In the Matter of POLICY STATEMENT OF COMPARATIVE HEARINGS INVOLVING REGULAR RENEWAL APPLICANTS; In Re Petitions Filed by BEST, CCC, AND OTHERS For Rulemaking To Clarify Standards in all Comparative Broadcast Proceedings
FEDERAL COMMUNICATIONS COMMISSION
24 F.C.C.2d 383
RELEASE-NUMBER: FCC 70-738
July 21, 1970 Released
Adopted July 8, 1970
BY THE COMMISSION: COMMISSIONER BARTLEY ABSENT; COMMISSIONER JOHNSON DISSENTING AND ISSUING A STATEMENT.
[*383] 1. On January 15, 1970 the Commission released a Policy Statement on Comparative Hearings Involving Regular Renewal Applicants, 35 F.R. 822, in which we set forth the approach we intend to follow in comparative broadcast hearings where a new applicant challenges a licensee seeking a renewal of license. The next day we released a Memorandum Opinion and Order adopted January 14, 1970 in RM-1551, 21 FCC 2d 355, dismissing a petition for rule making filed by BEST (Black Efforts for Soul in Television), CCC (Citizens Communications Center), William D. Wright, and Albert H. Kramer in which the petitioners proposed a new rule to clarify the standards in all comparative broadcast hearings, including contests on renewal, along the lines of our 1965 Policy Statement on Comparative Broadcast Hearings, 1 FCC 2d 393. We now have before us petitions for reconsideration of the January 15, 1970 policy statement filed by BEST, et al. (BEST), and (jointly) by Hampton Roads Television Corporation and Community Broadcasting of Boston, Inc. BEST has also filed a petition [**2] "for repeal" of the policy statement and a third petition, to reconsider the dismissal of the BEST petition for rule making; these pleadings are based upon the memorandum submitted with the petition to reconsider the policy statement. The petitions are opposed by several other licensees, and replies have been received.
2. Our January 15, 1970 policy statement set forth our proposed approach to the disposition of broadcast hearings involving contests between new applicants and regular renewal applicants. It followed and supplemented our 1965 policy statement on comparative broadcast hearings between new applicants for the same facilities. Several of the objections raised to the 1970 policy statement were treated in the opinion on BEST's petition for rule making. Thus, as we there made [*384] clear, the policy statement was not a rule and did not have the force or effect of a rule; consequently, as we stated, "parties are always free to argue in a hearing that a policy should be changed, or should be applied differently because of the facts of their particular situation." (21 FCC 2d at 356.) n1 Therefore, we must reject the contention that the adoption of the policy statement contravenes [**3] the rule making requirements of the Administrative Procedure Act. That statute specifically makes its notice requirements inapplicable to "general statements of policy." 5 U.S.C. § 553(b). That the policy statement express our views on matters of substance of course does not take it out of the statutory exemption nor, in light of the further exemption for rules of procedure, does the fact that it contains a procedural element. Substantive rules must be preceded by notice and comment. Substantive policy statements need not be. While we understand that the parties seeking reconsideration do not agree with our view that the policy statement contains a unified expression of policies largely formulated in earlier adjudicatory cases, their argument still misses the point that it is only a policy statement -- subject to full reargument in individual cases -- with which we are dealing. Although, in view of these considerations, we do not believe that a petition for reconsideration properly lies under Section 405 of the Communications Act, it nevertheless seems desirable to consider the contentions put before us. n2
n1 Even in the case of a rule, parties are allowed to make a showing why the rule should be waived in a particular case. See U.S. v. Storer Broadcasting Co., 351 U.S. 192-204-205; Section 1.3 of our rules, 47 CFR 1.3. A fortiori, a party may show why a policy should not be applied in his fact situation. In short, the touchstone for all Commission action remains the public interest, and therefore, the Commission must be alert to a showing that the public interest would be served by action different from that embodied in any general rule or policy.
