*1 Corporation, Center Communications grounds, Arthur non-Matter motion of Democracy Fairness & Digital exception for fall within does not the alien Channel Accuracy Reporting, Clear Velarde-Pacheco. by Matter out carved of Hispanic Communications, American deny- did err the BIA Accordingly, Association, Civil Radio Owned Remand. Bhiski’s Motion ing Rights on Communications Forum petition deny the therefore willWe Ameri Policy, League Latin United of this motion. as it concerns review Minority En Citizens, Business can Education Legal terprise Defense and III. Telecom Minority Fund, Media Council, Asian National munications CONCLUSION Asso Telecommunications American reasons, deny will we foregoing For the Lati ciation, Association National to the due both as for review petition Producers, National Independent no Motion to as to the appeal and process Organizations, Hispanic Coalition Remand. Raza, Nation La Council National Coalition, National Hispanic Media al Institute, Telecommunications Indian League, Amer Native Urban National Inc., Telecommunications, Public ican Rican Puerto PRLDEF-Institute Color, Unity: Policy, Journalists for Free Institute Inc. Women’s RADIO PROJECT PROMETHEUS the Press. dom of v. 03-3579, 03-3578, 03-3577, 03-3388, No. COM COMMUNICATIONS FEDERAL 03-3582, 03-3651, 03-3581, 03- 03-3580, of America MISSION; States United 03-3894, 03-3708, 03-3675, 03- 3665, Project, Media Radio Prometheus 04-4073, 04-4072, 03-3951, 04- Inc., General, Association National Sta Broadcasters, Affiliated Network Affili Alliance, Television ABC tions Appeals, Court States United Affil Association, Television CBS ates Third Circuit. Television and NBC iates Association Argued Feb. Group,
Affiliates, Fox Entertainment Stations, Inc., Inc. Fox Television 24, 2004. Filed June Broadcasting Inc., National Viacom Com Company, Inc., Telemundo Inc., Group, Sinclair
munications Inc., Alli Group, Media
Broadcast Corpo
ance, Paxson Communications
ration, Council National United of Christ
Churches Company, Paxon
States, Tribune Corporation, Emmis
Communications attesting (Letter from Maturo A.R (Checks Account from Joint A.R. at 38 Issued 16, 2003). Januaiy 30, 2002); Marriage dated November earlier dated no *6 Jay Andrew (Argued), Schwartzman Leanza, Cheryl A. Media Project, Access DC, Washington, for Prometheus Radio Project, Center for Digital Democracy and Accuracy Fairness and Reporting. Timmerman, Associa- National Plains, NY, Jerianne Green, for D. White Shelby DC, Broadcasters, for Washington, tion of Christ the Churches Council of National of Broadcasters. National Association in the United States. Bor- Spear Wilderman Spear, L. Samuel Hays, Jr., D. Feore, Michael R. John Runckel, Philadelphia, & Endy Spear ish Swanson, Salomon, Anne M. D. Kenneth Project. PA, Radio Prometheus for E. Rademach- Radway, Jason L. Theodore PLLC, Albertson, James A. (Argued), Dow, Campbell, er, Lohnes & Angela J. for Henein, Pub- Bachtell, DC, Institute Millcreek Broadcast- Karen Washington, DC, General, Inc., Washington, LLC, Simmons Representation, ing, lic Media Alliance of Communica- Communications Office and Paxson Group Media Media Christ, Inc. Church the United Corporation. tion of Stephanie Manishin, (Argued), B. Glen Walker,†,* 111,†Helgi C. E. Fiorini John LLP, Drye & Warren Kelley Joyce,
A. Reed,†,* G. Andrew Klindera Eve VA, Union Vienna, for Consumers Bodorff,* R. McBride,* James J. Richard of America. Federation Consumer E. Richard Kirby,†† A. Kathleen Bayes,†† Newsom, Jr., Kevin C. Long, A. Robert Heller,†† Martha E. Wi (Argued), Wiley,†† & Burling, Doerhoff, Covington Heidi C. LLP, Washington, Fielding & ley Rein Net- DC, Television for CBS Washington, Schmeltzer, (Argued), DC, Kathryn R. Association, NBC Televi- Affiliates work Lin, Gottfried, Tony (Argued), H. Barry Affiliated Sta- and Network sion Affiliates Flick, Cicelski, R. Christo A. Scott Paul tions Alliance. LLP, Sadowski, Pittman Shaw J. pher DC, Broadcast for Sinclair Washington, Prak, Mark J. Hargrove, H.
Wade Communications Group, Inc. and Univision Mclendon, & Pierce, Humphry Brooks, Inc. NC, Leonard, for ABC Television Raleigh,
Affiliates Association. Estrada, Michael J. (Argued), Miguel A. Patrick S. (Argued), Brands Henk LLP, & Crutcher Gibson, Edney, Dunn Paul, Weiss, Longwell, John H. Campbell, DC, Com- for Clear Channel Washington, LLP, Wash- Rifkind, & Garrison Wharton munications, Inc. *7 Group, DC, Entertainment ington, for Fox R. Phillips, (Argued), Clark G. Carter Stations, Inc. and Via- Inc., Fox Television P. Wadlow, James Klingler, D. Richard com Inc. Sidley Austin Wallgren, Anita L. Young, Evans, Mark L. Kellogg, K. Michael DC, LLP, Washington, Brown & Wood Evans, Huber, Hansen, & Todd Kellogg, Company, Chi- Kenney, H. Tribune Crane DC, for National PLLC, Washington, Company. cago, for Tribune Inc. and Telemun- Broadcasting Company, Inc. Group, do Communications Marcus, (Argued), Jonathan M. Jerome P.C., Auerbach, Montague, Berger Verrilli, (Argued), Ian Jr. Donald B. Smith, Capitol Dianne Philadelphia, PA, Goldenberg, J. Elaine Gershengorn, Heath NC, Inc., DC, Raleigh, Broadcasting Company, Block, LLC, Washington, Jenner & Broadcasting Company, Inc. Goodman, Capitol for Baumann, N. Henry L. Jack Newspaper of Amer- †† Association Corpora- Counsel for † for Communications Counsel Emmis Co., ica, Inc. and Corporation, Gannett Belo tion. * Company, LLC. Communications Morris Communications, Clear Channel Counsel for Inc. (Ar- David Honig, Lazarre, Nicolaine pany, Press Communications, LLC and gued), Fofana, Smith, Fatima Julie Minori- Diversified Communications. ty Media Council, and Telecommunications Winston, James L. Rubin, Winston,
Washington, DC, for American Hispanic Diercks, Cooke, Harris & Washington, DC, Association, Owned Radio Civil Rights Fo- for National Association of Black Broad- rum Policy, Communications League of casters, Inc. and Coalition, Rainbow Push United Latin Citizens, American Minority Inc. Business Enterprise Legal Defense and Pate, R. Hewitt Assistant Attorney Fund, Education Gen- Minority Media and Tele- eral, Delrahim, Makan Deputy Council, Assistant communications National Asian General, Attorney O’Sullivan, Catherine G. American Association, Telecommunications Nancy Garrison, C. James Fredricks, J. National Association of Latino Indepen- United States Department Justice, Producers, dent Anti- National Coalition of His- Division, trust Washington, DC, Organizations, for panic United National Council of States of America. Raza, La National Hispanic Media Coali- tion, National Indian Telecommunications John A. Rogovin, (Ar- General Counsel Institute, National League, Urban Native gued), Daniel M. Armstrong, Associate American Telecommunications, Inc., Public Counsel, General Lewis, Jacob M. Associ- PRLDEF-Institute for Puerto Rican Poli- ate General Counsel (Argued), Grey C. cy, Unity: Color, Journalists of Inc. and Pash, Jr., Joshi, Nandan M. Federal Com-
Women’s Institute for Freedom of the Commission, munications Washington, DC, Press. for the Federal Communications Commis- sion.
Stephen Gavin, D. Gleber, Katrina C. LLP,
Patton Boggs DC, Washington, SCIRICA, Before Chief Judge, AMBRO Nassau Broadcasting Inc., Holdings, FUENTES, Judges. Circuit II, Nassau Broadcasting LLC. Irwin, Irwin, David A. Campbell & Tan- OPINION OF THE COURT nenwald, DC, Washington, Family Sta- tions, Inc., Sunbelt Communications AMBRO, Com- Judge. Circuit
Table of Contents I. Background .... 382 A. The 1934 2. G. Procedural F TheOrder’s 3 4. Newspaper/Broadcast 5. 6. H. SubsequentLegislation. .. 389 E. TheCommission’s B DeregulationInitiatives 383 C. TheTelecommunicationsAct of 1996 .. 384 1. *8 D. RegulatoryReview Since 1996.. 384 & Regulation. Dual Network Rule ... 388 National Local Local Radio Ownership ... 387 CommunicationsAct and History Modification Broadcast Television Television 2003 the Current Report of Ownership ... 386 Ownership... 388 and Order ... 386 Appeals ... 388 Early Radio/Television Media Broadcast Ownership Ownership Cross-Ownership .. 387 Rules ... 386 II. Jurisdiction and Standard Review ... 389 A. Standard of Review Under the Administrative Procedure Act 389 B. Standard of 202(h) Review Considerations Under Section ... 390
380 public necessary in the rules any such whether “Determine 1. interest.”. 05rHCO longer no to be it determines regulations any modify “Repeal 2. public interest.” in the 05^CO 05LOCO
C. Conclusion. .395 Rule. Ownership Television National and the III. Mootness -q CD CO . Cross-Ownership Rules IV. -3 CO CO Review Biennial the 2002 Background Regulatory A. newspaper/broadcast on a ban not to retain decision The Commission’s B. 202(h) by record supported and is § under justified cross-ownership is C. D. 2. The Commission’s 2. 1. 3. 2. 1. 4. 3. 1. 5. evidence. different-type Cross-Media 202(h). A blanket Newspaper/broadcast The Commission The Commission Continuing to Continuing to Continuing Overview The Commission The Commission not interest. media shares. Limits necessary to First Amendment. Fifth Amendment. Limits that media outlets did outlets. decision prohibition not regulate regulate regulate provide Commission’s did should did did to retain Diversity Index it chose. protect not not was not combinations reasoned cross-media cross-media cross-media provide better rationally justify justify its constitutional newspaper/broadcast diversity. some Diversity Index its choice limits on analysis results. derive its can assumption of ownership ownership does not ownership notice promote and did common support Cross-Media on remand. Methodology- weight not does is localism. combinations equal market ownership of violate not violate specific specific violate is CO [00] [05] CO [05] [00] 399 400 O OO 05O rHrH . Ownership Rule Television V. Local rHCM Biennial Review. the 2002 Background and Regulatory A. rH CO overall to the Commission’s challenges threshold uphold B. We several approach. regulatory duplicative of station Limiting local television 1. regulation. antitrust view- may contribute television than broadcast other Media 2. diversity in local markets. point programming. improve local can Consolidation H-i CJT to allow adequately decision noticed The Commission triopolies. rHCD top-four restriction. to retain decision uphold Commission’s We C. rHCD further Commission’s limits specific numerical D. remand We consideration. Solicitation the Failed Station repeal of remand the E. We oq O Rule. *9 Ownership Rule. Radio to H VI. Local CO H Review. the 2002 Biennial Background and Regulatory A. markets. new definition uphold the Commission’s We B. COCO markets .... Arbitron Metro justified using The Commission to CO 1. . stations including noncommercial justified The Commission to Ü1 2. transfer restriction. Commission’s uphold the C. We COOí 1. Transfer restriction is “in public interest.”.427 2. Transfer restriction is reasoned decisionmaking.427 3. Transfer restriction is constitutional.428 D. We affirm the attribution of Joint Agreements.429 Sales 1. Attribution of JSAs is “necessary public interest.”.429 2. Attribution of JSAs is reasoned decisionmaking. 3. Attribution of JSAs is constitutional..430 E. We remand the numerical limits to the Commission for further justification.430 The Commission’s numerical approach limits is rational and public interest .431 The Commission did not support its decision to retain the existing numerical limits with reasoned analysis.432 a. The Commission did not sufficiently justified “five equal-sized competitors” right as the benchmark.432
b. The Commission did not sufficiently justified that the existing numerical actually limits ensure that markets will have equal-sized five competitors.433 c. The Commission did not support its decision to retain the subcaps.434
AM7FM
VII. Conclusion.435
In these
appeals
consolidated
we consid-
rule and the
cross-owner-
radio/television
er
revisions
Federal
Communica-
rule)
ship
with a single set of “Cross-
tions Commission to
regulations
gov- Media Limits.”
See Report and Order
erning broadcast media ownership that the
and Notice
Proposed Rulemaking,
promulgated
following its
13,620,
F.C.C.R.
(2003)
382 adequately are not that mission’s chal owners2 casters, newspaper and important- Most record. by the supported pro-regula Order, that arguing the lenged sufficiently jus- has not ly, as the absence as well revisions tory limits numerical chosen particular tified its Telecommunications violate deregulation further radio ownership, local television for 104- 1996, L. No. Pub. Act media cross-ownership of ownership, and Act”), (the (1996) “1996 104, 56 110 Stat. we Accordingly, markets. within local Constitu States APA, the United Com- for the the Order remand partially on Multidistriet Panel The tion. Judicial modifi- justification or additional mission’s the random to acting pursuant Litigation, Order. affirm the cation, partially we 28 U.S.C. procedures selection review our pending continue will stay The this petitions 2112(a), consolidated § remand.3 on action Commission’s of the stayed we September On Court. our pending rules of the implementation Background I. review. Act and A. Communications The below, affirm we stated the reasons For Regula- Ownership Early Broadcast regulate power of tion so, reject doing we ownership. In media the Com- authorized Congress the Constitution that contention par- private for grant licenses mission provides 202(h) Act somehow the 1996 frequen- of broadcast use ties’ exclusive ability to on limits rigid radio the finite that Recognizing cies. But we interest. public- regulate inherently limits spectrum frequency the Com- aspects of certain remand must this proof statement with reason. petitioners identifying these
2. Rather
reverse,
(and only
remand
discussing
do not
but
individually
that we
when
intervenors
opinion,
part).
we
throughout
positions
their
"Deregulatory
collectively as the
to them
refer
colleague
dissenting
with our
Differences
Clear Channel
They include:
Petitioners.”
Communications, Inc.;
presented
many issues
only
some
touch
Communica-
Emmis
Commis
believes
He
appeal.
on
Group,
Entertainment
Corporation; Fox
tions
flawed,
work,
comes close
part
while
sion's
Inc.;
Stations,
Media
Inc.;
Television
Fox
response:
approval. Our
our
enough to merit
Inc.;
of Broad-
Association
National
General
any imperfections
yet. He believes that
Company,
Broadcasting
casters; National
be recti
by
can
failings
Corporation;
Inc.;
Communications
Paxson
without
review
quadrennial
at the next
fied
Com-
Group; Telemundo
Sinclair Broadcast
Our
remand.
for a court-ordered
the need
Inc.;
Company;
Group,
Tribune
munications
the role
is to abdicate
response:
so
do
(intervenor);
Inc.;
Corporation
Belo
Viacom
(see
of review
our standard
assigned
us
(intervenor); Morris
Corporation
Gannett
role,
infra), a
incidental
at Part II
discussion
(intervenor); Mill-
Company
Communications
we
deny. What
do
colleague does not
ly, our
(intervenor); Nassau
Broadcasting LLC
creek
novel,
many of the same
reprises
itas
is not
(intervenor);
Holdings
Nassau
Broadcasting
expressed
analysis concerns
reasoned
(intervenor); Newspa-
II,
Broadcasting
LLC
Televi
Appeals in Fox
Circuit Court
D.C.
(intervenor); and
of America
per Association
(D.C.Cir.
FCC,
280 F.3d
v.
Communications,
(intervenor).
Stations
sion
Inc.
Univision
2002),
reh'g,
F.3d
modified
Group
(D.C.Cir.2002),
Broadcast
and Sinclair
several
colleague
dissenting
asserts
3. Our
(D.C.Cir.2002).
FCC,
F.3d 148
v.
Inc.
theme)
we
(indeed
principal
it is
times
gets an-
line: the Commission
bottom
judgment
policy
own
our
substitute
somehow
Once
actions.
justify its
other chance
response is
Our
that of
Commission.
us,
yet
may
to we
returns
case
occurs
poli-
our
impossible to substitute
simple. It is
our col-
agreement with
loop of
close the
when
of the Commission
judgment for that
cy
league.
act
policies save that
view on
we have no
*11
383
number of broadcast stations that can cial scrutiny in 1956. See United
v.
States
operate without interfering with one an- Storer
Co.,
Broad.
192,
351 U.S.
76 S.Ct.
other, Congress required that broadcast
763,
(1956).
to all to and services technologies information a applied medium,” and therefore UHF] all telecommunica- opening by Americans audiences as to UHF 50% “discount” No. S.Rep. competition.” to tions markets limi- audience national under the counted (1996). Act elim- The 1996 104-230, at 1-2 words, ¶¶ In other Id. 42-44. tation. radio owner- national all limits inated audi- only half their count stations UHF au- television national raised ship and with the compliance determining ences 1996 to 35%. 25% cap from reach dience ownership rule. television national 110- (c)(1)(B), at 110 Stat. 202(a), §§Act its “one eased In 1989 own- radio local also eased Congress 11. cross-owner- to a market” radio/television slid- a four-tier limits, establishing ership allowing requests waiver ship rules al- that caps of numerical limit ing scale in the 25 cross-ownership radio/television radio eight co-owned many as for as lowed The Commis- markets. largest television Id. markets. largest favorably look it would stated sion 202(b)(1), 110 Stat. § there where waivers requests upon local a new contain Act did not The 1996 broad- owned independently be 30 the Commis- rule, directed but it television after the market remaining in “voices” cast proceeding rulemaking a to “conduct sion Section Amendment consolidation. retain, modify, or to whether to determine Rules, the Commission’s 73.3555 of own- local television existing eliminate” Rules, 4 Ownership Multiple Broadcast 202(c)(2), 110 § Id. ership limitations. (1989). ¶ 1, 510875 1741, 1989WL F.C.C.R. applica- expanded It also at 111. Stat. and relaxed 1992, the Commission In one-to-a-market bility of radio/televi- restrictions ownership radio national to waiver restriction cross-ownership sion concen- radio to approach a tiered adopted 202(d), § Id. markets. fifty largest entity own single a tration that allowed at 111. 110 Stat. markets largest in the radio stations Act instructed stations, 1996 Finally, FM and three (up to three AM biennially its broad- to review limitation Commission reach audience subject a local wheth- “to determine ownership rules AM sta- cast cap of 30 national of 25% necessary in rules stations) any of such er and fewer FM tions 30 competi- result as the interest public Radio Revision markets. smallest 202(h), at 111-12. 110 § Stat. tion.” Policies, 7 F.C.C.R. Rules and 202(h) Commis- required (1992). Section 690638 1992WL any regulation modify “repeal sion Act of Telecommunications C. The longer no to be determines 1996 interest.” the Com- overhauled Congress In 1996 1996 Regulatory Since Review D. the Telecom- by enacting Act
munications
responded
1999 the
Act
Act of 1996.
munications
202(c) of the
under
directive
Congress’s
deregula-
“pro-competitive,
contemplated
rule
television
its local
to review
Act
designed
framework
policy
tory national
pro-
relax its
it would
announced
develop-
sector
private
rapidly
accelerate
miles, and, consequently,
only 44
MHz,
MHz-reach
house-
can reach
30 and
between
sta-
than VHF
(Ultra
households
High
non-cable
far fewer
away. UHF
up
to miles
holds
(channels higher than
Frequency) stations
tions.
13),
between 300
broadcast
hibition on the common
tele
11,058, 4,
F.C.C.R.
Meanwhile,
in 1998 the
be
Commission
Commission’s decision to retain it was
gan
ar
the first biennial review of its broad
bitrary
capricious
and contrary
cast
ownership regulations
required
un
202(h).
§
Id. at 1053.
202(h).
§
der
In 2000 it
announced
it
would retain the national television owner
A few
later,
months
the same Court
(the
ship rule
provided
35% limit
in the
reviewed the local television multiple-own-
Act)
and its
cross- ership
cable/broadcast
rule. Sinclair Broad. Group, Inc.
ownership rule after determining
FCC,
that both v.
(D.C.Cir.2002).
selected in lottery and consolidated the II.
appeals here. Jurisdiction We entered a stay Standard effective date of the proposed Review rules after a hearing on September 3, 2003. Prome- This is an appeal of an agency deci theus Radio Project FCC, v. No. 03-3388, sion under the Communications Act of (3d 2003 WL 2003). Sept. 3, Cir. 1934, 47 §§ U.S.C. 151 et seq. juris Our We then denied the Deregulatory Petition- diction is based on 47 402(a) § U.S.C. motion, ers’ joined by the Commission, to 2342(1). § U.S.C. Our standard of re transfer venue to the D.C. Circuit Court view is governed by the APA and the 1996 on September 16, 2003. Prometheus Ra- provision Act authorizing the Commis FCC, dio Project v. (3d No. 03-3388 Cir. periodic sion’s regulatory review.11 2003) Sept. 16, (order denying motion to transfer). After A. pushing back briefing Standard of Review Under the Ad- oral argument at the request of par- ministrative Procedure Act ties, on 11, February 2004, we heard ap- Our standard of review the agency proximately eight hours of oral argument rulemaking context governed first addressing the merits of Petitioners’ judicial provision review APA, claims. § U.S.C. it, Under we “hold unlawful
or set aside agency action, findings, and
H. Subsequent Legislation
conclusions” that are found to be “arbi
trary, capricious, an abuse
discretion,
In January 2004, while
petitions
otherwise not in accordance with the law
review the Order were pending in this
...
