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In Re Applications of: MOLINE TELEVISION CORP. (WQAD-TV), MOLINE, ILL. For Renewal of License of

WQAD-TV; COMMUNITY TELECASTING CORP., MOLINE, ILL. For Construction Permit

 

Docket No. 17993 File No. BRCT-584; Docket No. 17994 File No. BPCT-4032

 

FEDERAL COMMUNICATIONS COMMISSION

 

31 F.C.C.2d 263

 

RELEASE-NUMBER: FCC 71-837

 

August 20, 1971 Released

 

Adopted August 18, 1971

 


COUNSEL:

APPEARANCES

On behalf of Moline Television Corp. (WQAD-TV), Messrs. Thomas N. Dowd, William S. Green, and W. Theodore Pierson, Jr. (Pierson, Ball & Dowd); on behalf of Community Telecasting Corporation, Messrs. Paul Porter, Reed Miller, David H. Lloyd, Arminstead W. Gilliam, and Reid Peyton Chambers, (Arnold & Porter); on behalf of Mr. Frank P. Schreiber, intervenor, Mr. Joel H. Levy (Law Offices of Marcus Cohn); on behalf of Mr. Fred Weber, a subpoenaed witness, Mr. Charles V. Wayland (Fisher, Wayland, Duvall & Southmayd); and on behalf of the Broadcast Bureau of the Federal Communications Commission, Mr. Richard M. Riehl.


JUDGES:

BY COMMISSION WELLS FOR THE COMMISSION: n1 COMMISSIONERS BARTLEY AND JOHNSON DISSENTING AND ISSUING STATEMENTS; COMMISSIONER H. REX LEE ABSENT; COMMISSIONER HOUSER CONCURRING AND ISSUING A STATEMENT. 

n1 Commissioner Houser was not a member of the Commission on July 13, 1970, when oral argument was held on this matter.  However, Commissioner Houser, after taking office, read the transcript of the oral argument, and he is participating in this Decision pursuant to Section 1.277(f) of the Rules.


OPINION:

 [*263] 1.  This proceeding involves the mutually exclusive applications of Moline Television Corporation (Moline) for renewal of license of Station WQAD-TV, operating on Channel 8 in Moline, Illinois, and Community Telecasting Corporation (CTC) for a construction permit for a new television station to operate on Channel 8 in Moline.  In designating these applications for hearing, we specified certain disqualifying issues against Moline and the standard comparative issue for an evaluation of both proposals.  In order to better understand our present Decision, it will be helpful to summarize the matters in the designation order concerning Moline's basic qualifications to be a licensee.  11 FCC 2d 592 (1968).

2.  Moline originally acquired its license in a previous comparative hearing for this channel, n2 in which Moline advanced a number of  [*264]  programming proposals.  During its actual operation of the station, 1963-1967, however, it appeared that Moline had failed to carry out its proposals with respect to local live programming.  We noted that Moline had not alleged that its proposals were not responsive to the needs of the area, but had merely stated that "it was the judgment of the licensee not to present [the proposed programs]." In view of the representations previously made, we concluded that the basis for Moline's subsequent judgment must be ascertained in the hearing.  In addition, we observed that Moline had failed to implement a number of its integration proposals made in the prior comparative hearing.  Thus, we held that the reasons for, and extent of, this failure should be ascertained in the hearing. 

n2 32 FCC 923 (1962).

3.  We also stated that, in view of Moline's then recently dismissed assignment application, the hearing should determine whether Moline, in acquiring and operating its station, had intended to serve the public interest or to traffic in broadcast licenses.  Moline had alleged as the principal reason for the contemplated sale to the Detroit Evening News that, in order to achieve a more competitive market position, it required additional financing and that, since a number of stockholders did not wish in incur further indebtedness, sale of the station became necessary.  We noted, however, that Moline had not shown why additional financing was necessary and that, in any event, it had not adequately explained why it could not obtain any requisite financing on the open market.  n3

n3 The following issues were accordingly specified for hearing:

1.  To determine whether Moline Television Corp. failed to carry out representations made in docket No. 12506 as to programming and participation by its principals in operation of Station WQAD-TV, Moline, Ill.

2.  To determine, if at the time the WQAD-TV assignment application was filed, Moline required additional financing for the operation of WQAD-TV, and, if so, the amount thereof, and what efforts, if any, Moline made to secure additional financing from other sources.

3.  To determine all of the facts surrounding sales negotiations by Moline of the WQAD-TV license, and whether there has been an attempt by Moline of traffic in licenses.

4.  To determine which of the proposals would better serve the public interest.

5.  To determine, in the light of the evidence adduced pursuant to foregoing issues, which of the applications should be granted.

4.  In his Initial Decision, n4 Hearing Examiner David I. Kraushaar proposed to grant Moline's application and to deny CTC's application.  He held that there was no persuasive public interest basis for disqualifying Moline and concluded that Moline deserved to have its license renewed in the comparison with CTC.  Since we do not fully agree with the reasoning used by the Examiner in reaching his determination, the conclusions set forth herein will be substituted for those of the Examiner, to the substantial extent indicated.  n5

n5 Before us for consideration are: (a) exceptions and brief in support thereof, both filed April 7, 1969, by CTC; (b) exceptions filed April 7, 1969, by the Chief, Broadcast Bureau: (c) statement in support of the Initial Decision and exceptions to portions thereof, filed April 7, 1969, by Moline; (d) reply to (a) and (b), filed April 2,, 1969, and the errata thereto filed May 16, 1969, by Moline; (e) reply to (c) filed April 28, 1969, by CTC; and (f) the following pleadings concerning the petition for leave to amend filed September 23, 1969, by CTC: (1) an opposition filed September 30, 1969, by Moline; (2) a comment filed October 2, 1969, by the Chief, Broadcast Bureau; (3) a reply filed October 10, 1969, by CTC; (4) a supplement to the petition for leave to amend filed October 16, 1969, by CTC; and (5) an opposition to the supplement filed October 22, 1969, by Moline.  We heard oral argument, en banc, on July 13, 1970, and, except as modified herein and by our rulings on exceptions which are attached as an appendix, we adopt the findings of fact set forth by the Examiner in his Initial Decision.  [*265]

5.  During the original comparative hearing for this channel, Moline submitted an exhibit containing its programming commitments. Moline stated that its programming would vary as necessitated by circumstances and events; that it is difficult to anticipate what programming resources would be available and what needs would exist in the distant future; that the station would respond to inevitable changes in public taste, community needs, and talent availability; that its proposed program schedule represented its evaluation of the then existing needs and interests; and that, to the degree that those needs and interests existed at the time of operation, the program schedule would reflect the same evaluation and recognition.  The program schedule was proposed in the light of the availability of ABC network programming during prime evening hours (6 p.m. to 11 p.m.) at that time, and the schedule was designed to meet community needs while satisfying the station's obligations to the network.

6.  Moline's proposal contained twelve locally originated, live, agricultural, religious, educational, discussion, or talk programs to be televised on a regular weekly basis during prime time.  The evidence reflects that the needs and interests of this area have not changed in any material respect between the formulation of the original proposal and the date of this hearing.  However, none of these programs has been carried by the station during prime time on a regular basis.  Moline's reasons for this omission are: (a) the availability of network programs which had not been broadcast when the programming proposal was formulated; (b) the change in audience sophistication which occurred during this period; (c) the need for a proper balance between the needs of a special group, such as farmers, and the general needs and interests of the area the station is expected to serve; (d) the need to preserve the station's position against stations affiliated with the CBS and NBC networks; and (e) the fact of the station's early operating losses.  Other local live programs, which Moline proposed to broadcast outside of prime time, were not presented under the same program titles or at the originally proposed time.

7.  Nonetheless, Moline has substantially complied with its programming commitments as to type (entertainment, etc.) and as to source (live, recorded, etc.).  Moline has broadcast programs similar to those initially proposed in several instances, though not during prime time.  It has, on occasion, preempted network programs during prime time.  Moline has presented a large variety of locally originated telecasts of interest to its community, such as locally taken news film, documentaries, and religious programs.  Data taken from the renewal applications for Stations WHBF-TV, Rick Island, Illinois, and WOC-TV, Davenport, Iowa, show that Moline's performance compares favorably with that of its competitors.  n6 Moline also provided evidence from community leaders in its area indicating that the station had provided valuable programming assistance and service to various  [*266]  individuals and their organizations.  There is no record of public complaints about Moline's programming service. 

n6 Moline presented local live programming during approximately 15% of its total hours and 10% of its prime time operation.  WHBF-TV devoted a total of 5.8% of its time to local live programming.  WOC-TV broadcast local live a total of 20 hours and 8 minutes of its full 122 hours and 35 minutes, with 5 hours and 50 minutes of such programming carried during prime time.

