 United States Court of Appeals
         FOR THE DISTRICT OF COLUMBIA CIRCUIT



Argued January 20, 2015                 Decided April 3, 2015

                         No. 14-1039

   FIBERTOWER SPECTRUM HOLDINGS, LLC, FIBERTOWER
                   CORPORATION,
                    APPELLANT

                              v.

         FEDERAL COMMUNICATIONS COMMISSION,
                     APPELLEE

    FIXED WIRELESS COMMUNICATIONS COALITION, INC.,
                     INTERVENOR


                On Appeal of Orders of the
            Federal Communications Commission


     Pratik A. Shah argued the cause for appellant. With him on
the briefs were Tom W. Davidson, Douglas I. Brandon, Hyland
Hunt, Z.W. Julius Chen, Matthew A. Scarola, and Joseph M.
Sandri.

     Maureen K. Flood, Counsel, Federal Communications
Commission, argued the cause for appellee. With her on the
brief were Jonathan B. Sallet, General Counsel, David M.
Gossett, Acting Deputy General Counsel, and Jacob M. Lewis,
Associate General Counsel. Richard K. Welch, Deputy
Associate General Counsel, entered an appearance.
                               2

   Before: ROGERS and SRINIVASAN, Circuit Judges, and
WILLIAMS, Senior Circuit Judge.

    Opinion for the court filed by Circuit Judge ROGERS.

     ROGERS, Circuit Judge: This appeal challenges orders of
the Federal Communications Commission denying applications
to renew 689 wireless spectrum licenses in the 24 gigahertz
(“GHz”) and 39 GHz bands for failure to meet the “substantial
service” performance standard during the license term. It
succeeds only in part. FiberTower Spectrum Holdings, LLC,
and FiberTower Corporation (hereinafter “FiberTower”)
contend that the Commission’s interpretation of the performance
standard as requiring some actual construction in each license
area conflicts with the Commission’s statutory mandate in 47
U.S.C. § 309(j)(4)(B). Because this argument was not presented
to the Commission, see 47 U.S.C. § 405(a), it is not properly
before the court and we do not address it. FiberTower also
contends that the Commission’s interpretation of “substantial
service” is inconsistent with that standard as originally
promulgated by the Commission. Review of the text of the
regulations and the rulemaking record demonstrates this
argument is not well founded. FiberTower, however, further
contends that the Commission erred in applying its “substantial
service” interpretation to forty-two licenses because their
renewal applications stated construction had occurred. This
error requires a remand, and we vacate the orders denying
renewal of those forty-two licenses. As a result, we also vacate
the orders denying extension and waiver, so the Commission can
rule on those requests based on an accurate understanding of the
record.

                               I.

    The Communications Act of 1934, as amended, establishes
                                3

a system for licensing the use of radio spectrum, and vests in the
Commission the exclusive authority to grant radio licenses. See
47 U.S.C. § 301. The licenses do not “create any right, beyond
the terms, conditions, and periods of the license.” Id. The
Commission is authorized to prescribe restrictions and
conditions necessary to carry out its duties, see id. § 303(r), and
for licenses awarded by auction, see id. § 309(j)(1), it must
adopt

         performance requirements, such as appropriate
         deadlines and penalties for performance failures, to
         ensure prompt delivery of service to rural areas, to
         prevent stockpiling or warehousing of spectrum by
         licensees or permittees, and to promote investment in
         and rapid deployment of new technologies and
         services.

Id. § 309(j)(4)(B).

     Under Commission rules, licenses in the 24 and 39 GHz
bands, at issue here, are awarded for ten years, and the licensee
must demonstrate “substantial service” in the area covered by
the license by the time of renewal. See 47 C.F.R. §§ 101.67,
101.17, 101.527; In the Matter of Amendment of the Comm’n’s
Rules Regarding the 37.0-38.6 GHz and 38.6-40.0 GHz Bands,
12 FCC Rcd. 18600, ¶ 46 (1997) (“39 GHz Order”). The
Commission has defined “substantial service” as “service which
is sound, favorable, and substantially above a level of mediocre
service which just might minimally warrant renewal.” 47 C.F.R.
§§ 22.940(a)(1)(i), 24.203(d), 101.527(a); see In the Matter of
Amendments to Parts 1, 2, 87 and 101 of the Comm’n’s Rules to
License Fixed Services at 24 GHz, 15 FCC Rcd. 16934, ¶ 38
(2000) (“24 GHz Order”). One way a licensee can show
“substantial service” is by complying with one of several “safe
harbors,” which include “a showing of [construction and
                                4

operation of] four [microwave] links per million population
within a service area or service to an area that has very limited
access to either wireless or wireline telecommunications
services.” 24 GHz Order, ¶ 38; see 39 GHz Order, ¶ 46.