[or] unsupported by substantial evi
Court, Congress amended the 1996 Act by
dence.”
§
706(2)(a), (e); N.J. Coali
increasing from 35% to 39% the national
tion
FCC,
Fair Broad.
v.
F.2d
television ownership rule’s audience reach
1119, 1125(3d Cir.1978).
cap
202(c).
§in
Consolidated Appropria-
Act, 2004,
tions
Pub. L.
108-199,
No.
The scope of review under the
(2004).
118 Stat.
legisla-
“arbitrary
capricious”
*17
standard is
tion also
202(h)
§
amended
in
ways:
two
“narrow, and a court is not to substitute its
(1) making the Commission’s biennial
judgment
re-
for that of the agency.” Motor
obligation
view
quadrennial;
(2)
insu- Vehicle
Ass’n v. State Farm Mut.
Mfrs.
lating
202(h)
§
review “rules relating
Co.,
Auto. Ins.
29,
463
43,
U.S.
103 S.Ct.
to the 39 percent national audience
2856,
reach
77
(1983)
L.Ed.2d
(“State
443
limitation.”
390 beyond change the for analysis soned and articulated data relevant the
examined agency an when required may be action, which its for satisfactory explanation a order instance” first not act between does connection “rational including a compliance for scrutiny judicial made.” to survive choice and the found facts the 41-42, Farm, at 463 U.S. Lines, v. Inc. State the APA. Truck Burlington (quoting 168, 156, 83 S.Ct. S.Ct. States, 371 U.S. United 103 Normally, we (1962)). 207
239, L.Ed.2d 9 stan APA traditional Finally, the arbitrary and rule is agency an may find deferential even is of review dard where capricious and ‘not ‘elusive’ involve issues “where factors has relied agency programming as areas such defined’ easily consider, it to not intended has Congress Sinclair, 284 broadcasting.” diversity in important an consider entirely failed an adminis when even 159. Yet at F.3d expla- an offered problem, of the aspect determina policy involves order trative counter runs decision its nation “rationality” goals, elusive on such tions is agency, or evidence before NCCB, 436 See appropriate. is standard as- it not could implausible so (finding that 796-97, 2096 S.Ct. 98 at U.S. or in view a difference cribed rationally in deter acted re- expertise. agency product diversification mining that itself attempt not should court viewing increasing possibility enhance deficiencies; we for such up make an when Additionally, viewpoints). diverse basis a reasoned supply may not line-drawing deter engaged has agency has itself agency action that agency’s necessarily is review and our minations given. not AT&T see expertise, agency deferential U.S. 332 Corp., Chenery v. (citing SEC may 627, decisions at F.3d 220 Corp., 1995 1575, L.Ed. 91 196, S.Ct. 194, 67 run unreasonable” “patently not be Johnson Wood Robert (1947)); see agency. before to the evidence counter F.3d Thompson, Hosp. v. Univ. Sinclair, F.3d we way, Cir.2002). Put (3d another “is when decision agency’s reverse Considerations of Review B. Standard evidence, or by substantial supported 202(h) Section Under judg error clear amade has agency part promulgated was The Order FCC, F.3d v. Corp. AT&T ment.” requirements review periodic v. Cisne (citing Kisser (D.C.Cir.2000) Consequently, Act. 202(h) (D.C.Cir.1994)). 615, 619 ros, 14 F.3d by that informed standard our review deci however, “uphold will, We Order’s which, time at the provision, agen clarity if ideal of less sion release, read: *18 reasonably discerned.” may cy’s path Review. (h) Further Commission 43, 2856 103 S.Ct. Farm, 463 U.S. State rules its review shall v. Arkan Inc. Transp., Bowman (quoting all this section pursuant adopted 281, Inc., U.S. 419 Sys., Freight sas-Best part biennially12as ownership rules its (1974)). 447 438, L.Ed.2d 42 286, 95 S.Ct. under review reform regulatory its “for departs agency But ofAct Communications 11 section a rea- to supply “obligated mer views” provision. in this above, ally" Congress has I.H Part As noted 12. "quadrenni- "biennially’' with replaced since
391 1934 shall determine any whether of 110 Stat. 111-12. We analyze each of such rules are necessary in the public these instructions in turn.
interest as the result of competition. 1. “Determine any whether Commission shall repeal or modify such rules are necessary
any regulation public determines to be no interest.” longer in public interest. Recognizing competitive 110 Stat. 111-12. Section of the Com- changes the media marketplace could Act, munications 202(h) § refers, obviate the public necessity for some of the
was also added
1996 Act to ensure
rules,
in
first
that the Commission review periodically its
requires
struction
the Commission to take
regulations governing telecommunications
a fresh look at its regulations periodically
services to “determine
any
whether
such
in order to ensure that they remain “nec
regulation is no longer necessary in the
essary in the public interest.” This raises
public interest as a result of meaningful
the question of what is “necessary.”
economic competition between providers of
such service” and “repeal
§
or modify any
In the context of
11 of the Communi-
regulation it determines to
Act,
161-which,
be no longer
§
cations
47 U.S.C.
like
necessary in
public
202(h), requires
periodi-
interest.”
§
§
U.S.C.
cally
reg-
to review its telecommunications
they
ulations and determine whether
"re-
The text and legislative history of the
necessary
public
main
in the
interest"-
1996 Act indicate that Congress intended
interpreted
the Commission has
"neces-
periodic reviews
operate
as an “ongoing
sary"
"useful,"
to mean
"convenient" or
mechanism to ensure that
the Commis
"appropriate"
"required"
rather
sion’s regulatory framework would keep
"indispensable." Setting out its rationale
pace with the competitive changes in the
interpretation
for this
in the 2002 Biennial
marketplace” resulting from that Act’s re
Regulatory Review,
4726,
18 F.C.C.R.
laxation of the Commission’s regulations,
14-22,
(2003),
¶11
preme in their be read ... must ‘necessary’ authority.” rulemaking “general of grant a Furthermore, Id. statutory context.” 721, 142 374, 366, 119 S.Ct. U.S. 525 its for support judicial found Commission Characterizing (1999). 835 L.Ed.2d D.C. “necessary” of interpretation on limitation as a “not interpretation Sinclair, 284 in decision Court’s Circuit a authority, confirmation but Commission’s 159, regarding at F.3d that concluded it,” the Commission own- local television itsof review periodic rule- its applicable review standard 202(h). The Commis- § under rule ership “plain ais § 201 authority under making not did Court the Sinclair that sion noted F.C.C.R. 18 standard. interest” public definition any particular adopt 374, expressly at (citing 525 U.S. 31, ¶¶ 22 4276, 18 n. Commis- affirming but, in “necessary,” rea 721). The Commission 378, 119 S.Ct. fur- the rule 202(h) that finding § sion’s also must standard same that soned necessary in the is thus diversity and thers required under process review to the apply not artic- 160, it “did interest, at id. public If results. absurd avoid § 11 in order yard- interest public higher or a new ulate were standards review rulemaking and ¶20.13 did 4726, Nor F.C.C.R. stick.” promul could different, Commission Fox decision Court’s Circuit then, the D.C. at useful, but is that any rule gate “necessary,” interpretation foreclose its review, have would periodic the next determined, because Commission do not that those rules any of revoke language deleted Court rehearing the “indispensable.” higher standard meet a had that decision its initial system, ¶ such Under n. 33. &18 Id. its reviewing too lax standard applied inefficient either review periodic under rules media broadcast ef could irrelevant, Commission as the or II, 293 (citing Fox 202(h).14 Id. § re stringent sidestep the fectively 540). F.3d at reissuing subsequently view standard repeal had it rule that de- any reasons, “useful” Commission these For ¶ 18. “indispensable.” failing to be that requirement § ll’s that termined regulations telecommunications review argu- rejected Lastly, the “neces- they remain whether to determine judicial controlling there ments re- not interest” does public sary in the construc- “indispensable” precedent stringent stan- a more employ toit quire acknowledged It “necessary.” tion of found interest” public “plain dard Circuit the D.C. Court Supreme Act. the Communications parts other con- such upheld have Appeals Court 201(b) as an ¶¶ (citing 47 U.S.C. 18, 22 (citing Iowa Utils. structions, id. see 721; example). 374, 378, 119 S.Ct. Bd., 525 U.S. remedies, IFox addressing available 14. In sev- cited generally, the
13. More "necessary” to mean interpreted interpreting Court Court decisions Supreme eral only insofar be retained should regulation or "conve- "a "useful” "necessary” to mean (cit- in, merely consonant n. 24 necessary Id. 15 "appropriate.” as it is or nient” Maryland, alia, v. 280 F.3d at with, ing, inter McCulloch interest.” II, (1819) 413, 316, Wheat.) (4 expressly 4 L.Ed. in Fox excised language U.S. was This Prop- Necessary and (under the Constitution's at 540. F.3d I, § Clause, cl. Art. U.S. Const. er "use- "necessary” "convenient” means fill”)).
393
Recently, the D.C. Circuit
upheld,
Court
ticular
definition
“necessary” and Fox
11,
§
context of
I’s suggestion
of a heightened standard
interpretation of “necessary”
was expressly
contained in
retracted by
II,
Fox
293
the 2002
F.3d at
Biennial
540. Cellco
Regulatory Review.
limited Fox I’s state
FCC,
Cellco
ment that
P’ship
(D.C.Cir.
v.
“necessary”
357
implied
F.3d 88
a presump
2004).
tion in favor of
Recognizing
or
modification
“necessary”
elimination
is a
of existing regulations, see
“chameleon-like”
280
word
at
whose
F.3d
“meaning
1048, to the context in
may
...
which it
was made:
by
influenced
context,”
its
discussing whether vacating or remanding
Célico Court determined that it
up
the national television ownership rule was
hold any reasonable interpretation that did
the appropriate remedy. Cellco, 357 F.3d
not contravene the express provisions of
at 98. And while Sinclair apparently en
(cit
Communications Act.
94,
at
96
dorsed this language
I,
from Fox
see 284
ing
U.S.A.,
Chevron
Inc. v. Natural Res.
F.3d
159,
the Cellco Court characterized
Council, Inc., 467
837, 842-43,
U.S.
Def.
Sinclair as merely “piggybacking]” on
2778,
S.Ct.
(1984)).
L.Ed.2d 694
It
Fox I without “adopting] a general pre
went on to determine that
the Commis
sumption in favor of modification or elimi
sion’s interpretation
both
reasonable and nation of regulations when considering a
consistent with the
Act,
Communications
substantive challenge to the adequacy of
endorsing the Commission’s view that
the Commission’s
Cellco,
determinations.”
“necessary” must mean the same thing in
394 long- “no that modify” rules or “repeal indispensable they are whether determine conclud- Having interest.” public in the to incon- er lead would interest public in the the requires in- the instruction to first compared that the ed when results gruous sentence, any ex- 202(h)’s whether second to determine §in Commission struction “repeal public to “plain satisfy Commission the requires the fails to which rule isting to determines it any regulation relationship modify be- standard, or the interest” For interest.”16 public in the longer is no be instruction second first the tween meaning- to be instruction “determine” instruction, the the second the Under evident. same embody the must “necessary” ful, modify the or repeal must Commission that Con- standard interest” public “plain under determined it has that regulations modify” or “repeal the out set gress satisfy that not do instruction the first the by explained Lastly, as instruction.17 standard. same “useful,” or “convenient,” Court, the Célico not is “necessary” 202(h) § was definition that “helpful” acknowledge we While judi- any to Commission the deregulatory foreclosed context the enacted Sinclair. including Fox precedent, cial Act) the Commu- (the to 1996 amendments obli- Commission’s the interpreting inSo 1033; I, at F.3d Act, Fox 280 see nications broad- 202(h) its to review § under gation accept not dowe Sinclair, at F.3d 284 to rules determine media cast public modify in the or “repeal the that public “necessary in the they are whether oper- therefore must instruction interest” Commission the interest,” adopt what we ie., the ratchet, one-way only as ate standard interest” public plain “the termed process the review use can Commission “conve- means “necessary” under regulations. then-extant to eliminate only not “essen- “helpful,” “useful,” or nient,” “modify” both ignores starters, For “indispensable.” or tial” Commission the that requirement and the if the What regulations any public interest.” modify “in act the “Repeal or 2. that longer in reasonably determines no be to Commission it determines strin- a more for calls public interest.” interest the public strip it Congress Did regulation? gent instruction second Turning to the determina- that implement to the power to required is 202(h), the Commission §of compared when results incongruous lead "legal frame- citing in the it § 11 when under gov- that standard public interest plain 15. to the n. the Order. section of work” regulate authority to erns 202(h) word "neces- § omits the 16. Because NCCB, 436 U.S. industry. See the broadcast instruction, it modify” "repeal or sary” regu- long (”[S]o S.Ct. "ap- amenable even more arguably is for means an unreasonable are not lations of “neces- connotation or "useful” propriate” [Commission's seeking achieve Commission, like § But sary" general they [its] within fall goals, interest] [between difference not think do "we Communica- authority” under rulemaking what 202(h)] significant given § § and Céli- Act.). as the Just tions public interest’ 'necessary in the believe we context, "repeal § 11 co observed 4726, ¶ n. 20. 18 F.C.C.R. means.” meaningless be would modify” instruction or repromulgate consistency could argument Anticipating the because functions) lower could under rulemaking sentences (in and second first between "indispensable” was using any regulation achieved standard still "useful” both, we re- being "necessary” "in- modify not interpretation of repeal forced re- 202(h). requiring spond under dispensable” regulations it determined any modify peal or public interest to the essential were *22 tion? The obvious no, answer is and it will crabbed reading of the statute under continue to so absent clear congression- which we would have infer, to without al direction otherwise.18 express language, that Congress intended to curtail
What, then, 202(h) § makes Commission’s rulemaking “deregula- au- thority and tory”? It is 202(h) contravene this: Section requires “traditional ad- ministrative the Commission law principles.”19 periodically to justify its existing regulations, an obligation it would C. Conclusion not otherwise have. regulation A deemed
useful when promulgated must remain so.
Though
analysis
our standard of review
not,
If
it must be vacated or modified.
lengthy,
is
it is in the end amenable to a
straightforward summing-up:
period
Misguided by the Fox and Sinclair
In a
202(h),
Courts’ “deregulatory
§
presumption” char-
ic review under
required
acterization and
lacking
benefit of Cell-
is
to determine whether its then-
co’s subsequent
public
clarification, the Commis-
extant rules remain useful in the
sion
§
concluded
202(h)
interest;
longer useful, they
that
“appears to
if no
must be
upend traditional administrative
repealed
law prin-
or modified.20 Yet no matter
ciples” by not requiring
any
it to justify affir- what the Commission decides to do to
matively a
repeal
rule’s
or
particular rule-retain,
repeal,
modify
modification.
11. This
(whether
overstates
the case.
to make more or less strin
Rather than “upending” the
anal-
gent)-it
public
reasoned
must do so in the
interest
ysis requirement that under the APA ordi-
support
its decision with a reasoned
narily applies to an agency’s decision to
analysis.
aspect
We shall evaluate each
promulgate
(or
regulations
new
modify or
accordingly.
the Commission's Order
repeal
existing regulations),
see State
III. Mootness and
Farm,
the National
43,
463 U.S. at
S.Ct.
Television
202(h)
Ownership
§
Rule
extends this requirement
to the
Commission’s decision to retain its existing
The national television ownership
regulations. This interpretation avoids a
rule caps the number of television stations
18. For example,
enacting
a periodic
significant
review
...
given what we believe 'nec-
requirement for the Commission’s broadcast
essary
public
interest’ means.”
media ownership regulations, Congress gave
4726, ¶
F.C.C.R.
14 n. 20. But even if "neces-
express
no
indication that it
intended
re-
sary interest” under the first
strict the
rulemaking
Commission’s
authority.
sentence
"indispensable,”
meant
we still
See, e.g.,
Hosp.
NLRB,
Am.
Ass’n v.
499 U.S.
would not
import
have to
heightened
606, 613,
111 S.Ct.
retain 1985). that assume (Feb. 1, the We toward stations UHF audiences administratively uses Congress when ¶ 586. cap. have to its words term, it intended defined enact- however, Congress Subsequently, v. Bragdon See, e.g., meaning. defined cap. ownership television new national ed a 2196, 631, 624, 118 S.Ct. Abbott, 524 U.S. Appropriations 2004 Consolidated In its Furthermore, be (1998). L.Ed.2d 202(c)(1)(B) the 1996 § Act, it modified discount eliminating the reducing or cause “[t]he that provide effective Act to would audiences station UHF for multiple owner- limit, for rules cannot modify its we reach shall the audience raise ly audi- national increasing Commission’s to the by challenges ... ship entertain discount. UHF television the 50% limitation to retain reach ence decision claims 108-199, § on these granted No. we Any Pub. L. relief See to 39%.” specification Congress’s Com- undermine (2004). Because 3, 99 118 Stat. cap. to 39% precise aof statutory directive under mission is ownership television national mootness modify the evidence additional As discount, we to the 39%, challenges UHF to the cap challenges to cap Appropri- are 45% cap to 2004 Consolidated raise that to note decision to v. a sentence Corp. also added Narrowband Act PLMRS ations moot.21 Cf. apply not does (D.C.Cir.1999) 202(h): subsection “This § FCC, 182 F.3d 39% national relating to rules any later-modified (challenges Commission’s 118 Stat. limitation.” audience moot). order national challenge the 45% a constitutional stated Deregulatory Petitioners 21. limit, reason no we see retaining a reach audience rationale Commission's Congress's 39% constitutionality of "raises limit decide television national subsequently limit, questions.” Br. Petitioners same Amendment as these First troubling Telemundo, challenges Via- Fox, NBC, "any pending argued Petitioners Petitioners”) We rec- at 31. television ("Network national [regarding the com order June challenge would by a constitutional ognize that mooted” ownership rule] will leg- intervening necessarily be mooted Pe- Network Act. Appropriations Consolidated interpreted this we 2, 2004). even if But (Feb. islation. at 2 Br. Letter titioners’ raising language as "troubling questions” ... The UHF discount is a rule “relating to” ership rules with the Cross-Media Limits the national audience limitation. See 47 is not of itself constitutionally flawed and § 73.3555(e)(2) C.F.R. (providing for the does not 202(h). violate But we cannot UHF discount in a qualified section “for uphold the Cross-Media Limits them- the purposes of this (e),” paragraph selves because the Commission does not national television ownership rule para- provide a reasoned analysis to support the graph). Congress apparently intended to limits that it chose.
insulate the UHF periodic discount from review, a position consistent with A. Regulatory Background and the our reading of the legislation as endorsing 2002 Biennial Review the almost 20-year-old regulatory defini- Since 1970s, the Commission has tion of “national audience reach” that pro- *24 enforced two separate limits on the com- vides the UHF discount. mon ownership of different-type media Although we find that the UHF discount outlets in local markets. One cross-owner- is insulated from this and periodic future ship'rule prohibits the common ownership review requirements, we do not intend our of a full-service television-broadcast station decision to foreclose the Commission’s con- and a daily public newspaper in the same sideration of regulation defining the community. 47 § 73.3555(d). C.F.R. UHF discount in a rulemaking outside the other limits the number of television and 202(h). context Section The Commis- radio stations to the following combina- sion is now considering its authority going (1) tions: in.markets where at least 20 forward to modify or eliminate the UHF media, independently owned voices would discount recently and accepted public com- remain post-merger, two television stations ment on this issue. 69 Fed. Reg. 9216-17 and six radio stations or one television (Feb. 27, 2004). Barring congressional in- station and (2) seven stations; radio tervention, see, e.g., S. 108th Cong. markets where at least 10 independent § (2003) phase-out (proposing and 2008 voices remain, two television sta- UHF), sunset of the the Commission may tions and four stations; radio (3) and decide, in the instance, first the scope of other markets, two (sub- television stations its authority to modify or eliminate the ject to the local rule) television ownership UHF discount outside the context of and one radio 73.3555(c). § station. Id. 202(h). § The Commission’considered both cross- IV. Cross-Ownership Rules ownership rules during its 2002 biennial The Commission’s decision to repeal its 202(h). review under In Order, newspaper/broadcast cross-ownership Commission announced that because nei- rules22in favor of new Cross-Media Limits ther rule remained necessary the public has been attacked all on fronts. interest, Some it was repealing them and replac- petitioners support repeal but argue ing them with a single set of Cross-Media that the Cross-Media Limits too are re- Limits. The three-tiered Cross-Media strictive. challenge Others repeal de- regulate Limits common ownership de- cision and argue that the new limits are pending on the size of the market: small too lenient. We conclude (those that the Com- with three or fewer full-power com- mission’s decision to replace its cross-own- mercial or noncommercial television sta- 22. The Commission repealed its ra- Limits, the Cross-Media but petitioner no dio/television cross-ownership rule in challenges favor aspect Order. longer no was eight (between four
tions), mid-sized supra. II.C Part (more than interest. large stations), and television mar- stations). In small television eight combina- Newspaper/broadcast 1. combinations kets, newspaper/broadcast localism. promote can tions pro- combinations and radio/television In medium-sized 454. pro- Order hibited. measured newspaper own entity may markets, an se- “the considering of localism motion up (a) station television one and either to local responsive programming lection may be that stations the radio 50%to quanti- news interests, local needs under in that commonly owned Evidence quality.” ty (b) 100% up rule or radio local newspaper- (grandfathered) existing rule. the local under allowed radio stations produced stations broadcast owned markets, cross-owner- large quality with better quantity higher news ¶ 473. ship is unrestricted. Commis- convinced other newspaper/broadcast on ban sion decision B. The in- its localism undermined combinations newspaper/broad- on a ban retain relied principally The Commission terest. justified un- cross-ownership is cast study its MOWG findings *25 by 202(h) supported and der pro- stations television newspaper-owned evidence. record pub- and local news 50% more almost vide The Commission determined that sta- other programming lic affairs prohibiting newspaper/broadcast the rule per week. 21.9 hours tions, average cross-ownership longer necessary al., was no et Spavins ¶ C. Thomas (citing primary interest for three Television Local Measurement (1) necessary reasons: the ban is not Programs Public and News Affairs promote competition in local markets be 7) (Sept.2002)). No. at (MOWG Study cause most advertisers do not view news corresponding found also The Commission papers and television stations as close coverage of local quality advantages substitutes, 332; (2) ¶ the ban un stations, as newspaper-owned by provided by preventing dermines localism efficient ap- (measuring consumer ratings shown pro combinations that would allow for the (measuring industry awards and proval) high-quality news, duction of local id. ¶ (citing, 344-45 approval). critical 343; (3) enough there is not evi Pro- by the findings things, among other dence to conclude that influ in Journalism Excellence ject viewpoint ences to warrant a blanket “were stations newspaper-owned cross-ownership ban, making thus it un important focusing on do likely to stories justifiable diversity grounds, on id. at a wide provide and to community issues 364, (and moreover, presence Ii of oth likely less were they opinions, ofmix er media sources-such as the Internet fea- interest human celebrity and do cable-compensate viewpoint for the tures”). diversity consolidation, 365). lost to id. argue that Petitioners Citizen object The Citizen Petitioners to the local- it exam- because study was flawed MOWG diversity components ism and of the Com com- station newspaper/broadcast all ined mission's rationale. We conclude differ combi- “intermarket” binations, including ently, analysis supports as reasoned newspaper a (entities own nations Commission's determination that the blan cities), as in different broadcast newspaper/broadcast ket ban on cross- as well (enti “intramarket” combinations daily Canada’s newspaper circulation, re- broadcast, ties that own newspaper quires its newspaper editors to publish station the same city). But the Citizens editorials from headquarters, which it for- Petitioners do not suggest that a study bids local editorials to contradict. But the entirely focused on intramarket combina Commission explained that the Can West tions would have different results. The six example shows peril of national owner- intramarket combinations that were in ship and corporate centralization of media cluded in the study (grandfathered excep services, which is not relevant to the Com- tions to the ban) cross-ownership averaged mission’s regulations on local combina- more local news and public pro affairs tions. Order 352. In summary, the Citi- gramming compared to the overall aver zen Petitioners’ arguments do not unsettle (26 age weekly hours compared 21.9) the Commission’s conclusion that and higher ratings for their p.m. 5:30 and newspaper/broadcast cross-ownership ban p.m. 6:00 (9.8 programs news and 11 com undermined localism.
