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Case number 18-1209 et al, North Star Wireless LLC and SNR Wireless License Code LLC at balance versus Federal Communications Commission.

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Ms.

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Stetson for the petitioner North Star Wireless LLC, Ms.

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Flett for the respondent.

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Morning.

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Good morning, your honors.

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Good morning.

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May I please the court?

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Good morning.

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My name is Kate Stetson.

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I'm arguing for North Star and SNR this morning.

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This case is here after a remand to the FCC.

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And when it was last here in 2017, this court held two things.

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First, the court upheld the commission's determination that SNR and Northstar's agreements with their investor Dish gave Dish too much control over those small businesses for them to qualify as designated entities suitable for bidding credits under an auction.

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Second, though, this court also held

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that the commission had failed to give SNR and North Star sufficient notice that if a control finding was lodged after the auction, of course, that they would not be permitted to cure that control finding as other applicants had.

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So this court remanded to, and I'll quote here, give petitioners an opportunity to seek to negotiate a cure for the de facto control the FCC found the dish exercises over them.

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That's pin site 1025 of the prior opinion.

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The FCC did not give petitioners that opportunity.

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Instead taking one sentence of this court's opinion out of context, the commission simply directed SNR and Northstar to renegotiate their agreements with Dish and to submit those amendments to the commission for further comment and review.

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There was no discussions with commission staff.

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There was no guidance and there was no negotiation of a cure.

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The petitioners did what they could

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without staff input and submitted amendments addressing.

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You did meet with a couple of the commissioners, maybe three of them and one of their commissioners staff before the decision issued.

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Is that correct?

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We did, Judge Millett, less than a day before the decision.

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One of them was more than one meeting was more than that.

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If you're discussing, if you're talking about the May 2018 meeting,

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with Commissioner Clyburn, that actually had to do with the draft opinion from the commission denying the petition for review of the remand order itself.

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So that did not pertain to the submitted amendments, which hadn't been submitted at that point.

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If you're talking about the November, 2020 meetings, those of course came almost two and a half years after the, or two plus years.

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You said the day before, but I think you met with,

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three of the commissioners on November 2nd.

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We met with one commissioner, Commissioner Carr, on November 2nd, and three of them on November 16th, at 11 31 and 4, I believe.

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The opinion that we're talking about now was adopted on November 17th and made public on the 23rd.

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But more to the point, Judge Mallette, the window closed for amendments in June of 2018.

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So the fact that we were permitted an opportunity to talk to the commissioners not with and certainly not to receive guidance from them.

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One day before this 90 some odd page opinion issued is cold comfort.

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The fact is that was not the process that this court ordered it was not the process that clear calm followed.

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It seems as though SNR did exercise its put and is now wholly owned by DISH.

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Does that move their petition?

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It doesn't, and let me make one correction.

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SNR has notified DISH that it intends to exercise its put, but that is subject to the FCC granting an application for a transfer of control.

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That application hasn't even been filed yet, likely will be filed later this spring.

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So as things stand now, there is no

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It's status quo.

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There is no transfer of control whatsoever.

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We'll, of course, update the court if or when that occurs, depending on.

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It does wish to issue its put.

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It does indeed.

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SNR, not North Star, but SNR.

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But none of that, of course, has transpired yet.

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Ms.

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Stetson, can we go back to whether or not some sort of an iterative process was actually ordered by the court?

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Sure.

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accuse opposing counsel of focusing on, you know, one sentence in the opinion and using that to evade the responsibility.

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But I don't see in the opinion where this court actually required the kind of iterative process that you say is now was mandated.

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So can you help me to understand where you come from?

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Where are you getting?

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the argument that you needed to actually have the opportunity to engage in the type of process that CLEARCOM indicated.

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Certainly, Judge Jackson.

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And I think it's in the prior panel's discussion of CLEARCOM itself and in its pin sites to CLEARCOM.

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If you look at CLEARCOM, and I would direct you in particular to two paragraphs, paragraph seven and paragraph 24,

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You'll see in paragraph seven, among other things, that ClearComm talks about the meetings and conference calls that were held with respect to the petition for reconsideration.

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And then even more important, paragraph 24, look at footnotes 99 and 100.

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Footnote 99 says, in the course of resolving this issue, it became clear that one of the parties was operating under a misconception and that was cleared up.

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Footnote 100, this issue arose during the course of meetings.

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and was not substantively briefed, but the commission concluded it could reach that conclusion anyway.

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What is your response?

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I understand what actually happened in CLEARCOM, but what is your response to the argument that the prior panel only cited CLEARCOM in support of its fair notice finding as a potential reason why your client might've been confused into thinking that

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that some cure opportunity was going to be provided as opposed to being cited for a duty to actually engage in that type of negotiation.

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I don't see that.

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And I worry that a holding to that extent actually is inconsistent with what I understood the prior panel to be saying about actually curing is not what they were ordering.

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that the FCC could in fact, as long as it gave notice, not even give you an opportunity to cure, as long as upfront they said, clearly, you get one shot at this.

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So if that's true, if the FCC did not have to actually give you an opportunity to cure, it's confusing to me that you're suggesting that the panel also held that any opportunity to cure had to have certain features.

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Judge Jackson, let me take that a couple of bits at a time.

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The first is the quote that I read to you at the beginning of the argument, which is, this court remanded to allow petitioners an opportunity to seek to negotiate a cure for the de facto control the FCC found.

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So we can slice the opinion as the FCC does to suggest that, well, they never said here is the process to be followed.

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But of course, they didn't need to.

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And that's the second thing that I would offer to this court.

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In 2006, in a final rule, a commission final rule, I might add, this is a final rule that is cited by the prior opinion at pin site 1046.

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The commission said this, and bear with me because it's a 22nd quote.

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In applying our controlling interest standard, commission staff has carefully reviewed agreements between applicants claiming designated entity status and other existing wireless carriers.

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In these cases,

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Staff has usually undertaken discussions with such designated entity applicants in order to obtain revisions to agreements to ensure that entities with whom they've partnered are not an attributable controlling interest.

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So we don't need to go excavating through CLEARCOM and its footnotes to see exactly what the commission directed happened.

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That is from a 2006 final rule.

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It's unusual.

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Go ahead.

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No, I was just going to follow up by saying, so is it your position

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then that what was necessary here for the FCC to avoid reversal was to give you some kind of an iterative process.

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And if so, how much of an iterative process?

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Enough that you would actually cure?

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Are you saying we have to be able to solve all of the problems?

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No, we're not, Judge Jackson.

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And that was a point that the prior panel made as well.

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Nothing obligated the FCC to permit a cure.

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But what the FCC has done, and it's understandable because, of course, the FCC in these discussions, the reason it has these discussions is not only because of the timing problem we're talking about, the fact that these examinations are made after the fact, after the auction and after money is committed and bids are upheld.

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It's that the FCC in these discussions actually is supposed to be a force for good.

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helping the designated entities obtain some leverage against their investors.

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That's why the FCC participates in these discussions alongside the designated entities and their passive investors.

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So the fact that the FCC declined in this instance, unlike every other instance, to participate in these discussions.

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What more could it have said?

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I mean, in this case, you had a whole opinion.

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by the FCC that had focused on the deficiencies.

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I'm not sure what more you hoped to glean from a back and forth with the actual commission staff.

[00:10:23] Speaker 03:
Two things.

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The first is in CLEARCON, the parties had a whole letter identifying at least 30 questions that the FCC had about the transfer of control in that case.

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The second is, as we point out in our brief, the fact that we had an opinion is cold comfort for two reasons.

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The first is,

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The FCC emphasizes this over and over and over again.

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The totality of the circumstances analysis is the touchstone of the FCC's process.

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So the fact that the FCC in 2015 identified a number of deficiencies, which we cured, apparently was not enough, because as you will have seen, the FCC in 2020 came back with a number of other concerns, including concerns that were present in the 2015 agreements.

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So not only was the 2015 order some kind of panacea, it just identified the problems that could combined lead to a control finding.

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And you'll notice if you've read the 2015 opinion, what the commission says over and over again is this might not be a problem standing by itself, but in combination with these other problems, it's an issue.

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In 2020, what the commission chose to do is to say, yes, yes, you cured the major things that we identified in 2015.

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You terminated the management services agreement which permeated the 2015 opinion.

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You terminated the technology.

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You terminated the trademark agreement.

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You completely revised the investor protections in order to come within the six things prescribed by Baker Creek and the six things I would mention that the commission at footnote 232 of its 2015 order said are common passive investor protections.

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We did all of those things and then the commission came back and said ah, but you've got this common change some other things to them.

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We noticed that all you did was eliminate things you change things.

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as well, and so the commission says, and tell me why they're wrong, that you created more new problems.

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For example, on the investor protections, and particularly the control over leasing decisions, eliminating the ordinary courses business, for example.

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And so there were a number of other, it wasn't as though you just erased the things they didn't like and everything else was status quo, what they point to

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is a lot of new things that came in.

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And the continuing put obligation, which was flagged in the Fifth Memorandum of Union and Order, was mentioned at oral argument as a real problem in this case.

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And in fact, from the commission's view, and you can tell me why they're wrong, but from their view, the pressure to exercise that put

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remained because of the ballooning equity stock that was now going to go to DISH and the constraints, the very hard constraints on their ability to

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finance building the network, building out and doing anything to actually function successfully as a business.

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That's my summary.

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They'll tell me if I got it wrong of the changes or the repackaging, they might say.

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I'm not saying that, but the problems as opposed to the peer elimination of them.

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So let me let me break that into three parts.

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If I could just the new stuff, the put and then the money.

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With respect to the new stuff, the major problem is the stuff isn't new.

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What the Commission identifies is a common investor protection that gives a passive investor

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the decision whether to permit a lease of all or some of the assets, including license.

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The terms of that lease change, do you have to acknowledge?

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No, they did not.

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And I'm sorry, Judge Millett, to push back on you.

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But if you look at 6.11... The Ordinary Course of Business limitation on their dashes authority still in or out?

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the ordinary course of business limitation, I think, sits alongside the lease of major assets.

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A lease of major assets wouldn't be in the ordinary course of business.

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How would that not be when the whole point of what they're trying to do here is build a network?

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If they wanted to lease them so they could build a network, that's their business.

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That seems to me quite the ordinary course of business.

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If it is a common investor protection, again, Judge Millett,

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To permit passive investors to have a say about whether.

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The ordinary course of business language was eliminated correct.

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They I don't believe it was eliminated, I think it was added to so i'll let me refer you in the 2015 agreements and then we can go on to the foot to J a 180 and 183 this is 6.11 see.

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which prohibits the petitioners from leasing all or substantially all documentary us in there.

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That is no that's I think the llc agreement ja 180.

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And then section 6.18 a few pages later, and I see that I'm over time, but I hope you'll permit me to finish this hard answer.

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6.18 which is JA 183 prohibits lease of property or assets now owned or hereafter required by either petitioner except in the ordinary course.

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That's still in the 2018 agreement?

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That's the 2015 agreement.

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Is that still in the 2018 agreement?

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What the 2018 agreement says is that the lease of major assets is a significant matter requiring approval.

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I'm reading JA 1664, note 140.

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Just give me a second to catch up to you, please.

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Sorry, tell me which page again?

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1664, note 140.

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And this is the FCC's characterization of the 2015 agreements.

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And one of the issues we have here is, of course, what they say in that clinical judgment ledges.

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I still apologize.

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I'll give them the time to answer.

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I promise they will.

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1640.

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1660.

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Sorry.

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1664.

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Note 140.

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And this is where the major,

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While you're finding that, let me give a little context.

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This is 140, note 140.

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The commission says in this footnote, just for the benefit of others, if they haven't found it, under the 2015 agreements, the applicants could lease their spectrum without seeking dishes approval.

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That is simply false.

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That is a premise, an underlying premise of the entirety of the question is that the limitation on

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dishes veto authority still cabined by that ordinary course of business language under the 2018 agreement.

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So if you could point me to where that ordinary course of business language remains in the 2018 agreement, I think that would be most helpful to me.

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I will try to find during Ms.

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Flood's argument if or where that joint appendix site remains.

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But here's the more important point, I think, Judge Millett.

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As we say in our briefs, the leasing of major assets and assets leased outside the ordinary course of business, those are two different ways of saying the same thing.

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And more importantly, the FCC never acknowledged below that there was a prohibition on leasing.

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We can quibble about whether it's defined under significant matter or whether it's a lease in the ordinary course of business.

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A lease of all of the assets wouldn't be in the ordinary course.