     A failure to demonstrate substantial service by the renewal
deadline “will result in forfeiture of the license.” 47 C.F.R. §
101.527(c); see id. § 101.17(b). The Commission may grant an
extension of the deadline for showing substantial service if the
licensee shows that its failure to provide substantial service “is
due to involuntary loss of site or other causes beyond its
control.” Id. § 1.946(e)(1). The Commission may also waive
the substantial service requirement entirely when “[t]he
underlying purpose of the rule(s) would not be served or would
be frustrated . . . [and] a grant of the requested waiver would be
in the public interest,” or when “application of the rule(s) would
be inequitable, unduly burdensome or contrary to the public
interest, or the applicant has no reasonable alternative.” Id. §
1.925(b)(3).

     FiberTower provides “wireless backhaul” — i.e., the
transmission of voice and data between cell towers and regional
or national networks — to cellular companies and public
agencies. It owns over 3,000 licenses in the 11 GHz, 18 GHz,
and 23 GHz bands, and acquired through a merger in 2006 over
seven hundred licenses in the 24 GHz and 39 GHz bands, see In
re Matter of ART Licensing Corp., 23 FCC Rcd. 14116, ¶ 4
(WTB Oct. 2, 2008) (“2008 Bureau Order”); In re Matter of
FiberTower Spectrum Holdings LLC, 27 FCC Rcd. 13562, ¶ 2
(WTB Nov. 7, 2012) (“Bureau Order”). The 24 GHz and 39
GHz bands are used to provide backhaul service for mobile
broadband networks, and FiberTower’s licenses in these bands
cover most of the continental United States. See id. Shortly
after acquiring the 24 and 39 GHz licenses FiberTower obtained
an extension of the 2008 substantial service deadlines for its 39
                                5

GHz licenses to June 1, 2012.                   The Wireless
Telecommunications Bureau, see 47 C.F.R. §§ 0.131(a), 0.331,
found that the public interest “would best be served by”
extending the deadline for the 39 GHz licenses, 2008 Bureau
Order, ¶ 21, because the Bureau anticipated that mobile
broadband services, which rely on wireless backhaul, would
“develop robustly” in the coming years, id. ¶ 20. The Bureau
also cautioned that it did “not believe that a finding of
substantial service can be made without a demonstration of
actual construction or operation in the licensed area during the
license term.” Id. ¶ 16. In October 2010, the Bureau granted the
same extension to June 1, 2012 for FiberTower’s 24 GHz
licenses.

     In May 2012, FiberTower filed for an extension or a waiver
of the 2012 deadline with respect to 699 licenses. Two weeks
later, FiberTower also filed substantial service showings for
each license. In November 2012, the Bureau found that
FiberTower had not satisfied the substantial service requirement.
See Bureau Order, ¶ 18. Ten licenses in which the Bureau
found there had been “some level of actual construction as of the
deadline,” id. ¶ 2, were not terminated, but the other 689
licenses were because FiberTower’s “antecedent activities” —
investing in new technology, developing its own back-office
operations, acquiring equipment and property, and making its
spectrum available for lease on the secondary market — could
not alone “constitute substantial service.” Id. ¶ 22 (citing In the
Matter of Amendment of Part 101 of the Comm’n’s Rules to
Facilitate the Use of Microwave for Wireless Backhaul and
Other Uses and to Provide Additional Flexibility to Broadcast
Auxiliary Service and Operational Fixed Microwave Licensees,
27 FCC Rcd. 9735, ¶ 104 (2012) (“Wireless Backhaul Order”);
26 FCC Rcd. 11614, ¶ 114 (2011)). Concluding that
FiberTower’s failure to “build out” its licenses was a “business
decision” within its control, the Bureau denied an extension.
                                6

The Bureau also concluded the public interest would not be
served by waiving the substantial service requirement. See also
Bureau Order, ¶ 39.