n2 Taking into consideration that we are not adopting a binding rule and that these matters may be reopened in particular cases, we do not believe that oral argument is either appropriate or required. [**4]
3. It is urged that there is no support in fact for the weight we have given to stability and predictability in station operation. But we think it is amply clear that in an industry requiring substantial investments, often with long periods of financial loss, the public interest is served by a reasonable assurance that good public service will constitute a protection against a complete loss of the business. In this connection, we point out that Hampton Roads and Community are incorrect in their assertion that we have required a successful challenging applicant to purchase the facilities of the incumbent licensee. We said that it would be expected that arrangements could and would be made to purchase the facilities of the existing station, but we have not imposed any such requirement. n3 It is no answer to this problem that many stations are profitable, even highly profitable, for not only do many stations have unprofitable operations for substantial initial periods, but for all stations we can only expect the required initial and continuing investments if there is a reasonable expectation, consistent with the overriding requirements of the public interest, that the station will [**5] be treated as a going business. And, certainly, it would make no sense to apply the policy statement only to losing operations and to deny its benefits to any existing station which is operating in the [*385] black. This would hardly be an inducement to good operation. In short, a contrary policy would, we believe, result in a chaotic situation wholly at odds with the Congressional purpose in creating this agency and its predecessor.
n3 We note also that purchase of physical facilities will not provide recompense for operating costs.
4. As mentioned above, we have attempted to provide stability only insofar as it is consistent with the paramount public interest, and have given no advantage to any existing licensee who is qualified but only barely so. We have given up the fullest advantages of competition only in favor of continuance of a solid measure of performance without substantial defects. We have, however, maintained the competitive spur of the statutory scheme by not only permitting but encouraging competing challenge to renewal applicants who are believed to have only minimally served the public interest. And to make this policy effective, we have precluded "upgrading," [**6] either after the competing application is filed or during the third year of the license term because of the imminence of public challenge. n4 This, we stress, is a reasonable balancing of two considerations -- the desirability of stability and the competitive spur of challenge -- which best serves the public interest. It is said, nevertheless, that any such balancing is forbidden by the Communications Act as already interpreted by the courts, and that nothing short of a full comparative hearing involving all factors will suffice. We do not so read the statute. The cases relied upon all deal with initial applications and do not reach the question of whether it is permissible or, as we believe, necessary to give special weight to a sold record of performance in the renewal situation. The question is one of substantive policy, since our instruction to the examiners on the conduct of the hearing is peripheral procedure. If the policy is reasonable, and we have set forth our reasons for adopting it, we see no merit to the contention that it creates a right in the frequency or its use beyond the terms of the license (see Sections 301, 304, 307(d), 309(h), 47 U.S.C. 301, 304, 307(d), [**7] 309(h)). The assignment of conclusive weight to a solid record of operation in the public interest is not the grant of a right to future use based upon past occupancy of a channel. As we have made amply clear, past occupancy by itself is irrelevant under our policy statement. But there is nothing in the Communications Act that prohibits the assignment of different weights to different public interest factors in this situation, or the assignment of conclusive weight to a factors in this situation, or the assignment of conclusive weight to a factor we find to be determinative in its relationship to the public's interest in future use of the frequency or channel. While this policy may eliminate a direct comparison between applicants on factors such as integration of ownership with management and diversification of control of the media of mass communications, it does not sanction a grant to any renewal applicant [*386] who is disqualified in any respect, or in the face of a competing challenger, who is not substantially serving the public interest. Barring an unusual showing, it eliminates a comparison but does so upon a basis rooted in actual operation of the facilities in question. The [**8] Constitution is obviously not affronted by this policy if we are correct in our judgment that it is a policy reasonably calculated to best serve the public's interest. National Broadcasting Co. v. United States, 319 U.S. 190. n5
n4 In this connection, we note that our assignment and transfer forms require a showing as to the programming performance of the assignor or transferor, when an assignment or transfer is sought more than 18 months after the later renewal. This is intended to insure that the transferor has not ignored his renewal commitments in anticipation of sale. Thus, we would not permit transfers during the last 18 months of a license period where the transferor's operation raises a substantial question of basic qualification because of a failure to adhere to promises (or of course for any other public interest reason coming to our attention at any time). This is not new policy, cf. Jefferson Radio Co. v. Federal Communications Commission, 119 U.S. App. D.C. 256, 340 F. 2d 781 (1964), but it seems desirable to reiterate it here.
