In Re POLICY STATEMENT CONCERNING COMPARATIVE HEARINGS INVOLVING
REGULAR RENEWAL APPLICANTS
FEDERAL COMMUNICATIONS COMMISSION
22 F.C.C.2d 424
RELEASE-NUMBER: FCC 70-62
JANUARY 15, 1970
THE COMMISSION, BY COMMISSIONERS BURCH (CHAIRMAN), BARTLEY, ROBERT E. LEE, COX, H. REX LEE, AND WELLS, WITH COMMISSIONER JOHNSON DISSENTING AND ISSUING A STATEMENT, ISSUED THE FOLLOWING PUBLIC NOTICE:
[*424] In 1965 the Commission issued a policy statement on comparative broadcast hearings which is applicable to hearings to choose among qualified new applicants for the same broadcast facilities. See "Policy Statement on Comparative Broadcast Hearings," 1 F.C.C. 2d 393. We believe that we should now issue a similar statement as to the comparative hearing where a new applicant is contesting with a licensee seeking renewal of license. We have, of course, set forth our policies in this respect in several cases, and indeed, have done so in designating issues in some very recent cases. For example, In re Application of RKO General, Inc. F.C.C. 69-1335, paragraph 8; In re Application of Lamar Life Broadcasting Co., F.C.C. 69-1336, paragraph 2. There has, however, been considerable controversy on this issue, as shown by the hearings on S. 2004 now going forward before the Senate Subcommittee on Communications. Issuance of this statement will therefore contribute to clarity of our policies in this important area. This will be of assistance to the examiners who initially decide the cases. It will expedite the hearing process and promote consistency of decision. Above all, by informing the broadcast industry and the public of the applicable standards, the public interest "in the larger and more effective use of radio" (sec. 303(g) of the Communications Act) will be served.
The statutory scheme calls for a limited license term. This permits Commission review of the broadcaster's stewardship at regular intervals to determine whether the public interest is being served; it also provides an opportunity for new parties to demonstrate in public hearings that they will better serve the public interest. It is this latter aspect of the statutory scheme with which we deal here. See sections 307, 308, 309.
The public interest standard is served, we believe, by polices which insure that the needs and interests of the listening and viewing public will be amply served by the community's local broadcast outlets. Promotion of this goal, with respect to competing challenges to renewal applicants, calls for the balancing of two obvious considerations. The first is that the public receive the benefits of the statutory spur inherent [*425] in the fact there can be a challenge, and indeed, where the public interest so requires, that the new applicant be preferred. The second is that the comparative hearing policy in this area must not undermine predictability and stability of broadcast operation.
The institution of a broadcast service requires a substantial investment, particularly in television, and even where the investment is small it is likely to be relatively large to the person making it. It would disserve the public interest to reward good public service by a broadcaster by terminating the authority to continue that service. If the license is given subject to withdrawal despite a record of such good service, it will simply not be possible to induce people to enter the field and render what has become a vital public service. Indeed, rather than an incentive to qualified broadcasters to provide good service, it would be an inducement to the opportunist who might seek a license and then provide the barest minimum of service which would permit short run maximization of profit, on the theory that the license might be terminated whether he rendered a good service or not. The broadcast field thus must have stability, not only for those who engage in it but, even more important, from the standpoint of service to the public.
We believe that these two considerations call for the following policy -- namely, that if the applicant for renewal of license shows in a hearing with a competing applicant that its program service during the preceding license term has been substantially attend to meeting the needs and interests of its area, n1 and that the operation of the station has not otherwise been characterized by serious deficiencies, he will be preferred over the newcomer and his application for renewal will be granted. His operation is not based merely upon promises to serve solidly the public interest. He has done so. Since the basic purpose of the act -- substantial service to the public -- is being met, it follows that the considerations of predictability and stability, which also contribute vitally to that basic purpose, call for renewal.
n1 We wish to stress that we are not using the term "substantially" in any sense of partial performance in the public interest. On the contrary, as the discussion within makes clear, it is used in the sense of "solid", "strong", etc. (see p. 3, supra) performance as contrasted with a service only minimally meeting the needs and interests of the area. In short, we would distinguish between two types of situations -- one where the licensee has served the public interest but in the least permissible fashion still sufficient to get a renewal in the absence of competing applications (defined herein as minimal service) and the other where he has done so in an ample, solid fashion (defined herein as substantial service).