     The Commission affirmed, upon consideration of
FiberTower’s Application for Review and Petition for
Reconsideration. In the Matter of FiberTower Spectrum
Holdings LLC, 28 FCC Rcd. 6822 (2013) (“Order”); 29 FCC
Rcd. 2493 (2014) (“Reconsideration Order”). The Commission
endorsed the Bureau’s conclusion, based on prior Commission
decisions, that FiberTower’s antecedent activities without actual
construction could not satisfy the substantial service
requirement. See Order, ¶ 39 & n.156 (citing Wireless Backhaul
Order, ¶ 104). Agreeing also that FiberTower’s decision not to
construct links was a voluntary business decision, the
Commission rejected FiberTower’s claims that the market for
wireless backhaul was underdeveloped and that there was a lack
of viable equipment, noting the “explosive growth in demand for
mobile broadband services since 2008, and [a] corresponding
demand for backhaul,” Order, ¶ 19, and denied FiberTower’s
request for extension of the deadline, id.; see also id. ¶ 21. And
concluding that the need to enforce construction requirements
outweighed any delays in relicensing and the investments
FiberTower had made, the Commission concluded a waiver was
unwarranted.      Id. ¶¶ 34–37.      See also Order, ¶ 45;
Reconsideration Order, ¶ 39. FiberTower appeals.

                               II.

    FiberTower’ statutory challenge flounders under 47 U.S.C.
§ 405(a), which provides:

         The filing of a petition for reconsideration shall not be
         a condition precedent to judicial review . . . except
         where the party seeking such review . . . relies on
                               7

         questions of fact or law upon which the Commission,
         or designated authority within the Commission, has
         been afforded no opportunity to pass.

FiberTower contends that the Commission’s construction
requirement as a part of demonstrating “substantial service” is
“at odds with” the statutory goal in 47 U.S.C. § 309(j)(4)(B) of
promoting “investment in” new technologies. Appellant’s Br.
28. But FiberTower failed to make this argument in its
Application for Review to the Commission, never citing §
309(j)(4)(B) and instead arguing that the construction
requirement was an “ill-conceived policy” with “adverse
consequences contrary to the public interest.” Application for
Review, In the Matter of FiberTower Corp., at 20, File No.
5207557, Dec. 7, 2012. Neither did FiberTower present this
statutory argument in its Petition for Reconsideration.

     FiberTower’s suggestions that it nonetheless afforded the
Commission an “opportunity to pass” on its statutory argument
are unpersuasive. First, FiberTower states that “[a] core premise
of FiberTower’s application for review was that the
Commission’s policy of disregarding leasing and other activities
hindered ‘legitimate investment’ and the ‘develop[ment] [of] the
licensed spectrum.’” Reply Br. 4 (quoting Application for
Review, at 21–22) (alterations in original). But the Application
for Review characterized that argument only as illustrating why
the build-out requirement was “contrary to the public interest,”
Application for Review, at 20, not that the requirement was
contrary to § 309(j)(4)(B). The language suggests the sort of
claim that would normally give rise to judicial review only for
whether the agency’s action was arbitrary or capricious.
Second, FiberTower refers to a “white paper” submitted as a
supplement to its Application for Review that explained why its
antecedent activities “were consistent with Section 309(j)’s
mandate of promoting investment and deployment of new
                               8

technologies and services — underscoring that FiberTower’s
argument was anchored in the statute.” Reply Br. 5. Again, this
is not an argument that the “build out” requirement violates §
309(j)(4)(B), and “[t]he Commission need not sift pleadings and
documents to identify arguments that are not stated with clarity
by a petitioner.” Bartholdi Cable Co., Inc. v. FCC, 114 F.3d
274, 279 (D.C. Cir. 1997) (internal quotation marks omitted);
see also 47 C.F.R. § 1.115(b)(1). Third, FiberTower states that
the rulemaking proceedings in which the Commission adopted
the substantial service rules “were inextricably intertwined with
Section 309(j).” Reply Br. 5. Even so, FiberTower failed to
alert the Commission to the statutory argument that it seeks to
present for the first time on appeal.