pared 8.2). to 7.8 and Study MOWG No. 7 A; app. Comments Newspaper Associ A prohibition blanket newspa- America,
ation MB Docket No. per/broadcast 02-277 combinations is not (Jan. 2, 2003). necessary protect diversity. The Citizen Petitioners protest The Commission offered two rationales Commission’s reliance on anecdotal evi- for its conclusion that a blanket prohibition dence pro-localism combinations and its on newspaper/broadcast combinations is no disregard of anecdotal evidence to con- longer necessary to ensure diversity in trary. Significantly, however, the Com- First, markets. it found that “[Com- mission used anecdotal evidence23 merely monly-owned newspapers and broadcast *26 to illustrate its statistical findings did do not —it necessarily speak with a not on rely anecdote as the sole basis for single, ¶ monolithic voice.” Id. 361. Given its conclusions about Moreover, localism. conflicting evidence in the record24 on the Commission properly anec- whether discounted ownership influences viewpoint, dotal evidence aof Canadian newspaper the Commission reasonably concluded that conglomerate’s detrimental effect on local- it did not have enough confidence in the ism. West, Can which controls 30% of proposition that commonly owned outlets 23. example, For Company Gannett reported ny's newspapers did not endorse the same that the integration” "media resulting from candidate in the presidential election). newspaper/broadcast its combination in Phoe- The MOWG submitted a statistical study of 10 "improved nix efficiency, particularly in situa- newspaper-television combinations; in half of tions characterized by fast-breaking news such as the massive wildfires near Phoenix them the newspaper's overall "slant” was no ticeably different from the broadcast televi year.” last Both of Belo Corporation’s Dallas sion's "slant” on the news. See David Pritch outlets "have been able to cover a wider ard, Viewpoint Diversity in Cross-Owned range of through stories sharing information Newspapers and Television Study Stations: A between separate the newspaper and televi- News Coverage the 2000 of Campaign Presidential sion news staffs." Order 348. (MOWG 2) Study No. (Sept. 2002). hand, 24. On one But the the Study record Pritchard contained was the subject exam- ples aof newspaper-owner’s much criticism its (no for flawed affiliations and methodology biases influencing the news group and control editorial of independent media outlets pages. But there were also examples comparison) of com- for (it and narrow scope only monly newspapers owned expressing different looked at one judging "slant”). factor in Or viewpoints (such as that the Compa- Tribune der 362. ac- Commission because, the as 202(h), § sustaining to warrant bias uniform have the that suggests the evidence knowledges, ¶ 864. ban. cross-ownership the in the not cross-ownership restrictions di- found that Second, Commission the the that argue They also interest. public media sources other from viewpoints verse and First the violate Limits Cross-Media the and cable (such as markets local States the United Fifth Amendments lost to viewpoints for Internet) compensate counts. all on disagree We Constitution. consolidations. newspaper/broadcast suggests evidence record agree We cross-me- regulate Continuing to supplement Internet and in- public cable that ownership in the is dia by broadcast diversity provided viewpoint terest. markets.25 in local outlets newspaper and a blanket finding that Commission’s The below, believe we fully discussed As cross- newspaper/broadcast on prohibition weight much too gave that inter- longer no ownership is the Cross-Me- deriving the Internet to no that conclusion compel not est does ques- separate But Limits. dia ¶ 364. necessary. See regulation it was that conclude we degree, tion found above, the Commission described As that to find acceptable that premise undermine evidence view- contribute Internet cable viewpoint,26 always influences ownership diversity. point be true. opposite find not it did but oth- found while And retain decision Commission’s C. viewpoint contributed sources er media common limits some have markets, it not could in local diversity was outlets different-type media were cable Internet found violate did constitutional viewpoints substitutes complete 202(h). and broadcast newspapers provided (finding No. 3 Study sup MOWG See Petitioners stations. Deregulatory rank cable Internet news repeal port the do not they news, but but cross-ownership sources' ban paper/broadcast televi- broadcast newspapers restric outrank any to retain decision object to of bal- goal *27 sion). the Commission’s Given newspa ownership of the common on tion competi- interests public’s ancing the First outlets. media broadcast per and reasonably it diversity, localism, and tion, newspa on any limits that they argue cross-owner- repealing that concluded violate cross-ownership per/broadcast news of their the interest to benefit stories Substi- Consumer See, Waldfogel, e.g., Joel 25. study (citing a 2002 3) at 5 id. Study organizations); No. (MOWG Among tutability Media references more view included finding outlets consumers that that (suggesting (Sept.2002) daily treat- and services products a substitute as own sources to their news Internet others, news). favorably than and broadcast newspapers items ed those bias”); Comments "synergy exhibiting a thus con- supported Indeed, ample evidence America, Dock- MB Federation Consumer of of view- ownership can influence that clusion 2, 2003) (citing a 2002 (Jan. 41 02-277 at et 24-25; ¶¶ Comments point. See on information election finding that study (Jan. 4 al., 02-277 at No. Docket UCCet MB of candidate favor was slanted pages news Comments’’) (citing a Pew 2003) 2, {“UCC 44 at page); id. editorial endorsed journalists study television Center Research find- directors survey of news (citing a 2001 quarter nearly one found that and executives pressure sponsors owners ing media newsworthy avoid purposefully journalists news). slant reporters to tone of many soften nearly as stories 401 ship ban was necessary promote compe- Union N.J. v. Black Horse Pike Reg’l tition localism, while retaining Bd. Educ., some 1471, F.3d (3d Cir. limits was necessary to 1996) ensure diversity.27 (stating that we are obliged to follow Supreme precedent Court “until instructed
2. Continuing regulate cross-me- by otherwise a majority of the Supreme dia ownership does not violate the Court”). Fifth Amendment. 3. Continuing regulate cross-media The Deregulatory Petitioners ar ownership does not violate the First gue that the Cross-Media Limits violate Amendment. Equal Protection Clause of the Fifth The Deregulatory
Amendment they because single Petitioners ar out news gue that the paper owners special Commission’s decision to re restrictions that tain restrictions on do not common apply other media outlets. This of newspapers and argument is broadcast foreclosed, however, con by the travenes the First Supreme Amendment Court’s decision it because NCCB that limits the speech opportunities endorsed the constitutionality newspa of the 1975 per owners and newspaper/television broadcast station owners, cross-ownership ban. and hence limits public’s U.S. at 801-02, 98 S.Ct. access to 2096. Rather information. Yet again their concluding challenge newspaper owners by NCCB, foreclosed singled were where out for the Supreme treatment, different Court affirmed the Court determined Commission’s authori regulations “the ty, despite a treat First newspaper Amendment challenge, owners in essentially the to regulate same fashion broadeasVnewspaper as other cross- owners of major ownership in public media of mass interest. toDue communication” impos the “physical ing scarcity” limits on them as well broadcast as owners of spectrum, the Court television and scrutinized the regu radio stations. 801, Id. at lation to discern a rational S.Ct. 2096. basis. 436 We decline U.S. the Deregula- tory S.Ct. 2096. The Petitioners’ invitation to disregard Su action, held, preme was “a Court reasonable precedent means because of chang promoting ing times. interest in Surely diversified there are more media mass (such communications.” today outlets Id.’ at cable, Internet, S.Ct. broadcast) satellite than there were in 1978 when NCCB was decided. But it The Deregulatory Petitioners suggest, cannot be assumed that these media out as they did in mounting their Fifth lets contribute significantly to viewpoint Amendment challenge, that the expansion diversity as sources of local news and in of media outlets since day NCCB’s re *28 formation. See Part IV.D.2 Even quires a rethinking of infra. the scarcity ratio could, if it it is Supreme the pre Court’s nale and the lower level of constitutional rogative to change its precedent. own See review it entails. Again we decline their Khan, State Oil v.Co. 3, 522 20, U.S. 118 invitation to disregard precedent, and we 275, S.Ct. 139 (1997) L.Ed.2d 199 (stating are not alone. See v. League FCC of that only the Supreme can Court overrule Cal., Women Voters 364, 468 U.S. 376 & of its precedent); own Am. Civil 11,104 Liberties n. 3106, S.Ct. 82 (1984) L.Ed.2d 278 27. We also note that the provid- would, hibited fact, combination in enhance ed for a waiver of the Cross-Media Limits quality the quantity and of broadcast news upon a demonstration "that an pro- otherwise ¶ available in the market.” Order 481.
402 ownership diversification finding that Con- until scarcity rationale the (upholding achieving possibility the enhance I, F.3d issue); 280 Fox the speaks
gress
at
viewpoints.”
diversity of
greater
implication
contrary to the
(“First,
at 1046
NCCB, the
Here, as in
2096.
796,
S.Ct.
98
is
court
this
argument,
networks’
the
restric-
continued
its
justified
scarcity Commission
reject
the
position
in a
not
newspapers
ownership of
common
on
longer
tions
noit
that
agree
if we
even
rationale
the
promoting
as
broadcast
and
has
Court
Supreme
sense.
makes
diversity. Or-
viewpoint
interest
public
against
case
empirical
the
already heard
limit-
that
has said
Court
355.
der
ques-
‘declined
still
and
rationale
that
”
reasonable
ownership
common
ing
Tur-
(citing
validity.’
continuing
its
tion
interest
promoting
means
638,
S.Ct.
622,
114
FCC,
U.S.
v.
512
ner
at
U.S.
NCCB, 436
diversity.
viewpoint
(1994))).
497
2445,
L.Ed.2d
Therefore, applying
796,
U.S.
Even were we not constrained
Su
con-
Commission’s
NCCB,
that
we hold
preme
precedent,
Court
we would not ac
owner-
common
regulation
tinued
cept
Deregulatory
Petitioners' conten
does
broadcasters
newspapers
ship of
expansion
tion that
of media outlets
rights
Amendment
First
violate
not
spectrum
has rendered the broadcast
less either.
NCCB,
scarce.
In
the Court referred to
"physical scarcity"
spectrum-
provide
did
The Commission
D.
many
people
the fact that
would like
support
analysis to
reasoned
access to it than can be accommodated.
that
Limits
specific Cross-Media
403 mission’s reliance on the Department of sion categorize with markets HHI scores Justice and Federal Trade Commission’s above 1800 “highly concentrated.” If a formula, antitrust the Herfindahl-Hirsch- proposed merger would exceed that level (“HHI”), mann Index as its starting point of concentration, the agencies believe that measuring diversity in local markets. it would be harmful to competition converting In the HHI to a measure for that market. core, At its the Diversity diversity markets, however, Index here uses the same sum of market Commission gave too much weight to the share-squared formula. Internet outlet, as media a irrationally as- First, selected signed outlets of the same type media media outlets to include analysis equal shares, market and inconsistently viewpoint diversity in local markets derived the Cross-Media Limits from its based on reported consumers’ prefer- Diversity Index results. For these rea- ences for sources of local news and infor- sons, below, detailed we remand for the mation. The Commission determined Commission to justify modify further its television, broadcast daily and week- Cross-Media Limits. ly newspapers, radio, (via and Internet cable DSL, connection and dial-up, or 1. Overview of the Commission’s Di- connections) other are the relevant con- versity Methodology Index tributors to viewpoint diversity in local The Commission designed methodolo markets. See Neilsen Media Research, gy called the Diversity Index to identify Consumer Survey on Media Usage risk” “at markets where limits on cross- (MOWG 8) Study 2002). No. (Sept. media ownership should be retained. Based on the popularity of each media Diversity Index was “inspired by” the source, the Commission assigned each a HHI, which Department of Justice and relative weight: broadcast 33.8%, TV dai- the Federal Trade Commission use to ly newspapers 20.2%, weekly newspapers measure proposed mergers’ effect on com 8.6%, 24.9%, radio (cable) Internet 2.3% petition in local markets. A 394. (DSL, and Internet dial-up, or other con- market’s HHI score is the sum of market nection) ¶¶ 10.2%. 412, 415, Order squared. shares A highly competitive Next, market will have a lower HHI many selected score than a sample concentrated one. markets29 for For which it example, compare would deter- HHI mine a Diversity score of a market Index with score. equal- each of (10 sized competitors markets, those [competitors] x counted the number of competitor’s [each market outlets share within each percent type media and as- = 1000) age]2 signed the HHI each score of a outlet an equal market share. market only (For five equal-sized competi example, the City New York market = (5 2000).28 x tors The Department has 23 stations, television so each was one of Justice Federal Trade Commis attributed equal share.) 4.3%30market 29. 28. Of mula is 502 + 202 + dex scores controls 20%, where the equal size. and another course, 50% components for markets with five or fewer aIn market all the HHI controls market calculated of market where one formula also works 10%, share, + Diversity two control company HHI = not of for- In- 30.Throughout tions, television markets with between Index, television For report sample see we stations, stations, adopt the decimals app. the Commission's convention all markets with discussion C. Diversity ten six of intermediate randomly Index calcula- ten stations. Diversity selected and 20 prod- *30 (3) one newspaper, rule; one Iocal radio ownership calculated The Commission the number station, half of and television of outlets the number multiplying by share commonly to be allowed radio stations share. the market entity by by an owned (4) rule; two radio the local under owned in stations (Univision three television owns (5) newspaper and stations; one x television was 3 ownership share York, so its New (6) stations; one news- and = television two 13.0%.) share was ownership Each 4.3% stations, all of and two television paper, by media weight relative its given then the local under allowed stations the radio was thus (Univision’s share 13.0% type. D. app. Order radio rule. for televi- multiplier subject to 33.8% then stations). The Commission sion sce- the consolidation that all of Finding ownership weighted all of the squared increases relatively high in resulted narios total was the market’s shares; sum their scores for Diversity Index average to the in markets But Index score. Diversity (those three or markets with the smallest (outlets of differ- cross-owned shares stations), the Commission fewer television entity) by the same types owned ent media newspa- newspaper/television, prohibited ownership shares weighted entity’s combina- and per/radio, radio/television they were before together ¶¶ 459, were summed Order those markets. tions in (ABC television sta- one owned squared. (nine or more markets large In York, New radio stations four tion and scenarios stations), consolidation all weighted added the Commission so to the av- increases acceptable resulted station for the television share scores, so the Com- Diversity Index erage = 1.45%) weighted (4.3% to its x 33.8% cross-media limits on imposed no mission stations radio ownership share the mid- markets. ownership in those = 1.67%) a combined (6.7% x 24.9% (between eight four sized markets of 3.12%. ownership share ABC found stations), the Commission television the summa- included in of 3.12 was square scenarios, except the two of the that all tion). C. app. generally See duo- and television involving newspaper allowed, on their based be poly, should Diver- calculated After Diversity average increases to- modest of different scores for markets sity Index ¶ 466. markets. for those Index scores scores sizes, how those it determined consoli- different change several justify its did not 2. The Commission illustrate, the Com- To dation “scenarios.” specific weight me- choice with five that markets mission determined outlets. dia average Diversi- had television stations regu- both sides Petitioners newspaper and If a ty score Index spectrum attack latory a market station combined television inclusion in outlets for of media selection size, increase score would The Citizen formula. Diversity Index scenarios combination to 1134. The other argue Petitioners and all (1) station one television were: Internet at weight to the much commonly gave too allowed stations radio daily newspa- (2) of television rule; expense one radio the local owned under of con- level understating the thereby pers, the radio and all of newspaper the level di- overstating under the centration commonly owned to be allowed prod- here) intermediate from the unrounded (such rived rounded quotients as 4.3 ucts and (such the nearest tenth. products then rounded Final uct the nearest tenth. sentence) are de- reported in next 13.0 *31 versity in a market. The Deregulatory cal channels,” cable news almost half of Petitioners, hand, on the other argue that the respondents chose “other” as their Diversity Index understates the actual source cable news, network indicating amount diversity of in a by ignor- that cable news channels were probably ing important outlets, media primarily ca- confused with news). broadcast networks’ ble television. explained below, As we af- The survey’s indication that cable is an in- firm the Commission’s reasoned decision dependent source of local news was also to discount cable. But we think that the undercut evidence, external including same rationale also applies to the Internet. Neilsen ratings, that local cable channels Therefore, its decision to count the Inter- are the least any watched of or broadcast net as a source viewpoint of diversity, cable stations in the market. Order 414. while discounting cable, was not rational. Furthermore, the Commission noted that The Commission properly excluded ca- local cable channels are not available ev- ble because serious doubts as to the erywhere, only but in select markets. extent that provided cable independent lo- 924; 414 n. see also UCC Comments at cal news—the recognized Commission’s 30-31 (reporting that only 10 to 15% indicator of viewpoint diversity in local systems cable include channels that pro- (“News markets. Order public vide local program- affairs affairs programming is the clearest exam- ming i.e., public, educational, gov- — ple of programming that provide can ernmental access channels—and viewpoint diversity .... the appro- [and] there only are 22 local news cable chan- priate geographic market viewpoint di- nels in the country, five of which serve local.”). versity is While the responses to the area). City New York Thus, question one in the Commission’s survey Commission justifiably excluded cable suggested that cable significant is a from its Diversity Index calculations. news, source of local see MOWG Study Similarly, No. 8 tbl. the responses did not one find this credible Commission survey questions because the responses suggested to oth- er questions survey suggested is a Internet source re- of local news. spondents were See counting (18.8% signals Study broadcast MOWG No. 831tb1.1 that are respondents transmitted as cable channels listed the as Internet as a source sources local news). news on cable. See id. local But survey did not (from tbl. 18 a of popular list identify national respondents websites used cable news channels and a choice for “lo- as sources of local news.32 There is a 31. The suggests dissent affairs, that the MOWG Stud- al current responses so their this ies, "although not perfect signifi- question ..are helpful determining improvement cant over the study in Sinclair” whether the Internet indepen- .is source of that the D.C. Court Circuit determined dent did local news. To the extent that wé can not support the glean anything decision to lim- from this question unlikely, — it the definition of predominant "voices” in its local response televi- was "other” (34.9%) sion rule. But comparison popular is not relevant most websites identified —the because, out, point as we were channels, those of national cable news inconsistently applied (22.4%) analy- (19.1%), results MSN.com and CNN.com in- sis. dicating people that most types had those websites in reported mind when they using follow-up question respondents for the (The the Internet for responses news. other reported who using the Internet as a (17.9%), news were: Yahoo.com MSNBC.com source they (5.9%), asked which sites used had (5.1%), NewYorkTimes.com Fox- past days seven as a source of (2.2%), nation- (1.8%), News.com USAToday.com AB- *32 According to Internet. on the sites news that websites between distinction critical on news of local record, sources news and most local the of sources independent are newspa- the broad- are websites and newspapers the Internet of local