This is not new policy. It was largely formulated in the leading decision in this field, Hearst Radio, Inc. (WBAL), 15 F.C.C. 1149 (1951), where the Commission, in favoring the existing licensee, stated that where a choice must be made between an existing licensee and a newcomer, a grant will normally be made to the existing station if its operation has been meritorious, and that a good record may outweigh preferences to a newcomer on such factors as local residence and integration of ownership and management. The WBAL policy was followed in In re Wabash Valley Broadcasting Corp., 35 F.C.C. 677 (1963), and cited with approval in recent actions (see, e.g., In re Application of RKO General, Inc., F.C.C. 69-1335, par. 8).
If on the other hand the hearing record shows that the renewal applicant has not substantially met or served the needs and interests of his area, he would obtain no controlling preference. On the contrary, [*426] if the competing new applicant establishes that he would substantially serve the public interest, n2 he should clearly be preferred over one who was given the opportunity to do so but chose instead to deliver less than substantial service to the public. In short, the past record of the renewal applicant is still the critical factor, but here it militates against renewal and in favor of the new applicant, provided that the latter establishes that he would solidly serve the public interest.
n2 With several such new applicants, the "Policy Statement on Comparative Broadcast Hearings," 1 F.C.C. 2d 393, would be the basis for decision as among them.
We recognize that the foregoing policy does not work with mathematical precision, and that particular factual circumstances will have to be explored in the hearing process. For example, if there are substantial questions as to whether the renewal applicant's operation has been characterized by serious deficiencies -- such as rigged quizzes, violations of the Fairness Doctrine, over-commercialization, broadcast of lotteries, violation of racial discrimination rules, or fraudulent practices as to advertisers -- the facts as to these matters would have to be established, and any demerits resulting therefrom weighed against the renewal applicant in the public interest judgment which must be made. It is not possible to lay down any more precise standards here, since so much will depend on the particular facts.
Further, we recognize that the terms "substantially" and "minimally" also lack mathematical precision. However, the terms constitute perfectly appropriate standards. Thus, the word "substantially" is defined as "strong; solid; firm; much; considerable; ample; large; of considerable worth or value; important" (Webster's New World Dictionary College Edition, p. 1454); n3 the word "minimal" carries the pertinent definition, "smallest permissible" (Id. at p. 937). However, application and evolution of the standards would again be left to the hearing process. The renewal applicant would have a full opportunity to establish that his operation was a "substantial" one, solidly meeting the needs and interests of his area, and not otherwise characterized by serious deficiencies. He could, of course, call upon community leaders to corroborate his position. On the other hand, the competing party would have the same opportunity in the hearing process to demonstrate his allegation that the existing licensee's operation has been a minimal one. And he, too, can call upon community leaders to testify to this effect if that is, indeed, the case. The programming performance of the licensee in all programming categories (including the licensee's response to his ascertainments of community needs and problems) is thus vital to the judgment to be made. Further, although the matter is not a comparative one but rather whether substantial service has been rendered, the efforts of like stations in the community or elsewhere to supply substantial service are also relevant in this critical judgment area. There would, of course, be the necessity of taking into account pertinent standards which are evolved by the Commission in this field.
n3 We also note that the term is frequently employed in statutes, e.g., 15 U.S.C. 13 (the Clayton Act); 42 U.S.C. 403(f)(4)(A) (Social Security Act); 26 U.S.C. 382(a)(1)(C) (Internal Revenue Act); indeed, it is used in the Communications Act, 47 U.S.C. 503(b)(1)(A).
Two other points deserve stress in this respect. First, unlike the case involving new applicants (see 1 F.C.C. 2d at pp. 397-98), a [*427] programming record will be considered even though it is not alleged to be either unusually good or bad. Thus, the renewal applicant will not have to demonstrate that his past service has been "exceptionally" or "unusually" worthy. Were that the criterion, only the exceptional or unusual renewal applicant would win a grant of continued authority to operate, and the great majority of the industry would be told that even though they provide strong, solid service of significant value to their communities, their licenses will be subject to termination. As stated at the outset, such a policy would disserve the public interest. And conversely, a new applicant would not have to allege that the existing licensee's operation had been unusually bad.