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The more important thing is this leasing provision

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is a standard investor protection.

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And that gets me to my second point.

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So is a put.

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A put as the fifth memorandum and order says, this is paragraph 95.

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These are categorical rules.

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It's not that a put is just fine.

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And they had huge concerns about the put before all of the sort of hydraulic pressure that was going to be on SNR and Northstar to exercise these puts because of

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their extraordinary indebtedness and constraints on their ability to commercially exercise these lines and develop these licenses and they said, you can tell me actually how they're incorrect, but they said that pressure remains.

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So it was redesigned, but it wasn't eliminated.

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This is why they are incorrect, Your Honor.

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And forgive me, because that too, I think, requires a couple of corrections.

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First is, as I said, a put is actually a standard designated entity protection.

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That's what the fifth M-O-N-O said, paragraph 95.

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That was in 1994.

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The colloquies that I think you're referring to in the prior oral argument, Judge Millett,

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If you look at them again, it's mostly Judge Pillard, if I remember correctly.

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Judge Pillard is talking about something that 5th MO&O says, which is, if the put in combination with other things, and you'll find this actually in a quote in the SNR decision itself, a put in combination with the management services agreement and other capital contributions is greatly concerning.

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there has never been, never been an instance where the commission has found impermissible control with simply the existence of a put.

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And not only that, but Judge Pillard also made the point that perhaps the commission could permit a correction to the put in the form of multiple puts, which the designated entities implemented, multiple larger windows, which the designated entities implemented.

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So what that produces down to... Sorry, Judge.

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Go ahead, finish up.

[00:20:18] Speaker 00:
I'm sorry.

[00:20:18] Speaker 03:
I wanted, if I could, just to make the third point in response to Judge Millett's question, because I think it flows from this.

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What this reduces down to, if you look at the 2020 decision, is that the least discretionary prohibition, which is a standard investor protection, the put, which is a standard item of fare in designated entity agreements, all of those are not useful or suitable here

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precisely because Judge Millett, there's so much money involved.

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But since you've read the transcript of the first argument, you'll also have seen that Ms.

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Flood mentioned at the time, that's not our argument.

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Our argument is not that the money is the issue here, but every bit of the 20.

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Not by itself, but that's part of the problem, right?

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I mean, it's the put in combination with the money, but if the put isn't the problem, then the money is.

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and for the money to be an issue.

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That's not how it works in most effective things.

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One, they didn't say it's just put in money, right?

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The put by itself or the money by itself.

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It was the put and the money and this time around, and they could be wrong.

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They could very well be wrong about this, but the put and the money and the way there was going to be all this building, building, building debt, building or building equities, so more and more, because they had all these obligations to pay, to pay these dividends.

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If they didn't, they just kept getting more and more equity.

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and these deadlines that would be coming on building out and the inability to a number of constraints on their ability to enter their leases or contracts to sort of build out this network.

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I don't think it's fair to say, I mean, one of your fair notice concerns is this is such a sort of Rorschachian type analysis with all these multiple factors.

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So I don't think it's going to be fair for any of us to sort of pin one and one and the other, but it was sort of that,

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She may have more to add to the list, but that sort of gestalt at least as to this investor, this aspect of the investment.

[00:22:19] Speaker 00:
Let me ask, I would like to ask this in your reply brief, you are, I think making the point that you're, you're trying to wrap together here, but I want to make sure.

[00:22:32] Speaker 00:
So will you just amplify this a little bit so that I make sure I'm getting it?

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You say the commission has never before concluded that an investor protection provision

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gives an investor de facto control absent a management services agreement, giving substantial day-to-day control to the investor.

[00:22:52] Speaker 03:
That is correct, Judge Edwards.

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And that's something we also said, I believe, in our opening brief and invited the FCC to disagree with us.

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And that, I think, is part of the issue here that actually does map on to Judge Millett's question as well.

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There is a gestalt aspect to this, right?

[00:23:09] Speaker 03:
Because of this totality of the circumstances analysis,

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What would have been so helpful are discussions with commission staff so that we can understand if or how to correct those things.

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And Judge Jackson, the discussions don't need to result in a cure.

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There could be a point where if commission staff puts too much emphasis on an aspect of the agreement that Dish simply won't accede to, then

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There's no designated entity status, but the important thing is.

[00:23:41] Speaker 05:
Let me ask you, in this allegedly unclear world from your client's perspective, why didn't your clients do more after there was the opportunity to do more when there were comments that were made?

[00:24:00] Speaker 05:
So we had the remand.

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in that you claim that the process wasn't sufficiently iterative, but you did submit your paperwork.

[00:24:10] Speaker 05:
And then my understanding is pursuant to the FCC's process, comments were made concerning whether or not you had met the mark.

[00:24:23] Speaker 05:
And at that point, your clients decided to stand on their submission and not make any changes.

[00:24:29] Speaker 05:
And I'm curious as to why that is.

[00:24:32] Speaker 05:
and therefore how you can support the claim that you would have even done more had there been more communication from FCC staff.

[00:24:41] Speaker 03:
Certainly.

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And just to be clear on this, the comments that were made were not, of course, made by the commission staff or by the commission.

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They were submitted by other disgruntled large bidders.

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But here's the real heart of the matter.

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In March of 2018,

[00:24:58] Speaker 03:
SNR actually sent a long letter to the Commission saying, look, if you're not going to meet with us, here are a number of questions we have about how or whether or in what way we can correct for this totality of the circumstances analysis so that the totality of the circumstances don't add up to a finding of control and what the

[00:25:20] Speaker 03:
petitioners did when they finally submitted in June of 2018, Judge Jackson, they didn't just fix a couple things.

[00:25:26] Speaker 03:
As you know, they terminated the management agreement, they terminated the trademark agreement, they terminated the interoperability requirement, they lengthened the interest period, they converted a huge raft of debt to equity, making these two petitioners much more highly leveraged

[00:25:44] Speaker 03:
than other DEs in the same auction.

[00:25:47] Speaker 03:
They decreased the interest rate.

[00:25:49] Speaker 03:
They did a huge number of things.

[00:25:52] Speaker 03:
Of course, these disgruntled other big bidders were going to come in and say, well, you should have done more.

[00:25:57] Speaker 03:
But at that point, under Baker Creek and under Intermountain Microwave and under Judge Edwards' point that never in the history of a DE has there been found to be control without the management agreement also being present.

[00:26:10] Speaker 03:
these petitioners were entitled to think they had done enough.

[00:26:14] Speaker 05:
Nothing required them to... But if you are correct that they don't have to have the opportunity to actually nail it at the end of the day, then the FCC could make the determination on the totality of the circumstances test that all of the things that they had done, including the things that they changed and added, as Judge Millett pointed out, was still not enough.

[00:26:38] Speaker 05:
Right?

[00:26:39] Speaker 05:
I mean, and I have a question about the standard of review in terms of this court's analysis at this point.

[00:26:47] Speaker 05:
Isn't it that we have to give the FCC some deference?

[00:26:51] Speaker 05:
I mean, are we de novo now evaluating whether or not we think you did enough under a totality of the circumstances test?

[00:27:03] Speaker 03:
So let me work backwards, Judge Jackson.

[00:27:05] Speaker 03:
The answer is,

[00:27:07] Speaker 03:
The answer is yes.

[00:27:09] Speaker 03:
This is a fresh analysis.

[00:27:11] Speaker 03:
Whether you look at this as a question of the mandate rule, whether you look at it as a question of the commission's compliance with 47 USC 402H, which directs them that it shall be the duty of the commission to implement the court's mandate, or whether you look at this as just a simple administrative procedure exercise in which the commission

[00:27:32] Speaker 03:
rather than being accommodating of this court's prior opinion, read it in the most miserly way possible and denied the opportunity that this court requested these petitioners engage in, it's de novo review.

[00:27:44] Speaker 03:
But backing up to your point about the oppositions raising more questions, that is not an opportunity to cure.

[00:27:54] Speaker 03:
The party that has the cure power is not AT&T,

[00:27:58] Speaker 03:
It's not T-Mobile and it's not Verizon.

[00:28:01] Speaker 03:
It's the commission.

[00:28:02] Speaker 03:
The commission was dead silent from 2017 through 2020.

[00:28:09] Speaker 04:
An opportunity to cure is your ability.

[00:28:11] Speaker 04:
And the curing is by you.

[00:28:13] Speaker 04:
Correct.

[00:28:14] Speaker 04:
It's not by the commission.

[00:28:15] Speaker 04:
And we were very clear about that in SNR, that there's no obligation to end up permitting it at the end of the day.

[00:28:22] Speaker 04:
Yes, Judge Millett.

[00:28:23] Speaker 03:
But what you're saying.

[00:28:26] Speaker 03:
The opportunity to cure includes the opportunity to talk to staff about what a cure would look like.

[00:28:31] Speaker 03:
And remember, this is a protective discussion for the benefit of these small entities.

[00:28:37] Speaker 03:
Going back to that 2006 final rule, I will point the important.

[00:28:42] Speaker 05:
In our case, isn't there language about renegotiating the contracts with DISH?

[00:28:48] Speaker 05:
There is a line.

[00:28:50] Speaker 05:
That is the one line.

[00:28:51] Speaker 03:
Yes, that is the one line, but it doesn't say negotiate a cure with DISH, right?

[00:28:58] Speaker 03:
It never says that.

[00:29:00] Speaker 03:
And again, I would point you back to that.

[00:29:02] Speaker 04:
No, it does.

[00:29:03] Speaker 04:
I mean, I'm sorry, Judge Jackson.

[00:29:06] Speaker 04:
Yes, please.

[00:29:07] Speaker 04:
104.6 repeatedly.

[00:29:08] Speaker 04:
They say petitioners can't contend, I'm in the right hand column, that in the past, the FCC has compensated for lack of clarity by giving small companies a chance to modify their contractual agreements with large investors, right, in an effort to give the small companies enough independence.

[00:29:26] Speaker 04:
Petitioners seek precisely that kind of opportunity to modify their agreements with DISH.

[00:29:32] Speaker 04:
Yes.

[00:29:33] Speaker 04:
Right.

[00:29:33] Speaker 04:
He didn't clear notice that such an opportunity to modify your agreement with dish.

[00:29:39] Speaker 04:
Right.

[00:29:40] Speaker 04:
We renegotiate we remand for them an opportunity to renegotiate their agreements with dish the appropriate remedy here.

[00:29:47] Speaker 04:
What I don't see anywhere in the opinion is saying you get to other than once when they're describing your argument that you get to go have sit downs, multiple sit downs or even just one with the commissioners themselves.

[00:30:03] Speaker 03:
So Judge Mollett, a couple answers.

[00:30:05] Speaker 03:
The first is the passages you just read, of course, don't include the word cure.

[00:30:10] Speaker 03:
The rest of the opinion speaks to.

[00:30:13] Speaker 04:
In fact, if I counted, it's like more than 20 something times.

[00:30:18] Speaker 04:
It says cure, a cure, a cure.

[00:30:20] Speaker 04:
And I didn't see a single time.

[00:30:22] Speaker 04:
I sometimes did say negotiate a curb, but there's no object for who that negotiation is with, which seems to be what this language on 1046 is answering.

[00:30:32] Speaker 04:
But I guess for your argument that this was a miserly reading of the opinion, if you could point me to where they say, not in describing your argument, not in just describing

[00:30:44] Speaker 04:
The Clearcom case, where in independent language of the court, they said that you have a right to negotiate with the commission or the bureau on this.

[00:31:00] Speaker 04:
Can you point to that language in the opinion?

[00:31:02] Speaker 03:
That language, that the precise language about negotiating with staff, of course, isn't in the opinion.

[00:31:09] Speaker 03:
But that's the point of the court's site to Clearcom.

[00:31:12] Speaker 03:
And here's something not to lose sight of as well.

[00:31:14] Speaker 04:
Does that become by the president when a panel when a panel cites to another case and describes its factual context, but never despite having more than 20 something opportunities in the opinion to include that language never did.

[00:31:29] Speaker 03:
I think Judge mullet the reason they didn't feel like they needed to is because, as Miss flood will confirm it is standard.

[00:31:39] Speaker 03:
for these discussions with staff.

[00:31:41] Speaker 03:
This is not something that this court was prescribing.

[00:31:44] Speaker 03:
This court was instructing the commission to do the thing that the FCC in 2006, in that quote that I read earlier, does with respect to designated entities.

[00:31:55] Speaker 03:
It enters into discussions with designated entity applicants, and the objectors, by the way, and the investors.