websites the in- stations. merely republish television and broadcast that pers cast (62% by the of being reported at 33 already See, Comments e.g., UCC formation counter- station news- or broadcast from local news newspaper get users Internet an “inde- present do not The latter station part. television websites, visit 39% paper not be thus should viewpoint pendent” websites). the Commis- examples the And diversity to lo- contributing as considered Drudge Report cite—the does sion Accordingly, the Commission cal markets. local, national, news not Salon.com—have respondents discounted have should ¶ 427. focus.34 Order from rely on these websites primarily who vir- “the that suggests Commission who indi- respondents of number its total on sources” information tual of universe Internet access they use that cated of a source as it qualifies the Internet news.33 local But to diversity. Order viewpoint Furthermore, just as have to we would this rationale accept that cable indicating responses discounted that premise own the Commission’s distort local news of source independent an was viewpoint of an indicator is local news with other finding conflicted because (Diversity Index id. 391 diversity. E.g., discounted evidence, have it should record of these importance “the relative measures The Com- as well. responses Internet news”).35 local a source as media cite, the record does nor does not mission as such pages sponsored Search-engine there is a that contain, evidence persuasive about.com,36 were Local and Yahoo! local independent presence significant "aggre- Moreover, Report Drudge is an (1.7%), (1.8%), CBSNews.com CNews.com out- other news from gator” news stories (1.3%), (1.7%), Excite.com Netscape.com such, and, itself nor- is not as websites lets’ (1.1%), (1.2%), WallS- AT&T.net Iwon.com news, or local. national mally a "source” (7.3%), (1.0%), none don’t treetJournal.com (0.5%)). (3.5%), and refuse know public speaks of "news and Order also 35. The and cur- news or "local programming” affairs acknowledges the flaws dissent 33.The referring to when affairs information” rent suggests survey, that but Study 8No. MOWG diversity. E.g., Order viewpoint measures on the survey be fine-tuned "can because 394, 406, 409. IN not be the it should of reviews” round next to abdicate But we decline for remand. basis the Inde- notice dissent takes 36. The meaningful judicial provide obligation to our philly- as websites such Center pendent Media rely may not Just as the review. good exam- is a agree that this We imc.com. rulemaking, approach to a "wait-and-see” Internet. on the independent local news ple of 164, Sinclair, can we. at neither only eight 284 F.3d links in provides local IMC But the it for whether agency’s decision an We review The Commis- States. in the United markets evi- the record rationally derived is these websites even mention does not sion (or may may Internet, agency argue let whether the alone analysis dence—not will not) eight at the next man- the record local markets "fine tune” websites that IMC ' Furthermore, may just we news- diversity lost when viewpoint dated review. offset the agency’s allowed basis for broadcast stations supply papers reasoned not given, we believed even if agency itself has And consolidate. action 2856, case, 43, insert our role to Farm, is not our S.Ct. at 463 U.S. State that which analysis agency to substitute supply evidence to own we also do not State agency's rationale. missing from agency will include hopes that ("[W]e Farm, S.Ct. U.S. at study. in a future evidence suggested by eommenters agenda as sources of or use sfgov.org to learn how to information, may news be useful get a marriage license in San Francisco. for finding restaurant reviews and concert See Comments the Hearst Corporation, schedules, but this is not the type of “news MM Docket No. 01-235 & n. affairs programming” that the (Dec. apps. 3, 2001) A (“Hearst & C Com- Commission said was “the clearest exam- ments”) (listing these addresses, website ple of that can *33 programming provide view- others, among as examples of govern- local point diversity.” Id. 394. websites). ment But governments local not, are themselves,
To “media accept its outlets” for “universe of information” viewpoint-diversity purposes. many characterization of Like viewpoint Internet’s entities, they just diversity, happen we to use particu- would also a have to disregard lar media outlet —the professed Internet —to intent dissem- to focus inate its information. consideration viewpoint of diversity on ¶¶ 20,
media outlets. Id. 391. In terms of Similarly, advertiser-driven websites content, (to “the provides media” different such as hvnet.com and sfadvertiser.com, degrees, outlet) depending on the accuracy see Hearst at apps. C, Comments A & depth in local news in way a that an hardly contribute to viewpoint diversity. posting individual in a chat room on a Like local governments, sponsors particular issue of local concern does not. these websites are not just “media outlets” But more importantly, media outlets have they because “local have information” that an entirely different character from indi- they the public want they were, have—if vidual organizations’ or websites and thus their advertisements in telephone directo- viewpoint contribute to diversity in an en- ries would also have to count toward view- tirely different They way. provide an ag- point diversity. (ex- Compare Order 424 gregator function (bringing news/informa- plaining that the Commission would not tion to place) one as well as a distillation count toward viewpoint diversity a local function (making a judgment toas what is newspaper’s comics and classified ads be- interesting, important, etc.).37 entertaining, cause, while the subscriber is “undoubtedly (such Individuals candidates) as political getting service, a valuable it is not clear (such and entities governments as local that the service anything has to do with community organizations) may use the In- affairs”). news and current ternet to disseminate information and opinions about matters of local concern attempts to justify dif- (such as the extension of a path bike ferent treatment for cable and the Inter- Schuylkill River in City Center Phila- net by suggesting that local cable news delphia, IV.A.1), see dissent Part but these channels are only available in select mar- individuals and organizations not, kets, while the Internet is available every- themselves, media outlets. agree We only where. Not is this distinction de- “helps Internet citizens discharge (as the monstrably false even the Commission obligations of citizenship in a democracy,” acknowledged that almost 30% Ameri- ¶ 393, Order when go someone cityof- can cans not access, do have Internet glenfalls.com city find the 365), council’s next it is irrelevant. That the Internet
may supply a agen- reasoned for basis General, See Brief of Petitioner Media cy’s Inc., agency action that the giv- (noting has not at 55 itself "each media outlet in a en.”). community actually platform is for the ex- pression many viewpoints”). allow place in the first HHI formula news local cable more available —to diversity loss of the actual provid it is to measure mean does not channels into account by taking consolidation On remand from news. independent
ing importance” “diversity exclude either the actual must not do it could something inclu merging parties, selected media Internet ¶ 396. provide a test. Index or “voices” Diversity simple sion it is included in market shares why equal assigning explanation Finally, better Sin almost of cable. See news no local provide the exclusion light of outlets in (unexplained view clair, at 163-65 understated 284 F.3d certainly presents an arbitrary capricious). markets, thus con- consistency was in several concentration making goal travening the Commission’s justify did not 3. The possi- assumption conservative “the most equal market assumption ¶ 400. diversity. viewpoint ble” about *34 shares. that dispute no Additionally, there is and the Petitioners the Citizen Both gener- shares equal assignment to object Petitioners Deregulatory New example, in For results. ates absurd out- assign all to decision Commission’s Community Col- City, the Dutchess York (that is, type media the same lets within the stations station lege television radio stations, or daily papers, television equal 4.3% an receive by ABC each owned The as- stations) market share. equal an Dutchess compare the Or market share. is incon- market shares equal sumption weighted station’s Community College ap- overall the Commission’s with sistent (4.3% multi- times 33.8% 1.5% share of and also Diversity Index to proach television) weight- a mere 1.4% to plier for me- about assumptions unrealistic makes the New assigned to ed, share combined to view- contributions relative outlets’ dia daily co-owned Company’s York Times markets.38 diversity local point app. station. Order and radio newspaper assign decision The Commission’s tous requires Diversity Index AC. within a shares outlets equal market television community college accept jibe Commis- with the does not type media contribution greater makes a station weights to assign relative sion’s decision conglomerate diversity than viewpoint themselves, types media the different newspaper third-largest that includes reason to “we have no it said about which us to abandon requires also in America39 equal impor- are of all media believe reality. logic and both ¶ 409; also id. see tance.” Order justify its attempt to however, (“Not voices, speak all share actual market consider failure to volume.”). negates the Com- also It same persua- type is a media using outlets within rationale for proffered mission’s Cross-Media Limits. flaws, effectively, formulation these dissent views 38. The Rather, prospectively Limits the Cross-Media because the error” as "harmless markets, specific tool” that Diversity Index a "useful ban certain combinations called "informs, replace, judgment others, nothing our does not but the but based allow general applicability establishing rules combinations increases those relative we draw lines should where that determine Diversity average scores of Index on the have markets.” concentrated diverse and between of that size. markets Order, in its 391. But nowhere Order briefs, argument did Com- in its oral or See of Circulations. Audit Bureau 39. Source: identify any other than consideration mission http://www.accessabc.com/. having Diversity influenced Index suggests It sive. that actual-use data use news.” But the Commission obtained ac- data is not relevant because “current be- tual-use data in MOWG Study No. 8 with- necessarily havior is not pre- accurate any out “legal/Constitutional problems.” dictor of future behavior.” There it avoided having to make content- But truism did not prevent the Com- distinguishing judgments simply by asking mission from preferring data in actual-use respondents they where got their assigning relative weight the different news. And the Commission’s reference types. media The Commission sug- here to data problems collection vague is that, gests compared to prefer- consumer unexplained; there is no suggestion general (which ences for a media type that obtaining actual-use data for outlets stable), generally preferences consumers’ within a media type would be prohibitively particular media outlets are fluid be- more onerous than obtaining the same they depend cause on the media outlet’s data for the media types themselves, as it chosen format quantity or quality of did Study MOWG No. 8. content, which are easily changed.
¶ 422. But while variance in the local Because the Commission’s reasons news content of individual media outlets eschewing actual-use data in assigning e.g., the home shopping tele- market shares to outlets within a conceivable— media vision station could start carrying local type and assuming equal market shares *35 news—-the Commission does not provide are unrealistic and inconsistent with the any evidence that acttially media outlets Commission’s overall approach to Di- undergo such any radical content change, versity Index and its proffered rationale, let alone they regularly do so. Sim- we remand for the Commission’s additional put, ply the Commission needs to under- consideration of aspect of the Order. predictive gird judgment that stations freely can change the level of their news 4. The did not rational- content with some evidence for that judg- ly derive its Cross-Media Limits ment to survive arbitrary capricious Diversity from the Index results. I, review. Fox F.3d After the Commission calculated the av- Lastly, the attempts jus- erage Diversity Index scores for tify markets its refusal to employ data actual-use sizes, of various by set out to arguing determine that collecting “information on whether the increase in those scores re- viewing/listening/reading of local news and sulting from current different affairs consolidation sce- material” would make it “necessary narios have an acceptable first to determine or unac- pro- ceptable gramming results, constituted effect. The news and current affairs,” which appendix in turn contained in present Order, “would D of both legal/Constitutional replicated (We here for and data collection ease reference. problems.” Order have respect 424. With used boldface type indicate those “legal/Constitutional” problems, the increases Diversity Com- Index scores that mission is apparently concerned cat- about acceptable found in craft- egorizing programming as news “non- ing Limits.) the Cross-Media practice with the consistent figures points, chart’s illustrated
As
*36
mergers
block
of Justice
Department
Commission
type, the
in
are not
boldface
the local market’s
increase
would
that
in
consolidation
cross-media
prohibited all
illus-
As
points.
400
by over
score
HHI
where,
any of
under
markets
the smallest
above,
approach
by the chart
trated
scenarios,40the
consolidation
sample
their
permissive
far more
generated
have
would
ex-
be
Diversity Index would
in
increase
Peti-
The Citizen
Limits.
Cross-Media
per-
decided
Commission
cessive.
hand,
the other
that
argue, on
tioners
mar-
largest
scenarios
of the
mit all
cross-
have prohibited
should
increases
Diversity Index
kets,
finding
in-
to an
lead
mergers that
ownership
mar-
the mid-sized
acceptable.
to be
in-
points,
100
more than
of
crease
most
allowed
kets, the Commission
Department
triggers
that
crease
con-
prohibited
but
scenarios
consolidation
the deci-
But
review.”
“further
Justice’s
newspaper
involving
solidations
line between
to draw the
sion
where
duopoly.
television
in-
unacceptable
increases
acceptable
suggest
always
Petitioners
the Commission’s
Deregulatory
almost
creases is
prohibit-
to the Commission’s
have
Deference
should
make.
that the Commission
assessing
highest
when
mergers
judgment
is
cross-ownership
only
ed
line-drawing en-
agency’s
of the
rationality
400
of more
an increase
lead to
would
duo-
prohibit
television station
Diversity
which would
report a
did not
40. The Commission
sta-
than five
polies
would
fewer
markets
scenarios
for those
increase
Index
television
by
local
the modified
precluded
tions.
rule,
infra,
v.
generally Part
see
411
NCCB,
deavors.
814-15,
See
436
at
U.S.
combinations that the Commission permit-
2096;
98 S.Ct.
AT&T Corp., 220 F.3d
ted,
such as the newspaper and television
627. The Commission rationalized its deci
combination,
(four
242
stations),
(five),
sion to make conservative
assumptions
200(six),
(seven),
and 152 (eight).
order to “protect[its] core policy objective They are
higher
even
than those resulting
of viewpoint diversity.”
399;
see
from the combination of a newspaper and
Sinclair,
(Commission
also
Although the Commission is entitled Cross-Media Limits.41 deference in deciding where to draw the
line acceptable between and unacceptable 5. The Commission provide should increases in markets’ Diversity Index better notice on remand. scores, we do not affirm the seemingly Our decision to inconsistent remand the manner in which Cross-Me- the line was dia Limits gives drawn. As the illustrates, chart Commission an above opportunity to questionable Cross-Media cure its Limits allow notice. some combina- APA, tions Under an agency publish where must Diversity increases In- notice of dex scores either the were or generally higher terms substance of than for proposed other combinations rule a description that were not allowed. subjects (four
Consider the and issues mid-sized markets involved. 5 U.S.C. 553(b)(3). eight stations), where the We have held that “the ade- quacy found that a the notice combination a newspaper, a must be tested by station, television determining and half the whether radio sta- would fairly ap- tions prise allowed under the persons interested radio rule ‘subjects average increase the and issues’ before Diversity In- the agency.” Am. Iron dex (four scores EPA, those (3d markets & Steel Inst. v. 568 F.2d *37 stations), (five), Cir.1977). 340(six), 393 (seven), 247 The Citizen argue Petitioners and 314 (eight) points that, respectively. in “fairly These order to apprise” the public, permitted increases to seem on belong the the is also obligated Commission pro- to other side of the Commission’s They line. vide notice of its underlying methodology, are considerably higher than the Diversity the from reasoning which it derived the Index score increases resulting from other proposed rule. The Commission’s notice suggests The dissent that the newspaper + 1 TV station + 50% allowed provides justification sufficient in the Order radio permitted stations combination was explains why when it newspaper the + 2 TV Diversity when its Index score increases were stations combination is not allowed in mid- greater overall much the Diversity Index sized newspaper markets but the + 1 TV score increases for other allowed combina- station + 50% allowed words, radio stations com- tions. In other may the Commission bination allowed. is 467 (suggesting proffered have explanation why for "F” newspaper that a will benefit more from the should be differently treated seemingly from consolidation with its first-acquired "D,” TV sta- similar but explain why it does not "D” tion than with subsequently acquired sta- should similarly seemingly treated from tions). why "A,” "B,” But does not address different and "C.”
412 shown.”); see is prejudice unless impose, “cre considering it was that only indicated EPA, 484 F.2d v. Corp. also Solite [its] “reformulate to a new metric” ating use to agency (D.C.Cir.1991) (allowing “ diversity and measuring for
mechanism during data, unavailable ‘supplementary’ market,” that it was in a competition ‘ex- that period, comment notice and ac a test that “designing] contemplating con- information confirm[s]’ on and pand[s] outlet to different weights cords different rulemaking and proposed 18,503, tained Notice, F.C.C.R. types.” pre- deficiencies’ ‘alleged addresses argue ¶¶ Petitioners Citizen 113-15. The is prejudice no data, long as so existing publieal have should that the Inst., 749 Cmty. Nutrition (citing it de shown” once Diversity Index ly noticed As 57-58) (alteration original)). on F.2d at methodology that was termined flaws numerous Diversity Index’s rely to Cross- derive it would which decision the Commission’s apparent, Prods. make Steel McLouth Limits. See Media not scrutiny was (D.C.Cir. public fromit withhold Thomas, to 838 F.2d Corp. v. re- As prejudice. without (failure particular 1988) to describe re- on Limits Cross-Media considers its lev contamination computing “model” “metric” any new mand, it is notice); advisable United adequate els was competition diversity and measuring Corp., Prods. Food Nova Scotia v. States notice subject Cir.1977) made (2d a market be (agency’s 240, 251 F.2d into incorporated before it and comment the data notice of provide failure final rule. regulation foreclosed it derived or the methodology used “criticism of the Ownership Rule data”). Television Local Y. inferred from to be
meaning De- Petitioners Both the Citizen Diver- that the argues The Commission the Com- challenge Petitioners regulatory response to aas was formulated sity Index televi- to the local modification mission’s comments, not seek additional it need allow rule, which would as a sion data formulated public comment or more of 18 stations markets triopolies in comments.42 We to earlier response markets, subject to in other duopolies obligations APA’s notice mindful four on combinations a restriction in a notice-and- to result supposed are not uphold market. any We “Rulemaking largest “revolving door.” eomment but restriction remand top-four agen- if an never end proceedings for the Commission limits always be numerical must comments cy’s response to and bet- inconsistencies certain harmonize comments.” subject of additional made rationale. assumptions and its Block, support F.2d ter Inst. v. Cmty. Nutrition for the Commission also remand (D.C.Cir.1984). have courts We But expand justify decision may with- reconsider an agency suggested *38 to provision applicable rule’s the waiver data of its comment-derived hold notice — failed, television (“The failing, or unbuilt of sales prejudice. of only in the absence requirement eliminating by of moreover, take form may, response stations — station’s notice the applicants entailing the that waiver without new studies scientific buyers. availability out-of-market would appellants consequences procedural anything other than suggestion no argues Di- offers that the 42. Commission The Diversity used to formulate analytical tool" Index was "simply an versity Index was diversity. Resp’t Br. 90-91. measuring at Limits. Cross-Media before, supra note see we But as noted
413 Regulatory Background A. and the sion of other non-broadcast media. Sin clair,
2002 Biennial Review 284 F.3d part Act, As of the 1996 Congress di Commission consolidated Sinclair's rected the Commission remand order with to conduct a rule- biennial review 202(h). under making § to determine “retain, whether to Order announced the Commission’s modify, decision to or eliminate” abandon the its local duo- television poly rule favor of a rule, rule that ownership which at prohibit the time permit common ownership of two commer- ed the common of ownership two television cial stations in markets that have 17 or stations with B overlapping Grade signal full-power fewer commercial and noncom- 202(c)(2), § contours.43 111; 110 Stat. stations, mercial and common ownership of 73.35, Amendment 73.21.0, Sections and three commercial stations in markets that 73.636 the Commission’s Rules Relating have or more stations. Both limits are to Multiple Standard, Ownership FM subject to a restriction44 on the common and Stations, Television Broadcast ownership of stations ranked among the ¶ (1964) F.C.C. (establishing the largest market’s four based on audience restriction on the common ownership of share. Order 186. The Commission also stations). televisions expand decided to its criteria for waiving response to Congress’s directive, the the rule’s ownership restrictions pro- promulgated Commission a rule allowing posed combinations failed, that involve fail- entity own two television stations ing, or unbuilt eliminating the DMA, (1) provided same that: requirement that waiver applicants provide B field-strength Grade contours of the sta- notice sale to buyers. out-of-market (2)(a) tions do overlap; at least Id. 225. one of the stations is not ranked among the four highest-ranked uphold stations in B. We several threshold chal- DMA, (b) lenges at least eight “voices”—that the Commission’s overall is, owned, regulatory independently approach. operational, com- mercial full-power noncommercial Before we consider specific modifica- broadcast television stations —would re- tions to the local rule, television we ad- main in the DMA after proposed com- dress some threshold challenges to the bination. 1999 Review, Television Rule regulatory approach. 12,903, 8; F.C.C.R. 47 C.F.R. Limiting 73.3555(b).