     Time Warner Entertainment Co., L.P. v. FCC, 144 F.3d 75
(D.C. Cir. 1998), on which FiberTower relies, is inapposite. In
that case, the court held that its reasoning in an earlier remand
had given the Commission an “opportunity to pass” on an issue,
even though the issue had not been raised in a petition for
reconsideration. Id. at 81–82. The court observed that the logic
of its prior decision meant it was unreasonable for the
Commission not to respond on remand. Id. The court viewed
the Commission’s position that the issue had been conceded in
a pre-remand filing to be “a disingenuous gimmick used to avoid
a principled response to our remand.” Id. at 81. Here, by
contrast, no other party brought the § 309(j)(4)(B) argument to
the Commission’s attention. And, unlike in Time Warner,
FiberTower has not pointed to record evidence that the
Commission realized FiberTower’s § 309(j)(4)(B) argument was
before it. It is true that the court in Time Warner noted the
Commission is afforded the required “opportunity to pass” on an
issue “necessarily implicated by the argument made to the
Commission,” giving as an example when a petitioner claimed
that another party’s conduct violated the Communications Act
without stating that Commission policies to the contrary also
                               9

conflicted with the Communications Act. Id. at 80 (discussing
MCI Telecomm. Corp. v. FCC, 10 F.3d 842 (D.C. Cir. 1993);
Nat’l Ass'n for Better Broad. v. FCC, 830 F.2d 270 (D.C. Cir.
1987)). But FiberTower’s argument to the Commission was that
the “build out” policy was unwise, and that argument did not
“necessarily impl[y]” that the policy was also legally
impermissible.

    Because FiberTower failed to present its § 309(j)(4)(B)
argument to the Commission, the Commission never had an
opportunity to pass on it, and FiberTower thereby failed to
exhaust its administrative remedies. The argument that the
construction requirement conflicts with § 309(j)(4)(B) is
therefore barred under § 405(a) and not properly before the
court. See Fresno Mobile Radio, Inc. v. FCC, 165 F.3d 965, 972
(D.C. Cir. 1999); Bartholdi Cable, 114 F.3d at 279–80.

                              III.

     FiberTower also challenges the Commission’s interpretation
of “substantial service” as requiring construction as a matter of
law, on the ground that it conflicts with the rule originally
promulgated by the Commission, and as applied to forty-two
license renewal applications, where substantial service showings
stated construction had occurred.

                               A.
    In adopting the substantial service standard as the condition
for license renewal in the 39 GHz and 24 GHz bands, the
Commission emphasized the need for “flexibility in meeting
the[] performance requirement” and rejected proposals to
require a specific number of constructed links per market
population or geographic area, because “such a build-out
requirement would be unduly restrictive and burdensome.” 39
GHz Order, ¶¶ 42, 43; see 24 GHz Order, ¶¶ 37–38. In
                                 10

FiberTower’s view, by interpreting “substantial service” to
include a rigid construction requirement, the Commission
adopted the very inflexible build-out requirements that it
rejected during the rulemaking.

     The regulations define “24 GHz Service” as involving
constructed links. See 47 C.F.R. § 101.3. In the 39 GHz band,
a “substantial service showing should include, but not be limited
to” descriptions of “current service in terms of geographic
coverage; . . . population served, as well as any additional
service provided during the license term,” and the “licensee’s
investments in its system(s) (type of facilities constructed and
their operational status is required).” Id. § 101.17(a)(1), (2), (3).
Similar materials suffice for the 24 GHz band: “at a minimum,”
a “report, maps and other supporting documents describing [the
licensee’s] current service in terms of geographic coverage and
population,” with the report to include “a description of the
licensees’ [sic] investments in its operations.”              Id. §
101.527(b)(1). Nothing in the text indicates that non-
construction activities alone will suffice to show substantial
service. It is true that the regulations contemplate the
submission of information about activities other than
construction, but that only suggests that non-construction
activities are relevant, not that they alone can constitute
substantial service.