[00:32:02] Speaker 03:
Precisely so, people are in the room to discuss what changes, if necessary,

[00:32:08] Speaker 03:
could be made to the agreements to ensure that these designated entities actually have the protections that the FCC wants them to have.

[00:32:16] Speaker 05:
If you're right about that, then why don't we have the very moral hazard problem that the court was concerned about and that it was focused on when it made its fair notice pronounced?

[00:32:30] Speaker 03:
I actually think that the court wasn't concerned about the moral hazard problem, Judge Jackson.

[00:32:34] Speaker 03:
The court rejected the moral hazard argument that the FCC made the last time around.

[00:32:40] Speaker 05:
But it rejected that argument precisely because it said that the opportunity to cure doesn't mean you will actually ultimately get it.

[00:32:50] Speaker 05:
In other words, the moral hazard problem arises if, as you suggest,

[00:32:58] Speaker 05:
the party has a ironclad opportunity to sit down with FCC staff and correct all of its deficiencies such that it will actually cure at the end of the day.

[00:33:11] Speaker 05:
Then you have a moral hazard problem because why would anybody make their best effort at the beginning when they know they have this opportunity at the end of the day to hear exactly from the decision makers what they need in order to make sure that their arrangement satisfies the standards.

[00:33:28] Speaker 03:
So Judge Jackson, I think the answer is this is not, and we're not asking for an ironclad opportunity to sit down with staff and negotiate a solution and a cure to every last deficiency.

[00:33:40] Speaker 03:
We are looking for guidance from staff through those discussions that the commission has identified occur in control cases precisely to give these designated entities a little more leverage than they may have.

[00:33:53] Speaker 03:
This is not some kind of an ironclad guarantee of a cure.

[00:33:56] Speaker 03:
The point of the remand and the point of the commission's prior processes is to negotiate a cure, to find out what could change in this totality of circumstances, what could be put in or taken out that would change the way that those scales are levered.

[00:34:14] Speaker 03:
And remember too, this isn't just the kind of protective to the DE aspect that I mentioned, the timing of this matters.

[00:34:21] Speaker 03:
the way that these auctions are conducted, all of these decisions and discussions occur after the bids are made and won.

[00:34:30] Speaker 04:
And so the reason that- That's because your bidders made a commitment to pay full price on all the bid they made before they made those bids.

[00:34:41] Speaker 04:
They made an upfront commitment that they could pay the full price of what they are bidding.

[00:34:46] Speaker 04:
this process comes afterwards because you've already committed to pay that full price, but let's figure out whether we can give you a discount.

[00:34:54] Speaker 04:
It's not like they're saying you might be or might not.

[00:34:58] Speaker 04:
You have to do some contingency in your predicting.

[00:35:00] Speaker 04:
They say don't make the bid if you can't follow through on the full price.

[00:35:04] Speaker 03:
We submitted in the short-form applications, of course, the grounds for designated entity status.

[00:35:10] Speaker 04:
You may have, but you made a commitment.

[00:35:12] Speaker 04:
Your clients made a commitment as well, did they not, to pay the full price of every bid that they made?

[00:35:17] Speaker 03:
Yes, and that's a point the commission made during the last oral argument as well.

[00:35:21] Speaker 03:
And I think the response of this court in the prior opinion was it is not fair notice for that huge commitment to be made without an opportunity to see as applicants have stopped before discussions with staff.

[00:35:34] Speaker 03:
And I would suggest that the FCC council might be able to answer the question, the question that they never answer in their brief.

[00:35:42] Speaker 03:
They never even respond by the way to the 2006 discussions language that I just read, which is, does the FCC do this or not?

[00:35:51] Speaker 03:
Do staff do this or not?

[00:35:53] Speaker 03:
And the answer is staff did this all the time.

[00:35:57] Speaker 03:
Now in more recent years, staff has said, and the commission has said, don't expect an opportunity, but staff did this all the time.

[00:36:04] Speaker 03:
So we don't need to go on some archeological dig through CLIACOM or through this court's prior decision.

[00:36:12] Speaker 04:
I have two other questions.

[00:36:14] Speaker 04:
Sure.

[00:36:15] Speaker 04:
I know I interrupted you, Judge Jackson.

[00:36:16] Speaker 04:
No, that's all right.

[00:36:17] Speaker 04:
Please.

[00:36:19] Speaker 04:
You talk about, that was interesting in the investor protections here, that there's a qualification that says, I'm paraphrasing, you can say more accurately, but to the extent allowable by the Bear Creek decision.

[00:36:42] Speaker 04:
And my question is if, say SNR or North Star, forgive my language,

[00:36:48] Speaker 04:
I think the answer is, it's a, it's a.

[00:37:19] Speaker 03:
It's a process that wouldn't happen because the FCC was supposed to decide that.

[00:37:23] Speaker 03:
The reason that that language- I don't understand what that means.

[00:37:25] Speaker 03:
Even before that, even before that conversation occurs that you're talking about where SNR would come to dish and say, we would like to lease our spectrum in order to monetize this.

[00:37:36] Speaker 03:
The FCC in looking at these amendments had the opportunity, first of all, this all could have been solved by discussions, right?

[00:37:44] Speaker 03:
But had the opportunity to say that leasing provision

[00:37:47] Speaker 03:
in our view, is inconsistent with Baker Creek, so we strike it.

[00:37:51] Speaker 03:
So if the FCC had done that job- Wait a minute, I'm very confused.

[00:37:55] Speaker 04:
Okay.

[00:37:58] Speaker 04:
You wanted these agreements approved as written.

[00:38:02] Speaker 04:
You think that as written, your amended agreements for both companies demonstrated that there was no longer sort of disqualifying control by DISH and they should be sort

[00:38:16] Speaker 04:
Okay.

[00:38:16] Speaker 04:
And you did it based on that language.

[00:38:19] Speaker 04:
Okay.

[00:38:19] Speaker 04:
And now I'm saying, say if they had signed off and then two years later or a year later, this conversation, this disagreement comes up between North Star and Dish as to whether they can lease out 60% of their spectrum to some other company to help develop.

[00:38:41] Speaker ?:
Okay.

[00:38:42] Speaker 04:
You're saying the FCC will have already said whether as to that specific dispute.

[00:38:47] Speaker 04:
That's what I don't understand how that one.

[00:38:48] Speaker 03:
That's what I'm trying to ask.

[00:38:50] Speaker 03:
Let me clarify.

[00:38:52] Speaker 03:
I think there's two, there's sort of a fork in the road when those amendments were submitted in June of 2018 to the commission, right?

[00:38:59] Speaker 03:
I think your hypothetical is presuming that those amendments were accepted as submitted.

[00:39:06] Speaker 03:
correct me if I'm wrong, but those amendments were accepted as submitted that that standard investor protection was found to be appropriate.

[00:39:14] Speaker 03:
As you wanted it to be.

[00:39:14] Speaker 04:
That's your whole point here on the merits, is that this should have been approved as written.

[00:39:19] Speaker 04:
Yes.

[00:39:19] Speaker 04:
Say you won that.

[00:39:22] Speaker 04:
Say they said, okay, we agree with that.

[00:39:24] Speaker 04:
Yes.

[00:39:25] Speaker 04:
You wanted them to say agree with that and then this happens.

[00:39:28] Speaker 04:
What happens then?

[00:39:29] Speaker 03:
I think then Dish would be exercising the right that any standard passive investor would have to say yay or nay

[00:39:36] Speaker 03:
as to a lease of a significant amount of assets.

[00:39:39] Speaker 04:
But the point is- No, no, no.

[00:39:44] Speaker 04:
I forget how I did my hypothetical.

[00:39:45] Speaker 04:
Northstar may say, wait, you're violating Baker Creek.

[00:39:50] Speaker 04:
We think we get to do this, Luce.

[00:39:53] Speaker 03:
I know your honor.

[00:39:54] Speaker 03:
I think the reason that that belt suspenders have the final answer.

[00:39:59] Speaker 03:
Whether something was consistent or not with Baker.

[00:40:01] Speaker 03:
Exactly.

[00:40:02] Speaker 04:
Yes, because the FCC has already made that pronouncement I think where you and I had had the disconnect is already said that the dish, if it signs off on this agreement that if it's unclear, because all the agreement do is cite to the list of standards in Baker Creek and nothing more, not even its analysis.

[00:40:24] Speaker 04:
if there's disagreement about whether it's consistent with Baker Creek dish wins.

[00:40:31] Speaker 03:
I think there are in some circumstances dispute resolution processes that haven't become relevant to this case, but I think that the disconnect in the agreement I have.

[00:40:40] Speaker 03:
I'm sorry in the agreement itself as to this question.

[00:40:43] Speaker 03:
I don't know as to this question, your honor.

[00:40:45] Speaker 03:
This hasn't become

[00:40:47] Speaker 03:
relevant to this case until this hypothetical.

[00:40:49] Speaker 03:
So I confess, but I think the disconnect is that the reason that that language was in the amendments as submitted without the input of staff looking at past auction recipients, including this same auction DE recipient status, looking at what the commission had previously said, looking at Baker Creek is if we are wrong,

[00:41:10] Speaker 03:
tell us we are wrong and write that meeting provision.

[00:41:13] Speaker 03:
I have one more question.

[00:41:15] Speaker 03:
Okay.

[00:41:15] Speaker 03:
And just to, if I could put one more point on that, the way that this all could have been cleared up is discussions.

[00:41:21] Speaker 04:
And then ascertainable certainty.

[00:41:25] Speaker 04:
Can you tell me, articulate for me exactly the definition or meaning of ascertainable certainty that you wish to have applied here?

[00:41:34] Speaker 04:
because we've articulated it different ways.

[00:41:37] Speaker 04:
What do you think is the right articulation of the ascertainable certainty test that we should apply?

[00:41:45] Speaker 03:
I think the right articulation, probably the closest approximation to our standard is the DC Circuit's general electric opinion.

[00:41:54] Speaker 03:
Ascertainable certainty means that a regulated entity is able to look at the actions of an agency and determine whether its actions

[00:42:04] Speaker 03:
fall inside or outside of the fair and foul line.

[00:42:08] Speaker 03:
That gets to the very end of our brief and the substantive fair notice argument that we have, the point that Judge Edwards made some minutes ago, which is even if you get past the problem with the remand, the problem with the lack of communication, the problem with the new control finding that wasn't based on the old control finding, you are left with a control finding that these entities had no understanding

[00:42:33] Speaker 03:
how to determine with any ascertainable certainty would happen precisely for the reason we discussed.

[00:42:39] Speaker 03:
Never in the history of the designated entity program has control been found without a put plus something.

[00:42:47] Speaker 03:
That was the issue of the DCC.

[00:42:49] Speaker 05:
What I don't understand is how the ascertainable certainty standard can encompass more than knowledge of the standards or the tests that will be applied by the agency.

[00:43:02] Speaker 05:
You seem to suggest

[00:43:03] Speaker 05:
that in order to have ascertainable certainty, you have to know exactly how that standard is going to be applied and therefore whether you will win at the end of the day.

[00:43:14] Speaker 05:
And then if you lose, you have no fair notice because you looked at the standard and thought you might win.

[00:43:24] Speaker 05:
I don't understand how you get away from that unfortunate set of circumstances that seems to undermine all of

[00:43:34] Speaker 05:
you know, judicial notice and litigation and that kind of thing.

[00:43:38] Speaker 03:
I think it's an unusual set of circumstances, but not necessarily unheard of.

[00:43:44] Speaker 03:
But there are two problems, I think, that contribute to this.

[00:43:47] Speaker 03:
The first is, of course, the totality of the circumstances standard.

[00:43:51] Speaker 03:
Because that standard in the FCC's hands in this decision and in 2015 became essentially anything that FCC wanted it to.

[00:43:59] Speaker 05:
But isn't, I'm sorry, isn't the totality of circumstances pretty standard?

[00:44:03] Speaker 05:
in application across all sorts of circumstances?

[00:44:09] Speaker 03:
It is.

[00:44:09] Speaker 03:
It is, Judge Jackson, but that's why you look for footholds in other places, right?

[00:44:13] Speaker 03:
That's why you look to Baker Creek to see what are the investor protections that have been found to be okay.

[00:44:19] Speaker 03:
That's why this court actually in 2017 said, with respect to the Fifth Memorandum of Opinion and Order, that paragraph 95 that I mentioned,

[00:44:27] Speaker 03:
There was fair notice that a put option in combination with a management service agreement and capital contribution is potentially a problem.

[00:44:37] Speaker 03:
That is the kind of fair notice that we're talking about.