Second, the renewal applicant must run upon his past record in the last license term. If, after the competing application is filed, he upgrades his operation, no evidence of such upgrading will be accepted or may be relied upon. To give weight to such belated efforts to meet his obligation to provide substantial service would undermine the policy of the competitive spur which Congress wisely included in the Communications Act. A renewal applicant could simply supply minimal service from year to year, secure in the knowledge that even if a competing application were filed at the time of renewal, he could then upgrade to show substantial service. Therefore, no evidence as to improved service after the filing of the competing application (or a petition to deny directed to programming service) will be deemed admissible in the hearing. This is, of course, a departure from the procedure permitted in the WBAL case.
Further, the renewal applicant, seeking to obtain the benefits of this policy, cannot properly supply minimal service during the first 2 years of his license term and then upgrade during the third year because of the imminence of possible challenge. The act seeks to promote conscientious and good faith substantial service to the public -- not a triennial flirtation with such service. Therefore, while we recognize that the licensee's programming efforts do and must vary over a license period and hopefully are continually being improved, we could not weigh as controlling or determinative a pattern of operation which showed substantial service only in the last year of the license term.
We note also the question of the applicability here of our policy of diversification of the media of mass communications. We do not denigrate in any way the importance of that policy or the logic of its applicability in a comparative hearing involving new applicants. See 1 F.C.C. 2d at pp. 394-95. We have stated, however, that as a general matter, the renewal process is not an appropriate way to restructure the broadcast industry. For example, In re Application for Renewal of WTOP-TV, F.C.C. 69-1312. Where a renewal applicant with other media interests has in the past been awarded a grant as consistent with the Commission's multiple ownership rules and policies, and thereafter proceeded to render good service to his area, it would appear unfair and unsound to follow policies whereby he could be ousted on the basis of a comparative demerit because of his media [*428] holdings. n4 Here again, the stability of a large percentage of the broadcast industry, particularly in television, would be undermined by such a policy. Our rules and policies permit multiple ownership, and the industry has made substantial commitments based on those rules and policies. These rules are not sacrosanct, and indeed should and must be subject to periodic review. We are now engaged in such review in a number of overall rulemaking proceedings. For example, FCC dockets Nos. 18110 and 18397. If any rulemaking proceeding, now pending or initiated in the future, results in a restructuring of the industry, it will do so with proper safeguards, including most importantly an appropriate period for divestment. Such a way of proceeding is, we believe, sound and "best conduces to the proper dispatch of business and the ends of justice;" section 4(j) of the Communications Act; WJR v. F.C.C., 337 U.S. 265, 282 (1948). In short, whatever action may be called for in special hearings where particular facts concerning undue concentration or abusive conduct in this respect are alleged, n5 the overall structure of the industry, so far as multiple ownership and diversification are concerned, should be the subject of general rulemaking proceedings rather than ad hoc decisions in renewal hearings.
n4 Of course, if such a renewal applicant has not rendered substantial service, he might also face a demerit on the diversification ground. Such an additional demerit might well be academic, since, barring the case where his competitor is also deficient in some important respect, a past record of minimal service to the public is likely to be determinative, in and of itself, against the renewal applicant.
n5 In re Applications of Midwest Television, Inc., F.C.C. 69-261; In re Applications of Chronicie Broadcasting Company, F.C.C. 69-262.
We believe the issuance of this policy statement will expedite the hearing process in this area. Examiners will be clear as to our general policy. Indeed, it may significantly shorten hearings. If the examiner, at the conclusion of the initial phase of a hearing dealing with a renewal applicant's past record, has no doubt that the existing licensee's record of service to the public is a substantial one, without serious deficiencies, he should, either on his own motion or that of the renewal applicant, halt the proceeding at this point and issue an initial decision based upon that determination. However, where the matter is in any way close or in doubt, it would be more appropriate to proceed with the hearing, and thus insure that the record is complete when the matter comes before the Commission.
