00:48:45] Speaker 02:
We think that's what the commission did here.

[00:48:47] Speaker 02:
Now, on the acceleration payments point, my only addition there is to just point out perhaps an obvious fact, which is we're the ones paying those.

[00:48:57] Speaker 02:
We, the wireless industry, that that's on our dime.

[00:49:00] Speaker 02:
Yes,

[00:49:01] Speaker 02:
$9.7 billion is a substantial amount of money, of course, but the commission was making a difficult and critical decision here.

[00:49:12] Speaker 02:
How do we draw the line in figuring out effectively what is the lowest amount we can set that would nevertheless sufficiently incentivize clearing on a quite expedited basis?

[00:49:25] Speaker 02:
They basically cut two years off the clearing timeline

[00:49:31] Speaker 02:
From 2025, which is the outside deadline right that's that's what all the incumbents must meet the 2025 deadline and they said we can effectively move this forward by two years to the end of 2023.

[00:49:44] Speaker 02:
by providing you a carrot, and they actually refer to sort of using a carrot and stick approach, which is entirely proper.

[00:49:52] Speaker 04:
Also, unless my colleagues have questions, I'm going to ask you to bring your argument to a conclusion.

[00:49:59] Speaker 04:
You're over time.

[00:50:00] Speaker 04:
Absolutely, Your Honor.

[00:50:00] Speaker 02:
So we have interests on both sides of the equation.

[00:50:03] Speaker 02:
We stand by what the commission did, and we ask the court to refer.

[00:50:08] Speaker 04:
All right.

[00:50:09] Speaker 04:
Judge Walker, Judge Katz, any questions for counsel?

[00:50:14] Speaker 04:
All right.

[00:50:14] Speaker 04:
Thank you.

[00:50:16] Speaker 04:
Thank you.

[00:50:17] Speaker 04:
And we'll hear for counsel for intervener SES AmeriCom.

[00:50:23] Speaker 05:
Thank you and good afternoon, Judge Wilkins.

[00:50:25] Speaker 05:
May it please the court.

[00:50:26] Speaker 05:
My name is Paul Warner and I represent SES AmeriCom.

[00:50:29] Speaker 05:
SES is one of the largest income and satellite operators with business on the C band that is already actively working to transition its businesses, services, and customers

[00:50:40] Speaker 05:
into the upper 200 megahertz of the band to free up significant spectrum for deployment of revolutionary 5G services.

[00:50:49] Speaker 05:
With my limited time, I'd like to focus on the payment issues, and I'd like to pick up with Judge Walker's observation that the SSOs do not have standing to challenge the payments being made by third-party wireless overlay licensees to third-party incumbents.

[00:51:06] Speaker 05:
They plainly don't, and I would point the court to this court's decision

[00:51:09] Speaker 05:
in a mobile relay case.

[00:51:11] Speaker 05:
In order to have competitor standing, as they're alleging here, they need to be current and direct competitors.

[00:51:19] Speaker 05:
They're not.

[00:51:20] Speaker 05:
And that brings me to a fundamental distinction between the SSOs in the one hand and the incumbent satellite operators on the other.

[00:51:29] Speaker 05:
The FCC made a technical assessment based on its core competency in this area that the SSOs

[00:51:38] Speaker 05:
are nothing more than papered networks.

[00:51:40] Speaker 05:
They hold authorization, but the SEC concluded, based on the evidence, that they did not launch their satellites to provide services in the C-band in the United States.

[00:51:53] Speaker 05:
They have no C-band business now.

[00:51:55] Speaker 05:
They have no Earth stations in the C-band in the United States.

[00:51:59] Speaker 05:
And because of the technical limitations of their satellites and the past business they have provided using the C-band, they are unlikely

[00:52:07] Speaker 05:
the FCC predicted to provide services in the future.

[00:52:10] Speaker 05:
They're free to do so in the same amount of spectrum going forward that is left for the incumbents who have real business in the C-band.