8.  In connection with Moline's promises of stockholder participation, Frank Schreiber, originally a 1/% owner, served as President and Fulltime General Manager of the station from January, 1963, to May, 1965.  Unanticipated expenses in putting the station on the air created the need for an additional $350,000 in 1963 and led to difficulties between Schreiber and the other stockholder.  In January, 1964, the station's Executive Committee was expanded, the Committee was authorized to make final decisions on all aspects of station operation and to approve major expenditures, and a Station Manager was appointed to assist Schreiber by taking over various daily operational activities.  At the same time, Schreiber was directed to devote special effort to national sales and network relations.  Subsequently, mounting differences between Schreiber and the other members of the Executive Committee led to his replacement as General Manager by Arthur Swift, who is a 9.928% stockholder.

9.  Moline proposed Charles G. Rehling, a 0.451% stockholder, as moderator of a youth discussion program, but the participants preferred to choose their own moderator.  Rehling has participated actively in other station activities.  Robert M. Harper, a 0.722% stockholder, was to participate in a proposed press conference program and to assist in securing guests for other discussion programs.  However, his wife became seriously ill shortly after the station commenced operation, requiring Harper to reduce his service to the station.  Harper subsequently decided not to carry out this proposed program because he did not believe the public would receive it well.  Richard. G. Stengel, an 8.123% stockholder, proposed to spend 20% of his time on station operations and to moderate an adult discussion program.  Stengel has devoted significant amounts of time to station affairs, but, after being elected a state prosecutor in 1960, he decided that it would be inappropriate for him to moderate a program dealing with controversial issues.

10.  Charles G. Agnew, a 4.513% stockholder, promised to supervise the station's film operations and to moderate a photography program.  However, he subsequently contracted "Dupuytren's contracture," a disease which deforms the hands, and felt unable to carry out his original commitment.  Victor B. Day, a 9.025% stockholder, proposed to spend 10-20% of his time on station activities, and he has devoted significant amounts of time to the station on a continuing basis.  Philip Sitrick, a 2.256% stockholder, carried out his commitment to advise the station with regard to the area's Jewish community, and he participated on the station's Religious Programming Committee as long as it existed.  Several stockholder committees, devoted to the particular areas of station operation concerning programming, commercial standards, religion, and housing and maintenance, functioned for over a year, but their duties were subsequently absorbed by the expanded Executive Committee.

11.  With respect to Moline's proposed sale of the station, the evidence shows that Moline incurred greater than anticipated construction costs.  Rather than lease or renovate an existing structure, Moline decided to build studio facilities costing $615,000, whereas only $300,000 had been  [*267]  budgeted for this purpose.  In addition, technical equipment cost $930,000, which was $165,000 more than expected.  Thus, Moline's original financial structure was inadequate to meet the expense of putting the station on the air.  n7 In order to raise additional capital, Moline, in September, 1963, took out a five-year bank loan for $1,100,000, which was personally guaranteed by each of its stockholders.  In December, 1963, Moline borrowed $148,500 from its stockholders on an unsecured basis, and, early in 1964, an additional $99,000 of capital stock was purchased by all but one of the original stockholders. 

n7 Motion originally proposed the following capital structure:

Existing capital

$10,000

New capital

390,000

Loans

225,000

Deferred payments

417,547

Total

1,042,547

In actuality, Moline's stockholder had made capital contributions by August 31, 1967, of $554,000.

12.  For its first fiscal year of operation, Moline had an accumulated operating loss of almost $250,000 and a net tax loss of $116,180.  However, in its second year of operation, Moline had a profit of $3,022.  As of August 31, 1965, Moline's aggregate long term debt totaled $896,000, but, by September 1, 1968, that amount had been reduced to $738,500.  When the Detroit Evening New made its offer to buy the station in 1966, Moline needed $800,000 in additional capital to cover its existing loans and to buy more necessary equipment.  Moline could have attempted to raise these funds by calling upon the stockholders to put up additional capital or by requesting the stockholders to guarantee personally further bank loans.  Moline accepted the offer of the Evening News to buy the station for $5,500,000, with an additional $1,000,000 to be paid for a covenant not to compete.  This transaction, if it had been consummated, would have resulted in a total gain for Moline's stockholders of $4,500,000.

13.  During the hearing, two station brokers, Howard S. Frazier and Edward Wetter, testified as to how broadcast sales negotiations are generally conducted.  Since 1960 fewer stations have been available for sale, and, as a result, brokers must solicit more aggressively.  The seller does not usually set a price for the property, but owners often seek offers from brokers in order to obtain an appraisal of the station.  Brokers ordinarily start soliciting station owners about one-half year prior to the expiration of the three-year holding period.  Brokers generally continue to make contacts with such owners, even though they have been advised that the station is not for sale, and ten exchanges of correspondence with a prospective seller are considered a serious negotiation.  However, where the owner places a much higher price on the property than the normal market valuation, it is usually interpreted as an intention not to sell.

14.  Prior to the time that the Evening News made its offer for the station, other interested parties contacted Moline's stockholders concerning purchase of the station.  Fred Weber, a Vice-President of Rust Craft Broadcasting Company, conferred with several of Moline's stockholders beginning in early 1965.  A suggested valuation of $3,000,000 for the station was rejected out of hand without consulting  [*268]  Moline's Board of Directors.  On April 2, 1966, Weber prepared a memorandum for his superiors in which he suggested that, due to the scarcity of available stations, Moline would likely seek bids from all interested parties in order to obtain the highest price.  Weber testified, however, that no one connected with Moline made any kind of an offer to him.

15.  During the fall of 1965 and the spring of 1966, inquiries were made on behalf of J. B. Fuqua with respect to sale of the station.  Fuqua made offers of $4,500,000 less liabilities and of $4,000,000 for the station.  Both proposals included an exchange of stock as part of the offering price, but the Moline stockholders involved in this negotiation believed that Fuqua would increase his offer.  Judge Coyle, one of Moline's principal stockholders, during a meeting with Mr. Shaheen, a station broker with Hamilton, Landis & Associates, in August, 1966 indicated that he would not tae any offer of less than $6,500,000 to the Board of Directors.  n8 In addition to personal contacts, n9 written inquiries from brokers and others to ascertain whether the station might be for sale "just poured in." Moline explained that a number of its stockholders were interested in these contacts as a means of establishing a value for the station and that it made a practice of not answering such correspondence to avoid giving anyone a "brush-off."

n8 Judge Coyle claims that he was not interested in selling the station and that he picked the $6,500,000 figure "right out of the sky" in an attempt to discourage Shaheen.

n9 Such contacts were also made by Hugh Norman, a broker; Joseph Sitrick, a broker and nephew of Moline's Philip Sitrick; and Joseph Drilling, who apparently represented Crowell-Collier Publishing Company.

16.  The Evening News made its offer to purchase Moline's station in a letter dated September 30, 1966.  There was no discussion among Moline's stockholders regarding the proposed sale of the station, other than that of the persons directly involved in the negotiations, until the meeting in which the offer was accepted.  While some of the stockholders at that meeting appeared reluctant to sell and while a larger number of stockholders expressed no preference, all but one abstaining stockholder voted to approve the sale.  Moreline's acceptance was conveyed to the Evening News in a letter dated October 12, 1966; the formal agreement was executed around December 7, 1966; and the agreement not to compete was adopted on December 21, 1966.  After the agreement to sell was rescinded later the following year, Moline negotiated a loan for $800,000, which was personally guaranteed by its stockholders, on August 16, 1968.  At least 51% of Moline's stockholders have represented that they have no "present" intention to sell the station or their own interests in the licensee.

17.  This is a comparative hearing involving a regular renewal applicant a newcomer, and thus comes within the Court's recent decision in Citiens Communications Center v. F.C.C., Case No. 24,471, C.A.D.C., decided June 11, 1971.  The policies which are applicable to this field await full development in the Inquiry in Docket 19154 (see Further Notice, FCC 71-826), adopted August 4, 1971, and subsequent ad hoc decisions.  This case was begun in 1968, and should be decided upon the record compiled in the full hearing which was held.  We therefore turn to an analysis of the important factors.

18.  The Court in the above case noted that a most important factor is the past record of the incumbent.  It pointed out that "... insubstantial  [*269]  past performance should preclude renewal of a license [, while] superior performance should be a plus of major significance in renewal proceedings..." -- indeed, "... that the public itself will suffer if incumbent licensees cannot reasonably expect renewal when they have rendered superior service..." (Sl. Op. 25).  We have discussed this aspect in our Further Notice, and will not repeat that discussion here,.  The first issue is whether Moline's record, upon which it is primarily to be judged, entitles it to a demerit or "a plus of major significance."