§ television station The D.C. Circuit Court re- duplicative is not of an- viewed rule,” “duopoly so-called regulation. titrust 2002 remanded it for the justify its decision to only count broadcast reject We the Deregulatory Peti television stations as voices to the exclu- tioners’ contention that the Commission’s 43. The Commission considers two may field- consider such factors as rat- contours, strength B, Grade A and Grade ings demonstrating information competi- indicators a approximate station’s extent tive effect of the merger, proposed merg- coverage average over terrain in the absence er's ability effect on the stations' to transition Grade interference. B contours a measure digital signal, proposed merger’s signal A, weaker than Grade and thus have effect on viewpoint localism diversity. coverage wider area. C.F.R. 73.683. ¶¶ top-four 227-30. The restriction *39 waiver, however, only is available in markets rule, 44. Under top-four the new the restric- of 11 fewer stations. may tion case-by-case waived on a basis. waiver, In deciding grant whether to the Thus, reject the De- we Id. anti kets. duplicative rule
local television that the suggestion Petitioners’ regulatory Department the (by enforcement trust not does ownership rule Commis television local Federal Trade the Justice for audi- concern interest. the sion) thus, public Commission’s and, reflect not license preferences. ensures ence The Commission diversity, goals serve transfers note that Commission Finally, we anti localism, while competition, transfers, 47 U.S.C. license all reviews purpose: a different have trust authorities typi- agencies 310(d), the antitrust § while not companies do merging ensuring that mergers. See only cally large review See, levels. competitive above prices raise 18a(a) (a only be merger must § U.S.C. (re 7, 15 Act, § U.S.C. Clayton e.g., size of if the FTC DOJ to the reported com lessen that would mergers straining million or if exceeds $200 transaction market); of Justice Dep’t in a petition million exceed party $10 one assets of Merg Comm’n, Horizontal Trade Federal exceed party other assets ed.) (1997 (“Merg rev. § 0.1 er Guidelines million). of sta- percent Eighty-five $100 con Guidelines”) protect (seeking to er place since taken that have mergers tion not result mergers do ensuring sumers anti- subject to have been prices). anticompetitive fell assets parties’ because the review trust contend Petitioners Deregulatory Intervenor Br. of these thresholds. below are regulations new that the Commission’s Network, Financial (citing BIA at 37 UCC on reliance professed its not derived (2d 2003)). ed. Report Television Market the Commis- preference, audience that the context, hardly seems it regulatory its distinguishes suggests sion own- station local television Commission’s au- of the antitrust from that approach agencies’ of other duplicative rule is ership out that (pointing thorities. enforcement. antitrust ad- plus preferences audience considers competition, as indicators vertising data televi- broadcast other than 2. Media focus authorities antitrust while the viewpoint di- may to contribute sion tele- But the Commission’s prices). versity in local markets. audi- reflect rule does vision ways. three in at least preferences ence allowing televi- Recognizing its to focus decided First, could in local markets concentration sion pro- delivered analysis on the competition diversity, the Com- viewpoint detract from (as the video opposed gram market deregu- decision rationalized its mission video adver- or the programming media other finding that with its late market) the market that is tising because contribute view- television broadcast ¶ 141. viewers.” “directly affects This is diversity. Order point below, Part V.C Second, discussed rationale the Commission’s departure from preference audience used remanded rule —the issue existing that com- its conclusion support data to only television by the Sinclair Court —that stations local television ownership of mon diversity analy- relevant ¶ 150. quality. improve program can sis. V.C, Part Third, as also discussed conclu- agree We top-four restric- justified only are not media that broadcast sion share an audience evidence tion on di- viewpoint contributing outlets media top-four stations “cushion” between we Yet because markets. versity in local mar- in most station and the fifth-ranked *40 limits, remand the Commission’s numerical improve Consolidation can pro- local below, explained in Part V.D we need gramming. degree decide the to which non-broad- The Commission supported its decision cast media compensate for viewpoint lost to relax the existing “eight voices” rule diversity to justify the modified rule. findings that common ownership of Rather, we leave it for the Commission to television stations in local markets can re demonstrate that there is ample substitut- sult in “consumer ability from welfare enhancing non-broadcast media effi to war- particular rant the by ciencies” numerical limits eliminating that it redundant ex chooses on remand. penses and increasing opportunities for cross-promotion and related programming. We note that the record only contains ¶ Order 147. To promote localism, the weak evidence that cable can substitute Commission found that broadcast these television as a efficiencies source of view- point improved translated into diversity. For local example, news the Com- public mission found among interest cable subscrib- programming.45 Id. (a
ers class that already omits one-third of Evidence supporting this conclusion in households) American only 30% have ac- cluded findings that commonly owned tele cess to local news cable channels. See vision stations are likely carry to 924; 414 n. see also supra Part local news other stations and air a IV.D.2 (describing why the Commission quality similar and quantity of local news concluded majority that a survey re- as other stations. See Bruce M. Owen et spondents’ purported reliance on cable as a al., Common Ownership or Oper Effect of source of local probably news was based ation on Television Carriage, Quan News news); confusion with broadcast Reply tity and Quality, in Comments Fox UCC, Comments MM Docket No. Entertainment Group, al., Inc. et MB (Feb. 15, 2002), 01-235 at 5 UCC Com- (Jan. 2003). Docket 02-277 And a study ments at 30-31. respect With In- commonly seven owned broadcast televi ternet, while record evidence indicates sion stations indicates that consolidation negative correlation respondents’ between generally improved ratings audience —the reliance on broadcast television and the studied stations increased their audience Internet as news sources (suggesting that shares average of over 3.2% people who use the Internet for local news share they enjoyed prior to entering into do so at television), the expense of co-ownership with another station. Order Internet is also limited in its availability ¶ 150 & n. 295 (citing Fratrik, R. Mark and as a source local news. Compare Local Television Marketing Agreement Study 3, 34; MOWG 8 at No. with UCC Duopolies; Local They Do Generate Reply Comments at 10 and Study MOWG (Jan. New Competition and Diversity? Therefore, No. 8 tbl. 097. it seems that 2003), appendix the degree to Comments Coalition which the can al., rely on cable or et Broadcasters MM mitigate Internet Docket 02-277 (Jan. 2003)). threat that local station In light evidence, consolidations of this pose viewpoint diversity is limited. reject we the Citizen Petitioners’ conten finding 45. This is consistent with the programming Commis- can lead to and other service sion's 1999 decision to relax the local televi- benefits that enhance the interest.” ownership sion because rule (citing Order 155 1999 Television Rule Re- likely yield combinations were efficiencies view, 12,903, ¶ 34). 14 F.C.C.R. that “can in savings, turn lead to cost *41 could market same within local- stations finding of that the Commission’s tion consumers, that benefit unsup yield was efficiencies consolidation from ism benefits that sta- recognized also the Commission ported. an overall only have tion combinations adequately no- The Commission 4. when “welfare-enhancing” effect triopo- to allow its decision ticed larg- “new a not create does consolidation lies. alia, ¶ (citing, inter entity. Order est” Peti the Citizen reject alsoWe Williams, Michael & McAfee R. Preston the Commission that contention tioners’ Policy, Antitrust Mergers and Horizontal that it notice adequate provide failed to 1992)). (June 181-87 Econ. 40 J. Indus. allow that would a considering rule was that it determined Thus, to requires agencies APA The triopolies. combinations station limit allowable had to rulemaking of proposed a notice publish excessive not create that would to those sub terms “either that contains entity. largest” “new in a power market descrip rule or a proposed stance of au- “cushion” Finding significant that and issues involved.” subjects of the tion generally points percentage dience share 553(b). advised Notice The 5 U.S.C. the fifth- from top-four stations separates televi of the any reevaluation that parties decided stations, the Commission ranked take account ownership rule would sion ensure restriction top-four that Sinclair, left by ordered the remand to not lead did station consolidations that reexamine to it to the Commission ¶ 195-96. Id. power. market excessive “the numerical as well “voices” test that effi- recognized The Commission relationship ais limit, that given there financially prevalent when are less ciencies of voices and the definition between other. merge with each strong stations Notice, 17 limit.” a numerical choice of ¶ example, top-four 197. For Id. Sinclair, 284 18,503, (citing F.C.C.R. originating likely to be already more 162). the Commission Specifically, F.3d at the transi- made and to have “different economic local news46 comment asked for ¶¶ viewpoints 198-99. diverse relating digital to television. incentives” tion “among might exist newscasting assert Petitioners Deregulatory The stations, triopo duopolies, or stand-alone small- prevents top-four restriction doubt leaves little This lies.” any of the yielding stations from “de a sufficient provided Notice They argue that of consolidation. benefits in and issues subjects scription any consolidation effectively precluding by decision in the Commission’s volved” stations, fewer than five markets triopolies. allow the benefit of deprives deci- uphold the Commission’s in small C. We stations —those consolidation top-four restric- to retain the sion But most. need markets —who tion. pro- television rule nu- stations. of small-market tective recog
Though the Commission
effect,
allowed, in
already
limits
of television merical
the combination
nized that
Top-Ranked
Lower-
top-
Versus
the Four
that 85%
Commission found
fered
Stations,
Com-
programs, as
included
local news
Television
four stations offer
Ranked
al.,
Inc.,
top
outside
et
compared
of stations
Group,
19%
Fox Entertainment
ments of
(citing
(Jan.
2003)).
M. Owen
et
Bruce
four. 02-277
Docket
MB
al.,
Programming
and Public
News
Of-
Affairs
extra47
concentration
ensure that small-
The Deregulatory
object
Petitioners also
top-four
market stations
because,
would realize the
restriction
efficien-
they
*42
argue,
it unjustifiably treats
cy
top-four
all
benefits of consolidation. As for the
ranked stations the same. The essence of
smallest markets with
than five sta-
fewer
objection
their
is the
finding
Commission’s
top-four
tions —where the
restriction oper-
of a “general separation”
top-
between the
to preclude any
ates
consolidation —it was
four stations and other
They
stations.
not unreasonable
for the Commission to
point
that in many markets,
out
especially
conclude,
did,
as it
the detriment of
small-and
ones,49
medium-sized
the third
concentrated market power e.g., reduced
—
and fourth-ranked stations could combine
improve
incentive to
programming of mass without exceeding the audience share of
appeal outweighed
efficiency
benefits.
—
first
second-ranked
Thus,
stations.
¶¶ 197,
And,
Id.
200.
while we recognize
they contend,
there is a more substantial
that the Commission “cannot save an irra-
“separation” between the third and fourth-
tional rule by tacking on a
proce-
waiver
ranked stations than between the fourth
dure,”
FCC,
Corp.
ALLTEL
v.
888 F.2d
and fifth-ranked stations.50
(D.C.Cir.1988),
note that
we
But we must
uphold
agency’s line-
modified
allows
rule
the Commission to
drawing decision
when
is supported by
top-four
waive the
restriction
small mar-
the evidence in
Sinclair,
the record.
kets where those consolidations
would
162;
F.3d at
Corp.,
AT&T
The Commission modified rule equal defends its mar- would allow duopolist ket approach shares Viacom to with the ac suggestion quire a share, third station and potentially varies with in each season’s crease programs, new its audience is too “fluid” to share from 25% to 34%. basis for regulations. Philadelphia’s its HHI score is already But elsewhere the local well television above the own- Commission’s 1800 ership rule the target, and a found that the Viacom triopoly would raise market share was enough stable rely score to 2487. We acknowledge support top-four restriction.53 the Commission intended never the nu only And not is the Commis- merical limits represent a “mechanical sion’s “market share is too fluid” rationale application of Merger DOJ/FTC *44 inconsistent aspects with other rule, of the Guidelines.” Id. 11197.. But it expressly it unsupported. is The Order cites no chose its equal-sized six competitor bench evidence to support its assumption that mark to ensure that markets would not market share fluctuates more in television- exceed Merger Guidelines’ 1800 broadcasting than in other industries. threshold for highly competitive markets.54 Nor it does refute the Citizen Petitioners’ 192. After justifying 1800 as the suggestion that unlikely this is to be the target, the Commission relaxed the local because, case industries, unlike most other television ownership rule to allow more television station owners face a barrier to concentration in markets that already ex market entry license) (requirement aof ceed target-which just is not some and the number of market participants markets, but Reply UCC most. Com (television owners) station decline. (28 ments attachment 5 out of 33 markets
The Citizen Petitioners object to the' studied had HHIs that exceeded numerical because they data).55 limits allow mar- based on 2001 limits, ownership local radio particularly giv- cable include networks. The Commission en that there generally are more radio explained sta- that cable offer networks "almost tions than given television stations in a exclusively mar- ... broadly national or defined ket. regional programming,” profit-max- and thus imizing national, decisions reflect rather 53. The Commission also defends its rule local, markets. Order 191. On this against charges duplicative it is that of anti- ground, justified the Commission its decision authority by trust pointing out that it takes accept not to that and cable television com- account, preferences audience into unlike an- pete in the same market. As a matter regulators titrust prices: who focus on however, degree, recognized Commission that cable networks exerted competi- some 54. The deliberately did not select networks, pressure tive on local and thus se- Merger Guidelines’ 1000 threshold for higher (1800) lected benchmark it them moderately concentrated markets out of rec- ognition that television stations receive com- might otherwise have. petitive pressure only not from each other but says 55.The dissent that the Commission se- from cable networks as well. lected the HHI score of 1800 as mere "start- reject We the Deregulatory ing point” analysis. Petitioners' for its Dissent Part IV.B. Indeed', contention that the Commission's consider- the Commission against cautioned competitive ation "strict, of the effect cable overly for simplistic application of the purpose this is inconsistent with its Merger refusal Guidelines.” Order 192. DOJ/FTC to define the competitive relevant market to triopoly But the justified by rule was six in-market station television unbuilt review we with which The deference ¶ 225. buyer.56 ex- line-drawing decisions
Commission’s
line-drawing is
far as
only so
the FSSR
tends
promulgated
The Commission
“pat-
or is not
that
the evidence
rule
television
consistent
the local
review
in its
202(c)
Sinclair,
F.3d
under
required
ently unreasonable.”
Congress had
limits
that its
numerical
concerns
To alleviate
The Commission’s
1996 Act.
under-
duopolies
supports
to allow
evidence
decision
neither. No
mi-
assump-
station
share
television
mine
equal
created
norities,
under-
explanation
tion,
no reasonable
minority
qualified
to ensure
actual market
FSSR
disregard
decision
lies its
learn
chance to
a fair
had
broadcasters
similarly un-
rule is
The modified
share.
con-
financially troubled —and
that certain
allowing levels
concentra-
reasonable
were
affordable —stations
sequently more
benchmark
its own
further
to exceed
tion
Review, 14
Rule
Television
for sale.
(1800)-a
inconsis-
glaring
competition
¶¶ 13-14,
In the cur-
12,903,
F.C.C.R.
We
and result.
rationale
tency between
however,
does
Order,
rent
the Com-
limits
the numerical
remand
minority own-
preserving
explain
its ratio-
and harmonize
support
mission
FSSR, nor
purpose
was the
ership
nale.
harmful
was
the FSSR
argue
does
purpose.
toward
or ineffective
re-
the Commission’s
E.
remand
We
*45
to eliminate
decision
for its
only support
Solicita-
peal
Failed Station
of the
effi-
that “the
prediction
is its
the FSSR
Rule.
tion
two
operation
associated
ciencies
cir-
stations,
unusual
absent
same-market
also chal
Petitioners
The Citizen
buyer
cumstances,
always result
will
of the
repeal
lenge the Commission’s
in that
station
of another
being the owner
(“FSSR”),
Rule
Station Solicitation
Failed
¶ 225.
market.”57
a
n.7,
required
which
73.3555
47 C.F.R.
the
anything about
mention
By failing
the
to
notice of
provide
applicant
waiver
on potential
have
change would
buyers be
this
effect
out-of-market
potential
sale
owners, the Commission
minority station
failed, failing, or
the
sell
fore it could
judicial
petition
review.
rationale,
filing a
for
for
which was
time
competitor
equal-sized
FCC, 70 F.3d
P’ship v.
Ltd.
L.A. SMSA
Merger Guidelines'
See
in turn derived
1358,
new sta-
(D.C.Cir.1995). MMTC's
1359
was
No
rationale
other
benchmark.
1800
petitioner rather than
intervenor
then,
judicial
proper
tus
Surely,
it is
provided.
that
initial concern
negates the
its
failure
call
review to
expanded
scope
impermissibly
had
it selected.
MMTC
to the 1800 benchmark
adhere
argument
by raising an
review
issues on
any
petition-
addressed
was not
that
argument
Mi
is the
proponent of this
56. The
briefs.
ers'
Coun
nority
Telecommunications
Media and
("MMTC”),
participated
had
cil
7,
logic
proffered
see the
We fail to
April
party. On
briefing as an intervenor
same-
true that
if it were
Even
2004,
petition
rationale.
MMTC withdrew its
always
a duo-
lead to
will
efficiencies
same
market
on the
reconsideration
circumstances,
does
absent unusual
poly
eliminating
jurisdictional
grounds, thus
follow,
expla-
proof or
additional
without
precluded our
not
would have
that otherwise
bar
nation,
(1) marketing
outside
EPA,
the station
that
v.
Co.
Penn Power
review. See West
(2)
meaningless
burden or
Cir.1988).
accept
market is
581,
(3d
We then
F.2d
FSSR
not retain the
should
its
the Commission
petition for
because
ed MMTC’s
review
less "unusual.”
"circumstance”
make that
petition tolled
pending reconsideration
provided
analysis
has not
“a reasoned
indi
VI. Local
Ownership
Radio
Rule
cating
policies
that prior
and standards are
Petitioners challenge the Commission’s
being deliberately
changed,
casually
modify
decision to
its local radio ownership
ignored.” Greater
Corp.
Boston TV
v.
rule, which limits the number of commer-
FCC,
841,
(D.C.Cir.1970).
444 F.2d
cial radio stations
a party
own in
may
Furthermore, while the Commission
local
sizes,
had
markets of different
47 C.F.R.
73.3555(a),
promised
by,
among
1999 to “expand opportunities
other changes,
adopting a new method for determining
for minorities and women to enter the
size
They
markets.
argue
industry,”
broadcast
1999 Television Rule
justify
failed to
its
Review, 14
12,903,
F.C.C.R.
decision to retain the
specific
rule’s
numer-
only
FSSR
policy specifically
remained
ical limits. We affirm the Commission’s
aimed at fostering minority television sta
modify
decision to
the rule (including mod-
ownership.
tion
In repealing the FSSR
ifying its method for determining local
without any discussion
effect of its
size),
but we agree that its decision
minority
decision on
television station own
to retain the numerical limits was arbi-
(and
ership
without ever acknowledging
trary
capricious,
and hence remand for
minority
decline in
station
the Commission’s further consideration.
FSSR),
notwithstanding the
the Commis
“entirely
sion
failed to consider an impor
Regulatory
A.
Background
and the
tant aspect of the problem,” and this
Biennial
Review
arbitrary
amounts to
capricious
rule-
Commission abandoned its
Farm,
making.58
State
422 coverage. stations’ of. radio area lapping to relax the Commission directed gress 73.3555(a)(3)(h); Fed.Reg. § 47 C.F.R. for as more, to allow even limits
tiered
1992).
proposed
For each
18,089 (Apr.
(but more
no
stations
eight radio
many as
stations,
local market
service)
combination
AM or FM
in the same
five
...
sta-
“the number
by
defined
was
mar-
largest
in the
commonly owned
to be
community contours
principal
tions whose
stations.61
commercial
of 45 or
kets
prin-
in part,
in whole
overlap,
required
Congress
Additionally,
of the stations”
community contours
cipal
biennially
these limits
review
Commission
commonly
to be
proposed
that were
necessary in
modify them as
repeal or
73.3555(a)(3)(h).62
§
47 C.F.R.
owned.
202(h),
110 Stat.
interest.
public
review, at 111-12.
biennial
Following the 2002
this so-
replace
decided
reviews,
and 2000 biennial
methodology” with
“contour-overlap
called
the same
to retain
decided
market definition
geography-based
after
Congress
by
limits enacted
numerical
entity that
Arbitron,
private
by
used
necessary
to be
they continued
finding that
audiences
station
local radio
measures
Reg
1998 Biennial
interest.
public
¶¶ 275-76.
Order
stations.
its customer
11,058, 59,
Review, 15 F.C.C.R.
ulatory
Metro
“Arbitron
these so-called
Within
(2000);
Biennial
2000 WL
sta-
total radio
markets,”
the number
1207, 32,
Review, 16 F.C.C.R.