[00:52:19] Speaker 05:
The incumbents have billions of dollars of business in the C-band.

[00:52:23] Speaker 05:
SES alone has 16 satellites to provide C-band service in the United States.

[00:52:28] Speaker 05:
It has more than 100 customers.

[00:52:30] Speaker 05:
It has more than 100 services.

[00:52:32] Speaker 05:
And it is being impacted seriously by the transition along with the other incumbents who actually have services being provided to US earth stations.

[00:52:43] Speaker 05:
Which number in the tens of thousands?

[00:52:46] Speaker 05:
In fact, there are 16,000 plus earth stations that are going to be impacted by the transition.

[00:52:51] Speaker 05:
So as a result of their licenses being modified, the FCC properly determined that the incumbents will incur real and actual and substantial

[00:53:02] Speaker 05:
cost.

[00:53:03] Speaker 05:
This is an under unprecedented undertaking that the commission has set the incumbent out to accomplish on an expedited time frame.

[00:53:12] Speaker 05:
And I just want the core to understand the expedited nature and the significant undertaking that is required to transition out of the lower 300 megahertz.

[00:53:24] Speaker 08:
Mr. Mr. Mr. word.

[00:53:26] Speaker 08:
Do you agree that your petition at this point should be dismissed?

[00:53:31] Speaker 05:
The petition, yes.

[00:53:33] Speaker 05:
So as I was saying, and I recognize my time is up, but the incumbent satellite operators in order to transition the services are already incurring substantial costs in the order of billions of dollars.

[00:53:50] Speaker 05:
Those costs are set out in transition plans filed with the commission, and they will be vetted and reimbursed through an independent clearinghouse.

[00:53:58] Speaker 05:
Now quickly, just on,

[00:54:00] Speaker 05:
the incentive payment.

[00:54:02] Speaker 05:
Those payments are to incentivize SES and the other incumbents to take on voluntarily the massive costs, the logistical challenges, and the business and execution risks to carry out the transition at a breakneck speed, all while seamlessly delivering video and radio content to more than 100 million US households.

[00:54:28] Speaker 05:
the FCC correctly recognized, it would take a substantial incentive for the incumbents to take on that profound task, given the risks and costs involved.

[00:54:41] Speaker 05:
And the FCC did not accept the amount that the incumbent actually sought to perform that accelerated relocation.

[00:54:50] Speaker 05:
The FCC provided an amount far less than that.

[00:54:54] Speaker 05:
that amount that the FCC actually approved is also far less than the value that the incumbent satellite operators are going to deliver to the American public by freeing the spectrum on an accelerated timeline.

[00:55:08] Speaker 05:
It's also less than the value to the wireless overlay licensees of obtaining the spectrum early.

[00:55:17] Speaker 05:
If there are no further questions,

[00:55:19] Speaker 05:
I'm happy to answer any questions, but if there are no questions, I see my time is up, and we would ask that the commission's order be affirmed.

[00:55:26] Speaker 04:
OK, Judge Katz, Judge Walker, any questions?

[00:55:29] Speaker 03:
No.

[00:55:30] Speaker 04:
All right.

[00:55:30] Speaker 04:
Thank you, counsel.

[00:55:33] Speaker 04:
So now, rebuttal for Mr. Gavin.

[00:55:37] Speaker 04:
I believe you are out of time, but we'll give you two minutes.

[00:55:41] Speaker 06:
Thank you, Your Honor.

[00:55:41] Speaker 06:
I just wanted to address first Judge Walker's question.

[00:55:47] Speaker 06:
reported to the Commission on numerous occasions the issues of the power saturation and the difficulties that were going to be encountered with being able to deal with frequency coordination.

[00:56:01] Speaker 06:
I would refer you, Judge Walker, to our ex parte that were filed May 6 of 2019.

[00:56:10] Speaker 06:
That's JA 270.

[00:56:13] Speaker 06:
November 15, 2019, that's JA380.