19.  We shall of course examine all the record evidence on this score.  First, looking at the matter from a statistical basis, we find that Moline rendered noteworthy, strong service.  By categories, the breakdown for 1965-66, the last year of Moline's license, is:

 

Percent

Entertainment

77.1

Religious

2.8

Agricultural

2.6

Educational

5.5

News

4.3

Discussion

2.2

Talk/Sport

5.5

In the important local live category, Moline devoted 11.7% of its time to this type of program in the 6-11 p.m. time period and overall 14.9%.  The local programming presented by Moline in these categories has been described by the Examiner in some detail, and it would serve no useful purpose to list here again all these programs, with a brief description of each.  We therefore rely upon the Initial Decision, pars. 19, 20 and 35.  Further, we note that there were a significant number of "specials" presented by WQAD-TV, many in prime time (e.g., "Installation of Bishop O'Keefe"; "Blue Print for Air Power"; " A Time to be Proud"; "Assignment"; and "The American Way").  The station's prime time news shows have not only been innovative but have been specially geared to highlighting matters of local interest.

20.  The above are the statistics.  But what we are dealing with here is not service in vacuo, but service to the locality; we should therefore take into account what the record shows as to the locality's estimate of the service.  When the matter is viewed from the standpoint of community leaders, the record again is most favorable to Moline.  It shows that 28 community leaders believe genuinely that Station WQAD-TV has rendered them and their organizations or institutions valuable programming assistance and service.  (I.D., par. 37).  None of these leaders expressed dissatisfaction with the exposure which they received from WQAD-TV, and indeed, the record is barren of any public complaint against Moline's programming service.

21.  The record affords another pertinent standard -- the comparison with the efforts of like stations in the market or elsewhere.  Here again, the record evidence again reflects favorably on WQAD-TV.  The station has two competitors in the Moline market -- WHBE-TV, Rock Island, and WOC-TV, Davenport.  Upon the basis of the more recent renewal applications of these stations at the time of hearing, it appears that Station WHBF-TV devoted a total of 5.8% of its composite week programming time to local live programming (5.3% live commercial and 0.5% live sustaining); and that Station WOC-TV broadcast a  [*270]  total of 20 hours, 8 minutes out of a total 122.35 hours during its composite week in local live programming (about 16.4%); of the latter total, 5 hours and 50 minutes (about 4.7%) was broadcast during "prime" evening hours (6 p.m. to 11 p.m.); thus, the statistics with respect to WQAD-TV (14.9% overall; 11.7% in 6-11 p.m.) show that its performance during its 1965-66 composite week compares favorable with that of its two competitors in the area.

22.  Ordinarily, the above analysis would dispose of this issue, and we would find that the renewal applicant here was entitled to a "plus of major significance" based upon its past performance record.  But, in this case, there remains the promise vs. performance issue.  We turn now to that issue.

23.  As the Examiner noted, Moline substantially carried out its promises, when one looks only to percentages in programming categories.  However, the issue largely turns upon Moline's failure to present the following proposed "prime time" programs:

Evening Prayer Service, 6:15 p.m., Sunday

Quint Cities Church of The Air, 9:00 p.m., Sunday

Report From Washington, 6:30 p.m., Monday

Municipal Forum, 6:45 p.m., Monday

The Farm Hour, 9:00 p.m., Monday

Quint-Cities Forum, 8:30 p.m., Tuesday

Highway to Health, 9:30 p.m., Tuesday

The Farm Hour, 9:00 p.m., Thursday

Let's Talk It Over, 9:30 p.m., Thursday

Arts and Sciences, 9:00 p.m., Friday

Let's Talk I Over, 9:30 p.m., Friday

Imprint, 9:30 p.m., Saturday

 

Here again, the matter has been exhaustively treated in the initial decision, so that we need only set forth the highlights of our action.

24.  First, we note that there is a disparity between promise and performance.  WQAD-TV did present frequent worthwhile programs in prime time (e.g., the specials noted in par. 19; "Camera on Mid-America" and "Project 8", an in-depth documentary series).  However, these presentations fall significantly short of the above noted proposals.  The next issue is thus the explanation of the disparity.

25.  Proposals in a comparative hearing are not frozen in concrete.  Clearly, leeway must be given, in view of the great passage of time between the proposals and their implementation (e.g., in this case, over six years).  Indeed, Moline's proposed statement indicated that there would necessarily be changes.  There is a heated dispute here between the parties as to whether in these circumstances Moline could reasonably change from its proposals.  Like the Examiner, we find that there is substantial basis for change.  First, Moline could reasonably decide that a prime time agriculture program was not the most appropriate programming choice in view of the limited farming audience and its responsibility as a network affiliate; indeed, we note that CTC's Quinlan asserted that, as a network affiliate, he would not present a regularly scheduled agricultural program in prime time.  Thus, as to this program -- if the matter stood alone -- Moline could simply acknowledge an error in judgment.

 [*271]  26.  But that concededly does not explain 12 programs.  Here we do note that as a pragmatic matter there were changed circumstances which Moline could reasonably take into account.  When Moline made its proposal, ABC was not as strong a television network; its competitive efforts changed quite significantly between 1957 and the early 1960's.  Clearly Moline could take this significant change into account in deciding whether to preempt so much of this changed ABC network programming.  Moline is not unreasonable in pointing also to the marked increase in ABC's sophisticated public affairs offerings, which made it re-evaluate its own "man-on-the-camera" offerings.  There was also Moline's perfectly proper decision to emphasize its 10 p.m. news-casts -- to devote great effort and resources to this new magazine-type news concept (see par. 19, supra); in view of this heightened emphasis, it could also realistically take into account the lead-in shows to the 10 p.m. newscasts.  We need not go on detailing these matters, which are discussed in the initial decision.  It is our judgment that in view of the foregoing circumstances Moline did not act unreasonably in changing its plans to accommodate these considerations.

27.  The question then becomes: Does this factor excuse the failure to present all 12 programs or just a few or most?  Here it is most difficult to quantify, to give any precisely mathematical judgment.  Instead, it comes down to "feel", to an evaluation necessarily based upon one's judgment of the record facts.  It is our judgment on these record facts that Moline should not be faulted in a major sense, since it could reasonably revise its prime time schedule to a large extent because of the above noted considerations, but that it should nevertheless have done somewhat more to fulfill its proposals (par. 23).  Thus, a slight demerit is in order.

28.  We stress that the demerit is only slight for two additional reasons.  First, we note that Moline received no preference in the original comparative hearing on the basis of its program proposals.  The Commission found that each of the applicants proposed a well-balanced program schedule and that differences in emphasis placed by some on one or more categories simply reflected the applicants' varying judgments as to programming, without warranting any preference on the record before the Commission.  Community Telecasting Corp., 32 FCC 923, 925 (1962). In this respect, it is significant that some applicants proposed no prime time agricultural or religious programming or just one prime time discussion program, (e.g., id. at pp. 965-67). Second, we have also taken into account the background to these proposals -- the comparative process as it existed in 1957.  This is an important matter because it represents a sharp difference between the majority and minority in this case.  The minority urge that the Commission has turned its back on KORD, Inc., 31 FCC 85 (1961). We believe that we have done no such thing.  Rather, the minority has turned its back on the consideration that the comparative process in the very respect here involved has been drastically and completely changed.  We shall briefly amplify our position.

29.  First, we adhere to KORD and its importance.  The staff, in processing renewals, has standing instructions to check closely promise versus performance; it has done so, as could be exemplified by a number  [*272]  of instances in each renewal batch.  Nothing we do today detracts from that sound policy.  For, here we are not involved in the true KORD situation; on the contrary, what we have before us is a hangover from the proposed programming area as it existed in the comparative process up to 1965.  That process has been wholly discredited by the Commission.  The most cursory examination shows that this process was a shambles, reflecting poorly both on the Commission and the industry.  The Commission began well in the proposed programming area.  Thus, in Scripps-Howard Radio, Inc., 13 FCC 473, 4 RR 525 (1949), it refused to give any decisional significance to considerable differences in programming by two applicants for a radio frequency, stating that so long as each proposal was meritorious and would serve the needs and interests of the area, differences were to be expected and could be accorded no decisional weight.