Regulatory
both commercial
include
tions would
(2001). But
separately
numerical limit the Com- mission must determine many how radio uphold B. We the Commission’s new stations in that market by would be owned definition of local markets. entity same if entity acquired the Both Deregulatory Petitioners (called stations it proposes the “numera- and the object Citizen Petitioners to the figure). tor” If figure is within the changes inway limit, numerical may transaction pro- it defines local radio market. Predict ceed. ably, Deregulatory object Petitioners Under the contour-overlap methodology, to the modification that decreases the' size the Commission calculates the numerator of local (using markets Arbitron Metro by counting the acquiring entity’s radio markets instead of the contour-overlap stations that all have overlapping signal methodology) potentially lowers —which contours. A station whose signal contour applicable given numerical limit in a overlaps with some but not all of the other market —while Citizen Petitioners ob stations’ contours will not be counted in ject to the modification that increases the the numerator. The Commission calcu- (inclusion size local markets of noncom lates the by denominator counting all of stations) mercial potentially rais —which the stations whose contours intersect with applicable es the given numerical limit in a (not all) at least one of the contours of market. But we conclude that the Com another station in the numerator. justified mission has changes these under The Commission found that the contour- 202(h) § they arbitrary overlap methodology results inconsisten- capricious under the APA.
cy between the numerator and denomina- figures tor given for a transaction. Some justified 1. The using radio stations owned the acquiring enti- Arbitron Metro markets. ty may be counted in the denominator (because reject We out of hand the Deregulatory their contours intersect with at that, argument Petitioners’ by changing least one of the numerator-station’s con- tours) the market (because definition methodology, but not the numerator effectively increased nu- their contours do not intersect with all of 202(h)’s merical limits violation of pre- contours). the other numerator-station’s sumption in favor of deregulation. As dis- An acquiring entity might actually own *48 202(h) above, in cussed Part II is a not stations that do not count toward deter- one-way ratchet. The mining Commission is free many how more it may own within regulate or deregulate long limit, as as its the numerical but count toward do regulations in are the determining market, interest the size the where supported are a analysis. reasoned a bigger number higher to a correlates ¶ change to Arbitron Metro applicable markets is limit. Order num- 253. The both. inconsistency gives erator/denominator decid- reasons, the Commission these For artificially low numera- only not
rise methodol- ratio, contour-based jettison the favors combi- ed to which tor/denominator existing Arbitron’s employ that combi- ogy and instead potential also the nations but markets, acquire of local strategically definitions could geographical nation owners industry signals overlap with “established they whose finding the stations —those already-owned all of their a reasonable some, “represent not that but standard” numerical the signals end-run within stations’ market delineation geographic —to ¶ ¶ Further- 254. altogether. Id. 276.63 limits Id. compete.” radio stations which problem more, incentive” “perverse a point Deregulatory Petitioners theAs methodology contour-overlap arises, the as Arbitron out, reliance on the Commission’s pow- encourages actually consolidation One flaw. not without markets is Metro the stations stations because erful radio this method is that problem obvious to cre- likely are more larger signals country. cover the entire does not measure markets, makes it larger ate the Unit- fact, of counties in 70% In about be able owner would likely that their the 287 one of are not within ed States more radio stations even acquire But tend people Metro markets. Arbitron ¶ 257. market. Id. cen- specific population clustered in to be determined that The Commission ters, popula- of the United States’ as 78% the con- problems with fix these could not Arbitron 12 lives in age the tion over “merely by ex- methodology tour-overlap Nor has the markets. Metro the commonly stations from cluding owned public who minority of the ignored in including those stations denominator markets. Metro live in Arbitron does Excluding 255. Id. the numerator.” rulemaking proceeding It initiated new denominator those stations these ar- develop definitions for market determining was mean the Commission use a eas, decided to in the interim on who owns of the market based size methodology that contour-overlap modified that would both stations, “a distinction aspects problematic the more “minimize[s] in his- unprecedented unprincipled and ¶ 285. system.” Id. of that analysis.” Id. On competition tory of hand, commonly owned including all other argue that Petitioners Deregulatory in de- represented that are stations to demonstrate the Commission failed overly inflate could nominator actu- methodology was contour-overlap far “outlying by including stations levels petitioner competition. ally harming One from area of concentration.” explanation the Commission’s called inconsistency an numerator/denominator its found that The Commission also school theoretical graduate “exercise market definitions transaction-specific But Commis- Tr. economics.” ability to benchmark frustrated competi- potential find sion did evidence given in a compute competition the level of study sug- working group harm a tive that “a local it determined area. Thus under consolidation gesting station objectively deter- radio regime has resulted contour-overlap mined, ie., radio independent of the that is advertising prices. an increase acquisi- particular involved in above, the And, described 261 n. 548. tion, rational presents the basis most eontour-ov- that the observed 273. Commission defining radio markets.” purposes. addition, for antitrust as the relevant market noted that the *49 ¶ 276. Metros Department treats of Justice Arbitron
425 erlap created a in- methodology “perverse that it lieve was reasonable for the Com- problem, centive” as the powerful most fixed, mission to that conclude geography- stations whose contours intersect more based market definitions readily en- (and larger thus have a denomina- able accurate measurement and compari- tor) are more able than smaller stations to son of competition than a transaction-spe- ¶ acquire cific, more stations. Id. 257. The contour-based Id. definition. Commission also found that the contour- Finally, the Deregulatory Petitioners overlap methodology impairs ability its ac- point out that Arbitren money makes curately to compare measure and competi- customers, its station and it has financial
tion in consistently defined markets. obligations and other to those stations and ¶ 259. The findings provide Commission’s Therefore, its shareholders. they argue, justification ample for the conclusion that Arbitron’s economic incentives render its the contour-overlap methodology’s result- subject market definitions to manipulation. ing just are more inconsistencies ab- But the recognized Commission po- these theory. stract problems tential and adequately estab- reject specific
Next we lished Deregulatory safeguards Peti poten- to deter argument tioners’ that tial im manipulation, Commission a including two-year properly departed buffer past precedent, period any from its party before can receive namely, 1992 and 1994 benefit of decisions to either a change Arbitren retain the contour-overlap methodology. Metro market boundaries or the addition Policies, See Revision of more Radio Rules and radio stations to market. ¶¶ 37-40, 1992 7 F.C.C.R. Deregulatory WL sug- 690638 Petitioners’ (1992); gested conjectural Revision Radio Rides and Poli flaws persuade do not cies, 7183, ¶35, 9 that F.C.C.R. us adoption 1994 WL Commission’s of Arbi- (1994). Farm, tren State Metro markets was arbitrary Su and ca- preme pricious. reject Court that agency said when an We also their contention reverses its “former views” it “obligated use Arbitren supply a analysis delegates governmental reasoned the markets power beyond change private entity. a may that which Arbitren required only pro- will agency when an vide a measuring does not act first mechanism for concen- 41-42, instance.” 463 tration. Because the U.S. S.Ct. Commission remains 2856; Sullivan, see also Rust v. sole arbiter of 500 U.S. whether proposed 173, 186, radio S.Ct. L.Ed.2d station combination public serves the (1991). interest, Here the supplied improper delegation no will occur. analysis reasoned change for the —that reasons, For these we conclude that the only was “[i]t after the limits Commission’s decision to replace contour- were raised in the Act substantially overlap methodology with Arbitren Metro scope distorting of the market markets “in was interest” within effects of that system became manifest.” 202(h) meaning that it was a Order 262. rational exercise of rulemaking authority. Deregulatory argue Petitioners justified 2. The includ- signal-based that because is a radio enter- ing noncommercial stations. any prise, definition ignores the actual reach signals of station and the object The Citizen Petitioners scope of their listenership does not accu- the Commission’s decision to count both rately competition. measure But we be- noncommercial stations in commercial *50 stations noncommercial to take account Metro of an Arbitron the size
determining limits.66 ownership determining the inclusion argue that the They market.64 num- the increases stations noncommercial trans- uphold the Commission’s We C. market and given in a of stations
ber
fer restriction.
under
consolidation
more
thereby allows
impermissibly
limits.
It is
the numerical
rules,
ownership
the
its local
applying
In
inconsistent,
to increase effec-
they argue,
exist-
grandfather
decided to
way
in this
numerical
limits
tively the
television,
radio,
and
ing
radio/television
the exist-
defending
time
at the same
while
combinations,
require
“not
entities
and did
arguments that
limits from
ing numerical
in stations
current interests
divest
to
their
reject
we
relaxed. But
they
should
with
into
the
compliance
to come
in order
counting
that
premise
factual
argument’s
484.67 Un-
rules.”
ownership
Order
new
sig-
will increase
stations
noncommercial
rules, radio stations
past Commission
der
given
in a
of stations
nificantly the number
the rules were
compliance
created
counting noncommercial
market. Even
the Commis-
under
freely transferable
markets,
in the definition of
maintaining
stations
the status
that
policy
sion’s
oper-
markets
Metro
change
public
to Arbitron
harm to
create new
did not
quo
markets’
in most
decrease
Radio
ates as a net
See
goals.
interest
Revision of
Peti-
Policies,
Citizen
undercuts the
48.
7 F.C.C.R.
size.65 This
Rules and
course,
the Com-
that it
inconsistent
in this
argument
Switching
was
tioners’
the sizes
the transfer or
permit
to increase
mission refused
for the Commission
that
justifying
existing
grandfathered
combinations
sale
local markets while
except
ownership limits
arbitrary
its
It was
and violate
local
numerical limits.
qualify
that
therefore,
certain
entities”
“eligible
for
capricious,
that the Com-
The Notice stated
definition.
noncommercial
included
64. The Commission
"comprehensive
engage in
they
mission
finding
"exert[] com-
upon
stations
rules,
ownership
includ-
of its media
stations
review”
all
radio
petitive pressure on
other
competition
ing, specifically, whether
attention of
seeking to
attract
the market
body
potential
"competition
analysis
for
focus
listeners.” Order
should
the same
viewers/listeners,”
program-
"competition for
advertising.”
"competition
ming,”
¶¶
18,503,
50, 52, 57. This lan-
sizes,
17 F.C.C.R.
of various
investment
In 33 markets
apprised
guage adequately
found that there
banking
Bear Stearns
firm
find,
did,
might
as it
average
fewer stations
would be an
47.5%
compete with com-
stations
adopted approach
noncommercial
Commission's
under the
(that
stations
mercial stations
listeners.
noncommercial
includes
markets) than under the
Metro
uses Arbitron
(that
noncommer-
existing
excludes
approach
67.Though
the Commission restricted the
contour-overlap
employs
existing
cial
rendered
stations
transfer of
combinations
(Cross-
only 6 of the 33 markets
methodology).
noncompliant by
rules
all three local
rule,
Limits,
was there an increase
ownership
Stearns
studied Bear
Media
local radio
adopted approach.
rule),
under
we
in market size
consider
local television
Co.,
Bear,
Defining Mo-
challenges
A
Deregulatory
See
Stearns
Petitioners'
Radio?,
(May
No. 02-277
MB Docket
ment in
the context
transfer
issue within
restrictions
12, 2003).
the modifica-
radio rule because
(i.e.,
change
rule
tions to the local radio
markets)
likely
Arbitron
reject
Petitioners'
Metro
66. We
Citizen
deregulatory
other
provide
modifications
failed to
that Commission
contention
existing
to render
combina-
two local rules
adequate
to include
of its decision
notice
noncompliant.
tions
in its new market
noncommercial
*51
capricious
small businesses.68
488. We re-
Order
because the Commission
ject
Deregulatory
argu-
Petitioners’
the
“failed to
important
consider an
aspect of
ments that
this modification to the local
problem”
the
required under State
—as
202(h),
§
radio
rule contravenes
Farm,
see 463
at
U.S.
2. Transfer restriction is reasoned restriction depend “eligible does not on the
decisionmaking.
exception.
entities”
It
enough
is
for the
decide,
did,
Commission to
as it
that when
According
Deregulatory
to the
Petition-
ers,
arbitrary
the transfer
restriction is
comes
small business the relative
eligible
202(h)
entity
§
68. An
impose
stringent
$6
is a business with
not read
such a
million or less in annual revenue. rulemaking.
standard for
For our review
¶ 489.
modification,
purposes, any
d'eregu-
whether
latory
regulatory,
is "in the
Deregulatory
argue
69. The
Petitioners
scrutiny
interest” survives threshold
under
restriction,
anti-deregula-
the transfer
as an
202(h).
§
modification,
tory
per
invalid
se
under
202(h).
II,
explained
As we
in Part
we do
licenses,
are the sub
But
in which
broadcast
to a market
diversity advantages
restriction
ject'
transfer occurred
eligible-entity
property
transferability,
protected
the mar
are not
disadvantages to
outweigh
per
from the
Fifth Amendment.
interests
under
competition
ket’s
interests
*52
Station,
combination.
noncompliant
aof
Bros. Radio
petuation
v. Sanders
See FCC
in
exception is
693,
of times the
470, 475,
The number
L.Ed.
60 S.Ct.
84
309 U.S.
to the reasonableness
irrelevant
(1940) (“The
voked is
Com
[1936
of the
policy
869
as a whole.70
the transfer
restriction
person
clear that no
Act is
munications]
proper
nature of a
anything
to have
is constitu-
restriction
3. Transfer
of a
granting
a result of the
ty right as
tional.
FCC,
CBS,
license.”);
453
Inc. v.
see also
Deregulatory
reject also the
We
2813,
367, 395,
L.Ed.2d
S.Ct.
U.S.
that
the Commis
suggestion
Petitioners’
(1981)
spec
that the broadcast
(noting
transferability of
on the
sion’s restriction
domain and that
part
public
trum is
consolidations
noncompliant
pre-existing
“use of a limited
merely has
a broadcaster
questions”71
“raises serious constitutional
domain;
public
part
valuable
Takings Claus
the Due Process and
under
franchise it is bur
accepts that
when he
Fifth Amendm
es of
Constitution’s
public obligations”
by enforceable
dened
ent.72
(quoting
Communication of
Office of
FCC,
v.
359 F.2d
Christ
United Church of
pro
in a due
In order to succeed
(D.C.Cir.1966)));
§
994, 1003
47 U.S.C. 301
Fifth
under
takings
or
case
cess
(broadcast
the “use
provide
licenses
Amendment,
must first show
plaintiff
of channels of
ownership”
...
not the
but
property interest
legally cognizable
that a
communication).
ac
Broadcast
licensees
action
by the Government’s
is affected
subject to the Commis
cept their licenses
Educ. v.
Bd.
question. See Cleveland
pur
transfer
power
regulate
their
sion’s
Loudermill,
532, 538, 105 S.Ct.
470 U.S.
interest, convenience,
public
suant to “the
(1985)
1487,
pro
(requiring
L.Ed.2d 494
310(d).
Be
necessity.”
47 U.S.C.
process
due
property interest for
tected
property inter
legally cognizable
cause a
Pharmacies,
violation); Webb’s Fabulous
by the Commission’s
160-61,
implicated
est is not
Beckwith,
Inc. v.
449 U.S.
(1980)
pre
the transfer of
decision to restrict
(requiring
D. We affirm the attribution of Joint
interest.”
Agreements.
Sales
In the Order the
explained
Agreement
Under
Joint Sales
that,
potential
due to their
to convey influ-
(“JSA”), a radio station authorizes a bro
entities,
brokering
ence to
“may
JSAs
un-
advertising
ker to sell
time on the station
dermine
continuing
[the
in-
Commission’s]
Order,
exchange
for a fee.
terest in
competition sufficiently
broadcast
decided to count stations bro
*53
to warrant
limitation under the multiple
brokering
kered under a
toward the
JSA
¶
ownership rule.” Id. 318. The Commis-
(that
permissible ownership
station’s
totals
modify
sion’s decision to
its attribution
(1)
is,
JSAs),
long
to “attribute”
as
policy
accurately
to “reflect
the competi-
brokering entity
owns or has
attribut
today’s
tive conditions of
local radio mar-
in
able interest
one or more stations
¶
kets,”
321,
prevent
id.
and thus
its local
(2)
market,
joint advertising
undermined,
radio rule from being
is a
sales amount
15% of the
modification “in
interest” under
advertising
brokered station’s
time per
202(h).74
§
¶
jus
week. Order 317. The Commission
departure
tified this
prior policy
from its
2. Attribution
of JSAs is reasoned
finding
of nonattribution
that in-’
with its
decisionmaking.
market JSAs above the
threshold con
15%
vey
entity
degree
to the
a
An
brokering
agency
departs
that
from its
or
“influence
control” sufficient to warrant
“former views” is “obligated
supply
a
ie.,
ownership
analysis
limitation under the
reasoned
change beyond
for the
rules —
a
potential
may
required
“realistic
to affect
bro
that which
[the
the first
programming
judicial
kered
station’s]
other
instance”
order to survive
scru
¶
operating
tiny
compliance
core
decisions.”73 Id.
318.
for
with the APA. State
Furthermore,
Farm,
entity
41-42,
brokering
has the
this expectations that include explain does not vestment-backed cause the Commission regulato- upon legislative a reliance a what, transpired since 1999 anything, if Connolly v. Pension ry quo”); change position. status that accounts for its cf. 222-27, Corp., 475 U.S. Guar. interpret we Commis- But because Benefit (1986) (no 89 L.Ed.2d as a correction of its S.Ct. modification sion’s gov- taking occurred because “inaccuracy,” regulatory the Commis- policy’s prior appropriated property not ernment had particular to cite a interven- sion’s failure use, a severe impose own did not fatal to its reasoned for its ing change is not that n economic interfere impact, and did accept context we analysis. expectations). Thus we upon with reasonable the Commission’s determination' — sug- reject Deregulatory Petitioners’ that the “reexamination of the issue” JSAs (and will gestion that the attribution of JSAs always conveyed) po- have convey taking. sufficiently regulatory rational- result tential influence— jettison prior nonat- izes its decision to E. remand the numerical limits to We replace it with one policy
tribution *54 justifi- further the Commission for accurately the condi- that more reflects cation. local markets. tions of Order, In an- Commission is
3. Attribution
of JSAs
constitu-
existing
its decision to retain the
nounced
tional.
limits on radio
that
numerical
202(b)
§in
Congress established
disagree
Dereg
with the
We
preclude the
ulatory
suggestion
existing
that- the
1996 Act. The
limits
Petitioners’
ownership of radio stations with
“raises serious consti
common
attribution
JSAs
contours,
principal community
overlapping
tutional
concerns”75 under
the Fifth
(1) in a
market
Takings
except
Contracts
that:
radio
with
Amendment’s
Clause.
stations,
party
in
commercial radio
a
protected property
such as
are
or more
JSAs
Amendment,
may
up
eight
Fifth
see
own
commercial radio
terests under the
stations,
in
N.Y. v. New
not more than five of which are
United States Trust Co. of
(that
(2)
1505,
is,
FM);
16,
Jersey,
19 n.
97 S.Ct.
the same service
AM or
431 U.S.
(1977),
in a
market
30 and 44
who that there should be no limits narily applies only agency’s to an decision ownership. at all on local radio station promulgate new regulations or modify explained radio is a ones) existing apply also to the Com- ie., closed-entry market, all available radio mission’s decision to retain existing regu- frequency spectrum has been licensed. So Although lations. we accept the Commis- only way to develop power is to sion’s rationale for employing numerical Thus, buy existing stations. the Commis- (as opposed limits regulatory to other ap- says, sion numerical limits are a reason- proaches a case-by-case analysis), such as way preventing capacity able available we conclude that the Commission’s deci- being up” “locked in the hands of a sion to retain specific numerical limits few owners. Order 288. supported by is not analysis. reasoned explained The Commission then that the 1. The Commission’s numerical lim-
specific currently numerical limits approach is rational and in the employs Citing are effective to this end. public interest. literature, sug- economic gested equal-sized that a market with five *55 The Commission’s decision to re competitors sufficiently competitive is a tain a numerical approach limits to radio existing market. The for limits allow ownership regulation station “in is the roughly in equal-sized five firms each mar- public limits, interest.” Without numerical (For example, ket. eight-station the limit radio markets risk becoming up” “locked (or for markets of 45 or more stations allows in the hands of a few owners even one combinations). owner) eight-station for five because all of the available radio ¶ 289. The Commission that frequency concluded the spectrum has been licensed—a existing sufficiently competi- limits ensure high barrier to new market entrants. Or ¶288. evidence, tive local markets.76 The Commission also der Based on record explained why 76. The Commission also realized that its numerical limits for the depart equal- numerical limits from the five depart smaller market tiers also from the five competitor sized rationale. Of its decision equal-sized competitor rationale. It main- adopt not to a 10-station limit for markets that, markets, “greater tained in small levels stations, with 50 or more may of concentration be needed to ensure the said that it found no evidence that additional potential viability of radio stations.” Id. consolidation would increase efficiencies ¶ 292. Furthermore, those markets. Commis- below, explained that As we believe largest usually that sion said markets have underpinning numerical limits lack a rational small, stations, many low-power which make equal-sized competitor” theory in the "five appear competitive those markets the Commission advanced. But because we they actually are. A numerical limit that en- justification by the remand for further mission, Com- equal-sized compet- sures even more than five argu- largest provides we do not address Petitioners’ itors in these markets a com- regarding departure petition-protecting compensates that ments the Commission’s cushion ¶291. equal-sized competitor for this. Order The Commission also from the five rationale. support did not that nu 2. The Commission justifiably concluded existing decision to retain the necessary guard “to limits are merical reasoned numerical limits with ... and to ensure against consolidation analysis. opportunities that fosters market structure broadcasting.” entry into radio for new Petitioners and Both the Citizen study example, For a MOWG argue Petitioners that Deregulatory that, existing limits were found since decision to retain the the Commission’s sta the number of radio imposed arbitrary existing numerical limits was though even
tion owners declined 34% Predictably, the Citizen Peti capricious. by 5.4%. of stations increased number that the should argue tioners Roberts, & Scott Radio George limits, Williams and the tightened existing have 2002: Trends in Owner Industry argue Review Deregulatory Petitioners (MOWG Format, Study and Finance relaxed them. ship, Commission should have 2002). 11) argument Additionally, predominant the But sides’ (Sept. No. at 3 both essentially the the numerical limits same: today parent compa record shows supported by. are not the Commission’s which, largest of Clear Channel nies—the theory they equal-sized ensure five Communications, 1200 stations na owns While, competitors most markets. tionwide, in the radio or 10%'—dominate above, sup discussed substantial evidence dustry and control about two-thirds to retain ports the Commission’s decision nation both listeners and radio revenues numerical limits structure of its local contrast, prior to the wide. Id. at rule, ownership agree we also radio largest nation deregulation, 1996 Act’s that the lacks a rea the Petitioners radio station combinations had fewer wide analysis retaining specific these soned each. Id. than 65 stations limits. thus remand for the numerical We Furthermore, in- the record shows how justification. additional has increased station creased consolidation opportunities for new did not
prices, which limits
a. The Commission
sufficient-
ly justified
equal-sized competi-
“five
limits
market entrants and as
result
right
benchmark.
tors” as
diversity
output.
station
*56
at
Comments
18. Consolidation has
UCC
theory
game
The Commission relied on
locally pro-
amount of
also reduced the
premise
equal-sized
that five
support
its
content,
large group-owners
duced radio
as
competitors ensure that local markets are
remotely
often
from national of-
broadcast
structurally competitive.
fragmented and
having
employees pro-
fices
instead
(citing
Phillips,
289 n. 609
Louis
Order
programming.
duce
Comments
Future Competition Policy:
Theory
A Game
Per
Coalition,
Music
MB Docket 02-277
(1995);
spective
Timothy
Ch.
F. Bresna
2002).
(Nov. 20,
The record con-
13-14
Reiss, Entry
Competi
han & Peter C.
examples
tains
of consolidated stations
Markets,
tion in Concentrated
99 J. Pol.
production.
that eliminated local news
(1991);
Selten, A
Econ. 997
Reinhard
Sim
UCC Comments at 37-38. The evidence ple
Imperfect Competition
Model
Where
supports thus
Commission’s conclusion
2 Int’l
Many,
Four Are Few and Six Are
that, by continuing
(1973)).
to limit the consolida-
Theory
J. Game
The Citizen
stations,
tion of radio
numerical limits are
Deregulatory
Petitioners and the
Petition
“in
required
dispute
support
as
under
articles
ers both
these
interest”
202(h).
