The U.S. Court of Appeals for the District of Columbia Circuit today handed the FCC a major victory by upholding the incentive auction order it adopted last year (TRDaily, May 15, 2014), as well as a declaratory ruling concerning the agency’s channel repacking approach (TRDaily, Sept. 30, 2014).

The legal challenges filed by the National Association of Broadcasters and Sinclair Broadcast Group, Inc., had threatened to force the FCC to push back the start of the auction, which is scheduled to begin in the first quarter of 2016.

“We are gratified that the court agrees with the Commission’s balanced, market-based approach to freeing up more valuable spectrum for innovative wireless broadband services,” FCC Chairman Tom Wheeler said in a statement. “This decision provides the Commission and all stakeholders with the certainty necessary to proceed apace toward a successful auction in the first quarter of next year.”

However, the FCC could still face other legal challenges to orders related to the auction. For example, low power TV interests have said they plan to go to court over what they view as unfair treatment of LPTV stations as the FCC plans for the incentive auction (TRDaily, May 21). Some analysts have also speculated that wireless carriers or others may challenge some other rules or procedures related to the auction.

Today’s decision by a three-judge panel in “National Association of Broadcasters et al. v. FCC” (nos. 14-1154, 14-1179, and 14-1218) rejected all of the arguments raised by NAB and Sinclair. The decision was written by Judge Sri Srinivasan and joined by Senior Judge David Sentelle and Judge Karen LeCraft Henderson.

NAB and Sinclair had argued that the FCC violated the Middle Class Tax Relief and Job Creation Act of 2012, which is known in telecom circles as the Spectrum Act, and authorized the FCC to hold incentive auctions. The entities said the Commission failed to follow Congress’s directive that it “make all reasonable efforts to preserve, as of [Feb. 22, 2012] … the coverage area and population served of each broadcast television licensee, as determined using the methodology described in [the FCC’s] OET Bulletin 69.”

The broadcast entities said the Commission violated that requirement by deciding to use new TVStudy software that would change the coverage areas and population served of stations.

NAB and Sinclair also said that the FCC violated the Spectrum Act by deciding not to protect unpopulated coverage areas of broadcasters, and they said another violation involved the failure to preserve coverage areas that are enabled by fill-in translators. The entities also contended that the FCC violated the Administrative Procedure Act (APA), in part, by failing to provide notice that it was considering departing from its OET-69 methodology and might decide not to protect unpopulated areas, and that it violated the APA’s notice-and-comment requirement “by releasing TVStudy updates through nonpublic channels,” including a private listserv.

Sinclair also challenged the FCC’s incentive auction order on two other grounds – the requirement giving broadcasters 39 months after the auction to move to repacked channels or go dark and the determination that broadcasters in single-bidder markets can participate in the reverse auction.

But the FCC said its rules were reasonable and did not violate the Spectrum Act or the APA.

“We agree with the Commission that the statutory text does not preclude the Commission’s decision to use the improved TVStudy software and more accurate and current data when determining a broadcast licensee’s coverage area and population served,” the court said in today’s decision.

“The Commission persuasively explained why the TVStudy software is both more user-friendly and better adapted to handle the kinds of computations the Commission will need to conduct in the reverse auction and repacking process called for by the Spectrum Act,” the opinion added. “The Commission also explained that its use of updated and more precise data inputs advanced its statutory mandate to use ‘all reasonable efforts’ to preserve each station’s coverage area and population served as of February 22, 2012.”

The court added, “It is self-evident that the accuracy of the Commission’s determinations would be improved by its use of more recent population data, more precise terrain calculations, and more exact technical information.”

The judges rejected the petitioners’ other arguments as well, either agreeing with the FCC’ arguments or deferring to its judgment.

“Throughout the incentive auction proceeding, NAB’s focus has been on preserving a robust local television service that is the envy of the world,” said Dennis Wharton, NAB’s executive vice president-communications. “We’re disappointed with today’s ruling, which we believe fails to hold the FCC to the letter of the law passed by Congress. Nonetheless, we remain committed to working with policymakers to ensure a successful auction that protects the interests of broadcasters, whether they participate or not, and does not disenfranchise our tens of millions of viewers.”

“Our Coalition intervened on behalf of the FCC in these appeals and we are thrilled with the result,” said Preston Padden, executive director of the Expanding Opportunities for Broadcasters Coalition, one of several groups that intervened in the case on behalf of the FCC.  “This is a tribute to the hardworking FCC Staff and great news for starting the Incentive Auction early in 2016.”

Asked if he was concerned that another challenge to auction-related rules could delay the start of the sale, Mr. Padden told TRDaily, “Unless some party gets a Judicial Stay (very hard to get), the auction can go forward.” – Paul Kirby, paul.kirby@wolterskluwer.com