30.  In the television field, the Commission initially adhered to this view in Beaumont Broadcasting Corp., 19 FCC 161, 9 RR 816 (1954); but see on reconsideration, 9 RR 818u (1955). However, new and unfortunate ground was broken in the Tampa Tribune case, 19 FCC 100, 9 RR 719 (1954). There, the winning applicant's proposal to devote 43% of its broadcast time to local live programming was an important decisional factor; its "agricultural" (4.6%) and "educational" (4.9%) proposals were also a factor.  With the issuance of this decision, "puffing" in proposed programming became the order of the day, with local live proposals soaring to over 50%.  Sometimes there was decisional reliance on aspects of these proposals, and other times not.  This situation obviously merited fully the criticism of scholars like Professor Kenneth Jones and Judge Friendly.  It was clearly unworkable.  If one takes a sample of 35 cases during the period 1952 to 1965 (when the Commission abandoned this policy), the winning applicants on the average proposed to devote 31.5% of their broadcast time to local live programming, whereas in fact they devoted only an average of 11.8% to such programming.  n10 To again use the Tribune case as an example, the winning applicant, who had proposed 43% local live, in fact devoted 16.2% to this category, as shown by its 1963 renewal application. 

n10 These winning applicants were WJRT, KPTV, WFLA, EXEX, WSAV, KTBS, WKRG, KCRA, KSLA, WREC, KARD, KGW, KOSA, WRVA, WISC, WRCB, WCYB, KETV, WAVY, WRAL WWL, KZTV, WTIC, WFGA, WPSD, WSOC, KMOX, WHDH, KTVU, KIRO, WTOM, WKBW, WILX, WTEN, and KATU.

31.  The Commission recognized that this process was stultifying and in 1965 commendably took steps to end it.  In its 1965 Policy Statement on Comparative Broadcast Hearings, 1 FCC 2d 393, 397-8, the Commission ruled that it would no longer permit evidence to be adduced as to proposed programming unless it had specified an issue to that effect.  While the Commission noted that the parties could seek an issue asking for a preference, based on an unusual attention to local community matters for which there is a demonstrated need, it specifically stated that it would "... not assume, however, that an unusually high percentage of time to be devoted to local or other particular types of programs is necessarily to be preferred" ( id. at p. 397). In short, the Commission was plainly saying to all applicants: "Our past decisions invited a foolish puffing process.  That is over.  Do not puff; there will be no further preferences given on these overblown proposals.  We want serious, solid proposals which will not be in issue at  [*273]  the hearing, but as to which there must be effectuation." (see id. at 398; KORD, supra). And significantly, since the issuance of the 1965 Statement, n11 we have not awarded a preference to any applicant based on proposed programming.  The door to a sorry episode has been firmly closed. 

n11 We also note that at about the same time, the Commission revised its initial and renewal application forms, so that the applicant no longer submits a detailed program schedule.  Instead, what is called for is his proposals, in a revised list of programming categories and sources, and then under KORD adherence to these proposals.  Thus, in this case, CTC did not put any of its programming proposals in evidence, since there was no issue sought as to programming.  In other words, CTC does not claim that its proposed operation will provide better service for the Moline area than that being rendered by the renewal applicant here.

32.  The minority here would reopen the door.  When the minority argues for a large, indeed determinative, demerit against Moline on this promise vs. performance score, it is ignoring not only the considerations set out above, but also that this is a wholly discredited area.  Such action would not indicate to the industry that the KORD principle is sound and must be observed by broadcast licensees.  It would only indicate that when the Commission has employed stultifying, incorrect policies, it adheres to them even after it has acknowledged the very unsoundness of the policy that is being applied.  We do not believe that any such "game-playing" enhances respect for KORD or the Commission.  The way to enforce KORD is not by "grandstanding" in clearly inappropriate circumstances but rather by vigorous, fair scrutiny of every application in each renewal batch.  That is our present course.

33.  For all the considerations discussed in pars. 28-32, we find that the demerit in the area of promise versus performance is of a slight nature and wholly insufficient to overcome Moline's solid preference found in pars. 19-21.

34.  We turn now to the are of integration of ownership and management.  Here Moline was given an important preference in the comparative hearing, based on the participation of Frank Schreiber.  Schreiber did put the station on the air and was general manager for five months.  However, differences developed between the Moline board and Schreiber.  The board felt that Schreiber, although suited to run a big city, large scale TV operation, was too extravagant when operating in a smaller milieu.  Examples are cited as to friction in the area of excessive expenditures on studio and equipment plans, etc.  See I.D.par. 39.  It is not our task to assess blame in this situation.  It is enough to say that such differences do arise and that Moline was acting in reasonable, good faith fashion.  This is further demonstrated by the fact that Schreliber was replaced by Arthur Swift, also an experienced and competent general manager, who was then given a percentage of stock equal to that of Schreliber (9%), so that the integration promise to the Commission would be observed.  With respect to Moline's other stockholders, the findings summarized in paragraphs 9 and 10, supra, show that many of Moline's specific integration promises have not been carried out due to circumstances beyond its control, but that nonetheless Moline's individual stockholders have made a good faith effort to participate in the day-to-day affairs of the station.  We do not find the basis for a demerit in these circumstances.

35.  As to the trafficking issue, the Examiner has dealt with this  [*274]  matter in depth.  There is no evidence or indication in the record that Moline sought the permit in order to traffic.  The record shows that the stockholders in vested substantial sums and found that still further financing was called for.  At about this time -- near the end of the license period -- it also became evident that in lieu of the additional financing, the station could be sole.  The application for sale was filed after the expiration of the three-year period and thus was completely consistent with our rules and policies.  We point out again that Moline has rendered solid, good service to its area.  Like the Examiner, we find in these facts no basis for holding Moline to be an opportunist or "trafficker".

36.  We turn now to a consideration of the other factors.  The important factor, diversification of the media of mass communications, does not have decisional significance in this case.  As to the integration factor, the Examiner found "Moline deserves to be preferred decisively on the ground that its present (and proposed) integration of ownership in management by persons with actual operative television experience in the Moline area, all of whom have resided in the Quad City area for some years, and who participate in local community affairs, and in varying degrees in the operations of Station WQAD-TV, is superior qualitatively, to the proposed integration in management by CTC's Mr. Quinlan who is not a present local Quad City resident." We see no reason to disturb this finding.

37.  Under these circumstances, we are convinced that Moline's license should be renewed.  As set forth above, Moline is entitled to a "plus of major significance", based on its past performance.  Only a slight demerit attaches on the promise vs. performance issue.  It is clear, in view of the entire record in this case, that the public interest, convenience, and necessity will be best served by grant of Moline's renewal application and by denial of CTC's application for a new facility.  n12

n12 Under these circumstances, CTC's petition for leave to amend its application and the supplement thereto, which would show the withdrawal of a 5% stockholder, will be dismissed as moot.

38.  Accordingly, IT IS ORDERED:

(a) That the petition for leave to amend filed September 23, 1969, and the supplement thereto filed October 16, 1969, by Community Telecasting Corporation ARE DISMISSED as moot;

(b) That the application of Moline Television Corporation for, renewal of its license for television station WQAD-TV, Moline, Illinois (File No. BRCT-584), IS GRANTED:

(c) That the application of Community Telecasting Corporation for a new television station in Moline, Illinois (File No. BPCT-4032), IS DENIED; and

(d) That the motion to correct transcript of oral argument, filed July 22, 1970, by Community Telecasting Corporation, which seeks corrections that should be made, IS GRANTED, and that the transcript of oral argument in this proceeding on July 13, 1970, IS CORRECTED as requested.  n13

n13 The mistake involving the name "Lischer" on page 1709 of the transcript occurs in line 9, not, as CTC's motion states, in line 10.

 

FEDERAL COMMUNICATIONS COMMISSION, BEN F. WAPLE, Secretary.


DISSENTBY: BARTLEY: JOHNSON

 

DISSENT:

 [*276]  DISSENTING STATEMENT OF COMMISSIONER ROBERT T. BARTLEY

I dissent.

I would deny the WQAD-TV renewal application on the grounds that Moline failed to meet its burden of proof on the disqualification issues as to (a) promise v. performance, and (b) trafficking in broadcast licenses.

Even assuming that Moline should not be disqualified, I believe that, on a comparative basis, CTC must preferred to Moline.  The majority opinion gives decisional preference to Moline on integration of ownership and management.  I believe that the preference is misplaced and constitutes error.  Eighty percent of CTC ownership would be integrated on a full time basis in management of the station, whereas only ten percent of Moline's ownership would be.  Accordingly, in my opinion, the preference on integration must go to CTC.

The majority opinion gives Moline a substantial plus for "superior performance." Moline's performance was inferior even to the standards it set for itself.  Its performance fell substantially short of what it originally proposed as serving the public interest.  Even the Examiner in his Initial Decision in this case did not go so far as to find the performance "superior;" only that WQAD-TV "performed an effective service" and "carried worthwhile programs." It appears to me the majority decision also sets forth examples of worthwhile and effective programs, of which most any station has some, and then calls the overall programming "superior" to qualify for a "plus of major significance" under the Court's recent decision in the Citizens case, which invalidated the Commission's 1970 Policy Statement on renewals (Case No. 24,471 C.A.D.C.)

The court also stated that "... insubstantial past performance should preclude renewal of a license," and in my opinion the record in this proceeding shows insubstantial past performance rather than superior performance.  The majority decision bases its "superior" finding to a great extent upon the rationale that WQAD-TV broadcast more local live programs than its two competitive stations in the market.  The rationale, in my opinion, is illogical and invalid.  The rationale means that if other stations in a market carry no news, no educational programs, no public service programs of any kind, and another station carried one-half percent of each, that station should be accorded a "superior performance" award.  I don't believe that's what the court had in mind, or the Commission should practice in its granting of licenses.