    The rulemakings show that in discussing the standard for the
39 GHz band, the Commission acknowledged that the types of
services available from 39 GHz providers are “tremendously
varied.” 39 GHz Order, ¶ 42. It decided not to apply to this
band the then-existing general requirement to construct one link
within 18 months of licensure, id. ¶ 39, and declined to replace
it with “a specific build-out benchmark.” Id. ¶ 43 (emphasis
added). The performance standards that it rejected as too rigid
involved specific build-out requirements — “four links per 100
                                11

square kilometers . . . within 18 months,” “a specific number of
links, increasing over time, per geographic area,” or “a specific
number of link installations based on the market’s population.”
Id. ¶¶ 43, 44, 45. The Commission explained that the specificity
of those construction requirements did “not adequately take into
account the differences among licensees,” id. ¶ 44, such as
varying market size, population density, and services offered, id.
¶¶ 44–46. But in providing examples for what might satisfy
substantial service, the Commission still described activities that
involved link construction. See 24 GHz Order, ¶ 38; 39 GHz
Order, ¶¶ 42 & n.97, 46. For instance, its “examples of
presumed substantial service” were “based on a specific number
of links per population.” Id. ¶ 42. The one “showing tailored to
a particular type of operation” it described involved “giv[ing]
greater weight to a high capacity link than is recognized by the
specific build-out option.” Id. ¶ 42 n.97. In addition, the
Commission rejected “the arguments of some commenters that
a build-out requirement should not be imposed” at all. Id. ¶ 50.
The Commission did not state that the flexibility it sought in
adopting “substantial service” as the performance standard
extended to allowing license renewal where there had not been
any construction. Rather, the Commission described its
approach as a “build-out/renewal requirement[]” that would
“give licensees a sufficient opportunity to construct their
systems.” 39 GHz Order, ¶¶ 47, 49.

    FiberTower’s reference to other regulations that contrast
“substantial service” with specific build-out requirements is also
unavailing. Although these regulations list different types of
“performance or build-out requirement[s]” — to include “e.g.,
a requirement that the licensee construct and operate one or
more specific facilities, cover a certain percentage of geographic
area, cover a certain percentage of population, or provide
substantial service,” 47 C.F.R. § 1.9020(d)(5); see id. §
1.9030(d)(5) (same); id. § 90.155(d) (similar); id. § 90.685(b)
                                12

(similar); id. § 24.203(a), (b) (similar) — they draw the same
distinction the Commission drew in the 39 GHz Order and 24
GHz Order between substantial service and a specific amount of
construction.

     The fact that, as FiberTower points out, neither the
regulations nor the rulemakings for the 39 or 24 GHz bands
include a statement that construction of at least one link is
required is of no moment. The Commission’s interpretation is
consistent with the text of the regulations and rulemaking
records. And courts are to “defer to an agency’s interpretation
of its regulations, even in a legal brief, unless the interpretation
is ‘plainly erroneous or inconsistent with the regulation[s]’ or
there is any other ‘reason to suspect that the interpretation does
not reflect the agency’s fair and considered judgment on the
matter in question.” Talk America, Inc. v. Mich. Bell Tel. Co.,
131 S. Ct. 2254, 2261 (2011) (quoting Chase Bank USA, N.A. v.
McCoy, 562 U.S. 195, 208 (2011) (quoting Auer v. Robbins, 519
U.S. 452, 461 (1997))); see Rural Cellular Ass’n v. FCC, 685
F.3d 1083, 1093 (D.C. Cir. 2012). FiberTower has not shown
that the Commission’s interpretation of the substantial service
requirement is inconsistent with the regulatory text or the
original rulemakings.

                                B.
     FiberTower also contends that the Commission misapplied
its substantial service interpretation with respect to forty-two
license renewal applications. For those licenses, FiberTower
submitted substantial service showings stating that links had
been constructed and service was being provided in the license
area. For example, the substantial service showing for license
WMF848 stated that “FiberTower so far has one link built and
operating at a school in Kansas City, Missouri, the geographic
area of this license.” FiberTower Spectrum Holdings, LLC,
Substantial Service Showing, FRN 0019211895, at 8 (June 1,
                               13

2012). Neither of the challenged orders indicate an awareness
of these construction notifications. The Bureau’s substantial
service analysis was predicated on the finding that there was no
“construction of any facilities whatsoever” in any of the
terminated license areas.       Bureau Order, ¶ 22.           The
Commission, in turn, adopted the Bureau’s conclusion that
“FiberTower was seeking a finding of substantial service
without any construction of facilities,” Order, ¶ 38, and acted on
the basis of its understanding that the Bureau “did not take
action against any license where construction had been reported,
whether or not the construction met a safe harbor,” id. ¶ 33
n.133.

