The battle for Portland, Maine.

AuthorTollin, L. Andrew
PositionCellular telephone service


Portland, Maine, sits serenely on the banks of Casco Bay. It suffers few of the typical problems of large metropolitan areas. The city is clean; the traffic is manageable; there is no apparent crime problem; and people generally know one another. In 1985, however, the FCC began the competitive process of deciding who would be licensed to provide cellular telephone service to Portland, and chaos and irony reigned. Thirteen years later, after a bitter legal battle among local telephone companies, a provider was finally selected. At one point or another, all three branches of government became involved: Congress, the U.S. Supreme Court, the U.S. Court of Appeals for the District of Columbia Circuit, a federal district court in Maine, the Solicitor General's Office, the Office of Legal Counsel and Civil Division (OLC) within the Department of Justice, as well as the Office of Information and Regulatory Affairs (OIRA) in the Office of Management and Budget (OMB). The license itself changed hands three times during the case and, in essence, three different

telephone systems were constructed. The FCC observed that "the litigiousness of the parties in this proceeding [was] staggering."(1)

At times, the case appeared to come straight out of Alice in Wonderland. For instance, the originally licensed entity, PortCell, was stripped of its operating authority for failing to make a sufficient showing that it could finance and build the Portland system even though it had already successfully financed, built, and operated the system. Moreover, the financing on which PortCell relied came from a NYNEX-owned company. NYNEX encountered no particular difficulty in financing and building much larger, more complex cellular systems in New York and Boston; yet, apparently, Portland was just too much.

Ultimately, the case was decided not on the basis of whether PortCell complied with the financial showing regulation, but whether the FCC itself complied with a preexisting federal law, the Paperwork Reduction Act (PRA), in adopting the regulation in the first place. That law, unlike many other statutes, tolerates no violations. Noncompliance simply renders the regulation at issue unenforceable notwithstanding any other law. Despite this override, it still took an act of Congress to clarify how and when the public protection provision could be used.

The Washington Post wrote a half-page story about the case.(2) This Article attempts to tell the whole story from one lawyer's viewpoint and to piece together how the judicial branch, Congress, and administrative agencies function when there is an intervening change in law during an actively litigated case.


  1. The 1980 Paperwork Reduction Act

    In 1942, Congress enacted the Federal Reports Act (FRA)(3) to control the growing amount of federal paperwork created by administrative agencies. From the beginning, the FRA provided that federal agencies could not "conduct or sponsor the collection of information ... from ten or more persons" unless the "pertinent regulations" were first submitted for review to what was then the Bureau of the Budget.(4) There were no penalties imposed on agencies for violating the FRA, and it was honored in the breach. In the 1970s, concern over this enforcement problem and the increasing time and expense of complying with federal agency paperwork requests led to the establishment of the Commission on Federal Paperwork (Commission).(5) As a result of the Commission's recommendations,(6) the Paperwork Reduction Act of 1980 (1980 PRA)(7) was enacted as a successor to the FRA. The Act combined a paperwork clearance process with a comprehensive, government-wide paperwork management framework managed by the OMB through its OIRA. The heart of the statute, section 3507, provided that:

    (a) An agency shall not conduct or sponsor the collection of information unless in advance of the adoption or revision of the request for collection of such information-- (1) the agency has (C) submitted to the Director [of OMB] the certification required under section 3506(c)(3), the proposed collection of information, copies of pertinent statutory authority, regulations, and other related materials as the Director may specify; .... (3) the agency has obtained from the Director a control number to be displayed upon the collection of information.(8) This Act continued the general approach of the FRA, requiring clearance of federal paperwork requirements. The 1980 PRA added teeth to the OMB clearance requirement. There was, however, no remedy for agency violations of the FRA. Section 3512, the public protection provision, barred enforcement of agency paperwork requirements that did not have the required OMB control number:

    (a) Notwithstanding any other provision of law, no person shall be subject to any penalty for failing to comply with a collection of information that is subject to this chapter if-- (1) the collection of information does not display a valid control number assigned by the Director in accordance with this chapter.(9) Thus, the Act provided that no penalty could be levied where an agency has not obtained the required clearance. The legislative history emphasizes that a regulation without the required control number is a "bootleg" request that can be ignored with impunity.(10)