The "insubstantial" nature of WQAD-TV's performance is magnified by what it originally "promised" by way of programming representations and what it actually performed.  Moline "promised" to broadcast substantially more "live" and "sustaining" programming and substantially less "commercial" and "spot announcements" than it actually broadcast from 1963 to 1966, as shown by the following table:  [*277] 

 

 

Composite weeks

 

Proposed

 

 

 

63-64

64-65

65-66

Commercial

66.1

86.9

87.4

89.2

Sustaining

33.9

13.0

12.6

10.2

Live

24.1

15.4

14.9

14.9

Spot announcements

335.0

369.0

379.0

572.0

Non-commercial spot announcements

160.0

216.0

178.0

212.0

 

For the same period, Moline, in none of the composite weeks, 1963-1964, 64-65, 65-66, devoted as much time as it said it would to "Religion," "Agriculture," "Education," "News" (except 64-65), "Discussion," and "Talk/Sport." It devoted substantially more time to "entertainment" than it said it would (77.1% v. 62.6%).

I contend that the record does not support a finding of "superior" performance, but does establish that, under the promise versus performance issue, as well as the trafficking issue, WQAD-TV must be found disqualified.

I believe that the proposed Decision attached to Commissioner Johnson's Dissenting Statement herein should be the Decision of this Commission.


DISSENTING OPINION OF COMMISSIONER NICHOLAS JOHNSON

"Who's Judge Wright?  He is only one man!" -- Comment by FCC staff member in Commission meeting during discussion of the Court of Appeals' opinions in CCC n1 and BEM n2 cases. 

n1 Citizens Communications Center v. FCC,     F. 2d    , 22 P & F Radio Reg. 2d 2001 (D.C. Cir. 1971) (hereafter cited CCC).

n2 Business Executives' Move for Vietnam Peace v. FCC,     F. 2d    , 22 P & F Radio Reg. 2d 2089 (D.C. Cir. 1971).

This is a lawless decision.  It directly violates the recent Court of Appeals decision n3 on the Commission's treatment of comparative renewal cases.  It overrides or ignores basic Commission precedent in the KORD case, n4 in WHDH, n5 and the standards set out in the 1965 Policy Statement on Comparative Hearings.  n6 It reaches a result that I would find impossible to defend.  I dissent. 

n3 CCC, supra note 1.

n4 KORD, Inc. 31 F.C.C. 85, 21 P & F Radio Reg. 781 (1961) (hereafter cited KORD).

n5 WHDH, Inc., 16 F.C.C. 2d 1, 15 P & F Radio Reg. 2d 411, (1969), reconsideration denied 17 F.C.C. 2d 856, 16 P & F Radio Reg. 2d 185 (1969) (hereafter cite WHDH).

n6 Policy Statement on Comparative Broadcast Hearings, 1 F.C.C. 2d 393, 5 P & F Radio Reg. 2d 1901 (1965) (hereafter cited 1965 Policy Statement).

I have attached as appendix a draft opinion that I believe represents the correct disposition of this case.  My main purposes in this statement are to defend the draft opinion against the unwarranted and incorrect attack by the majority and to indicate that even accepting the premise of the majority (that the renewal applicant, Moline, is not disqualified) the new applicant, CTC, should be preferred.

The history of this case extends back into the 1950's and is relevant to an understanding of the issues now before the Commission.  A comparative proceeding was begun June 30, 1958, to choose among several competitors vying to become the licensee of TV Channel 8 in Moline, Illinois.  The Hearing Examiner's Initial Decision granted the channel to applicant Community Telecasting.  n7 On review the Commission, by  [*278]  a 3 to 2 vote, determined that Moline Television Corp. should be preferred.  n8 On review in the U.S. Court of Appeals for the District of Columbia, the Commission was affirmed.  n9 Then in 1968 Moline Television's renewal application was designated for hearing on disqualification issues, i.e., whether it had performed on its promises - promises the Commission relied on in the comparative hearing in which Moline Television was originally granted its license.  In addition, an application by CTC, a new group seeking the Channel 8 license, was consolidated for comparative hearing in the event that Moline was not denied renewal.  n10 Before the Examiner issued his Initial Decision, the Commission decided WHDH for the first time.  n11 After the issuance of the Examiner's Initial Decision, n12 which recommended a grant of renewal to the present licensee, Moline, the Commission issued its opinion on reconsideration in WHDH.  n13 And since then there have been the court review of WHDH, n14 the issuance of the 1970 Policy Statement, n15 its demise in court, n16 and the opening of a proceeding to define "substantial" or "superior" performance in the comparative renewal situation.  n17

n7 Community Telecasting Corp., 32 F.C.C. 939, 24 P & F Radio Reg. 23 (1960).

n8 Community Telecasting Corp., 32 F.C.C. 923, 24 P & F Radio Reg. 1 (1962).

n9 Community Telecasting Corp. v. FCC, 317 F. 2d 592 (1963).

n10 Moline Television Corp., 11 F.C.C. 2d 592 (1968).

n11 WHDH, supra, note 5.

n12 Moline Television Corp., FCC 69D-11,     F.C.C. 2d    ,     P & F Radio Reg. 2d     (1969).

n13 WHDH, supra, note 5.

n14 Greater Boston Television Corp. v. FCC,     F. 2d    , 20 P & F Radio Reg. 2d 2052 (D.C. Cir.; 970), cert. denied,     U.S.     (1970).

n15 Comparative Hearing on Renewal Applicants, 22 F.C.C. 2d 424, 18 P & F Radio Reg. 2d 1901 (1970), aff'd on rehearing 24 F.C.C. 2d 383, 19 P & F Radio Reg. 2d 1902 (1970).

n16 CCC, supra, note 1.

n17 Broadcast Renewal Applicant, 27 F.C.C. 2d 580 (1971).

The present case cannot be understood unless one is aware of the specific nature of events surrounding the choosing of a licensee for Channel 8 in Moline, of the pressure now within the Commission to dilute and "invent around" the effects of the CCC case, and of a determination -- seemingly no matter what the facts may show -- never the find in favor of a competitor who is opposing a present licensee at renewal time.

The majority's decision in this case rests on four findings.

First, it concludes that the failure of Moline to perform as it had promised, and as the Commission and the court in reviewing the Commission's initial grant of license had expected, should result in a slight demerit.  n18

n18 Majority Opinion, para. 27.

Second, the majority concludes there is no basis to conclude that Moline is an opportunist or a trafficker.  n19

n19 Majority Opinion, para. 35.

Third, the majority concludes that Moline's integration of ownership and management is superior to new applicant CTC's.  n20

n20 Majority Opinion, para. 36.

And, finally, the majority concludes that Moline as a renewal applicant is entitled to a "plus of major significance" based on its past performance.  n21

n21 Majority Opinion, para. 22.

In my view, the appropriate resolution of the first two issues compels a finding that Moline is not entitled to renewal under applicable Commission policy and law.  Even assuming for the sake of argument that Moline is not disqualified, the Commission should conclude that CTC  [*279]  is preferred by an appropriate application of the Commission's criteria to the comparative issues.

In its discussion of the question of promise versus performance, and whether Moline fulfilled the representations made to the Commission, the majority says its "feel" of the case is that Moline cannot be charged with a major demerit because it was reasonable to revise its primetime schedule.  n22 Rather than rely on "feel," I prefer to examine the history of the representations made to the Commission. 

n22 Majority Opinion, para. 27.

The Federal Communications Commission, like all administrative agencies, is granted by Congress a certain amount of discretion to decide cases and make rules.  The very breadth of the language in §  309 -- "public interest convenience and necessity" -- allows the Commission to exercise its regulatory and adjudicatory powers with the minimum of restraints felt by a court of law.  Yet the same breadth of language invites for a certain amount of abuse of that discretion.  The F.C.C. is still bound by the rule of law.  It cannot decide cases arbitrarily, and it owes at least an explanation when it reverses itself on an issue of materiality.  And, it must decide the cases before it based on the evidence brought forth in that particular case.  Its findings of fact must be supported on the record taken as a whole.  Universal Camera v. NLRB 340 U.S. 474 (1951). And its decisions must be consonant with the law applicable to the case before it -- statutory, judge-made, or Commission-made.  Crowell v. Benson.  285 U.S. 22 (1932).