[00:44:39] Speaker 03:
But here, when you've never had the commission say- When you have case by case, agencies can make law through case by case adjudication, right?

[00:44:49] Speaker 04:
Yes.

[00:44:49] Speaker 04:
They can do that here as well.

[00:44:51] Speaker 04:
There's nothing about this area that forbids making law through case by case adjudication.

[00:44:55] Speaker 03:
No, I mean, that's what the commission said in 2006.

[00:44:58] Speaker 04:
Even if they haven't encountered a particular problem in the past, when they encounter a new problem, as long as there was, this is where I think your action is, of course, as long as there was sufficient notice as to the standard and the concerns that they would be looking for, even if not the particular factual scenario that was right.

[00:45:15] Speaker 04:
This isn't qualified immunity analysis, right?

[00:45:18] Speaker 04:
No, we are looking for an exact fact pattern that has been

[00:45:21] Speaker 04:
You know, approved by the Supreme Court, right?

[00:45:24] Speaker 03:
This is not qualified immunity.

[00:45:26] Speaker 03:
But I think part of the issue here, too, is the commission's instruction that folks not look to anything other than commission decisions for guidance.

[00:45:40] Speaker 03:
But what we're left with in combination with those timing issues we talked about, which, of course, played a central role in the court's prior opinion,

[00:45:48] Speaker 03:
is a situation where you commit the money, as you said, Judge Millett, then you have the examination of the control status.

[00:45:54] Speaker 03:
Then you have precisely because of this totality, the circumstances analysis, you have discussions with staff to figure out where the minefields are, where the problems are.

[00:46:06] Speaker 03:
And then if you can cure them.

[00:46:07] Speaker 04:
Yes, but it's not an unfair thing.

[00:46:10] Speaker 04:
You've committed to pay the full amount.

[00:46:12] Speaker 04:
And then they say afterwards, we'll look and see if you qualify for the special status.

[00:46:18] Speaker 04:
They didn't sanction you for not qualifying for special status.

[00:46:22] Speaker 04:
They sanctioned you for violating your obligation, your commitment to pay full price for all the bids that you made.

[00:46:28] Speaker 04:
And so all they're doing here at post-hoc is saying, maybe we can get you a discount.

[00:46:36] Speaker 04:
But when they don't, then you still had already, I mean, that would be icing on the cake.

[00:46:42] Speaker 04:
But you had already made a representation to pay all of these bids.

[00:46:46] Speaker 03:
Judge, you began that question by saying it's not about fairness, but the prior panel, of course, said that that's exactly what it's about.

[00:46:53] Speaker 03:
Prior panel said, whereas here hundreds of millions of dollars are at stake, regulated parties need fair notice of the circumstances of which a finding of de facto control will and will not be subject to an opportunity to cure.

[00:47:05] Speaker 03:
The issue here, the combination of the timing plus the money

[00:47:11] Speaker 03:
plus the commission's consistent practice, right?

[00:47:15] Speaker 03:
The amount of money doesn't matter, right?

[00:47:17] Speaker 03:
The amount of money is not a determinant factor.

[00:47:19] Speaker 03:
The amount of money, we would say, is not the determinant factor.

[00:47:22] Speaker 03:
In fact, as I pointed out earlier, these petitioners are actually much more highly leveraged than other designated entities have been in this auction and others.

[00:47:30] Speaker 03:
The amount of money just means the spectrum that they hold is incredibly valuable.

[00:47:35] Speaker 03:
That's the point of the amount of money and value means assets and equity and everything that the designated entities need in order to make this work.

[00:47:44] Speaker 03:
The fair notice is because these entities were not given a chance simply to have a discussion with staff about how to cure things.

[00:47:52] Speaker 03:
And as I said, we don't need to go back and do a dig through the court's prior opinion even to find that the commission itself in 2006 told us that these discussions happened.

[00:48:04] Speaker 03:
Do my colleagues have any further questions?

[00:48:07] Speaker 04:
We've kept you up a little bit over your time here.

[00:48:10] Speaker 04:
Thank you very much for your assistance.

[00:48:12] Speaker 04:
We'll give you some time on rebuttal.

[00:48:14] Speaker 04:
Thank you.

[00:48:19] Speaker 02:
May it please the court, Maureen Fland from the Federal Communications Commission.

[00:48:23] Speaker 02:
I'd like to start with a fair notice point.

[00:48:25] Speaker 02:
This court and its 2017 opinion found that the petitioners had fair notice that the Commission would find the petitioners under de facto control of DISH.

[00:48:35] Speaker 02:
Now with the benefit of the same rules and the same precedent that the petitioners had before, plus a lengthy commission order and a court decision,

[00:48:45] Speaker 02:
plus comments from parties of record in the proceeding below, petitioners had more than fair notice of how to comply with the commission's control rules of precedent and how to demonstrate that they were no longer under the de facto control of Dish.

[00:49:01] Speaker 02:
Well, what's your response?

[00:49:02] Speaker 00:
Can I just ask you the matter that's of principle concern to me as I'm looking at this case?

[00:49:10] Speaker 00:
In my understanding of administrative law cases, and this goes across the board, totality of circumstances is always a loose standard and it can be troublesome depending upon how it's applied.

[00:49:24] Speaker 00:
It can mean a lot, it can mean very little.

[00:49:27] Speaker 00:
And my understanding has been in all the years I've been doing this, the totality of the circumstances is always defined by reference to agency practice.

[00:49:38] Speaker 00:
And that's what gives,

[00:49:40] Speaker 00:
the affected party some understanding of what is within and without the totality of circumstances.

[00:49:49] Speaker 00:
If it is true, as the other side says, that the commission has never before concluded that an investor protection provision gives an investor de facto control absent a management services agreement, giving substantial day-to-day control to the investor.

[00:50:06] Speaker 00:
How can you get it here?

[00:50:08] Speaker 00:
That makes no sense to me.

[00:50:09] Speaker 00:
And it really is no answer to me to say, well, but the commission is not precisely bound.

[00:50:15] Speaker 00:
They can do whatever they want.

[00:50:16] Speaker 00:
And it doesn't matter what staff resolves.

[00:50:19] Speaker 00:
If it is true that the cases come out of the commission have resulted in a scenario in which there's never been, however it's done, there has never been a finding of de facto control.

[00:50:35] Speaker 00:
where you have investor protection provisions, but you do not have a management services agreement giving any substantial day-to-day control.

[00:50:44] Speaker 00:
Why should it happen here?

[00:50:46] Speaker 02:
Because, Your Honor, the petitioners, the commission told the petitioners in the 2015 order that consistent with our application of the Intermountain Microwave Test, this is a six-factor test, that the commission could find control

[00:51:00] Speaker 02:
even if it only found problems under some but not all of those six factors.

[00:51:06] Speaker 02:
And as we explained in our brief, and we explained in the order, elimination of the management services agreement only cured the commission's previously identified control concerns under two of- What is it that they had reason to know that would make a difference?

[00:51:22] Speaker 00:
Because, Your Honor, the commission had told them that- No, but I mean, what is it in the totality of the circumstances that they

[00:51:29] Speaker 00:
got any indication that would cause them to, we sent the case back.

[00:51:34] Speaker 00:
We don't normally send a case back like this unless we're concerned that the affected party, the challenging party really doesn't get what's required.

[00:51:46] Speaker 00:
I mean, that's the key to me here.

[00:51:48] Speaker 00:
We don't send a case like this back with a long, long, long opinion.

[00:51:52] Speaker 00:
with lots of things saying that the FCC's right on this, the FCC's right on that, their FCC's right on this, but you know what?

[00:52:01] Speaker 00:
We're sending it back.

[00:52:01] Speaker 00:
You know what the but was?

[00:52:03] Speaker 00:
The but was, in my view, when I read that decision and listen to the arguments here, the but was they don't really understand what it is they need to do under this totality of circumstances test to cure whatever problem it is that the FCC has in mind.

[00:52:24] Speaker 02:
Your honor.

[00:52:24] Speaker 00:
Because what they have in mind is not being revealed.

[00:52:27] Speaker 00:
And I don't think you win in an administrative law case if that's the scenario.

[00:52:32] Speaker 00:
And I mean, there's lots of areas of law where that's in play all the time.

[00:52:36] Speaker 00:
Totality of the circumstance is great when the agencies want to fling it around and say, that's all we have to tell you.

[00:52:42] Speaker 00:
We can weigh everything.

[00:52:43] Speaker 00:
That's total nonsense.

[00:52:45] Speaker 00:
You can't invariably weigh everything.

[00:52:48] Speaker 00:
You have to explain to parties

[00:52:51] Speaker 00:
what counts on the scale and what does not count on the scale.

[00:52:54] Speaker 00:
And they have to have a fair understanding of that.

[00:52:57] Speaker 00:
You don't have to handhold them all the way through the process.

[00:53:00] Speaker 00:
I'm not disagreeing with you there, but they have to be able to find some indication of what will make a difference and why.

[00:53:08] Speaker 00:
And if they are right, then we have investor protection provisions that never has resulted in defacto control finding from the FCC, never.

[00:53:20] Speaker 00:
there has not been the day-to-day management services agreement, never, and you're not refuting that, then I'm not getting it.

[00:53:30] Speaker 02:
Because, Your Honor, there were problems under four of the other six intermountain microwave factors identified in 2015 that had nothing to do with the management services agreement.

[00:53:41] Speaker 02:
So, for example, the money was a huge issue and

[00:53:45] Speaker 02:
petitioners overwhelming financial obligations to DISH, in addition to DISH's ability to stymie their ability to pay off their debt.

[00:53:55] Speaker 02:
So for example, it was very clear in the 2015 order that the commission was concerned that DISH could prevent the petitioners from monetizing their licenses by building out networks and generating revenue

[00:54:08] Speaker 02:
that they could use to pay off their debt to DISH.

[00:54:11] Speaker 02:
Eliminating the management services agreement doesn't do anything to resolve that concern.

[00:54:16] Speaker 02:
The commission was concerned about the fact that petitioners, this was in the 2015 order, that petitioners could not exit the business without DISH's consent.

[00:54:25] Speaker 02:
The petitioners knew that going into the cure proceeding, what did they do?

[00:54:29] Speaker 02:
They consented to a restriction that basically barred them from selling their licenses

[00:54:35] Speaker 02:
to any competitor of dishes, even though those are the only potential buyers of licenses.

[00:54:41] Speaker 02:
The Commission expressed concern in the 2015 order that the petitions would never make a profit from their licenses because they would first have to pay off their debt to dish, which dish could prevent them from doing.

[00:54:55] Speaker 02:
And only after they did that, would they be able to generate a profit and that was unlikely so all of these issues you're asking me what fair notice they have the fair notice they had was the commission's analysis under the order.

[00:55:07] Speaker 02:
And as we thoroughly explained in the order on review, eliminating them, and we gave them credit.

[00:55:12] Speaker 02:
We gave them credit under two of the six intermountain microwave factors for eliminating the management services agreement.

[00:55:19] Speaker 02:
But petitioners did not, the elimination of the management services agreement in and of itself did not do anything to resolve the clearly identified problems under the four other intermountain microwave factors.

[00:55:32] Speaker 02:
And in fact, petitioners in their brief barely grappled

[00:55:35] Speaker 02:
with our Intermountain Microwave Analysis, all they do is say, well, we got rid of the management services agreement, that's enough, but as we explain, it's not enough.

[00:55:43] Speaker 04:
Can you help me understand or explain how the fifth memorandum, opinion and order from 1994, and I'm thinking about paragraphs 95 and 96, which talks about puts, and when puts with other terms of an agreement,

[00:56:00] Speaker 04:
can be found to establish de facto control.

[00:56:06] Speaker 04:
Can you explain to me, your view, I mean, the commission's view on whether or how that provided fair note, the terms of those paragraphs, or if there's else, we can look elsewhere too, but those are the ones I found, but if there's others, you can point those to, I don't mean to confine you to that, but did that provide, did that give notice or not?

[00:56:26] Speaker 02:
relevant here.

[00:56:27] Speaker 02:
Well, Your Honor, the commission's 2015 order and the court's decision gave petitioners fair notice.

[00:56:33] Speaker 02:
I mean, there's the precedent, the court in the SNR wireless decision.

[00:56:39] Speaker 02:
I understand your argument about that.

[00:56:41] Speaker 04:
What I'm trying to say is the argument as to whether you have to have a management contract thing.

[00:56:47] Speaker 04:
As I read it, it says whether put options in combination with other terms to an agreement, deprive an otherwise qualified control group,

[00:56:55] Speaker 04:
of de facto control over they're doing it in the negative there right so whether it's deprived them so.