Most important, as stated above, the policy will markedly serve the public interest by informing the broadcast industry and the public of their responsibilities and rights. And, in doing so, it retains the competitive spur provided in the Communications Act and yet insures predictability and stability of broadcast operations. For the policy says to the broadcaster, "if you do a solid job as a public trustee of this frequency, you will be renewed; your future is thus really in your hands." The policy says to all interested persons, "The act seeks to promote not just minimal service but solid, substantial service; if at renewal time, a group of you believe that an applicant has not rendered such service, you may file competing application and will be afforded the opportunity, in a hearing the establish your case. If you do so, you will be granted authority to operate on the frequency [*429] in place of the renewal applicant who has failed to provide substantial service." n6
n6 It would be expected that appropriate arrangements could and would be made to purchase facilities owned by the existing station. See, e.g., In re Application of Biscayne Television Corp., 33 F.C.C. 851(1962).
The policy is thus fair to the broadcaster and to the new contestant, and above all it serves the listening and viewing public. To the argument that the hearing process itself is an unfair burden, the short answer is that such hearings stem directly from the statutory scheme, and particularly from the notion that the broadcaster is a public trustee who can acquire no permanent ownership of the frequency on which he operates. With even-handed administration of the policy, there is unlikely to be any plethora of frivolous challengers, in view of the significant costs involved. n7 And in any event, where frivolous challenges are made, the examiner may in his discretion, and should, take action to avoid a long drawn out hearing. In the final analysis, the broadcaster has, we believe, the answer within his hands -- if he really knows and cares about his area and does a good substantial job of serving it, he will discourage challenges to his renewal applications.
n7 We wish to stress, with the issuance of this statement, that barring extraordinary circumstances, the challenger to a renewal cannot be reimbursed in any amount for his expenditures in preparing and prosecuting his application, nor will merger agreements be countenanced.
We recognized that there can be concern whether this policy will prevent a new applicant willing to provide a superior service from supplanting an existing licensee who has broadcast a substantial, but less impressive, service. But, as stated, there are obvious risks in accepting promises over proven performance at a substantial level, and we see no way, other than the one we have taken, adequately to preserve the stability and predictability which are important aspects of the overall public interest. We believe that there will still be real incentives for those existing broadcasters willing to provide superior service to do so, since the higher the level of their operations, the less likely that new applicants will file against them at renewal time. And as the Commission spells out, in decided cases, the elements which constitute substantial service, it will serve the private interests of broadcasters to make certain that their operations fall clearly into that class of service. Thus the public interest will be served by the continuing efforts of broadcasters to minimize the chances of the filing of competing applications.
The foregoing policy is limited to comparative hearings between renewal applicants and new applicants for the same facilities in the same community. The restriction to the same community is necessary to exclude from this policy contests between applicants for different communities which are governed by the provisions of section 307(b) of the act, since this section requires that the grant go to the community most in need of the station, without regard to the comparative qualities of the applicants. In practical effect, this section applies solely to standard broadcasting. n8 Such AM cases involve considerations quite different from those with which the Commission is concerned here, and are thus not dealt with in this statement.
n8 The policy set forth herein will apply where a new applicant files against a renewal applicant, seeking to use the contested FM or TV channel in a different community under the provisions of secs. 73.203(b) or 73.607(b) of our rules.
[*430] As shown by our recent actions (see p. 1, supra), this policy is of course applicable to pending proceedings, and indeed, we stress again that its essential holding reflects long established precedent. The policy statement is inapplicable, however, to those unusual cases, generally involving court remands, in which the renewal applicant, for sui generis reasons, is to be treated as a new applicant. In such cases, while the past record, favorable or unfavorable, is of course pertinent and should be examined, the WBAL policy, as here amplified, is inapplicable; a good record without serious deficiencies will not be controlling in such cases so as to obviate the comparative analysis called for in the "Policy Statement on Comparative Broadcast Hearings," 1 F.C.C. 2d 393 (1965).
In sum, we believe that this is the best possible balancing of the competing aspects of the public interest which are to be served in this area. However, the promise of this policy for truly substantial service to the public will depend on the consistency and determination with which the Commission carries out this policy in the actual cases which come before it. Only if we truly develop and hold to a solid concept of substantial service, will the public derive the benefits this policy is designed to bring them. We pledge that we will do so, and in turn call upon the industry and interested public to play their vital roles in the implementation of this policy.