In this case, the majority states: "it comes down to 'feel,' to an evaluation necessarily based upon one's judgment of the record facts." (para. 27.) Of course, the very basis of a decisional process is the weighing of facts and law within one's own mind; no man is a computer, and thankfully so.  However, I consider the majority's use of the word "feel" to be at the very least highly unfortunate, and possibly grounds for eventual reversal.  Unfortunate, because it tends to increase the suspicion of those critics of the Commission and of the administrative process that the decisions of the Commission are made in a haphazard, illogical manner unrelated to the substantial merits of the case; grounds for reversal, because it might lead a reviewing court to decide that the Commission's majority decision was in fact arbitrary, not based on the facts of the case taken as a whole.

Of course, I would rather the majority decide the issue differently than merely change the language it uses to come to what I believe an illogical result; still, I cannot let the matter pass without some comment.

The 1960 Hearing Examiner's Initial Decision, recommending a grant to an applicant other than Moline, made the following findings on Moline's plans for its station operation, and its programming proposals:

Insofar as planning is related to proposed programming, all applicants are about equal except that it may be noted that Moline relies primarily upon subjective factors, i.e., the professed intimate knowledge of its officers, stockholders, and directors of the Moline area rather than objective data gleaned from contacts and observations specifically for the purpose.  Moline's position is that by the time of a grant, conditions may be different anyway, hence the continuing knowledge of, and experience with, the changing community by its principals are of as much or more value than present collections of data.

* * *

Moline's proposals [on programming] are briefest because of reasons, no doubt, sketched in the paragraph, supra, on planning.  In the final analysis Moline's philosophy may be the most realistic, but it leaves much to conjecture.  That is not to say that Moline's program proposal is not a bona fide one or one which would not or could not be effectuated; it is only to say that it makes comparison more difficult.  All proposals presented are well-balanced and reserve commendation, especially in the area of farm programs and news coverage.  n23

n23 Community Telecasting Corp., 32 F.C.C. 939, 1070-71, 24 P & F Radio Reg. 32, 167 (1960).

 

 [*280]  The Examiner awarded a slight preference on programming to an applicant other than Moline.  n24 Clearly, however, he relied on the programming proposals of Moline in deciding how to evaluate all the applicants.  It is ironic that he also expressed concern over the specificity of Moline's proposals, and the Likelihood that they would be effectuated.  The Examiner ultimately chose an applicant other than Moline as the preferred licensee.

n24 Id.

On review the Commission reversed and chose Moline by a 3 to 2 vote.  n25 The question of whether Moline's programming proposals reflected the needs of the community and whether they would be effectuated were raised on review.  The Commission concluded that no preference should be awarded for programming because the proposals were equivalent.  As for the Commission's then recent holding in KORD, the Commission said that KORD "involves the continuing responsibility of a licensee to keep abreast of community needs, and therefore is not applicable here." n26 The Commission did agree with the Hearing Examiner that all programming proposals were well-balanced.  But the major reason for the Commission's preference for Moline was the "superiority of Moline in the area of broadcast experience." n27 That preference rested on one fact -- the broadcast experience of Frank Schreiber, President and 10% stockholder of Moline.  n28 The importance of Schreiber's presence to the rationale of the Commission decision was again emphasized in the subsequent court appeal. 

n25 Community Telecasting Corp., 32 F.C.C. 923, 24 P & F Radio Reg. (1962).

n26 Id. at 925.

n27 Id. at 931.

n28 Id. at 930.

In a per curiam affirmance of the Commission's grant to Moline, the Court of Appeals for the District of Columbia commented on the Commission's reliance on the participation of Mr. Schreiber:

We see no basis for downgrading the experience of a principal whose training and background had included the duties of supervision of the departments of an important outlet which involved programming, production, public relations and coordination of activities.  n29

n29 Community Telecasting Corp. v. FCC, supra, note 9, at 593-4.

 

The Court also concluded that a community survey was not required by Moline's principals since "Their knowledge and experience in such respects had produced a consensus as a result of their many meetings and discussions out of which emanated the suggestions for the programs which were incorporated into their proposals." n30

n30 Id. at 593.

Then in 1968, in the order beginning this proceeding, a unanimous Commission set for hearing the renewal application of Moline and consolidated a 1967 petition to deny and an application by CTC seeking the license for Channel 8.  n31 The Commission said: "The information before the Commission raises questions as to whether the licensee failed to carry out programming and integration of ownership and management representations made at the comparative hearing and whether the assignment applicated constituted an attempt to traffic in broadcast licenses." n32 The Commission also said on the promise versus performance question:

n31 Moline Television Corp., supra, note 10.

n32 Id. at 595.

 [*281]  We have made clear that a licensee is not held to a rigid implementation of proposals [citing KORD].  But Moline has not alleged that its original proposals were not in keeping with the needs of the area.  The closest it came was the general statement repeated several times in its opposition pleading to the petition to deny: "...  [It] was the judgment of the licensee not to present the programs." In view of the representation made, we must ascertain the basis of the licensee's judgment and this matter will be included as one of the issues in the hearing being ordered.  n33

n33 Id. at 593.

Based on the record of that hearing, the majority here concludes that Moline should receive a slight demerit for the failure of its promises to live up to its performance, but that its programming is entitled to a "plus of major significance," the holding crucial to the majority's determination that Moline is to be renewed.

I disagree with the majority, both as to its analysis of the law of the KORD case, and as to its evaluation of the evidence in the record before us.

The majority suggests that KORD is not applicable to this case.  Its basic position is that the old comparative renewal process encouraged extravagant claims in programming the everyone knew would not be effectuated, and therefore when a licensee does not follow through on its representations it is blameless.  This position raises a number of questions.  Why does Moline get any demerit at all?  What did a unanimous Commission have in mind in 1968 when it made KORD directly relevant to this proceeding, and stated that Moline would have to show more than that it decided not to present the proposed programs?  The answers I think are clear.  The majority is not forthright enough to completely disavow KORD -- all it can do here is to undermine about 90% if it.  The majority is willing to take virtually any excuse that Moline offers for its failure to perform on its promises.

The majority suggests that KORD is undermined because of the failure of the process of comparing program proposals in the old Commission comparative hearings.  But that view misreads what the Commission held in KORD.  Recognizing the appropriate judgment to be exercised by the licensee in the area of programming, the Commission also said: "But it is quite another thing for the applicant to drastically curtail his proposed public service programming..." simply to further his profit position, "without an appropriate and adequate finding of a change in the programming needs of his area." n34 This is the standard the Commission set up in KORD.  This is the standard it proposed should apply to this case when it was set for hearing.  And this is the standard the courts have understood.  In Crowder, a trafficking case, the Court said:

n34 KORD, supra, note 4, at 89.

Service in the public interest presupposes an intent to operate the broadcast facility as represented [citing KORD] for the duration of the license, under Commission supervision, honestly without concealment, and responsive to the broadcasting needs of the community and nation.  It does not exclude an intention to profit from the operation of a broadcast facility, since this "is as essential to the full development of broadcasting as it is to the development of any industry."

Trafficking on the other hand allows exploitation of a broadcast facility to enhance its value as a marketable asset.  It rewards commercialization rather than mature programming.  It may inflate the price of a station so that only  [*282]  wealthy individuals or businesses will be eligible transferees.  It may lead the new ownership, in an effort to recover its investment, to decrease the quality of the programming while increasing the quantity of the commercials -- all at the expense of public audiences.  (Other footnotes omitted, emphasis in the original.) n35

n35 Crowder v. FCC, 399 F. 2d 569, 572 (D.C. Cir. 1968), cert. denied 393 U.S. 962 (1968).

 

All that KORD required in the case before us was an adequate explanation from Moline as to why it changed its programming performance -- an explanation keyed to an evaluation of community needs.  The explanation that the evidence shows, and the majority accepts, is that Moline concluded it could make more money by plugging into the network fulltime and ignoring its proposed programming.  Its general manager was fired because he would not go along, or as the majority characterizes it in paragraph 34, he was "too extravagant." Thus, not only did Moline not perform on its programming proposals, it fired the man who tried to put those proposals into effect -- the man whose presence in Moline's operation the Commission relied on in granting the original license!

The majority makes much of the door it believes it has closed by its "interpretation" of the applicability of KORD.  n36 The only door the majority closes in this decisions the one that would give competitors a fair opportunity in a comparative renewal hearing. 

n36 Majority Opinion, para. 31-32.

The hollowness of the majority's proposed application of "promise versus performance" under KORD is further illustrated by its representation as to the Commission's present renewal process.  To hear the majority, the Commission's "present course" is a "vigorous, fair scrutiny of every application in each renewal batch." n37 This is a totally discredited view of what the Commission actually does at renewal time, as the increasing intervention by community groups at renewal time attests.  Even the majority has recognized the need to drastically improve our renewal processes.  n38

n37 Majority Opinion, para. 32.

n38 Renewal of Broadcast Licenses, 27 F.C.C. 2d 697 (1971).