§
equal-
selection of five
Commission’s
competitors
appropriate
discrepancy
Respon-
as
address this
sized
Brief,77
dent’s
and should do so on remand.
Deregulatory
Petitioners
benchmark.
because
argue that the articles fall short
sufficiently
b. The Commission did not
not rule out market structures
they do
justified
existing
that the
numerical
(such
equal-sized competitors
than
other
actually
limits
ensure that markets
ones)
firm
large
many
as one
small
equal-sized competi-
will have five
equally competitive
argu-
markets. This
tors.
Commission,
ment,
by
unanswered
Regardless
equal-sized
whether
five
(as
response
because
discussed
warrants
competitors
right
is the
benchmark for
below)
supports
the record
nei-
evidence
competition, the
did
not suffi-
potential
actual nor
existence of
ther
ciently justified
equal-sized
that five
com-
equal-sized competitors.
petitors
emerge
actually
have
argue that the
The Citizen Petitioners
emerged under the numerical limits.
It
three articles the Commission cites are
logic
defies
to assume that a combination
superseded
by
and contradicted
the De-
top-ranked
competitive
stations is the
partment of Justice and Federal Trade
equal to a combination of low-ranked sta-
most recent re-write of the
just
tions
because the two combinations
Guidelines,
Merger
under which market
have the same number of stations. The
equal-sized competitors
acknowledges
with five
is consid- Commission .itself
that “ra-
dio station groups with similar numbers of
“highly
Merger
ered
concentrated.” See
1.51(c) (a
vastly
[can]
radio stations
have
different
highly concentrat-
Guidelines
power.”
levels of market
Order
HHI
higher
ed market has an
score
1800).
rely
The Commission’s decision to
Furthermore,
evidence shows
theory
Merger
that conflicts with the
existing
do not
numerical limits
ensure five
because, in
suspect
the same
Guidelines
equal-sized competitors. According to the
Order,
the Commission relied on the
record,
by
most markets are dominated
Merger Guidelines to derive its new limits
large
one or two
station owners.78 And
ownership.
for local television station
See
top-four
together
station owners
con
¶¶
of market.79
192-93. The Commission did
trol the lion’s share
Even
argued
considerably high-
77. The Commission
instead that we
owners had market shares
line-drawing
largest
defer
owners. For exam-
should
to its
discretion.
er than the next
deference,
judicial
ple,
top
But in order to warrant
in San Francisco the
two station
controlled,
agency’s line-drawing
justi
respectively,
decision must be
owners
26.8%
share;
explanation
fied
a reasonable
and cannot
of the local commercial
the third
20%
fourth-largest
controlled
run counter to the evidence before it. Sin
owners
13.4%
clair,
162;
NCCB,
12.1%,
Atlanta,
respectively.
larg-
F.3d at
see
*57
814-15,
aspect
at
The Commission market share into not take actual could support did not c. The Commission numerical lim- deriving the account when retain the its decision to it the “market share proffered its.80 Had subcaps. AlM/FM rationale, already we have too fluid” challenge Deregulatory Petitioners in the context of rejected explanation that decision to retain the Commission’s ownership rule and the the local television subcaps, which the Commission AM/FM also note that Limits. We Cross-Media grounds that FM stations justified on past extolled has advan- technological have and economic share data for meas- the value of audience ¶ 294. tages over AM stations. diversity competition in local uring Deregulatory point Petitioners But markets.81 the Commission’s reli- radio So out, not ex- agree, and we that this does competi- equal-sized ance on the fiction of necessary impose an AM tors, plain why it is measuring their actual opposed all. The does not suspect subcap competitive power, is even more particular in its brief to this criti- respond of the local radio rule. the context concentration, the Com- In its 15 mid-sized lead to undue local of the market share. markets, largest mission said: four firms controlled be- of the market share. And tween 86 100% recognize We that there are some limita- studied, the four in the seven small markets relying exclusively on market share tions to largest firms controlled between 92 and 100% weigh in the local data to concentration of the market share. pointed by peti- marketplace, as out radio However, petitioners tioners. to the extent suggests that this conclusion is 80. The dissent argue ratings inherently data are un- Order, by paragraphs two undermined purposes analyzing local con- suitable centration, ¶¶ 300-01, justified in which the Commission disagree. We we believe audience its decision not to reinstate an share audience share will be useful in information cap mergers. we But the flaw find in helping diversity competi- to measure analysis nothing has to do with Specifically, audience share data can tion. cap audience share its conclusion that an identify the most dominant stations in earning discourage would radio stations from And, compared market. to limits based by investing quality program- market share involved, solely on the number of stations is, rather, ming. Order 300. Our concern use of audience share is a means of ac- sought justify that the Commission its nu- counting variety types for the of sta- by suggesting they merical limits channel, regional, daytime, tions—clear low equal-sized a sufficient number of com- allow high power exist in various mar- —that (five) competitive petitors to allow for a mar- Moreover, continuing kets. consider ket, when fact there is no evidence that the limits, part this factor as of our resulting competitors anything ap- would be may provide our rules an incentive proaching “equal-sized.” stronger, stations to invest in successful generally low audi- *58 other local stations with In the context of its decision in its 1992 ence shares—an outcome that consistent rulemaking purposes proceeding. to retain a audience share with the 25% Policies, acquisition will Radio benchmark at which an raise Revision Rules and 6387, prima F.C.C.R. concern that the transaction will facie so, modify eism. Thus it should do or its ence agency accorded to decision-making. In approach, doing, remand. so the Court has substituted its policy
own judgment for that of the Feder- VII. Conclusion al Communications upset Commission and ongoing review of broadcast media Though we affirm much of the Commis- regulation by mandated Congress Order, sion’s we have several identified Telecommunications Act of 1996. provisions in which the falls short of its obligation justify its deci- I stay would lift the and allow the Com- retain, repeal, modify sions to or its media mission’s media ownership go rules to into ownership regulations with reasoned anal- effect. It is not the role judiciary of the ysis. The Commission’s derivation of new second-guess the reasoned policy judg- Limits, Cross-Media and its modification ments of an agency administrative acting of the on both numerical limits television within scope delegated of its authority. and station ownership radio in mar- (now Allowing quadrennial) biennial kets, all have the same essential flaw: an process review to run give its course will unjustified assumption that media outlets Congress oppor- type of the same an equal make contribu- tunity to monitor evaluate the effect diversity tion to competition in local the proposed rules on the media market- markets. We thus remand for the Com- place. importantly, More it will ensure justify modify mission to or its approach that accountability for these crucial policy setting numerical limits. We also remand political decisions rests with the branches for the Commission to reconsider or better of our government.
explain repeal its decision to the FSSR.82 I. Introduction stay in currently effect will continue our pending review of the Commission’s 1934, In Congress delegated broad au remand, action on panel over which this thority Federal Communication jurisdiction. retains regulate Commission to “interstate and foreign in commerce communication SCIRICA, Judge, dissenting Chief in radio,” wire and grant and to station part, concurring part. “public broadcast licenses that served con I Although parts venience, interest, concur some necessity.” Com comprehensive analysis Court’s 151, of this munications Act of §§ U.S.C. order, 309(a). complex agency including rejec- statutory authority to regu This tion of the constitutional I re- challenges, girded by late media is broadcast an obli spectfully dissent from its gation preserve decision to va- “to an uninhibited market view, cate my and remand. place the Court’s ultimately ideas which truth will upended decision way prevail.” FCC, has the usual Red Lion Broad. Co. v. judiciary 367, 390, reviews agency rulemaking. U.S. 89 S.Ct. 23 L.Ed.2d (1969). Whether the “arbitrary standard is or ca- delegated respon The FCC’s “reasonableness,” pricious,” sibility vari- some foster robust forum for nation “deregulatory ant of a presumption,” the al unique debate is administrative law applied sup- Court has a threshold vibrancy to the essential our deli plants principles Valeo, the well-known democracy. Buckley defer- berative See v. norities, 82. On remand the Commission should Commission had deferred proposals enhancing MMTC's consider for future consideration. ownership opportunities for and mi- women *59 436 (2003) ¶¶ 90-94, 21511828 2003 WL 651 612, 659 1, 49, 46 L.Ed.2d 96 S.Ct.
424 U.S.
(“Order”)
modern
history of the
(detailing
a well-
(1976)
on
(“Democracy depends
Today, the modern
marketplace).
media
electorate.”).
informed
literally thou-
includes
marketplace
media
of ideas”
“marketplace
Preserving the
television
and broadcast
sands of radio
to mathematical
easily
itself
not
lend
does
national, regional
stations,
of
hundreds
feder-
independent
other
certitude. While
net-
television
and local non-broadcast
measura-
may
greater
act with
agencies
al
range of content
delivering a vast
works
emis-
reducing pollution
precision
ble
in
satellite
and direct broadcast
over cable
or even
sions,
safety standards
defining
significantly,
perhaps
most
systems,
rates,
oper-
establishing
FCC
interest
digital technol-
and a host of
the Internet
speech
arena
less scientific
of
ates
services.
interactive
ogy-enabled
realm, the Commis-
this
In
debate.83
¶¶
ownership
media
designing
95-128.
viewpoint di-
maintain
mandate to
sion’s
land-
technological
dynamic
rules for
media is
broadcast
in the national
versity
balance the
must
scape, the Commission
concept
by the “elusive”
both
complicated
license own-
negative effects of
potentially
inherent uncer-
diversity,84
of
di-
programming
concentration on
ership
of
tainty
prospective
effects
regarding
viability of
versity against
the economic
regula-
the direct
Even
structural rules.85
outlets.
struggling media
new or
e.g.,
broadcast
specific
tion of
content —
seventy years, the Com-
past
Over the
af-
public
for news and
guidelines
content
actively adjusted its license
has
mission
necessarily
not
programming
fairs
—does
ongoing basis to
ownership rules on an
achieved.
diversity will be
viewpoint
assure
media outlets
growth
of new
foster
regulate
duty to
The Commission’s
programming
maintaining a focus
while
public
interest
media
broadcast
history,
early
diversity. For much of
unpredictable
by the
complicated
further
assump-
with the
operated
on the
technologies
emerging
of
impact
best
tion that diversification
the Commis-
marketplace.
media
When
in promoting
public
interest
served
formed,
or “standard”
AM
sion was first
diversity.86
example,
For
programming
only broadcast medium
radio was the
Ra-
Genesee
the Commission denied
1938
2002 Biennial
See
practical concern.
for a second
Corporation’s application
dio
-
Com-
concluding
Review Review the
Regulatory
AM
license after
was
station
,
Rules
grant
Ownership
“not
mission’s Broadcast
interest
broadcast station
Adopted
Rules
Pursuant
additional
and Other
facilities
opera-
already
control of the
Telecommunications
to interests
202
Section
and in
13,649-
of the same class
1996,
13,620,
tion of
station
Act
F.C.C.R.
18
States,
616,
policy and First Amendment
U.S.
on both
250
83. See Abrams United
v.
(citation omitted).
(1919)
630,
17,
grounds.”)
437
community.”
],
ally
the same
Genesee Radio
],
rather than
further[
frustrate[
(1938).
183,
Corp., 5 F.C.C.
186
For the
foremost First
goal
Amendment
aug
of
years,
regulation
next
media
forty
contin- menting popular discussion of important
primarily
theory
ued
“on the
that diversifi- public
Amendment
issues.”
Section
of
cation of mass media ownership
serves
73.3555
the Commission’s Rules Relat
of
public
by promoting diversity
interest
of
ing
AM, FM,
to Multiple Ownership of
program
viewpoints,
and service
well
as
Stations,
and Television Broadcast
100
by preventing undue concentration of eco-
17, 20,
(1984).
F.C.C.2d
1984
251222
WL
NCCB,
power.”87
780,
nomic
436 U.S. at
dynamic
evolution of the media
110 Stat. *61 in communica- Congress.90 revolution unprecedented in motion technologies, Congress set
tion
statutory
review
Short-circuiting
me-
process of
statutorily-prescribed
and
the Commission
process deprives both
on the conviction
deregulation based
dia
to eval-
Congress
opportunity
the valuable
media
competition
increased
of de-
new rules and the effects
uate the
public
serve the
marketplace would best
marketplace.
the media
Un-
regulation on
manda-
significance of the
interest.89
schedule,
implementation
original
der the
ig-
not be
mechanism should
tory review
already
initi-
would have
the Commission
ownership
set
particular
This
of
nored.
rules
proposed
ated
assessment
by the
passed
of those
any
rules —like
the 2004 Biennial Re-
preparation
in iron. No sin-
not cast
Commission —is
view. See
of 1996
Telecommunications Act
perfectly
rules can
proposed
of
gle set
202(h).
remanding the
Vacating
§
and
dynamic nature of the media
capture the
pre-
rules to the Commission will
proposed
as an im-
These rules serve
marketplace.
for months
existing
place
rules
serve the.
ongoing
a'n
of reference in
portant point
resulting delay
years,91 and the
or even
Nevertheless,
the latest
process.
review
than if
likely
public
leave the
worse off
will
step
a reasoned
towards
represent
rules
take effect.92
rules were allowed to
deregulatory media
these
pro-competitive,
20, 2001,
rulemaking
September
Appropriations
posed
of
on
Act
In the Consolidated
629,
3,
2004,
108-199,
reply by January
requiring
§
comment and
118 Stat.
100
and
Pub.L.
Thereafter,
7, 2002).
(2004),
re-
Congress replaced the
review
biennial
thoroughly
quires
time to
review
quadrennial
a
review.
additional
commentary gathered
and
evaluate
104-458,
Rep.
at 113
Conf.
No.
89. See H.R.
Here,
through
NPRM.
(1996)
pro-
(defining purpose
"to
of the Act
pro-
comprehensive
a
NPRM the
initiated
on
de-regulatory
pro-competitive,
na-
vide for
ownership
incorpo-
posed
rules-which
media
policy
designed to accel-
framework
tional
commentary
previous rulemaking
from
rated
deployment
rapidly private sector
of
erate
newspa-
proceedings on the local radio and
and informa-
telecommunications
advanced
cross-ownership
Sep-
per/broadcast
rules-on
by open-
technologies
Americans
to all
tion
23,
Regula-
tember
2002. See 2002 Biennial
ing
to com-
all telecommunications markets
tory
the Commission's
Review—Review of
petition”).
Ownership Rules and Other Rules
Broadcast
Adopted
202
Tele-
Pursuant to Section
of
Meyerson,
Mar-
I.
Ideas
90. See Michael
of
1996;
communications Act
Cross-Owner-
of
to the 1996
ketplace: A Guide
Telecommunica-
Newspapers;
ship
and
Broadcast Stations
of
Act,
(1997)
Fed. Comm. L.J.
253
49
tions
("The
Concerning Multiple
Policies
Own-
Rules and
as,
experiment,
Act is an
one
1996
ership
Radio Broadcast Stations in Local
admit,
all telecommunication
have
Markets;
("No-
Radio Markets
Definition of
regulation
experiment.”).
is an
18,503,
tice”),
F.C.C.R.
WL
17
2002
Proposed Rulemaking pro
(2002).
Notice
did not
31108252
The Commission
("NPRM”) typically
several
cess
consumes
proposed
order
media
issue its final
See, e.g.,
2, 2003,
Concern
Rules
Policies
months.
July
rules until
some ten
ing Multiple Ownership
Broadcast
Radio
notice
com-
months
initiation of the
after
Markets,
Radio
in Local
Stations
process.
ment
Definition of
Markets,
19,861, 2001 WL
16 F.C.C.R.
(2001)
already
(allowing 90-days
publi
has
been chas-
92.The Commission
deregula-
holding up
process
reply);
tised for
notice for
cation of
comment
by Congress.
clearly mandated
See
Cross-Ownership
Stations and
tion so
Broadcast
Stations,
FCC,
v.
280 F.3d
Newspapers, Newspaper/Radio Cross-Owner
Fox Television
Inc.
("Fox
("The
(D.C.Cir.2002)
I")
Policy,
Pro
Waiver
Order and Notice
ship
17,283,
approach
Making,
wait-and-see
cannot
posed
Rule
F.C.C.R.
(2001)
squared
statutory
(issuing
pro-
with its
mandate
WL
notice
dynamic
nature of the
opment,
Given
indus
myriad
avenues for intellec-
try,
crafting regulatory
the task of
struc
activity.”
230(a)(3)
tual
47 U.S.C.
(1994
V).
ture that
the realities of the media
ed.,
reflects
Supp.
“surfing”
While
marketplace requires the Commission to
Web,
World Wide
primary
method
predictive
make
judgments about the fu
of remote information retrieval on the
consistently recognized
ture. Courts have
today,
Internet
individuals can access
authority
unique
the Commission’s
ex
material about topics ranging from aard-
*62
pertise
making
such estimations. See
varks to Zoroastrianism. One can use
FCC,
88,
P’ship
Cellco
v.
357 F.3d
98
the Web to read thousands of newspa-
(D.C.Cir.2004)
...
(“Nothing
suggestfs]
pers published
globe,
around the
pur-
§
that under
ll’s biennial review mandate
chase tickets for a matinee at
neigh-
longer rely
the Commission could no
on its
theater,
borhood movie
or follow the
predictive judgment or properly-supported
progress
any Major
of
League Baseball
in determining
regu
inferences
to retain a
team on a pitch-by-pitch basis.
lation.”). Courts
correctly
also have
ac
ACLU,
564, 566,
v.
535
122
U.S.
Ashcroft
knowledged
virtually
it is
impossible for an
1700,
(2002) (cita
S.Ct.
ship reviewing a conten authority by adopting challenges. delegated various within determined properly arbitrary of rules which agency a set rule is that an tion re interest. Our serve gov review is our standard of capricious, necessarily cabined rules is view of those Proce the Administrative erned first role. constitutional our traditional within § Act, 706. Under 5 U.S.C. dure against the dan guard “must courts APA, instructed “hold is this Court nar from the unconsciously sliding ger of action, find agency and set aside unlawful spacious into of law confines row that are found conclusions” ings, and v. Dodge Corp. Phelps policy.” domain of discre an abuse “arbitrary, capricious, 177, 194, NLRB, 61 S.Ct. 313 U.S. tion, not in or otherwise accordance (1941). or not Whether we L.Ed. 706(2)(A); Jersey New Coal. law.” rules, it particular set agree with this FCC, 574 F.2d v. Fair Broad. the Commission’s to overturn not our role *63 (3d Cir.1978). Chevron, See judgments. policy reasoned Council, U.S.A., Natural Res. Inc. v. Def. the “arbi under scope of review The 2778, 866, 837, 81 104 S.Ct. 467 U.S. “narrow, is capricious” standard trary and (“The (1984) responsibilities L.Ed.2d 694 judg not is to substitute court policy of such assessing the wisdom for Motor Vehi agency.” of the ment for that struggle the between resolving choices and Auto. Mut. Ass’n v. State Farm cle Mfrs. public interest of the are competing views 2856, Co., 29, 43, 103 S.Ct. 77 U.S. Ins. 463 judicial ‘Our Constitution vests not ones: (1983). Nevertheless, L.Ed.2d 443 political responsibilities such decision, agency the must ex reaching its Hill, ”) v. TV A 437 (quoting branches.’ articulate a the data and amine relevant 2279, 153, 195, 57 L.Ed.2d 98 S.Ct. U.S. for its action in satisfactory explanation (1978)). diversity Questions of media 117 between cluding a “rational connection strongly diver ownership command the choice made.” facts found and should questions But those gent views. Lines, Inc. v. Burlington Truck (quoting legislative within our answered officials by 168, States, 156, 83 S.Ct. 371 U.S. United of government. branches executive (1962)). Normally, 239, an 9 207 L.Ed.2d II. of Review Standard arbitrary capricious is agency rule appeal agency of an decision This is an where: 1934, Act of 47
under the Communications on factors which agency has relied jurisdic- seq. § This 151 et Court’s U.S.C. consider, it to Congress has not intended 402(a), and § on 47 U.S.C. 28 tion is based important an entirely failed consider 2342(1). Although there § U.S.C. expla- aspect problem, offered similarities, majori- I differ from some runs counter nation its decision that for of review. ty applicable on the standard agency, before the to the evidence Moreover, majority’s subse- I believe as- that it not be implausible so could analysis oversteps appropriate quent in view or the cribed to a difference so, majority sub- doing standard. The re- agency expertise. product of policy for deci- judgment stitutes its own attempt itself should not viewing court by Agency. to be resolved sions meant deficiencies; such we up to make A. may supply not a reasoned basis itself agency that the has agency’s action litany noted, bring a As Petitioners given. Order. challenges to the Commission’s
441 Id.; also Robert ownership see Wood Johnson Univ. tion of would enhance the likeli- (3d 273, Hosp. Thompson, v. 297 F.3d 280 of achieving diversity hood of viewpoints). Cir.2002). will, however, “uphold We a Additionally, where issues involve line- decision of less than if clarity ideal determinations, drawing our review is nec- may agency’s path reasonably be dis essarily deferential agency expertise, Ass’n, cerned.” Motor Vehicle FCC, 463 Corp. see AT&T v. 607, 220 F.3d Mfrs. (quoting (D.C.Cir.2000),
U.S.
S.Ct. 2856
Bow
long
so
as these decisions
Transp.,
man
Inc. v. Arkansas-Best
run
do not
counter to the evidence before
Inc.,
281, 286,
Freight Sys.,
Sinclair,
419 U.S.
agency.
influenced
allocated
202(h)
lenge
the Order as violating
enabling
FCC in its
act. The 1934 Act
the 1996 Act. This section reads:
grants “broad discretion” to the Commis
sion to
allocate broadcast
licenses
The Commission shall review its rules
interest,
“public
adopted pursuant
convenience and necessi
to this section and all
Guild,
ty.”
v.