n5 See also Hale v. Federal Communications Commission, U.S. App. D.C. , , F.2d (No. 22,751, February 16, 1970), holding that issues of concentration of control applicable to the industry as a whole and involving an overhaul of multiple ownership policy, may appropriately be reserved for treatment in general rule making. [**9]
5. We have carefully considered the arguments contained in the petitions before us and we are not convinced that our announced policy on comparative renewal proceedings is either illegal or unwise. Of course, those adversely affected may raise any relevant contention in individual proceedings, where they will be examined de novo. However, it should be useful to all parties concerned to have the Commission set forth the overall views to which its experience has led it. Finally, we stress again what we said in concluding our 1970 statement:
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 [**10] of this policy.
6. For the foregoing reasons, the petitions before us ARE DENIED.
FEDERAL COMMUNICATIONS COMMISSION, BEN F. WAPLE, Secretary.
DISSENTING OPINION OF COMMISSIONER NICHOLAS JOHNSON
I dissent to the denial of these petitions for reconsideration on three grounds: The Commission's January 15, 1970 Policy Statement (1) violates Section 4 of the Administrative Procedure Act (5 U.S.C. Section 553) or, at least, is an abuse of agency discretion; (2) violates Section 309(e) of the 1934 Communications Act; and (3) violates the First Amendment to the United States Constitution.
The Administrative Procedures Act (APA) requires the Commission to follow certain procedures (notification, opportunity to file comments, etc.) in all cases of administrative "rule making." Section 2(c) of the APA defines a "rule" as:
... the whole or any part of any agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or to describe the organization, procedure, or practice requirements of any agency...
Section 4(a) of the APA, however, exempt from rule making:
... Interpretative rules, general statements [**11] of policy, rules of agency organization, procedure, or practice...
[*387] The majority argues that the January 15, 1970 Policy Statement is an exempted "general statement of policy" under Section 4(a), and not subject to the safeguards of Section 4. Although the legal precedent on this question is by no means clear, I believe there are valid reasons for disagreement.
The rule making safeguards of the Administrative Procedure Act were clearly designed to limit the discretion of federal agencies in their legislating function -- that is, the adoption of substantive rules or general schemes of administration to affect differing groups or individuals across-the-board. In delegating its legislative authority to non-elected bodies of men not directly responsible to the electorate, I do not believe that Congress intended to cast this and other agencies adrift on the limitless sea of their own unbounded discretion, able to enact substantive rules at will (under the guise of "policy statements") without due consideration of interested parties' views. This, at any rate, appeared to be the position of Attorney General Francis Biddle who gave the following interpretation of "policy statement" [**12] in a 1941 Report:
[Approaches] to particular types of problems, which as they become established, are generally determinative of decision... As soon as the "policies" of an agency become sufficiently articulated to serve as real guides to agency officials in their treatment of concrete problems, the may advantageously be brought to public attention by publication in a precise and regularized form. Report of the Attorney General's Committee on Administrative Procedures, S.Doc. No. 8, 77th Cong., 1st Sess., pp. 26-27 (1941).
In other words, certain procedural safeguards exist to protect the public in formal rule making and adjudication; once law has been established through these procedures, however, the agency may explain it to the public through "policy statements."
Procedurally, at least, this Commission could have addressed the substance of its Policy Statement through adjudicatory or rule making proceedings -- both of which contain the safeguards of the adversary process. Arguably, however, it cannot do so without any procedural safeguards at the time of adoption, as it has attempted here. Cf. Moss v. Civil Aeronautics Board -- F.2d -- (D.C. Cir., July 9, 1970). There [**13] must be some logical and legal distinction between a "rule" and a "policy statement." An administrative agency is apparently not free to characterize its action in any way it sees fit:
The particular label placed on it by the Commission is not necessarily conclusive, for it is the substance of what the Commission has purported to do and has done which is decisive. Columbia Broadcasting System v. United States, 316 U.S. 407, 416 (1942).