For example, the Commission's "vigorous, fair scrutiny" in the last renewal batch had the following results.  Renewals are handled primarily at staff level, with the Commission receiving a report on what the staff proposes to do with all the stations up for renewal.  The August 1, 1971 renewal batch was for the stations in Texas.  The Commission received no report on the proposed programming of the 141 FM stations in Texas, since the majority apparently feels that such FM stations are not important enough even to inquire into their news, public affairs, and other non-entertainment programming proposals.  Three of the 58 TV stations up for renewal proposed less than 5% news, or less than 1% public affairs, or less than 5% for combined public affairs and other non-entertainment programming excluding news.  Of the 283 AM stations up for renewal, 30 proposed less than 5% news, or less than 1% public affairs, or less than 5% public affairs and other non-entertainment programming, excluding news.  In line with its "vigorous, fair scrutiny" the Commission made absolutely no further inquiry of the staff on these applications, and approved the staff's proposed grant of these renewal applications.  Thus, on the "promise" side, the majority apparently cares nothing about what programming  [*283]  proposals are made at renewal time.  It gets no reports on FM stations, and approves whatever an AM or TV station proposes.  As for performance, there are no cases where the Commission has taken action adverse to a licensee in this renewal batch, or in any other so far as I know, because the performance has not measured up to the proposals made when the Commission last granted his license.  In fact, Commission "scrutiny" consists of writing letters to those renewal applicants whose performance is more at variance than usual with its past proposals, asking for an explanation.  It is my understanding that there is virtually no situation in which the licensee cannot adequately explain to our staff (acting under instructions from the Commission) the reasons that the performance did not measure up to the promise.

So much for "vigorous, fair scrutiny." In short, although the Commission has proposed revisions in its renewal processes, the situation today is no different than that detailed in the renewal studies which Commissioner Cox and I have prepared during the past five years.  n39

n39 Renewal of Standard Broadcast and Television Licenses [Oklahoma], 14 F.C.C. 2d 1 (1968); Renewals of Standard Broadcast and Television Licenses [N.Y.-N.J.], 18 F.C.C.2d 268, 269, 322 (1969); Renewals of Standard Broadcast and Television Licenses [Md.-Va.-Del.], 21 F.C.C. 2d 35 (1969). The only response of the majority to these analyses has been the rulemaking, cited in ftn. 38, supra.  In the interim, the old ways remain.

The question of trafficking has been adequately dealt with in the proposed draft majority opinion, paragraphs 27-29, which is an appendix to this opinion.  The test of Crowder, the decision by the licensee that he no longer wished to operate the station, that he was only interested in improving the profit position of the station so that it could be sold for a 900% profit, is the only conclusion that the evidence in case will support as to Moline.  This was the motivation for the termination of Schreiber five months after he began as general manager.  This was the motivation for the continuous negotiations with buyers on price.  The "explanation" of the need to obtain financing is belied by the history of this proceeding -- the proposed sale by Moline fell through under the pressure of Commission inquiry sparked by a petition to deny, and financing was subsequently obtained.  Now Moline has no "present" intention of selling.

In sum, these conclusions should lead to a denial of Moline's application for renewal irrespective of whether there is another applicant competing for the license of Channel 8.

There can be no dispute that the Commission and the court relied on Moline's promises both as to programming and as to the role of Schreiber.

 

There can be no dispute that these promises were not fulfilled, without any notification to the Commission, or any effort to ascertain whether the needs and interests of the community had changed so as to warrant changed programming responsive to changed needs.

 

There can be no dispute that the Commission, in setting this case for hearing, rejected the explanation for the non-performance that the majority now accepts.

 

There can be no dispute that the Commission, in setting this case for hearing, intended that KORD should be fully applicable, and that an adequate explanation by Moline would be required.

 

 [*284]  There can be no dispute that Moline's prime motivation, prior to the expiration of its license, was not to operate the station but to sell it for the highest profit possible, and that course was abandoned only after Commission inquiry and the filing of a petition to deny.

Without abandoning my view that Moline's application for renewal should be denied, I turn now to the majority's evaluation of Moline and CTC under the Commission's comparative criteria.  Although it is nowhere made explicit, it is my understanding that the majority believes it is using the 1965 Policy Statement on Comparative Broadcast Hearings n40 as the basis of its evaluation of the comparative merits of Moline and CTC.  Although I prefer the approach of the draft opinion I have proposed, I believe an appropriate resolution of this case could be made by deciding the case strictly on the comparative merits, and not reaching the question of whether Moline should be disqualified.  I would find significant demerits for Moline on the promise versus performance and trafficking issues, that Moline is entitled to no preference on its past broadcast record, and that CTC is preferred on its proposed integration of ownership and management.  There is no need to further discuss the promise versus performance or trafficking issues under a comparative evaluation, and I turn now to the integration of ownership and management issue.  In its opinion here the majority simply agrees with the Hearing Examiner's conclusion on proposed integration of ownership and management.  n41

n40 1965 Policy Statement, supra, note 6.

n41 Majority Opinion, para. 36.

Integration of ownership and management refers to the Commission's desire to have licensees managed by owners of the station.  Credit for integration of ownership and management is given only if the owner is involved in management full-time, or in substantial amounts of time on a daily basis.  The higher ranking the management position by an owner, the more credit for integration.

The facts of this case indicate a substantial preference for CTC.  Two owners, who hold 80% of the CTC stock, would be fully integrated into the management of CTC.  The President and General Manager would be a 69% owner.  For Moline, only one stockholder, who owns roughly 10% of the Moline stock, would be fully integrated.

The majority agrees with the Examiner's conclusion that Moline should receive a decisive preference because of the quality of the integration -- apparently the fact that Moline's integrated owner is a Moline resident, had had experience broadcasting in Moline, and that other stockholders, who receive no credit for their management of the station since it is on a random, part-time basis, are also Moline residents with experience with the present licensee.  The Examiner's conclusion, and therefore that of the majority, is completely at variance with the Commission's most recent holdings on integration of ownership and management.

The Commission has rarely had occasion to decide integration issues in a comparative proceeding, but in its most recent holding, decided April 28, 1971, the Review Board was reversed and a moderate preference was awarded on comparative grounds to an applicant whose  [*285]  full-time integration was roughly 35% as compared with a competitor with roughly 6%.  n42 And this preference would have been awarded despite any problems with the past broadcast record of the 6% owner.  It is ironic that the majority relies on the local residence and local experience of the sole Moline stockholder who would receive credit for integration of ownership and management.  He was the person that replaced Schreiber.  And the initial granted relied on the integration of owner Schreiber into the management of the station -- Schreiber coming from Chicago to assume that position.  CTC now loses in the eyes of the majority because its integrated owner-manager is coming from Chicago. 

n42 East St. Louis Broadcasting Co., 29 F.C.C. 2d 170, 173-4, 21 P & F Radio Reg. 2d 992, 997-8 (1971). Commissioner Houser in his concurring opinion apparently agrees that majority has applied incorrectly its standards on integration.

There remains one issue upon which the majority can still claim to rest its decision.  For the majority, Moline's past programming is entitled to a "plus of major significance," n43 despite the majority's conclusion that Moline must be assessed a slight demerit for its promise versus performance failures.  I would hold that Moline's past and proposed programming falls within the bounds of mediocre to average, and as such is entitled to no decisional significance. 

n43 Majority Opinion, para. 22.

The difficulties in making a clear evaluation of Moline's past programming stem in part from the variety of Commission actions that occurred during the time this case was being litigated at the Commission.  This case was tried before the Commission's first decision in WHDH.  The Initial Decision was issued before the Commission's reconsideration of WHDH.  The case was briefed and argued before the Commission while the 1970 Policy Statement was in effect, and before the CCC case overturning the 1970 Policy Statement and the Commission's initiation of the "substantial performance" Inquiry.  In view of the sharp turns in the Commission's and court's views of the standards to be applied to past programming I think some discussion of the history is warranted.

The first WHDH decision explained the standard in comparative renewal hearings for evaluating past performance.  The 1965 Policy Statement was applied, and the Commission said:

As the policy statement states, past records are considered to determine whether the record shows: (i) unusual attention to the public's needs and interests, such as special sensitivity to an area's changing needs through flexibility of local programs designed to meet those needs, or (ii) either a failure to meet the public's needs and interests or a significant failure to carry out representations made to the Commission.  In the latter connection, the Commission stated that the fact that such representations have been carried out does not lead to an affirmative preference for the applicant, since the Commission expects, as a matter of course, that a licensee will carry out representations made to the Commission.  n44

n44 WHDH, Inc., 16 F.C.C. 2d 1, 10, 15 P & F Radio Reg. 2d 411, 424 (1969).

 

The Commission also stated that a past record "is meaningful in the comparative context only if it exceeds the bounds of average performance.  We believe that this approach is sound, for otherwise new applicants competing with a renewal applicant would be placed at a disadvantage if the renewal applicant entered the context with a built-in  [*286]  lead arising from the fact that it has a record as an operating station." n45

n45 Id. at 9-10.