[00:57:02] Speaker 04:
What does that signify if you have a put option and other terms of an agreement that doesn't have to be I think they do, for example, management orders, but it doesn't have to be.

[00:57:13] Speaker 04:
Because this is footwritten in the negative.

[00:57:15] Speaker 04:
This is when it's not finding control.

[00:57:17] Speaker 04:
I'm having trouble.

[00:57:20] Speaker 04:
So focusing on those paragraphs, does it does it or does it not alert folks that a put agreement combined with other terms of an agreement that are going to force or some level of likelihood force a sale by the designated entities.

[00:57:36] Speaker 02:
Sure.

[00:57:37] Speaker 02:
Petitioners had more than fair notice of our finding under the Fifth Memorandum of Opinion and Order based on our 2015 order and the court's decision.

[00:57:45] Speaker 02:
The commission's point in the remand order was that the petitioners had not identified any of the problems with the put that we had previously identified because they didn't make any material changes to the put right in their agreements.

[00:57:59] Speaker 02:
I mean, in the 2018 agreements or in the context of the 2018 agreements, you have the same situation that you had before.

[00:58:06] Speaker 02:
same story, different day, which is that essentially there are three things that happen.

[00:58:12] Speaker 02:
First of all, DISH is still allowed to control when and how petitioners use their licenses, which determines whether or not the petitioners can pay off their massive financial obligations to DISH.

[00:58:23] Speaker 02:
Two, the financial obligations are still massive.

[00:58:26] Speaker 02:
They might've changed the form of their debt, but the amount of it is still the same.

[00:58:30] Speaker 02:
And because of that, and because of a new dividend requirement,

[00:58:35] Speaker 02:
When you combine the debt with the dividend, which petitioners as startup companies with no revenue are never going to be able to pay, and turns into preferred equity, which functions like debt and must be paid off first at liquidation, you end up in the same place that you did before where the petitioners are never going to be able to turn a profit.

[00:58:55] Speaker 02:
So if you're sitting there under those circumstances and you're looking at the put rights, and I mean, the put rights changed, I mean, the changes are superficial.

[00:59:03] Speaker 02:
They have two put rights now.

[00:59:05] Speaker 02:
Rather than one and the window stays open longer but that's it So if you look at those circumstances.

[00:59:11] Speaker 02:
and you're led to the same place that the commission were at and the court was at in the first phase of this case, which is that the petitioners have an overwhelming incentive to exercise the put right or just to sell their licenses to DISH down the road because it's the only way that they can avoid certain financial failure.

[00:59:29] Speaker 02:
If you're in a situation where you can take the generous rate of return on the put right without having to meet any of your construction deadlines and without having to pay off your debt to DISH,

[00:59:40] Speaker 02:
Of course, you would do that, of course, you would do that, and the Commission was also looking at this in the context of the fact that the petitioners are now six years into their license term.

[00:59:49] Speaker 02:
With their build up milestones quickly approaching and let's talk about that for a second in order for the petitioners to keep their licenses by October of 2025.

[00:59:59] Speaker 02:
each of those licenses has to provide service to 70% of the population covered by the license.

[01:00:06] Speaker 02:
If they don't, they default back to the commission.

[01:00:08] Speaker 02:
With those construction deadlines looming and no construction, no use of the licenses today, the commission recently found that the petitioners would exercise the put right.

[01:00:20] Speaker 05:
So Ms.

[01:00:20] Speaker 05:
Flood, can I just paraphrase what I thought I heard you say right there just so I can make sure that I get it?

[01:00:27] Speaker 05:
I thought I heard you say that in the prior order, the FCC made clear that the control problem was that the way these arrangements were organized, the only way to avoid certain financial failure on the part of these companies was to exercise their put right.

[01:00:46] Speaker 05:
That you had a situation that when everything was combined, the fact that

[01:00:52] Speaker 05:
Dish was controlled within how these companies could use their licenses, they had this massive debt to Dish, and they had this attractive foot right, that that was the circumstance that created control.

[01:01:06] Speaker 05:
And that notice then was given that if they were gonna cure, they would have to address those issues.

[01:01:12] Speaker 05:
And the FCC's position here today is that they knew that and they didn't address them sufficiently.

[01:01:19] Speaker 05:
Am I, is that a fair summary of your argument?

[01:01:23] Speaker 02:
Yes.

[01:01:23] Speaker 05:
Okay.

[01:01:24] Speaker 02:
Yes.

[01:01:25] Speaker 02:
I mean, as we explain at length, as we explain at length when we order, in order to resolve our previously articulated concerns under the guidance in the Fifth Memorandum of Opinion and Order, the petitioners would have to make material changes to the agreements.

[01:01:45] Speaker 02:
And the changes they made to the court right were superficial.

[01:01:48] Speaker 02:
And because they did not make material changes that resolve the clearly articulated terms.

[01:01:54] Speaker 02:
And you remember the court in his last decision said that the Fifth Memorandum of Opinion and Order clearly presaged the commission's control finding.

[01:02:03] Speaker 02:
The commission found once again that the petitioners were under dishes control under the Fifth Memorandum of Opinion and Order guidance.

[01:02:10] Speaker 02:
You know, I also just want to go back and point out something.

[01:02:13] Speaker 02:
Judge Edwards expressed concern about the fact that the commission and past has never found control.

[01:02:19] Speaker 02:
when there hasn't been a management services agreement, that goes to the Commission's holding that the petitioners were under the control of DISH under the Intermountain Microwave Factors.

[01:02:29] Speaker 02:
As the Commission pointed out, that's separate and apart from our analysis of control under the Fifth Memorandum of Opinion and Order.

[01:02:36] Speaker 02:
So if the Court disagrees with our Intermountain Microwave Analysis, then you shouldn't because our decision is reasonably and reasonably explained, but if you don't,

[01:02:44] Speaker 02:
the court could still affirm the commission under the Fifth Memorandum of Opinion and Order because the rulings are distinct.

[01:02:50] Speaker 02:
And the Management Services Agreement wasn't a factor in our analysis under the Fifth Memorandum of Opinion and Order in 2015, and it wasn't again in 2018.

[01:03:01] Speaker 05:
What's your response to Ms.

[01:03:02] Speaker 05:
Dexson's sort of initial point that perhaps, you know, that wasn't clear enough

[01:03:10] Speaker 05:
for her clients and that the commission really was obligated under this court's prior ruling to sit with them and explain that really what the issue is here is the way in which you've created a situation

[01:03:31] Speaker 05:
that is a carrot and a stick and a sword of Damocles for the clients and that that's what needed to be addressed.

[01:03:40] Speaker 05:
She says, procedurally, the commission staff needed to respond to their calls and explain how they could have cured.

[01:03:48] Speaker 05:
Why is she wrong about that?

[01:03:50] Speaker 02:
Because nothing in the

[01:03:52] Speaker 02:
For several reasons, your honor, but the first one, and I think this came out during your exchange with counsel for petitioners is that nothing in the court's opinion requires that.

[01:04:02] Speaker 02:
I mean it clearly says that page 1046 the opinion that what the court wanted the petitioners to have the remedy of the court wanted

[01:04:11] Speaker 02:
wanted petitioners to have the opportunity to renegotiate their agreements with Dish.

[01:04:15] Speaker 02:
Nowhere in the opinion does the court describe the cure opportunity as an opportunity to renegotiate with the commission.

[01:04:23] Speaker 02:
And that makes sense because the agreements that gave rise to the control finding the agreements between the petitioners and Dish.

[01:04:30] Speaker 02:
Presumably, I mean, the commission, and we'll point this out in our briefs and in the order, the commission has great discretion under section 4j of the act

[01:04:37] Speaker 02:
order its own proceedings.

[01:04:39] Speaker 02:
And this court's practice is to leave remand procedures to the agency.

[01:04:45] Speaker 02:
So if the court in its last decision was going to take the extraordinary step of telling the commission how to conduct its remand, presumably it would have described the procedures in its decision.

[01:04:58] Speaker 02:
I also want to make a distinction here

[01:05:00] Speaker 02:
Council for petitioners uses staff and the commission interchangeably, and she refers to the CLEARCOM procedures.

[01:05:09] Speaker 02:
There's an important distinction there.

[01:05:11] Speaker 02:
The reason that any interactions between the applicant and CLEARCOM and the staff took place because that application was being handled by the commission staff.

[01:05:25] Speaker 02:
The commission delegated it down to the

[01:05:27] Speaker 02:
commissions wireless bureau to handle it here.

[01:05:30] Speaker 00:
That's true.

[01:05:31] Speaker 00:
We understand that case law.

[01:05:32] Speaker 00:
Nonetheless, you've got to understand that it dulls our brain some when we look at the agency and one part of the agency is allowing something and another part, that's not impressive.

[01:05:43] Speaker 00:
But you're right.

[01:05:44] Speaker 00:
You generally have the case law on your side.

[01:05:47] Speaker 00:
But don't think we're not affected by that.

[01:05:50] Speaker 00:
You're all in the same building, so to speak.

[01:05:53] Speaker 00:
And if some, wait, if some parties are coming out

[01:05:58] Speaker 00:
advantaged, so to speak, and other parties are not coming out in the same way.

[01:06:04] Speaker 00:
A judge, by definition, is going to say, gee, that's troublesome.

[01:06:08] Speaker 00:
It's the same agency.

[01:06:09] Speaker 00:
Do they not talk to one another?

[01:06:11] Speaker 00:
But in any event, let me ask you one thing to make sure, see if I'm getting you right.

[01:06:16] Speaker 00:
If I'm understanding your argument, it is essentially that they should have understood that an overwhelming incentive to exercise the put right ends the analysis.

[01:06:29] Speaker 02:
Under the Fifth Memorandum of Opinion and Order.

[01:06:31] Speaker 02:
Yes, Your Honor.

[01:06:32] Speaker 00:
In this case, that ends the analysis.

[01:06:36] Speaker 00:
They should control if you have an over... If I'm hearing you correctly, if I'm trying to tease out, I'm really mundane in this way.

[01:06:43] Speaker 00:
I like to tease out straightforward principles of law if I can.

[01:06:48] Speaker 00:
What I hear you saying through all this maze is we told them before and we're telling them again, if there's an overwhelming incentive to exercise that book, there's control and that's it.

[01:06:58] Speaker 00:
The case is over.

[01:06:59] Speaker 00:
And we think on the facts of this case, there's clearly an overwhelming incentive to exercise the put.

[01:07:06] Speaker 02:
We did, and we found an overwhelming incentive to exercise the put because they had fair notice.

[01:07:11] Speaker 02:
They didn't identify or they didn't resolve problems that have been clearly identified by the commission in 2015.

[01:07:17] Speaker 00:
No, no, but I'm just trying to, if we wrote anything, it seems to me that's what you would really want it.

[01:07:24] Speaker 00:
Now in the totality of the circumstances test, if

[01:07:28] Speaker 00:
The court finds in reviewing the agency that the agency was correct in finding there was an overwhelming incentive to exercise support.

[01:07:37] Speaker 00:
That's the end of it.

[01:07:38] Speaker 00:
We don't have to go to any other factors that ends it.

[01:07:40] Speaker 00:
That's the legal principle that governs.

[01:07:41] Speaker 00:
That's what you're saying, right?

[01:07:44] Speaker 02:
Yes, and under the standard review, I mean, it's a very deferential standard review.

[01:07:49] Speaker 02:
I mean, in the past case... No, no, no, I get all of that.

[01:07:51] Speaker 00:
I just want to make sure you're saying that's dispositive.

[01:07:54] Speaker 00:
You don't have to go through factors 7, 12, or anything else.

[01:07:57] Speaker 00:
If you find that, Your Honors, we win.

[01:08:00] Speaker 00:
If we are right on that finding, we win.

[01:08:04] Speaker 02:
We do, you would not have, I mean, but we also were correct under, I don't want to give up and say that we weren't also correct under Intermountain Microwave.

[01:08:11] Speaker 02:
Judge Jackson, can I go back?

[01:08:13] Speaker 05:
I'm sorry, before you leave that, because I'm a little confused by Judge Edward's framing of this, my understanding is that you made that finding the first go-round and that this court actually upheld it.

[01:08:26] Speaker 05:
In other words, that you looked at the agreements that previously existed, that under the fifth M&O or whatever you said, there's the put right incentive, it's too great, and that's one of the reasons why we're finding control, and that the original panel agreed.