  2. The FCC's Cellular Financial Rule

    While the FCC generally complied with the 1980 PRA, there were occasional lapses that generally went unnoticed. One such lapse came in December 1985, when the FCC tightened its financial qualification rules for companies applying for cellular licenses. Until 1985, section 22.917(a) provided that applications "shall demonstrate the applicant's financial ability to meet the realistic and prudent [expenses]" in a manner that shows with "reasonable assurance" that the funds needed to construct a proposed system and operate it for one year would be available.(11) The amendment resulted in a more strict financial showing standard requiring applicants to obtain and submit a "firm financial commitment" letter in support of their applications.(12) The rule at issue, section 22.917(b), reads as follows:

    The tentative selectee chosen in a random selection process ... shall within [thirty] days of the [p]ublic [n]otice announcing such status, obtain a firm financial commitment for the financing necessary to construct and operate for one year its proposed cellular system and shall amend its application to so demonstrate.(13) The firm financial commitment rule was published in the Federal Register. Despite the fact that the rule clearly required a collection of information from a lending institution, the Commission made no application to the OMB for assignment of the required control number.

  3. The Portland Licensing Case Begins

    In 1986, five local telephone company affiliates filed applications for the wireline cellular license in Portland.(14) Because they did not reach a full settlement, the FCC held a lottery to select a winner.(15) Using the same plexiglass drum that the Selective Service used for the Vietnam War draft lotteries, the FCC drew numbers and ranked the five applicants as follows:

    1. Seacoast Cellular, Inc.

    2. Saco River Cellular, Inc.

    3. Community Service Telephone Company (later renamed Lewiston-Auburn)

    4. Northeast Cellular Telephone Company, LP

    5. NYNEX Mobile Communications Company

    Three of the companies--Seacoast, Community, and NYNEX--were eligible local telephone company affiliates that, before the lottery, entered into a partial settlement combining their interests into PortCell, as the FCC's rules then permitted. Thus, Seacoast's first-ranked status made PortCell the lottery winner, and the Seacoast application was amended to substitute PortCell. In response to the FCC's financial rule, PortCell submitted a loan commitment obtained from NYNEX Credit Corporation, an affiliate of NYNEX Mobile, which lacked certain required terms.

    In 1987, the FCC staff found the NYNEX credit letter to be sufficient and awarded PortCell the license, overruling Northeast's objection to the financial showing.(16) The Portland system was built and began operation in June 1988.(17) Northeast appealed the decision to the FCC. On review, the FCC found that PortCell had not strictly complied with section 22.917(b), but waived the rule given its experience with NYNEX's ability to build and finance telephone systems.(18)

  4. The First Court of Appeals Decision

    Northeast then appealed the waiver grant to the D.C. Circuit. After a contentious oral argument, during which the court specifically discounted the fact that PortCell had already successfully financed the building of the system, the court held that the FCC's waiver was "arbitrary and capricious because it was not based on any rational waiver policy."(19) In a strongly worded opinion, the court added, "given the record in this case, we cannot imagine any standard that would have justified a waiver."(20) The court indicated that "[b]igness and national reputation are not reasonable standards for a waiver policy.... It follows that this waiver reflects an outrageous, unpredictable, and unworkable policy that is susceptible to discriminatory application.(21) It thus vacated the order and remanded the case to the FCC, stating in the conclusion to its opinion:

    At a minimum, the FCC needed to indicate what information it had about NYNEX Credit's uncommitted assets, NYNEX Credit's practices in evaluating the creditworthiness of loan applicants, the terms it would imply into NYNEX Credit's loan letter based upon its prior experience, and its basis for concluding that NYNEX Credit would commit funds regardless of whether NYNEX Mobile abandoned the partnership. Absent a finding that this information was considered and used in formulating an articulatable standard at the time the waiver was granted, the FCC must disqualify Port Cell's application.(22) The FCC's compliance with the 1980 PRA was not addressed...

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