The appropriate distinctions may well turn on whether the agency takes action affecting a charge in substantive legal rights (through a rule on adjudication), or whether the agency's action merely explains or interprets existing policies or decisions previously enacted through proper legal procedures (a policy statement). Thus, the Commission can issue a "Public Notice" through its Office of Information, explaining or summarizing the import of a particular rule; but it cannot adopt that rule, without procedural safeguards, merely by captioning its document a "Public Notice" and pretending that no substantive change in the law is involved.
[*388] The issue here, therefore, turns on whether the January 15, 1970 Policy Statement effected a substantive change [**14] in our comparative renewal standards. I frankly do not think even the majority can seriously contend that the Commission has not substantially changed its hearing procedures in comparative renewals by its January 15, 1970 Policy Statement. We have designated many cases for comparative hearings since the Hearst case, yet we have never even suggested to the Examiner that he first determine whether the incumbent licensee "has been substantially attuned to meeting the needs and interests" of the community. Indeed, we have recently reimbursed Voice of Los Angeles, Inc., for costs incurred during the initial portions of a comparative challenge to the license of KNBC, Los Angeles, essentially on the ground that our January 15, 1970 Policy Statement came as an unannounced surprise to Voice, and that given the change in policy it would be inequitable not to permit them to withdraw. National Broadcasting Co., Inc. (NBC), FCC 70-691 (Docket No. 18602) (released July 7, 1970). Prior to January 15, 1970, no communications lawyer or even FCC Hearing Examiner would have dreamed that a competing application would not even be considered if the incumbent licensee met certain programming standards. [**15] Accordingly, we must conclude that a substantive change in law has been made, and the rule making procedures of the APA should apply.
Even if action by policy statement is a legally available option to the Commission in this case, I believe the Commission has abused its discretion by so acting without clearly articulated reasons. In dismissing petitioners' request for rule making. Petitions by BEST, 21 F.C.C.2d 355 (1970), the Commission cited S.E.C. v. Chenery Corp., 332 U.S. 194 (1947), for the proposition that the Commission has the discretion to choose between adjudication and rule making. The Commission, however, does not attempt to explain why the use of a policy statement in this case was preferable to the use of adjudication and rule making. Rather, it simply asserts that it had the power to act without the usual procedural safeguards. Even conceding that the Commission has this power, it must exercise its discretion in a rational way in an opinion explaining its reasoning. Even Chency recognized that agency discretion was limited by certain fundamental standards of fairness.
The Commission's Policy Statement decision cannot be considered "reasonable" or "fair" [**16] -- particularly in view of the political events surrounding its adoption. Following the decision in WHDH, Inc., 16 F.C.C. 2d 1 (1969), the broadcasting industry sought to obtain from Congress the elimination or drastic revision of the comparative hearing procedure. See, e.g., Hearings on S. 2004 [Orderly Renewals] Before the Subcommittee on Communications of the Senate Committee on Commerce, 91st Cong., 1st Sess. ["The Pastore Bill"] (Dec. 1, 1969). Although more than 100 Congressmen and 23 Senators quickly announced their support, a number of citizens groups testified that S. 2004 was "back door racism" and would exclude minorities from access to media ownership in most large communities (Black Efforts for Soul In Television), would perpetuate excessive concentrations of control (National Citizens Committee for Broadcasting), and would remove [*389] "competition" from broadcasting and "freeze out every underrepresented class in American Society" (American Civil Liberties Union). See Hearings on S. 2004, supra.
The impact of citizen outrage measurably slowed the progress of S. 2004, and many Senate observers began to predict the Bill would never pass. Then, without formal rule making [**17] hearings, or even submission of written arguments, the Commission suddenly issued its January 15, 1970 Policy Statement -- achieving much of what Congress had been unable or reluctant to adopt.
There were many parties who had invested substantial time and money fighting the threatened diminution of their rights, and who no doubt would have opposed our January 15, 1970 Policy Statement on numerous grounds. In challenging S. 2004, many of these parties claimed to represent the interests of important segments of our population: the minorities, the poor, and the disadvantaged. By refusing even to listen to their counsels, this Commission reached a new low in its self-imposed isolation from the people; once again we closed our ears and minds to their pleas. See, e.g., National Broadcasting Co., 20 F.C.C. 2d 58 (1969); KSL, Inc., 16 F.C.C. 2d 340 (1969); Office of Communication of the United Church of Christ [WLBT-TV], -- F. 2d --, No. 19,409 (D.C. Cir., June 20, 1969), and 359 F.2d 994 (D.C. Cir. 1966).