DISSENTING OPINION OF COMMISSIONER NICHOLAS JOHNSON
The issues surrounding citizen participation in the license renewal process are among the most complex and significant before the FCC.
The nature of the American political process is such that any efforts to regulate broadcasting by either Congress or this Commission must constitute a negotiated compromise of sorts. That the broadcasting industry today is perhaps the most powerful Washington lobby in our Nation's history is generally acknowledged. Popular reform movements always start with a substantial disadvantage. For none is that more true than for those groups trying to improve the contribution of television to the quality of American life. But, then, the stakes are higher.
There is no question but that the American people have been deprived of substantial rights by our action today. There is also no question that the results could be much worse -- given the commitment of the broadcasting industry on this issue, and the introduction of legislation (such as S. 2004) by 22 Senators and 118 Representatives.
The policy statement has been discussed by us calmly and at length. Each Commissioner has endeavored to balance the conflicting interests of broadcasters and public. The language has been revised in a spirit of accommodation; the public interest is better served as a result. Because of my participation in these drafting efforts I feel considerable inclination to concur. On agonizing balance, however, I find I cannot.
There is a germ of legitimate concern in the broadcasters' position. (1) It is inequitable that a broadcaster who has made an exceptional effort to serve the needs of his community, and whose programming is outstanding by any measure, should be subjected to the expense [*431] and burden of lengthy hearings merely because some fly-by-night chooses to take a crack at his license. (2) When evaluating a competing application in a renewal case, a record of outstanding performance by the licensee obviously should be given considerable weight. (3) It is far better to provide consistent national standards for station ownership by general rulemaking (with divestiture if necessary) than to involve them on the case-by-case happenstance of which stations' licenses happen to be challenged. (4) There are some public benefits from stability for those broadcasters who take their responsibilities seriously.
What the public loses by this statement can be summarized in the word "competition." The theory of the 1934 Communications Act was that the public would be served by the best licensees available. No licensee would have a right to have his license renewed. Each would be open to the risk that a competing applicant would offer a service preferable in some way, and thereby win the license away. The FCC was to choose the best from among the applications before it, whether the incumbent's record was mediocre or excellent. This is the principle of the marketplace: the public is assured the best products by opening the market to all sellers, comparing their products, and rewarding the best with the greater sales. The analogy in broadcasting is the competing application. The FCC is the public's proxy. It is we who must make the choice among competitors; it is the public that receives the benefits (or burdens) of our choice.
What we have done in this policy statement is comparable to providing that there could be no new, competing magazines, automobiles or breakfast cereals unless a new entrant could demonstrate that the presently available products are not substantially serving the public interest. The affected industry's arguments on behalf of such a policy would be quite similar to those presented by the broadcasters in this instance. But this country has long believed that the public will be better served over the long run by free and open competition. And after lengthy consideration it is still my belief that, on balance, the principle is equally valid in the broadcasting industry.
Given the harsh political reality that the broadcasters have the power to obtain some measure of protection against competing applications, there are at least some possible public benefits from the policy statement we have drafted.
It is impossible, or at least unlikely, that there would ever be a sufficient number of public organizations to contest each of the 7,500 radio and television station licenses in this country. Any truly effective efforts at reform will have to apply to all stations equally. This FCC policy statement may have some salutary impact industry-wide.
What we have created, in effect, are four levels of performance: (1) Not minimally acceptable. A licensee in this category will not have his license renewed, whether or not it is contested. (2) Minimally acceptable. If it meets this standard, licensee without a competing application will be renewed by the Commission. If it is challenged, however, it will be set for hearing. (3) Substantial service. If a licensee is challenged at renewal by a competing applicant, the hearing will be terminated if the examiner finds, after initial evaluation, that the [*432] licensee has been "substantially attuned to meeting the needs and interests of its area." This amounts to a form of summary judgment, saving both broadcaster and challenger the burden of a lengthy hearing likely to be futile. (4) Comparative public interest. If a licensee under challenge by a competing applicant cannot meet the substantial service standard, a full evidentiary hearing will be held. The licensee must then demonstrate that its renewal will serve the public interest, and would be comparatively preferable to awarding the license to the challenger.