[00:56:20] Speaker 06:
January 8, 2020, which is JA401.

[00:56:23] Speaker 06:
And February 20, 2020, which was JA464.

[00:56:29] Speaker 06:
The Miami Hard Rock Stadium was used was an example that was provided afterwards.

[00:56:38] Speaker 06:
But the issues, we addressed the issues prior to that.

[00:56:42] Speaker 06:
I also want to do, with my time remaining, just to touch on something that Council for the Commission said.

[00:56:49] Speaker 06:
I repeat what we said from the beginning.

[00:56:53] Speaker 06:
We were concerned even about 100 megahertz being reallocated.

[00:56:57] Speaker 06:
But we ultimately accepted the idea that 200 megahertz could be allocated.

[00:57:03] Speaker 06:
And if my calculations are correct, something like Miami, and I'm guessing others of those frequency quarters,

[00:57:12] Speaker 06:
coordination studies would still work if it were only 200 MHz being transitioned.

[00:57:18] Speaker 06:
The last thing is the issue of programming demand and we submitted in our briefs and cited in the record repeated assertions by, among others, the NAB at J444 about the importance of occasional use

[00:57:39] Speaker 06:
and ESPN specifically reporting that there was an increased demand that they had for C-band services in these last several years.

[00:57:48] Speaker 06:
So that is at JA-278.

[00:57:51] Speaker 06:
I thank your honors and I repeat, we seek that the order be vacated and thank you for consideration of our argument.

[00:58:04] Speaker 04:
Thank you, Mr. Gavin.

[00:58:05] Speaker 04:
Mr. Wright,

[00:58:08] Speaker 04:
You were out of time, but we'll give you two minutes for rebuttal.

[00:58:13] Speaker 07:
Thank you, your honor.

[00:58:17] Speaker 07:
On modification and notice.

[00:58:20] Speaker 07:
So it was noted that the FCC hardly defends its existing customer standard, even though the commission articulated that many times.

[00:58:29] Speaker 07:
It was suggested as we, of course, think that it's an arbitrary, capricious standard.

[00:58:35] Speaker 07:
The following test about sort of whether or not we would be able to build customer base in the future is sort of an extension of the existing customer's test.

[00:58:50] Speaker 07:
So if the existing customer's test isn't the applicable test, I don't think we could have known that the commission would say, well, okay, how about future customers?

[00:59:05] Speaker 07:
And so we just didn't have notice of that.

[00:59:10] Speaker 07:
And no one has cited any case, again, where a licensee got moved without getting full replacement spectrum and or money, you know, except motion.

[00:59:25] Speaker 07:
So my friends in the wireless industry, you know, basically say this rule would be unlawful if applied to them.

[00:59:34] Speaker 07:
and the commission in paragraph 143 of the order sort of gave away that this was a one time only rule that would be applied.

[00:59:44] Speaker 07:
And I think that simply shows it's unlawful.

[00:59:50] Speaker 07:
I would also note that Mr. Carranza articulated the standard we think should apply and Congress thinks should apply with respect to determining

[01:00:01] Speaker 07:
the payments beyond payments for actual relocation costs.

[01:00:08] Speaker 07:
That standard is to determine the amount of compensation the licensees would accept to move.

[01:00:15] Speaker 07:
The SEC thinks it has authority to order them to move.

[01:00:18] Speaker 07:
We actually agree, but it has to compensate them for doing so.

[01:00:24] Speaker 07:
One other point.

[01:00:26] Speaker 07:
SES will get all of its relocation costs covered, including any relocation costs to do it faster, to do it on an accelerated basis.

[01:00:39] Speaker 07:
I hope the court understands that and that the 9.7 billion is simply pure profit rather than compensation for expenses.

[01:00:53] Speaker 04:
All right.

[01:00:53] Speaker 04:
Thank you, Mr. Wright.

[01:00:55] Speaker 04:
We have all of your arguments and the case is submitted.