The majority argues for the Policy Statement's validity by contending that its "only a policy statement" which may be fully reargued in future cases when it is applied. This argument [**18] will deter groups that otherwise might have entered comparative contests. Between WHDH, Inc. and our Policy Statement, a number of applicants filed competing license challenges with the Commission. To my knowledge, not one TV application has been filed since January 15, 1970 -- and one major applicant has even withdrawn on the basis of our Policy Statement. See National Broadcasting Co., Inc. (KNBC), FCC 70-691 (Docket No. 18602) (released July 7, 1970)9 In addition, our Policy Statement will doubtless be applied to future cases without exception. No man is likely to reverse himself once he has announced his decision in public, and no one seriously believes that applicants will be able to reargue the merits of our January 15, 1970 Policy Statement and obtain an impartial and open-minded reception. As in Moss v. Civil Aeronautics Board, -- F.2d --, (D.C. Cir., July 9, 1970), the basic decisions have been made ex parte in "closed sessions," and there is little anyone can do to re-open them.
Finally, the Commission's abuse of discretion becomes particularly severe in light of the First Amendment questions discussed below. Whatever discretion the Commission may have to choose [**19] various procedural modes in other cases, that discretion must be narrowly limited where it results in a curtailment of speech freedoms. Our failure to follow normal rule making procedures, there fore, is an abuse of agency discretion and cannot be justified by the principles of Chenery.
The January 15, 1970 Policy Statement also violates, in rather clear fashion, Section 309(e) of the 1934 Communications Act. That Section provides that if the Commission cannot find that the grant of any [*390] particular license application will serve the "public interest, convenience, and necessity," it must designate the application for "a full hearing in which the applicant... shall be permitted to participate. c In other words, the Commission must either grant a license application, or provide the applicant with a full hearing on the merits. Thus, where an incumbent licensee is challenged by an otherwise acceptable new applicant, Section 309(e) bars rejection of the competing application without a hearing. Yet this rejection is precisely what will happen under the Policy Statement when the Examiner finds the incumbent "substantially attuned" to community needs and interests. In Ashbacker Radio [**20] Corp. v. FCC, 326 U.S. 327, (1945), the FCC granted one of two mutually exclusive applications and designated the other for hearing. The Supreme Court reversed, saying:
We do not think it is enough to say that the power of the Commission to issue a license on a finding of public interest, convenience or necessity supports its grant of one of two mutually exclusive applications without a hearing of the other. For if the grant of one effectively precludes the other, the statutory right to a hearing which Congress has accorded applicants before denials of their applications becomes an empty thing. We think that is the case here. (326 U.S. at 330.)
As Ashbacker said, "where two bona fide applications are mutually exclusive, the grant of one without a hearing to both deprives the loser of the opportunity which Congress chose to give him." Id. at 333. Although Ashbacker involved competing applications for a new facility, its reasoning is equally applicable here. Even Hearst Radio, Inc. (WBAL), 15 F.C.C. 1149 (1951), and Wabash Valley Broadcasting Corp., 34 F.C.C. 677 (1963), which the Commission cite to support its January 15, 1970 Policy Statement, granted both applicants a full [**21] hearing on all issues involved. I believe Congress intended in Section 309(e) to give new applicants with allegedly improved programming proposals at least a hearing to prove their claims. The Commission's Policy Statement eliminates this right.
Finally, I believe the January 15, 1970 Policy Statement imposes burdens on freedom of speech which are inconsistent with the First Amendment. Freedom of the press, for example, must do more than protect newspaper publishers from government censorship; it must also ensure that access to ownership of the print media is not blocked. Freedom of the press would not exist in this country if the government, while refraining from direct censorship over newspaper content, made it excessively difficult for people to own, control or publish a newspaper. The Supreme Court has on numerous occasions recognized the distinct connection between diversity of ownership of the mass media and the diversity of ideas and expression required by the First Amendment. See, e.g., Associated Press v. United States, 326 U.S. 1, 20 (1945). And in Red Lion, the court said:
It is the purpose of the First Amendment to preserve an uninhibited marketplace of ideas [**22] in which truth will ultimately prevail, rather than to countenance monopolization of that market, whether it be by the Government itself or a private licensee. Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 390 (1969) (emphasis added).