[01:08:44] Speaker 05:
They upheld your substantive view of that, but they said,

[01:08:50] Speaker 05:
The other side, the petitioners should have had an opportunity to make changes to their agreements to solve that problem.

[01:08:58] Speaker 05:
You then went back and said, here's the procedures for you having the opportunity to make those changes.

[01:09:05] Speaker 05:
And when you looked again at the renegotiated agreements with Dish, you said you haven't solved the problem that we previously identified and that the Court of Appeals actually affirmed us substantively with respect to that issue.

[01:09:21] Speaker 05:
Am I wrong about that?

[01:09:23] Speaker 05:
No, you're right.

[01:09:24] Speaker 00:
I'm not disagreeing with that.

[01:09:25] Speaker 00:
I'm just trying to understand

[01:09:27] Speaker 00:
You're heavily resting on that.

[01:09:29] Speaker 00:
I'm trying to understand what your argument is.

[01:09:32] Speaker 00:
And as I sit here listening, that's the essence of your argument.

[01:09:36] Speaker 00:
We told them it before, they didn't fix it, and they still lose.

[01:09:40] Speaker 00:
But bottom line, you're saying that's it.

[01:09:44] Speaker 00:
That's this case.

[01:09:45] Speaker 04:
You're saying that's one route.

[01:09:48] Speaker 00:
I'm going to let her.

[01:09:51] Speaker 00:
She can answer however she wants.

[01:09:52] Speaker 00:
I want her to understand what I'm hearing.

[01:09:55] Speaker 00:
What I'm hearing is that's the crux of this case.

[01:09:57] Speaker 00:
There's an overwhelming incentive to exercise the put right.

[01:10:00] Speaker 00:
That's control period.

[01:10:02] Speaker 00:
We told them that before.

[01:10:03] Speaker 00:
They didn't fix it.

[01:10:04] Speaker 00:
They lose.

[01:10:06] Speaker 02:
We'll take that.

[01:10:06] Speaker 02:
We also think we want to do it in our mountain microwave.

[01:10:09] Speaker 02:
But Judge Jackson's articulation of my argument is much better than mine, so I'm going to rest on that.

[01:10:16] Speaker 02:
But Judge Jackson, I wanted to go back for one second.

[01:10:20] Speaker 02:
My point that I was making about the fact that the commission was going to decide this and not the Bureau is as follows, it is well established in this court

[01:10:29] Speaker 02:
reiterated this in the SNR wireless decision that the Commission is not bound by the informal guidance provided by its staff.

[01:10:37] Speaker 02:
So this is why I think it's important to make the distinction between CLEARCOM and the other applications that the petitions rely on in their brief.

[01:10:46] Speaker 02:
All of those were decided by a delegated authority by the Commission staff.

[01:10:52] Speaker 02:
Here the Commission was deciding it.

[01:10:54] Speaker 02:
So the Commission had already provided petitioners substantial guidance on how to cure their control problems.

[01:11:00] Speaker 02:
Where that put us was even if the Commission had directed the petitioners to sit down with its staff, the staff couldn't provide any more guidance than the Commission had already provided.

[01:11:11] Speaker 02:
And even if the staff sat down with petitioners and negotiated terms and proposed those to the Commission, the Commission could still disregard them.

[01:11:20] Speaker 02:
So the petitioners here aren't similarly situated to any other applicant that came before them.

[01:11:26] Speaker 05:
So even in the sort of terms of Judge Millett's prior discussion in terms of agency practice, to the extent that the petitioners here are pointing to CLEARCOM as a prior practice, that was at most, you would say, a practice of what the staff would have thought about.

[01:11:47] Speaker 05:
the circumstances.

[01:11:48] Speaker 05:
CLEARCOM can't possibly establish precedent for what the commission itself would have said.

[01:11:54] Speaker 02:
That's absolutely right.

[01:11:55] Speaker 02:
And you know, the Petitions Council makes much of the commission statement in one of its prior orders about the fact that it's our usual practice to have our staff sit down and talk about control problems with a vending credit applicant.

[01:12:09] Speaker 02:
It's our usual practice because that's because in most instances, these applications are handled on delegated

[01:12:17] Speaker 02:
Here, the commission reasonably determined that in a case involving $13 billion in spectrum licenses and $3.3 billion in bidding credits, it was going to handle it itself.

[01:12:28] Speaker 02:
And you remember the first order.

[01:12:30] Speaker 02:
The commission evaluated petitioners' bidding credit eligibility in the first case.

[01:12:36] Speaker 02:
Now with the judicial remand, of course the commission is going to keep that decision to itself.

[01:12:41] Speaker 02:
And given that the commission isn't bound by the decisions of its staff,

[01:12:45] Speaker 02:
Why would the Commission direct the petitioners to sit down, or why would the Commission direct the staff to sit down with the petitioners and hash out terms?

[01:12:54] Speaker 02:
I just want to point something.

[01:12:56] Speaker 04:
Something I just I'm getting a little confused here.

[01:12:57] Speaker 06:
Yeah.

[01:12:59] Speaker 04:
Why would the commission direct its staff.

[01:13:01] Speaker 04:
Are you talking about direct commission staff or are you treating like here the wireless bureau.

[01:13:07] Speaker 04:
Are you including them within your staff.

[01:13:08] Speaker 04:
I'm getting rather confused.

[01:13:09] Speaker 02:
I'm sorry.

[01:13:10] Speaker 02:
I'm talking about the staff and the wireless bureau.

[01:13:14] Speaker 02:
So I'm not talking about the commissioners personal staff like the advisors to the commissioners.

[01:13:19] Speaker 02:
What the petitioners wanted is they wanted, and I apologize, it's being too inside baseball and I apologize for the confusion.

[01:13:27] Speaker 02:
To clarify, what the petitioners wanted was they wanted to sit down with staff in the wireless bureau to hash out terms.

[01:13:35] Speaker 02:
And you could see a discussion of this.

[01:13:37] Speaker 02:
It's in paragraph 24 of the Remand Procedures Order.

[01:13:41] Speaker 02:
We cite a pleading filed by the petitioners.

[01:13:43] Speaker 02:
The petitioners wanted to sit down

[01:13:45] Speaker 02:
with wireless bureau staff over a series of meetings that take place by their estimate that would take more than a year to actually rewrite the terms in their agreements.

[01:13:56] Speaker 02:
So in other words, what would happen is they would come in with their agreements and the staff would get out the blue pencil and mark everything up.

[01:14:03] Speaker 02:
And the petitioners anticipated that that would take more than a year.

[01:14:06] Speaker 00:
In fairness, Ms.

[01:14:08] Speaker 00:
Flood, there are so many variations on that notice argument.

[01:14:13] Speaker 00:
I think what they're really saying in fairness is,

[01:14:16] Speaker 00:
They wanted to get a sense of how folks at the FCC thought that they might avoid the appearance of overwhelming incentive.

[01:14:27] Speaker 00:
That's clearly what they're talking about.

[01:14:29] Speaker 00:
So give us your best sense.

[01:14:31] Speaker 00:
Now we may not, you still may not make it, but if I'm an attorney, I would like to be able to sit with FCC, anyone in the FCC.

[01:14:40] Speaker 00:
We got a problem here with this put.

[01:14:42] Speaker 00:
We don't want to look like we have an overwhelming incentive.

[01:14:45] Speaker 00:
Do you have any suggestions?

[01:14:47] Speaker 00:
We may or may not take them.

[01:14:48] Speaker 00:
We know the commission won't be bound by what you're telling us, but give us some guidance because the totality of circumstances test can be utterly ridiculous in some cases.

[01:14:57] Speaker 00:
The one thing we know is this put thing is a problem.

[01:15:01] Speaker 00:
Do you have any way we can avoid this problem?

[01:15:03] Speaker 00:
That's not useless.

[01:15:06] Speaker 02:
Your honor, the standard here, and I

[01:15:09] Speaker 02:
I hate saying this because, you know, this, I mean, you know, you've written a lot about administrative law, but the standard here is, is this an abuse of discretion?

[01:15:16] Speaker 02:
And the commission did not abuse its discretion in determining that it shouldn't require, that there was no need to require a staff to sit down with a petition.

[01:15:25] Speaker 00:
No, no, no.

[01:15:26] Speaker 02:
Find them more guidance about how to.

[01:15:28] Speaker 00:
I understand your formal argument.

[01:15:30] Speaker 00:
And for the most part, your formal argument is strong in terms of what procedures

[01:15:37] Speaker 00:
We can tell the commission they had to follow on remand.

[01:15:40] Speaker 00:
I'm not generally, I'm just a little concerned that you're overstating your position and suggestion.

[01:15:45] Speaker 00:
There's nothing to be gained by allowing petitioners on a remand in a huge case with a lot of money where one issue is huge and overriding.

[01:15:55] Speaker 00:
And all I want to do is talk to some folks to get some guidance, how you can avoid the appearance that's bothering the commission.

[01:16:03] Speaker 00:
I think it's ungenerous to suggest there's nothing to that.

[01:16:07] Speaker 00:
I think that's ridiculous.

[01:16:08] Speaker 00:
You're a smart lawyer.

[01:16:09] Speaker 00:
The other side has smart lawyers.

[01:16:11] Speaker 00:
I'm a smart lawyer.

[01:16:12] Speaker 00:
And I don't agree with it.

[01:16:14] Speaker 00:
There is something to be gained by that.

[01:16:16] Speaker 00:
Can we write that in the law?

[01:16:18] Speaker 00:
Probably not.

[01:16:18] Speaker 00:
But there's definitely something to be gained.

[01:16:21] Speaker 02:
Governor, you might think there's something to be gained.

[01:16:23] Speaker 02:
And the petitioners obviously think there's something to be gained.

[01:16:26] Speaker 02:
But the commission did not use its discretion here in finding that there wasn't enough to be gained.

[01:16:30] Speaker 02:
I hear you.

[01:16:32] Speaker 00:
I hear you.

[01:16:33] Speaker 02:
Can I just please go ahead and then I was going to I was going to say Judge Malat you were asking about the leasing restriction and I actually have a page for you to look at if you want to go back about the what restriction the leasing restriction you're asking whether or not the ordinary course of if I remember correctly you were asking whether the ordinary course of business exception was in the was it was retained in the 2018 agreements and it wasn't so if you look at

[01:17:03] Speaker 02:
or at least not as relevant to the commission's analysis.

[01:17:06] Speaker 02:
If you look at page 1047 of the Joint Appendix, the petitioners put in a red line of the 2015 agreement.

[01:17:16] Speaker 02:
Can you repeat the page?

[01:17:27] Speaker 02:
Sure, sure.

[01:17:27] Speaker 02:
It's Joint Appendix page 1047.

[01:17:29] Speaker 02:
Thank you.

[01:17:38] Speaker 02:
Okay, so if you look at, this is section 6.18 of the credit agreements.

[01:17:44] Speaker 02:
So it's a red line.

[01:17:45] Speaker 02:
So it starts with the language from the 2015 agreement, and then the red line changes reflect the changes that were made in the 2018 agreement.

[01:17:54] Speaker 02:
So as originally written, this provision said, the loan party agrees that it shall not without the prior written approval of the lender, which approval may be withheld, da, da, da, da, da, lease,

[01:18:07] Speaker 02:
Transfer otherwise dispose of this property or asset now owned or hereafter required okay what the petitioners did so what under their own reading what that means is because they're reading property or assets to also cover licenses what that means is before it was amended.

[01:18:23] Speaker 02:
The.

[01:18:26] Speaker 02:
petitioners could not lease their licenses without dishes prior written approval.

[01:18:36] Speaker 02:
unless it was in the ordinary course of business.

[01:18:39] Speaker 02:
They amended the language, so it says, property or assets now owned are hereafter required except for the sale of non-major assets in the ordinary course of business.

[01:18:50] Speaker 02:
So what they did was they amended the language so that now that ordinary course of business exception to the prior written approval requirement

[01:19:02] Speaker 02:
Only applies to the sale of non major assets with the Commission was concerned about was the lease of major assets because major assets include licenses.

[01:19:12] Speaker 02:
So the the ordinary course of business exception, which even under the petitioners own interpretation of their agreements.

[01:19:19] Speaker 02:
would allow the petitioners to lease their licenses in the ordinary course of business without dishes prior written approval.

[01:19:26] Speaker 02:
That was in 2015.

[01:19:28] Speaker 02:
It no longer applies now.

[01:19:30] Speaker 02:
And that was the commission's point in finding that the leasing restriction was new.

[01:19:34] Speaker 02:
I mean, the petitioners don't dispute that they change or they add a language about what a major asset is in the 2018 agreements that wasn't there before.