On reconsideration the Commission affirmed this view:

[In] keeping with the policy statement we asserted that a past broadcast record within the bounds of average performance would be disregarded, since average future performance is expected, and that emphasis would be given to records which, because they are either quite good or very poor, give some indication of unusual performance in the future.  We recognized that a renewal applicant must literally run on his record and such a record is the best indication of its future performance.  However, we held that such a record is meaningful in the comparative context only if it exceeds the bounds of average performance.  n46

n46 WHDH, Inc., 17 F.C.C. 2d 856, 857, 16 P & F Radio Reg. 2d 185, 189 (1969).

 

In Citizens Communications Center v. F.C.C. (CCC), the Court criticized the past Commission decisions in comparative renewal cases, and fully approved of the Commission's rationale in the WHDH decisions.  n47

n47 CCC, supra, note 1, at ftn. 23 and accompanying text.

Against this background of Commission and court standards for evaluating the past programming record, it is of interest to note two facts.  In his Initial Decision in this case, the Examiner explicitly refused to find that Moline had performed in a manner other than average, despite the criteria of the WHDH case that was available to him.  n48 In his view there were no standards the Commission had enunciated in WHDH were unwise.  In oral argument, the Commission's Broadcast Bureau had a firmer view:

n48 Moline Television Corp., supra, note 12, para. 107.

[The] Bureau would have to conclude that Moline's performance was not substantial.  n49

n49 Oral Argument Transcript 1716.  It is important to note that the Hearing Examiner, in his hurry to expedite this case, denied unopposed Broadcast Bureau requests for extension of time in which to file its brief, and the Commission is thereby deprived of the important advantages full participation by the Bureau would have provided in this landmark case.  More than 2 1/2 years have passed since the issuance of the Initial Decision, and in retrospect, a little additional time for the Bureau to fully participate in a case of this magnitude probably would have been a wise course.

 

Of course, at the time of the oral argument, a finding of substantial performance under the Policy Statement would have resulted in automatic renewal for Moline.  The Bureau explained the basis for its conclusion:

[In] this case the strong affirmative representations by the applicant in its original proposal, without any, from our point of view, meaningful basis for making major changes in it, is the real reason why we have indicated to you that we believe they have not substantially performed within the criteria of your statement.  n50

n50 Oral Argument Transcript 1728.

 

The majority awards a deciding monitors against monitors at the transmitter, phrase in the CCC case it likes: "superior performance should be a plus of major significance in renewal proceedings." n51 In its footnote to that phrase, the Court suggested three criteria the Commission should consider in defining superior performance:

n51 CCC, supra, note 1, 22 P & F Radio Reg. 2d 2001, 2018 (D.C. Cir. 1971), and Majority Opinion, para. 18 (Emphasis in original).

Along with the elimination of excessive and loud advertising and delivery of quality program’s one test of superior service should certainly be whether and to what extent the incumbent has reinvested the profit on his license to the service of the viewing and listening public.  n52

n52 CCC, supra, note 1, at ftn. 35.

 

 [*287]  These phrases the majority apparently doesn't like and they are ignored -- note disputed, simply ignored.  The majority's road to "superior performance" is short.  The breakdown of Moline's programming is repeated and found to be noteworthy.  n53 There are kudos for "local, live" although it is significantly less than Moline said its community needed when it received its license.  The majority likes Moline's specials and its news programs, without much explanation as to why.  In paragraph 20 we learn that no one complained -- although in oral argument the Broadcast Bureau pointed out that some community leaders would prefer to have available the prime time Moline had promised, but no one ever came back to let them know that the time was still available.  n54 Finally in paragraph 21 we find that Moline measure slightly better than two other TV stations in the Moline market, using more recent statistics from the other two stations.  In one category, amount of local, live programming, Moline does less well than WOC-TV.

n53 Majority Opinion, para 19.

n54 Oral Argument Transcript 1725.

In essence there are no reasons for the majority's conclusion that Moline's performance is superior.  It has to like what Moline has done, or there is no way to find it superior.  In the only comparison with other stations, the majority relies on a sample of two other stations, and then in only one category.  Their conclusion is taken virtually verbatim from the Initial Decision at paragraph 36.  Nothing is said about any of the other important categories of station performance and how Moline would compare.  For example, the Commission data in the "substantial performance" Notice of Inquiry would suggest that Moline's news performance, 4.3%, would rank in the lowest 10% of all VHF network affiliates, in an analysis based on recent renewal forms!  n55 With so small a sample, and with comparisons in only one category, the majority's "pertinent standard" is worthless. 

n55 Broadcast Renewal Applicant, supra, note 17, at 586.  None of the other categories of Moline's programming are compared.  If the majority had checked Moline Exhibit 50, they would have discovered that Moline compares very badly in the news category -- according to the material supplied by Moline, its competitors programmed 8.2% (WHBF-TV) and 11% (WOC-TV) news, while Moline programmed less than half, 4.3%.  Finally, the "substantial performance" test proposed by the Commission, 27 F.C.C. 2d 583, 584 (1971), would not be met by Moline in the news area, and probably not in prime time for news or public affairs.

In short, there is nothing in the record to indicate that Moline's programming is anything more than average, and no amount of "puffing" by the majority can make it "superior."

There is little that needs to be added.  One gets the feeling that there was a result here that had to be reached by the majority, and a very difficult and strained effort has gone into justifying it.  I am afraid that "past broadcast record" has been equated with "substantial performance" which has then been equated with "superior performance" -- and that that finding means automatic renewal.  In the CCC case the Court said that the Commission had made comparative renewal hearings into petition to deny hearings, and that S. 2004 had been adopted administratively.  n56

n56 CCC, supra, note 1, 22 P & F Radio Reg. 2d 2001, 2015 (D.C. Cir. 1971).

 [*288]  In this case the Commission has gone farther still.  S. 2004 would have provided that if under a petition to deny a renewal applicant should be found unqualified for renewal, then the Commission could consider new applicants.  But here the renewal applicant is not qualified to be renewed, there is a new applicant, and the renewal applicant still gets renewed.

I dissent.


APPENDIX:

APPENDIX

RULINGS ON EXCEPTIONS TO THE INITIAL DECISION EXCEPTIONS OF MOLINE TELEVISION CORPORATION

Exception No.

Ruling

 

1-8 Exception to paragraph 137 (sic.,107) of the Initial Decision.

Denied in substance.  The Examiner's findings adequately and correctly reflect the record.

 

Granted to the extent reflected in our Decision herein.

 

EXCEPTIONS OF COMMUNITY TELECASTING CORPORATION

 

1, 14, 16, 73, 124-131, 139-143.

 

 

Denied.  The Examiner's findings adequately and correctly reflect the record.

 

2-13, 15, 17-61, 63-72, 74-123, 132-137, 144-145.

 

 

Denied in substance.  We believe that the significant evidence concerning Moline is adequately and correctly reflected in the Examiner's detailed Initial Decision. Further findings would have only a cumulative effect, and, in view of the reasons for our resolution of the issues, it is clear that they would not be of decisional significance.  While exception has also been taken to certain findings of the Examiner's Initial Decision on the grounds that they are contrary to the evidence of record, irrelevant, and misleading, we have given no weight in our Decision to such findings and thus they are immaterial to the determination made herein.

 

62

Denied.  Evidence of other local stations' records may be considered in evaluating Moline's past broadcast record. See paragraph 21 of our Decision herein.

 

138, 184

Denied.  The Examiner's ruling was proper.  We have consistently refused to accord credit for the record of a broadcast licensee in the absence of a significant ownership interest in the licensee.  Since Quinlan held only an option to acquire a meager portion of the licensee's stock during the period he was managing WBKB-TV, it would be inappropriate to aware CTC any credit on the basis of WBKB-TV's broadcast record.

 

146-163, 182-183, 185, 192.

 

 

Granted to the substantial extent that our conclusions have been substituted for those of the Examiner, but denied in all other respects for the reasons set forth in our Decision herein.

 

164-181, 186-191, 193-194.

 

 

Denied.  As reflected in our Decision, the Examiner's conclusions are correct.

 

EXCEPTIONS OF THE BROADCAST BUREAU

 

1-37

Denied in substance.  We believe that the significant evidence concerning Moline is adequately and correctly reflected in the Examiner's detailed Initial Decision. Further findings would have only a cumulative effect, and, in view of the reasons for our resolution of the issues, it is clear that they would not be of decisional significance.  While exception has also been taken to certain findings of the Examiner's Initial Decision on the grounds that they are argumentative, conclusionary, and lack support in the record, we have given no weight in our Decision to such findings and thus they are immaterial to the determination made herein.

 


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