The upshot may very well be an improvement in radio and television programming performance by all licensees.
At the present time many broadcasters know that a minimal performance is all that's required for license renewal. This belief is exacerbated by an FCC majority's willingness to find that no news and public affairs adequately serves the public interest, Herman C. Hall, 11 F.C.C. 2d 344 (1968), and that a licensee on probation who has bilked advertisers of $6,000 through fraud is entitled to another probationary term, Star Stations of Indiana, Inc., 19 F.C.C. 2d 991, 996 (1969). Commissioner Cox and I have tried, so far without success, to urge the application of some standards, however minimal, to the Commission's license renewal process. Renewal of Standard Broadcast and Television Licenses [Oklahoma], 14 F.C.C. 1 (1968); Renewal of Standard Broadcast and Television Licenses [New York-New Jersey], 18 F.C.C. 2d 268, 269, 322 (1969); District of Columbia, Maryland, Virginia, West Virginia Broadcast License Renewals, F.C.C. 2d (1969).
The industry's response to the initial WHDH decision, WHDH, Inc., 16 F.C.C. 2d (1969), and the increased effectiveness of public groups devoted to improving broadcasting has been confused and irrational, and of mixed impact on programming. The policy statement will remove much of this confusion.
The Commission has made it clear that it will not permit chaos to reign, that the better broadcasters have nothing to fear, and that all can get back to the task of programming their stations in ways that serve the awesome needs of the American people for quality entertainment, cultural enrichment, continuing education, and information and analysis about life in the communities and world in which they live. The more responsible broadcasters now know they will be protected from harassment from audience on FCC.
On the other hand, the public now clearly understands that a new day has dawned; licenses will not be automatically renewed; those licensees not offering substantial service are open to challenge.
The below-average broadcasters should respond to this new state of affairs by upgrading their programming from a minimal to a substantial performance. They now have a very real incentive to purchase this renewal insurance against the possibility of a challenge.
Moreover, the statement only relates to competing license challenges, not petitions to deny license renewals. Such petitions may still be filed and considered against any licensee. Their consideration in the future may very well be more rigorous than at present. No smart licensee will lightly risk walking too close to the cliff of minimal performance. [*433] And, of course, a competing license challenge may also be filed against any licensee in good faith, even though it ultimately may be rejected by an examiner. Only the broadcaster who is confident his performance is well above average can be assured of the outcome.
And, in the last analysis, as the statement concedes, its ultimate impact will only be known after the examiners, FCC and courts have processed some cases. No statements of policy can affect the FCC's will to act (or lack thereof) in deciding whether to deny license renewal in one-hundredth of 1 percent, one-tenth of 1 percent, 1 percent or 10 percent of the renewal cases coming before it. (With roughly 2,500 license renewals a year, these percentages are equivalent to one denial every 4 years, two or three a year, 25 a year and 250 a year, respectively.) No statement of policy can be the basis for predicting such percentages with any greater precision until the results are in.
There are legal and public relations considerations involved in issuing this statement as fait accompli rather than as proposed rulemaking for public comment. I will not review the issues here, except to say that I think it would have been wiser, on such a controversial matter, to use the rulemaking procedure.
I cannot avoid reference, in passing, to the significance of this particular kind of necessary compromise with broadcasting's power. The record of Congress and the Commission over the years shows their relative powerlessness to do anything more than spar with America's "other government," represented by the mass media. Effective reform, more and more, rests with self-help measures taken by the public. Recognizing this, the broadcasters now seek to curtail the procedural remedies of the people themselves. The industry's power is such that it will succeed, one way or another. This is said, because -- unlike the substantive concessions it has obtained from Government from time to time -- there is no turning back a procedural concession of this kind once granted. Not only can the industry win every ball game, it is now in a position to change the rules.
I have considerable sympathy and respect for my colleagues' commendable and good faith effort to resolve this conflict between formidable political power and virtually unrepresented public interest. They have tried. They really have. And it is not at all clear to me that more than they have done would have been politically possible, or could have withstood political appeal. It is not even clear that today's effort is secure.
Thus it is, with no feelings save understanding, frustration and sorrow, that I dissent.