     The Commission responds on appeal that FiberTower’s as
applied challenge is barred because FiberTower failed to present
this argument to the Commission. FiberTower stated in its
Application for Review that:

         The Bureau erred as a matter of fact when it found that
         no facilities have been built-out in FiberTower’s
         licensed areas. The record demonstrates that, as of
         June 1, 2012, a significant amount of construction had
         occurred in many of FiberTower’s license areas that the
         Bureau identified for termination.

Application for Review, at 23. This statement would appear to
alert the Commission to FiberTower’s claim of factual error, and
afford the Commission an “opportunity to pass” on the issue, as
required by § 405(a). It also “concisely” and “plainly” states the
question for review, as the Commission’s rules require. 47
C.F.R. § 1.115(b)(1). The Commission points out, not
unreasonably, that the statement of error in FiberTower’s
Application for Review was generic and failed to identify the
specific licenses that FiberTower claims were erroneously
canceled. After all, FiberTower submitted a large number of
                                 14

applications for license renewal with substantial service
showings, and in seeking Commission review, FiberTower could
have listed by license number the forty-two license areas in
which it claimed there had been actual construction. To state the
obvious, it was in FiberTower’s interest to facilitate the
Commission’s ability to locate these licenses.

     But the Commission overstates its position in maintaining
that it “‘had no notice of’ FiberTower’s ‘specific objections.’”
Appellee’s Br. 39 (quoting U.S. Airwaves, Inc. v. FCC, 232 F.3d
227, 236 (D.C. Cir. 2000)). The exhaustion cases on which the
Commission relies involved arguments that had not been made
at all in the Application for Review or Petition for
Reconsideration. See Environmentel, LLC v. FCC, 661 F.3d 80,
84 (D.C. Cir. 2011); Qwest Corp. v. FCC, 482 F.3d 471, 478
(D.C. Cir. 2007); U.S. Airwaves, 232 F.3d at 236; Bartholdi
Cable, 114 F.3d at 279. Here, FiberTower alerted the
Commission to its argument of factual error in the Application
for Review. Because the Commission requires that substantial
service showings be made on a license-by-license basis, see
Order, ¶ 39 n.155, it ill behooves the Commission to imply that
it can cancel licenses for failure to show any construction
without reviewing each substantial service showing. To the
extent the Commission maintains on appeal that the forty-two
license renewal applications do not adequately demonstrate
substantial service because they failed to “demonstrat[e] the
extent of [the constructed] facilities or that those facilities served
customers or provided internal service,” Appellee’s Br. 39–40,
that was not the basis on which the Commission denied the
renewal applications and cannot provide the basis for upholding
the Commission’s action. See SEC v. Chenery Corp., 318 U.S.
80, 94 (1943).

    We therefore vacate the Commission’s orders denying
renewal applications for the forty-two licenses for which
                               15

FiberTower submitted substantial service showings stating there
had been construction. “An agency action is arbitrary and
capricious if it rests upon a factual premise that is unsupported
by substantial evidence.” Ctr. For Auto Safety v. Fed. Highway
Admin., 956 F.2d 309, 314 (D.C. Cir. 1992). Upon remand the
Commission can determine whether there was substantial
service for those licenses.

                               IV.

     FiberTower’s other challenges relate to the denials of its
requests for an extension or waiver of the substantial service
deadline beyond June 1, 2012. In view of our conclusion in Part
III.B, supra, we vacate the orders denying these requests, so that
the Commission may rule on FiberTower’s requests in light of
an accurate understanding of the license renewal record.
Although the burden for challenging the Commission’s denial
of waiver and extension is heavy, see Morris Commc’ns, Inc. v.
FCC, 566 F.3d 184, 188 (D.C. Cir. 2009), the Commission has
acknowledged that the proportion of licenses that have been
built out may be relevant to its extension analysis. See Order,
¶ 26 (discussing 2 Lightspeed LP, File Nos.
0005222510–0005222513 (July 23, 2012)).

     Accordingly, we affirm in part and we remand for the
Commission to determine whether there was substantial service
for the forty-two licenses in which FiberTower stated there had
been construction, and to consider anew FiberTower’s requests
for an extension or waiver of the substantial service requirement
based on an accurate understanding of the renewal record.