[01:19:43] Speaker 02:
It defines a lease of a spectrum.

[01:19:46] Speaker 02:
It defines a spectrum license as a major asset.

[01:19:49] Speaker 02:
And so the Commission looked at the terms in the 2018 agreements and said wow okay so before the lease restriction didn't expressly cover licenses and there was this ordinary course of business exception.

[01:20:01] Speaker 02:
Why did you amend your agreements in 2018 so the least restriction now expressly covers licenses and you've eliminated this ordinary course of business exception went to their point leasing wasn't an issue.

[01:20:14] Speaker 02:
Before I also want to point out this this notion that the Commission will move the goalpost on the reason the Commission looked at leasing is because it was doing its job, the petitioners made leasing an issue when they were rebutting the.

[01:20:29] Speaker 02:
The comments filed by opponents of their applications.

[01:20:33] Speaker 02:
They came in and it was their expert that said, no, they are not likely or it's not inevitable that they will exercise the put right because, among other things, they can monetize their licenses through leasing.

[01:20:44] Speaker 02:
So the commission looked at that and said, OK, well, can they lease?

[01:20:48] Speaker 02:
So we looked at the 2018 agreements and we saw the language that said, effectively, if they wanted to lease any of their licenses, they would have to get prior written approval from DISH.

[01:20:58] Speaker 02:
And then we went back and looked at the 2015 agreements.

[01:21:00] Speaker 02:
And we said, wow, they seemed to have lost discretion in 2018 that they had in 2015.

[01:21:05] Speaker 02:
And the commission found that to be significant.

[01:21:09] Speaker 04:
Well, Ms.

[01:21:09] Speaker 04:
Stetson was right.

[01:21:10] Speaker 04:
The ordinary course of business language is still there.

[01:21:12] Speaker 04:
So I apologize.

[01:21:13] Speaker 04:
But it doesn't function the same way it did.

[01:21:15] Speaker 04:
It does not function the same way.

[01:21:18] Speaker 04:
She may have a different reading of it.

[01:21:19] Speaker 04:
This was the commission's conclusion.

[01:21:21] Speaker 04:
It does not function.

[01:21:22] Speaker 04:
Mike?

[01:21:23] Speaker 04:
The host of course has any questions.

[01:21:24] Speaker 04:
I do have a question.

[01:21:27] Speaker 04:
And this gets back to the role of the bureau because it is really hard for companies trying to navigate this space with the totality of circumstances tests or divining the converse meaning of the order, the fifth memorandum opinion and order.

[01:21:52] Speaker 04:
And it gets even harder when

[01:21:57] Speaker 04:
The Commission allows its wireless bureau, which is probably quite expert in this area, to issue approvals of agreements for the status of being a designated entity without any explanation and as best public can tell from whatever they're able to piece together, it looks

[01:22:19] Speaker 04:
It looks, I mean, their argument is it's the same.

[01:22:21] Speaker 04:
They're talking about AWS.

[01:22:22] Speaker 04:
They'll tell me if I've got the wrong ones, but AWS, these are the post 2015 ones, AWS, Bitco and Advantage Spectrum.

[01:22:29] Speaker 04:
And when all the commission goes is, oh, that was just our little bureau.

[01:22:34] Speaker 04:
That seems a bit too dismissive because that's a source of guidance and information.

[01:22:40] Speaker 04:
They are real decisions with real legal consequence and practical consequence.

[01:22:47] Speaker 04:
And so,

[01:22:48] Speaker 04:
Did the commission just say we're not bound by the bureau because it had nothing more to say as to those?

[01:22:57] Speaker 04:
And if that's true, isn't that a problem?

[01:23:00] Speaker 02:
Your honor, the court in the prior case held that the commission can't be bound by the decisions of its staff because those one word grants don't provide any reasoning behind them.

[01:23:10] Speaker 04:
They're your agent.

[01:23:13] Speaker 04:
They're your agent.

[01:23:14] Speaker 02:
Yes, your honor, but in section five of the act, Congress

[01:23:18] Speaker 02:
established that the commission can delegate matters to its staff, but that the commission is not bound by the decisions that.

[01:23:27] Speaker 04:
Yeah, be bounded by them, but are they relevant?

[01:23:31] Speaker 04:
Are parties supposed to be able to look at those and at least try to define some guidance as to meeting these standards that you have, or is your position when you say we're not bound that you can look all you want?

[01:23:44] Speaker 04:
It's 50-50 whether we will agree or not at the end of the day.

[01:23:48] Speaker 04:
That's a very harsh environment in which to expect companies to operate.

[01:23:52] Speaker 02:
It's not, Your Honor.

[01:23:53] Speaker 02:
I mean, as I will respond, my response is this court's opinion in the prior case where the court at length- Maybe you're not bound by them, but that's a different thing from the commission saying, tell me if I'm wrong here.

[01:24:06] Speaker 04:
We're not bound by them.

[01:24:10] Speaker 04:
But when we leave them in place,

[01:24:13] Speaker 04:
Don't pay them any attention.

[01:24:15] Speaker 04:
Nobody can rely on them.

[01:24:18] Speaker 04:
And that's an aspect of the reasoning in this case that I find troubling.

[01:24:22] Speaker 02:
Your Honor, but if parties know that the commission is two things, if parties know, the petitioner should know, because the court in the prior case told them that the commission is not bound by the decisions of the staff.

[01:24:36] Speaker 04:
It may be bound, but the commission is to inform.

[01:24:38] Speaker 04:
Are these meant to be informed?

[01:24:41] Speaker 04:
learn from those decisions.

[01:24:43] Speaker 02:
No, they can't, Your Honor, because they can't.

[01:24:46] Speaker 02:
I mean, for multiple reasons, as the court pointed out.

[01:24:48] Speaker 04:
AWS BIDCO decision.

[01:24:49] Speaker 04:
I don't know if it is.

[01:24:50] Speaker 04:
We don't have an explanation.

[01:24:51] Speaker 04:
We don't have a full record.

[01:24:53] Speaker 04:
I don't know everything that the Bureau was looking at in those cases.

[01:24:56] Speaker 04:
But if I'm going to offer a hypothetical, and we're going to say it's the XXX company.

[01:25:04] Speaker 04:
And let's imagine their facts are identical.

[01:25:08] Speaker 04:
Their agreement is identical to the one

[01:25:11] Speaker 04:
that was proposed in 2018 here by North Star and SNR.

[01:25:16] Speaker 04:
And if the Bureau says, fine, go get your bidding credits on an identical agreement, is it rational for the commission to say, or is it even permissible for the commission to say, we're fine, we're going to say the opposite here, and we're good with having complete inconsistency in our internal decision making?

[01:25:38] Speaker 02:
Your honor, can I ask you a clarifying question about your hypothetical?

[01:25:41] Speaker 02:
Is it the same agreement or is it the same agreement and the companies are in the same circumstances?

[01:25:46] Speaker 04:
I mean, are they the identical company?

[01:25:48] Speaker 04:
I'm going to tell you they're not the same company.

[01:25:51] Speaker 04:
Of course, they can't get a different answer in two places.

[01:25:53] Speaker 04:
But the facts are all the material facts.

[01:25:57] Speaker 04:
There'll be different names for the companies.

[01:25:59] Speaker 04:
Who the companies are is different.

[01:26:01] Speaker 04:
But the material facts, every material fact cited by the commission in its decision here

[01:26:07] Speaker 04:
is the same.

[01:26:09] Speaker 02:
Presumably, if the material facts were the same and the agreements are the same, then the bidding credit application would be granted to party number two.

[01:26:20] Speaker 02:
But I mean, that's not what happened here.

[01:26:22] Speaker 04:
No, no, why wouldn't it be?

[01:26:23] Speaker 04:
You just said, I'm assuming one is decided by the Bureau and one is decided by the commission.

[01:26:30] Speaker 04:
And the commission is not bound by it.

[01:26:31] Speaker 04:
So the Bureau goes first in hypothetical case with companies XXX.

[01:26:37] Speaker 04:
And they go, okay, this is not, we don't find a defacto or a control problem here.

[01:26:44] Speaker 04:
And then SLR and Northstar come and they have, they go, wait, that worked.

[01:26:51] Speaker 04:
We are going to copy that, cut and paste, change the names of the companies, but all the material facts are the same and the terms of the agreement are the same.

[01:27:01] Speaker 04:
And they come to the commission and the commission says, no,

[01:27:06] Speaker 02:
Because, Your Honor, the Commission retains the right, the Commission retains the right to determine that its staff got it wrong.

[01:27:14] Speaker 02:
I mean, under your hypothetical, the agreements could be the same and both applicants can be in the same position, but the Commission is the ultimate decision-maker.

[01:27:24] Speaker 02:
I mean, Congress established that.

[01:27:26] Speaker 02:
Do you have any way to distinguish AWS, Spidco, or Advantage Spectrum?

[01:27:31] Speaker 02:
I don't, Your Honor, because as the Court pointed out in its prior opinion, there's no Bureau decision explaining why those applications were granted.

[01:27:41] Speaker 02:
I don't know.

[01:27:43] Speaker 02:
This was the Court's point in the prior case.

[01:27:45] Speaker 02:
How can the Commission comment on it?

[01:27:48] Speaker 05:
I'm following up on Judge Millett's point in a couple of ways.

[01:27:52] Speaker 05:
In a situation in which the Bureau says, this looks good to us,

[01:27:57] Speaker 05:
In the actual process, the way that it works, does the commission ultimately sign off on every bureau determination?

[01:28:05] Speaker 02:
No, Your Honor.

[01:28:06] Speaker 02:
The commission does not review that.

[01:28:09] Speaker 02:
Under Section 5 of the Act, what essentially happens is the commission can delegate matters for its staff to handle.

[01:28:17] Speaker 02:
And when the staff disposes of it and issues a decision, or in this case,

[01:28:22] Speaker 02:
an administrative grant and the bidding credit application that has the force of law, unless it's challenged up to the Commission.

[01:28:30] Speaker 05:
So we don't really have the conflict that I think Judge Mullett was alluding to with her hypothetical because the Commission has not said in scenario one

[01:28:41] Speaker 05:
Yes, we agree with our staff on these facts.

[01:28:45] Speaker 05:
And then in scenario two, it comes to them individually without the staff and they say something different.

[01:28:51] Speaker 05:
We don't know what the commission actually would have held except when it comes to it in the second instance, right?

[01:28:58] Speaker 05:
I mean, I. That's correct.

[01:29:00] Speaker 02:
And also the commission doesn't know why the bureau held what it said.

[01:29:04] Speaker 05:
So that even if even if.

[01:29:06] Speaker 05:
we have a world in which the Bureau's representations and views are meant to inform the Commission.

[01:29:13] Speaker 05:
Let's assume that the Bureau did give all of its reasons, it laid it all out, and there it was, and it says, in that scenario, we believe there is no control, everything is fine.

[01:29:24] Speaker 05:
Even if that is the case,

[01:29:27] Speaker 05:
I think the question here would be whether the Commission abused its discretion in saying that we don't need that information.

[01:29:35] Speaker 05:
We're going to take this one ourselves.

[01:29:37] Speaker 05:
We don't need to hear from the Bureau because it seems as though Ms.

[01:29:42] Speaker 05:
Stetson's argument was the Commission had to.

[01:29:46] Speaker 05:
send it to the Bureau and have the Bureau work with the parties and come up.

[01:29:52] Speaker 05:
So is there a world in which the Commission could say, no, no, because of the amount of money, because of the scenario, we're going to handle this one ourselves, and we're not going to designate the Bureau to sit down with you and come up with its own informative determination as to what should happen?

[01:30:11] Speaker 02:
Yes, Congress granted us that authority in section five of the act, commissioning to determine what it's going to delegate to its staff and the commission can decide when it wants to keep something for itself.

[01:30:20] Speaker 00:
When they delegate authority, can an appeal be taken from the Bureau?

[01:30:26] Speaker 02:
An appeal cannot be taken from the Bureau straight to court.

[01:30:29] Speaker 02:
It has to go to the commission first.

[01:30:31] Speaker 00:
It has to what?

[01:30:33] Speaker 00:
I don't mean a court appeal.

[01:30:34] Speaker 02:
Oh, can you, yes, you can, you can challenge it to the full commission.

[01:30:38] Speaker 00:
And if the commission decides we're not going to look it over, does the commission feel bound by that decision because they've declined to review it?

[01:30:48] Speaker 02:
Well, if you challenge, if you, if a party brings an application for review to the commission, the commission has to, I mean, the commission should decide it.