[*391] Although the Commission's Policy Statement is ostensibly grounded in economic considerations, it undeniably impedes access to ownership of the broadcast media, and is therefore deeply imbued with First Amendment considerations. Upon review of agency and Congressional action, the Supreme Court will generally pay great deference to administrative and legislative expertise and experience in matters involving economic regulation, see e.g., Williamson v. Lee Optical of Oklahoma, 348 U.S. 483 (1955); but it has clearly warned that "[there] may be narrower scope for operation of the presumption of constitutionality when legislation appears on its face to be within a specific prohibition of the Constitution, such as those of the first ten Amendments...." United States v. Carolene Products Co., 304 U.S. 144, 152 n. 4 (1938). Because the First Amendment freedoms of speech and the press occupy a "preferred position" in the spectrum of constitutionally guaranteed [**23] liberties, Kovacs v. Cooper, 336 U.S. 77, 88 (1949), see Saia v. New York, 334 U.S. 558, 562 (1948); Thomas v. Collins, 323 U.S. 516, 529-30 (1945); United States v. Cruickshank, 92 U.S. (2 Otto) 542, 552-53 (1876), the government must prove that a "compelling," N.A.A.C.P. v. Button, 371 U.S. 415, 438 (1963); Sherbert v. Verner, 374 U.S. 398, 403 (1963), or "paramount," Thomas v. Collins, 323 U.S. 516, 530 (1945), governmental interest exists to justify restrictions upon First Amendment freedoms.
I think it is obvious that the Commission has made no "compelling" or "paramount" showing of necessity for the doctrines adopted in its January 15, 1970 Policy Statement. We have taken no hard economic evidence on the issue; we have consulted directly with neither licensees nor the public on this issue; and we have considered no alternatives to this scheme of regulation.
The Supreme Court has also indicated in First Amendment cases that legislative bodies must use "less drastic means" of regulation whenever possible to create the least interference with individual liberties, E.g., United States v. Robel, 389 U.S. 258, 268 (1967); Shelton v. Tucker, 364 U.S. 479, 488 (1960); see generally, [**24] Note, Less Drastic Means and the First Amendment, 78 Yale L.J. 464 (1969); Wormuch & Merkin, The Doctrine of the Reasonable Alternative, 9 Utah L. Rev. 254, 267-93 (1964). If the Commission is concerned that the scheme of competitive applications established by Congress in 1934 is unduly severe on the broadcasting industry, and that "stability and predictability in station operation" is needed to safeguard its "financial investments," then there are clearly "less drastic means" for accomplishing this goal than eliminating altogether potential licensees who might better serve their communities. The FCC, for example, might give losing incumbent licensees a tax certificate entitling it to involuntary conversion treatment under Section 1033 of the Internal Revenue Code. Another possibility would be to require the winning applicant to reimburse the losing incumbent for the fixed costs of his investment -- or perhaps even his programming investments during the past two or more years. The point, simply, is that there are any number of alternative ways to increase stability in the broadcast industry without substantially impeding the access of various groups to ownership.
The importance [**25] of the First Amendment in this proceeding is three fold: [*392] First, the restrictions the Commission has placed on entry into the broadcasting field may well violate the standards of the First Amendment; second, the significant involvement of First Amendment issues in the comparative renewal procedure places on this Commission a greater burden of justifying its action than it has met; and third, the First Amendment considerations should limit the discretion of this agency to adopt substantive rules without the safeguards of the Administrative Procedure Act. We may be able to justify purely economic regulations by our alleged fund of "accumulated experience"; but we must do more when we curtail access to media ownership. We must demonstrate a "compelling" need for these regulations, and that there are no "less drastic means" available to us. This we have clearly failed to do.