[01:30:58] Speaker 00:
No, no, no, no, wait, wait.

[01:30:59] Speaker 00:
I may be recalling things incorrectly, but that's why I wanted your clarification.

[01:31:04] Speaker 00:
If a party says we want to seek review from the Bureau's action and the commission seek review with the commission, the commission says we don't want to review it.

[01:31:14] Speaker 00:
So it stands.

[01:31:16] Speaker 00:
Okay.

[01:31:17] Speaker 00:
Is the commission bound in the future by that disposition?

[01:31:20] Speaker 02:
Can I ask a clarifying question, Your Honor?

[01:31:22] Speaker 00:
Sure.

[01:31:22] Speaker 02:
When you said the commission doesn't want to decide it, does that mean the commission doesn't take action or the commission?

[01:31:27] Speaker 00:
The commission says we are letting it stand.

[01:31:30] Speaker 00:
So they affirm the Bureau, they issue an order saying they, we, we are not going to change this disposition.

[01:31:40] Speaker 00:
I, my recollection is over the years that that happens.

[01:31:44] Speaker 00:
And they simply say, we're not going to, we're not going to change this disposition.

[01:31:49] Speaker 02:
If the commission affirms, if the commission issues an order, Your Honor, that affirms the Bureau's grant of the vending credit application.

[01:31:56] Speaker 00:
No, not the grant.

[01:31:57] Speaker 00:
They just say, we're not going to review it.

[01:31:59] Speaker 00:
I may be mistaken in my recollection of how this works.

[01:32:04] Speaker 00:
My understanding is the agency, the FCC can say, we're not going to change this.

[01:32:11] Speaker 00:
We're not going to review this disposition.

[01:32:14] Speaker 02:
I'm not familiar with that process, Your Honor.

[01:32:16] Speaker 02:
Typically what happens is,

[01:32:20] Speaker 02:
If somebody, the commission only decides that it's not going to review something when it's brought to the commission's attention, the commission affirms the bureau, but this process where the commission doesn't issue an order, but somehow affirmatively decides that it's not going to act on it, I'm not familiar with that.

[01:32:41] Speaker 00:
Okay.

[01:32:41] Speaker 00:
In your understanding of the commission affirms an order without writing anything, are they bound by the bureau's decision?

[01:32:50] Speaker 02:
Your honor, if the Commission affirms the Bureau decision, I believe it has to write a written order.

[01:32:55] Speaker 02:
And at that point, it would become Commission President.

[01:32:57] Speaker 02:
So just to use an example, like an irrigate wireless, which is discussed in the petitioner's brief, what happened was the Bureau

[01:33:06] Speaker 02:
granted the irrigate wireless application with conditions, it was challenged and the commission affirmed the bureau's determination that the applicant was eligible for bidding credits.

[01:33:17] Speaker 02:
So at that point, not the procedures, because the commission didn't affirm the procedures, because it didn't say anything about the procedures.

[01:33:24] Speaker 02:
But if somebody wanted to come in and say, you commission affirmed the bureau's grant of the irrigate wireless,

[01:33:33] Speaker 02:
bidding credit application, like the substantive grant, that becomes Commission Presna.

[01:33:40] Speaker 02:
I hope I answered your question.

[01:33:41] Speaker 00:
Yes, you did.

[01:33:42] Speaker 00:
Thank you.

[01:33:45] Speaker 04:
Ready for their questions?

[01:33:48] Speaker 04:
No.

[01:33:48] Speaker 04:
No.

[01:33:48] Speaker 04:
OK.

[01:33:48] Speaker 04:
Thank you, Ms.

[01:33:49] Speaker 04:
Bled.

[01:33:49] Speaker 04:
Thank you.

[01:33:50] Speaker 04:
Ms.

[01:33:50] Speaker 03:
Dixon, we'll give you three minutes.

[01:33:53] Speaker 03:
Thank you, Your Honor.

[01:33:54] Speaker 03:
I want to talk briefly about what SNR and North Star had notice of and what they didn't.

[01:34:00] Speaker 03:
What SNR and North Star had notice of?

[01:34:03] Speaker 03:
was that he put option itself under the fifth M-O-N-O is not an issue.

[01:34:08] Speaker 03:
It's not a control concern.

[01:34:10] Speaker 03:
What they had notice of also under the fifth M-O-N-O paragraph 96 is what the commission emphasized over and over again in the 2015 decision, which is concerns are greatly increased when a single entity provides most of the capital and management services and is the beneficiary of investor protections.

[01:34:32] Speaker 03:
That's when the put option increases the concerns.

[01:34:35] Speaker 03:
That was the basis of the 2015 ruling.

[01:34:38] Speaker 03:
That's why that phrase that I just read you occurs at least five times in that ruling.

[01:34:42] Speaker 03:
The management services agreement was a huge feature of the 2015.

[01:34:48] Speaker 04:
If MO&O doesn't confine itself to having a, doesn't say a put order is only improper if combined with the management services order, it says just other terms of the agreement.

[01:34:58] Speaker 03:
Correct, but in terms of what we understood the problem to be, and you can see this at pages 36 to 37 of our opening brief and 25 to 26 of our reply, the management services agreement was the culprit.

[01:35:10] Speaker 03:
So we had noticed that that under the 2015 agreement was a problem.

[01:35:16] Speaker 03:
Put option combined with the management services agreement.

[01:35:19] Speaker 03:
We had noticed, as your honor pointed out, Judge Millett, that AWS BIDCO and Advantage Spectrum had both

[01:35:27] Speaker 03:
been permitted to include standard put options in their designated entity agreements with their investors.

[01:35:34] Speaker 03:
Because of course, this is a standard provision in a designated entity agreement.

[01:35:39] Speaker 03:
Those are the things we had notice of.

[01:35:40] Speaker 03:
Here's what we didn't have notice of.

[01:35:43] Speaker 03:
We didn't have notice, to Judge Edwards' point, that the commission would do something it never has done before, which is to conclude that even in the absence of

[01:35:53] Speaker 03:
a culprit management services agreement that was such a fundamental feature of the 2015 decision, even in the absence of the MSA, that a put option itself would be suggested to exert so much leverage that it couldn't do anything.

[01:36:07] Speaker 03:
We did not have notice under the 2020 analysis that the commission would last.

[01:36:13] Speaker 04:
Do the opinion here say that the put option itself, I think you just said,

[01:36:18] Speaker 04:
Was the problem here or did it say the put option, does the decision say the put option in combination with other terms in the agreement that limit the, and I know you have disagreements with some of that, but that limit the ability in the commission's view, that limit the ability to develop the business.

[01:36:35] Speaker 03:
I think that is part of the commission's pivot in 2020.

[01:36:38] Speaker 03:
Yes.

[01:36:38] Speaker 03:
In 2015, it was put plus management services agreement equals control.

[01:36:42] Speaker 03:
Now it's put plus these other standard investor protections.

[01:36:47] Speaker 03:
which by the way have never been found to be an issue.

[01:36:49] Speaker 03:
I cited you to footnote 232 of the 2015 decision where the commission says these protections are okay.

[01:36:56] Speaker 03:
Now the put option in combination with those standard investor protections is the problem.

[01:37:01] Speaker 03:
We could not have reasonably had notice of that because the put option is standard.

[01:37:06] Speaker 03:
And of course the Baker Creek investor protections are standard.

[01:37:09] Speaker 03:
We have no answer or no notice of the fact Judge Jackson

[01:37:14] Speaker 03:
to your questions, both to me and to Ms.

[01:37:16] Speaker 03:
Flood, that even if the commission decided that it wouldn't have its staff meet with us, as it's done every time before, even if the commission decided that there was control, that we would be punished.

[01:37:29] Speaker 03:
This isn't just a straight up classic abuse of discretion review.

[01:37:35] Speaker 03:
This is a situation where these petitioners were not given sufficient notice that if they didn't

[01:37:41] Speaker 03:
If they actually followed form with the other designated entities in their same auction, they would nevertheless be found not to be in control of their designated entities and would be punished.

[01:37:53] Speaker 05:
But why do you say that they are punished in light of the very good point I thought that Judge Millett made earlier?

[01:38:01] Speaker 05:
which is regardless of all of the rest of this, at the beginning of this process, with respect to companies that were stood up within two weeks or so of the actual auction.

[01:38:13] Speaker 05:
Those companies said, we are going to pledge to put up all of the money that would be necessary to buy the spectrum rights, right?

[01:38:26] Speaker 05:
I mean, there was no lack of clarity with regard to the obligation to pay for

[01:38:31] Speaker 05:
any licenses that they actually want in the auction.

[01:38:34] Speaker 05:
And so all of this notion of whether or not at the end of the day, they got the discount seems to me that it has to be considered in light of the broader set of circumstances.

[01:38:46] Speaker 05:
Why is it punishment not to give them the discount that the FCC determines later based on all of the circumstances they're not eligible for?

[01:38:57] Speaker 05:
Why is it punishment under those circumstances to say, but you still have to pay the full price as you agreed to at the beginning?

[01:39:06] Speaker 03:
I think, Your Honor, I think if it weren't a punishment, I don't think that the first SNR opinion would have come out the way it is.

[01:39:12] Speaker 03:
Of course it's a punishment.

[01:39:14] Speaker 03:
These entities, these small businesses... Is there a first decision to say this is a punishment?

[01:39:20] Speaker 03:
Are there words that say that?

[01:39:22] Speaker 03:
Yes, there's a default penalty that's described in the regulations.

[01:39:26] Speaker 03:
And in this case, it was to the tune of $500 million.

[01:39:29] Speaker 03:
But here's the other important point.

[01:39:31] Speaker 03:
What we didn't have noticed.

[01:39:32] Speaker 04:
Sorry, was that default penalty, was that for not qualifying as very small businesses, or was that for not carrying through on the commitment to pay the full bids?

[01:39:48] Speaker 03:
It was for not being in a position to pay the full bids because we did not get the benefit of the designated entity discount, which we had submitted for in the short form application.

[01:39:57] Speaker 03:
You had committed to pay without that status.

[01:40:00] Speaker 03:
You had committed to pay either way.

[01:40:01] Speaker 04:
We had committed to pay as designated entity.

[01:40:04] Speaker 04:
Either way.

[01:40:04] Speaker 04:
You had committed to pay either way before you made a bid.

[01:40:08] Speaker 04:
You can't commit in advance to pay only if I get my designated energy status.

[01:40:12] Speaker 04:
And we had sought designated entity status along with that commitment.

[01:40:15] Speaker 04:
I'm trying to get a very clear answer to this question here.

[01:40:19] Speaker 04:
That initial commitment, before you start bidding, that whatever the bid we make is, we will pay it, is what was made.

[01:40:31] Speaker 04:
There was not an asterisk that said, if we get designated energy status.

[01:40:38] Speaker 03:
Your Honor, I think that's right.

[01:40:40] Speaker 03:
But let me add this as well.

[01:40:43] Speaker 03:
We submitted, even in the short form application, the agreements that showed, to the best of our knowledge and ability at the time, that DISH didn't exercise control.

[01:40:53] Speaker 03:
So we made that commitment on the understanding, to Judge Edwards' point, that we could look at prior Bureau practice and understand where those lines were.

[01:41:02] Speaker 03:
And that leads me to my last point, if you'll let me, which is these designated entities were left completely unprotected by the Commission.

[01:41:12] Speaker 03:
unlike every designated entity before.

[01:41:14] Speaker 03:
If the commission, to Judge Edwards' also earlier point, if the commission had actually permitted its staff to sit down with them, and by the way, every commission decision is drafted by the relevant Bureau.

[01:41:26] Speaker 03:
So if the commission had permitted Bureau staff to sit down with these entities and had discussions, all of these issues that we've been talking about for the last almost two hours could have been worked out.

[01:41:38] Speaker 03:
And if not worked out, then the parties would have walked away without designated entity status, but it was incumbent on the commission and on its staff to give us that opportunity.

[01:41:48] Speaker 03:
And because it didn't and led to a 2020 decision that was completely foreign to us and unanticipated by us, either this is another terrible procedural foot fault on the part of the commission, or it is a straight up administrative procedure violation because there was no way

[01:42:06] Speaker 03:
for these designated entities, these small businesses to know that they would be found still not to have control of their own businesses.

[01:42:15] Speaker 03:
My colleagues, any further questions?

[01:42:17] Speaker 03:
Thank you very much.

[01:42:19] Speaker 03:
The case is submitted.

[01:42:19] Speaker 03:
Thank you, Your Honor.