FCC WNCN Listeners’
of its
biennially
part
rules
582, 594,
regulatory
U.S.
101 S.Ct.
of its
L.Ed.2d
reform review under
(1981).
section 11
Act’s
interest stan
of the Communications Act of
“supple
dard is a
*64
instrument for the exer
1934 and shall
any
determine whether
of
expert body
cise of discretion
such rules are necessary
public
in the
Congress
charged
carry
has
to
out its
interest as the
leg
competition.
result of
593,
policy.”
islative
Id. at
101
repeal modify
S.Ct. 1266
Commission shall
or
Co.,
(quoting
any regulation
FCC v. Pottsville Broad.
it
309
determines to be no
138,
134,
437,
in
longer
public
U.S.
60 S.Ct.
ty suggests judg that “the Commission’s part required by of the biénnial review this regarding public ment how the interest is section, necessarily our review is informed judi best served is entitled to substantial by Congress’ direction in the statute that deference,” cial and “is not to be set aside” in reviewing ownership addition to its rules long implementation as as its public biennially to any whether “determine interest standard is “based on a rational such necessary public rules are in the in- weighing of competing policies.” Id. at terest as competition[,] the result" of [t]he 596, 101 S.Ct. repeal modify any Commission shall or regulation longer to in determines be no
Finally, the standard of review is even
202(h).
§
public
interest.”
more deferential “where the issues involve
easily
‘elusive’ and ‘not
statutory language
defined’ areas such
This
has been inter-
programming diversity
in
preted
correspond
broadcast
deregula-
with the
FCC,
ing.”
Group
tory process
Sinclair Broad.
v.
284
in the
Act.
codified
1996
See
(D.C.Cir.2002).
148,
I,
F.3d
159
(noting
Because Fox
280 F.3d at
in
202(h)
many aspects
§
of this
Congress
administrative order
instructed the Commis-
policy
process
deregula-
involve
determinations on such elu
sion to “continue (“This
tion”); Sinclair,
goals,
“rationality”
sive
a
standard is often
444 grant- authority has] rulemaking [it broad one, upheld.97 and should be reasonable it to do so suspected ... would have ed we history bol- legislative 1996 Act’s excep- describing expressly language in Section interpretation. the FCC’s sters authority]”).98 tion the [to larger a 202(h) ambit of the falls within in 1996 11 the Section provision, review con though the Order must Finally, regarding Sec- report conference Act. The from directives the remand with sistent 104-458, at 11, Rep. No. H.R. Conf. tion Sinclair, reasoned deci and those Fox and longer in the (1996), “no interprets 185 instructive, the law they are not sions meaningful.” longer “no interest” as public This appeal. in current case the of the syn- course, essentially is phrase, This the review of petitions case involves use- longer “no phrase the onymous with a reexamination comprehensive FCC’s much longer appropriate,” ful” or “no rules, set of its broadcast larger indispens- longer than “no exacting less parties partici set in a different Report’s def- Thus, the Conference able.” compiled, was record a different pated, interest” longer “no in inition of See, e.g., reached. result different “nec- interpretation of the FCC’s supports (3d 776, 786 F.3d Leavy, 322 v. Hamilton essary.” Cir.2003) (Law applies case doctrine of the 202(h)’s deregula- admittedly § Despite only litigation.”).99 to the “same tenor, does not foreclose the statute tory another But instructive Sinclair is un- regulation of increased possibility proper application relating to the reason if the Commission the biennial review der Sinclair, of review. our standard public interest. action finds such failed found D.C. Circuit Act overcomes in the 1996 Nothing of non-broad- exclusion demonstrate authority of FCC. rulemaking broad in of “voices” from its definition cast media 303(r). Any § limitation 47 U.S.C. See was not ownership rule See, its local television by Congress. clearly stated must be F.3d at 165. capricious. 284 arbitrary and NLRB, 499 U.S. v. e.g., Hosp. Ass’n Am. in order at failure The Commission’s 1539, 675 606, 113 L.Ed.2d 613, 111 S.Ct. notably different in- issue Sinclair (1991) had Congress “if (stating that purported degree kind and both particular in a area to curtail tended sought agency permissibly 97.''Necessary” to mean what has been found Telecomm., by oth F.3d at "appropriate” merely Cellular 330 "useful” or achieve.” Act, 416; GTE, these reviewing but 1996 Iowa er 205 (discussing courts F.3d 509-12 portions of 721, discrete 366, dealt with Bd., cases all other 142 119 S.Ct. U.S. Util. & Inter Telecomm. See Cellular Cellco, statute. 835). recently L.Ed.2d Most (D.C.Cir.2003) FCC, v. 330 F.3d net Ass’n Agency's upheld the D.C. Circuit F.3d Act); 10(a) GTE (dealing § "necessary” interpretation “useful” FCC, (D.C.Cir. F.3d 416 Corp. v. Serv. provision of the Act. review similar 251); 2000) AT&T (dealing U.S.C. with 47 at 99. Bd., *67 U.S. 119 Corp. 525 v. Iowa Utils. 721, (same). (1999) S.Ct. 142 L.Ed.2d 1996 Act point, I do not find the 98. On this Moreover, Telecommunications the Cellular regulation, provided highwater mark for "indispensable” rejected the explicitly court regulate. could beyond FCC the by "necessary” required as interpretation statute, giving Chevron deference instead the motion to denial of the 99. As noted the "necessary” interpretation that to the FCC’s transfer, separable this case "we find 10(a) "referring to the § existence means De- independent Fox and Sinclair....” from the strong between what aof connection Transfer, at 5. Motion to by way regulation and nial agency has done majority “flaws” the require limits, believes va- ship by not supported the record. cating view, the FCC’s Order here. my In none of purported these flaws reach the level of arbitrary and capricious sum, In the standard of gov- review is 202(h).100 decision-making or § violate by erned the requirement foremost APA’s that the FCC’s rules not arbitrary The majority’s conclusions cannot be this, capricious. Beyond bear in we mind evaluated without examining underly- the requisite flexibility the the ing afforded Com- rules and the FCC’s rationale for the Act, mission’s rulemaking under the changes. The evolution of the challenged particular and the granted deference puts rules Agency’s the mammoth task in the Commission’s decisions on diversity perspective. This includes discussion of and other difficult goals. to define Finally, goals the FCC’s objectives in its bien- 202(h) § overlays deregulatory tenor on view, nial In my review. Agency ratio- our I review. While would not term supports this nale changes rule and demon- a “deregulatory standard presumption,” strates the Commission’s decisions required the FCC is to demonstrate that arbitrary were neither capricious. nor its remain useful in rules inter- Policy A. Goals Landscape and Media
est. In accordance with its 2002 biennial re III. Appeal Rules at Issue in this obligations, view the Commission initiated Agency Rationale for Rules a comprehensive review of six media own majority The partially vacates and re- ership rules. part Order 1. As of its 2002 mands the Order for the Review, Commission to Biennial Agency sought com re-evaluate certain purported flaws. With ment four broadcast rules: regard Index, Diversity to the majority the Local Multiple Television Ownership finds weight assigned Internet, to the Sinclair; Rule on remand from the Radio- assumption well as the equal shares Television Rule; Cross-Ownership the Na for outlets within the type same media tional Television Multiple Ownership Rule lacks support. majority record also on Fox;101 remand from and the Dual Net finds the Commission inconsistently de- work Rule. 2002 Regulatory Biennial Re rived view, its Cross Media Limits from the 18,503, 17 F.C.C.R. 2002 WL Diversity (2002). Index regard results. to the The FCC also incorpo rules, local ownership the majority finds pending proceedings rated on local radio the television and radio rules’ reference to ownership, Rules Concerning and Policies a particular market structure' —one with Multiple Ownership Radio Broadcast equal-sized firms—as the Markets; Commission’s Stations in Local Definition of underpinning adopting specific Markets, owner- 19,861 Radio 16 F.C.C.R. majority noted, majority vacates remands As the our review of this precluded repeal Commission's rule is Appro- decision the Consolidated Act, 2004, Rule, priations 108-199, Failed Station Pub. L. No. Solicitation as well as its (2004). § 118 Stat. For reasons sub-cap to retain an decision AM in the Local majority opinion, discussed in the agree I Ownership Radio Finally, Rule. majority statutory challenges directive renders to provide specific instructs Commission to Commission's decision to maintain the UHF Diversity notice rulemaking Index agree discount moot. I also after purported remand. I find none of these estopped revisiting is not UHF dis- arbitrary flaws capricious to be or violate 202(h) rulemaking count § outside the con- 202(h). *68 text.
446 ¶ goal en- 19. This Id. perspectives. of (2001), Radio 1402453 WL of Definition of marketplace a robust (2000), to ensure 25,077 deavors Markets, 15 F.C.C.R. to its adhered The Commission newspaper/broadcast ideas. on proceedings poli- that the Cross-Ownership determination “longstanding cross-ownership. multi- ownership of Newspapers, limiting common cy Stations Broadcast (2001). the most reliable 17,283, outlets is 2001 WL ple media F.C.C.R. diversity.” viewpoint promoting means here issue commenced The Order ¶ Id. 26. rulemaking re- proposed a notice 17 F.C.C.R. 2002. September leased to a vari- diversity refers Programming (2002) 18,503, 2002 WL and content. formats programming ety of (“NPRM”). analysis, help guide its To ¶ pro- found The Commission Id. 36. a Media Owner- established generally best diversity was gramming (“MOWG”), which Working Group ship be- competition on by reliance achieved from ranging studies twelve commissioned ¶ Ac- Id. 37. delivery systems. tween analyses of to economic surveys consumer Commission, diversity outlet to the cording filed parties Interested markets. media there given a means comments, consist- of pages thousands firms. Id. owned independently multiple analyses, social, and economic legal, ing of ¶ regulat- found that The 38. evidence, in- and anecdotal empirical to achieve ownership of outlets ing their support to data dustry and consumer attempt- to preferable diversity was outlet positions. directly, because engineer outcomes ing to 256-page a order was The result the need for regulation reduces ownership analyzed record the Commission subjective judg- to make the Commission vote, determined, ¶ a three-to-two Id. 39. program content. about ments a provide ownership rules modify its availability to the diversity refers Source “new, comprehensive framework variety of content content of media Order ownership regulation.” broadcast ¶ light of dramatic Id. 42. producers. June the Order on adopted 3. The FCC markets, including in television changes later, on 2, 2003, it a month and released of channels in the number the increase Order 2, summary A July 2003. households, the Commis- to most available Register in the Federal published was diversity that source need sion determined 46,286 (Aug. Reg. 2003. 68 Fed. August owner- objective of its broadcast not be 2003). Minority and fe- 43. ship policies. policies which en- diversity male refers Policy of the Present Order 1. Goals ownership of minority and courage female Order, identified In its sources, reaf- and the Commission media policy goals that longstanding three goal the Order. policy firmed rules: di- ownership guide continue to ¶ 46. and localism. versity, competition, diversity types five Commission found to the preamble forth in the As set viewpoint di- ownership policy: relevant to competi- Act, greater Congress believed diversity, diversity, versity, program outlet would inure regulation tion reduced minority and female diversity, and source Act, preamble, benefit. diversity. Order reaffirmed the Stat. commitment “longstanding to the avail- Commission’s diversity applies Viewpoint by ensuring pro- competition variety promoting ability reflecting content media *69 structures,” competitive market costs, Order tion increase transparency [the] “ ¶ 57, recognizing [consumers receive process, and ensure consistency deci- choice, more prices, ¶ lower and more inno- sions.” Id. 82. The Commission deter-
vative in competitive services markets than mined that a case-by-case process accounts they do markets where one for the particular circumstances each firms power.” exercises market Id. transaction but fraught with regulatory satisfying its competition goal, the Com- ¶ problems, id. such high adminis- mission also noted competitive markets trative costs a lack of planning and help to the contribute related goal view- investment predictability for media own- ¶58. point diversity. Id. The Commis- ers.102 Based on the efficiencies and pre- pointed sion out that competition also fur- dictability of bright rules, line regula- thers goal product innovation. Id. tory supports model most of the Agency’s ¶ 69. ¶ rules. Id. 85. The Agency reiterated
Federal regulation
broadcasting
bright
his-
line rules were adopted based
torically
placed
has
significant emphasis on on a comprehensive review of the media
policy
localism. The
goal of localism ad- marketplace and its
assessment
what
dresses whether broadcast stations are re-
rules
necessary
were
promote
goals.
its
sponsive to the needs and interests of their
local communities.
Id.
74. Localism is
2. New
Landscape
Media
and the
in congressional
contained
directives to the
Growth of the Internet
Commission and has been judicially reaf-
Order,
In its
the Commission took sub-
firmed as a
regulatory objective.
valid
stantial notice of the expanding media
¶ 73;
States,
see
v. United
NBC
319 U.S.
significant
technological ad-
190, 203,
(1943)
63 S.Ct.
vantage of companies’ media incentives to serve local communities. To measure lo- Significant technological advances calism, the Commission on the se- focused media marketplace over the twenty- last lection of programming responsive to local years five required new regulatory re- interests, needs and and local quanti- news sponses from the Among Commission. ty quality. Order 78-79. these advances in the distribution infor- Internet, mation Commission considered were the regula- satellite distri- tory systems, framework that bution would best achieve its cable television and video- goals. It recognized bright cassette Today line rules recorders. are over there and case-by-case analysis offer different 308 satellite delivered net- non-broadcast advantages. The Commission cable, concluded works available for carriage over bright provide rules line greater “cer- direct systems (“DBS”), broadcast satellite tainty outcomes, resources, conserve re- and other multi-channel viewed program- duce delays, administrative (“MVPD”) transac- ming lower systems. distribution Still, closely reiterated com- requests examine pe- both waiver particular mitment to review deny. cases and to titions to *70 house- million, of total U.S. or 76% sources, 86.3 the num- traditional more
Within Co., Tribune by 2006. Comments holds radio out- and television of broadcast ber at 10. in the significantly grown also have lets ¶ Commission, 121. virtually Id. years.
last 40
to the
According
corre-
a
company has
major media
every
is
media sources
new
explosion of
This
site,
any person
and
web
sponding
The
Internet.
by the
illustrated
best
can
server
web-hosting file
to
access
commented:
may
site,
public
which
web
create a
medi-
Internet,
new
entirely
an
as
view sites
can
Internet users
access.
of all
amalgam
an
um, composed of
a search
or can use
choosing
their own
it, completely
preceded
technologies that
News,
pres-
Google
as
such
engine,
we com-
way in which
transformed
approxi-
gathered
information
ents
These
ways.
unimaginable
municate
4,500
sources worldwide.103
mately
news
provision
only enabled the
advances
¶
conclusion, the Commission
In
Id.
119.
they
put
also
of content
amounts
of vast
that:
determined
public,
hands of
control
more
avail-
media
types of
far more
there are
what, when and
control
them to
allowing
per-type
outlets
today, far more
able
information.
they receive
how
news
far
today, and
more
media
¶
a fo-
provides
Internet
111. The
options
programming
interest
public
indepen-
numbers
unlimited
rum for
than ever
today
to the
available
Additionally,
voices.
dently administered
many
these new
Although
before.
multimedia;
is
the Internet
content on
...
subscriptiombased
are
outlets
heard,
simulta-
read,
and viewed
can be
free,
upon
placed
pressure
competitive
¶
The Commission
118.
neously.
Id.
to better
has led
media
over-the-air
content
web
experiencing
out
pointed
cases,
increase
some
quality
activity where
individualized
highly
content.
types
is
of some
quantity
24 hours a
the Internet
expect
can access
we
people
years,
ten
next five to
to a web
be-
free,
have access
to
they
content
day anywhere
over-the-air
(i.e.,
technologies
new
available
Id.
come
as
browser.
transmission)
to
applied
are
these
digital
way of
new
spawned a
The Internet has
(i.e.,
televi-
broadcast
media
traditional
in-
first graphical
at media.
looking
sion).
was
Internet
introduced
for the
terface
¶
rapidly changing
dynamic,
128. This
only 50 websites
there were
1989. In
backdrop for
landscape provided
media
1994,
as
were
there
By
in the world.
ownership rules.
the Commission’s
By year-
in use.
3,000
sites
many
web
30 million
more than
there were
end
Ownership
B.
Rules
¶
42.5
Approximately
117.
web sites.
Cross-Ownership Rules
1.
subscribed
American households
million
Cross-Ownership
History
a.
in 2000. Id.
provider
access
an Internet
Regulation
comments,
According
submitted
main-
years the Commission
many
on-
For
in 2001 were
households
62.6 million
cross-ownership of
governing
tained rules
rise
line,
expected
that total
deciding
noted,
selecting
headlines
Google
headlines
As
get top placement. Order
which headlines
Google
selected en-
News are
appear
Approach
(citing
A Novel
n. 230
on how
algorithms,
tirely by computer
based
(BETA),
News,
www.goo-
Google
News
appear elsewhere on
the stories
where
gle.com/help/aboutjnews_search.html).
editors at
There
no human
web.
media in local markets.
From 1975 F.C.C.R. 1741
(1989).
See 2000 (2001). ¶ 32, WL objectives policy looked to FCC and di- localism competition, of promoting issue, the Commission In the Order Newspa- and concluded versity, cross-ownership rules both repealed Rule Cross-Ownership per/Broadcast Cross more flexible with them replaced 1) respect (NBCO): neutral was more fine- Limits, established Media 2) local- actually undermined competition; small cross-ownership limits in ly-tuned newspaper-broadcast by preventing ism *72 markets, no placed and and medium-sized and more provide that would mergers large in cross-ownership restrictions markets; news their local higher-quality local intra-service beyond the markets view- 3) preserve necessary was not and caps. ¶ 330. Id. in most markets. diversity point the Commission competition, of terms and perspective, provide historical To is newspaper “the local concluded Newspaper/Broad- repeal of the place broadcasting mar- local from the distinct con- proper in Cross-Ownership Rule cast newspaper/broad- ket,” “a and therefore the ban text, to note important it adversely af- ... cannot combination cast ago, in a nearly three decades adopted was market.” any product in competition fect that has been dramati- environment media ¶332. Synergies and cost-reductions Id. irreversibly transformed cally and into could also translate cross-ownership thirty nearly In the years. intervening ¶ As dis- Id. 337. competition. increased cross- years newspaper/broadcast since promotion cussed, the FCC measured enacted, was ownership prohibition “the se- two metrics: through of localism dramatically, changed landscape has media to local responsive programming lection extensively documents the Commission interests, quanti- and local news and needs changes are Among these in its Order. ¶ de- FCC Id. 78. The quality.” ty and VCRs, cable, video satellite growth local- cross-ownership promotes termined services, Or- the Internet. and and audio stations newspaper because allows ism noted, ¶¶ outlets As media 106-19. der their re- pool stations broadcast television within broadcast per market of their cover- sources, the whole allowing period as during grown radio have parts. of their the sum to exceed age ¶ awith well, viewers providing id. Study 7 found No. MOWG “Specifically, twenty not available choices multitude net- but owned non-network that while other techno- years ago. With ten or even on aver- provide, stations work-affiliated in near likely advancements logical news and week of local per 14.9 hours age, that its future, recognized newspaper- programming, affairs public FCC outdated. The had become rigid rule almost provide affiliated owned confronting question that “the concluded averaging programming, such 50% not whether today is companies ¶ media In addi- Id. 344. per week.” 21.9 hours the distribu- able to they will be dominate number average tion, study found any in mar- and information tion of news affairs of local news of hours same-market, to be they will able ket, by provided whether but programming television-newspaper cacophony voices among commercially all owned heard at hours/week, com- 25.6 Id. of Americans.” combinations was the attention vying for sample of for the to 16.3 pared hours/week 367. television stations by owned out-of-market tary, community affairs, and national/in- newspapers. Id. The FCC also found cor- ternational information. Seventy-two responding advantages percent quality Americans are now online and coverage provided by spend an newspaper-owned average of nine hours weekly stations, as on the shown ratings Internet. MOWG (measuring Study 3No. approval) suggests consumer consumers industry generally awards view Internet (measuring news approval). critical sources as a substitute daily newspapers Substantial evidence supports broadcast news Commis- ... the Internet play sion’s does important decision that cross-ownership trans- role the available media lates mix. into pro-competitive public interest benefits. It is also worth noting that none of the 30 million web sites existing The FCC concluded negative effects the year 2000 existed when the NBCO of the NBCO Rule on localism hurt diver- Rule was first adopted. sity as if well: local stations do not have (1) The record supports: growth provide resources to a high quantity television outlets; *73 and radio (2) and quality news, the number of strong cable and the Internet were properly cited voices in their market will be diminished. in growth of media outlets. Addition- The FCC cited record evidence sup- both ally, the benefits to localism from cross- porting and refuting the notion that com- ownership provide a rational basis re- mon ownership leads to common viewpoint pealing' the blanket prohibition. More- among media properties. From this con- over, the Agency’s decision on the mixed flicting evidence, the FCC inferred that is record particularly reasonable"in light of “although there is evidence to suggest that the deregulatory 202(h). tenor of ownership influences viewpoint, the degree to which it so does cannot be established c. Cross-Media Limits any certitude.” Id. 364. The record and the Commission’s expe- The Commission examined led it rience to conclude that more narrow- growth outlets, in media including the ad- ly focused limits were necessary in certain dition of cable and the Internet as viable specific situations to guard against “an news sources. It concluded large elevated risk of harm to range number of new voices rendered the NBCO breadth of viewpoints may be avail- unnecessary for purposes of protecting di- able public,” to the resulting from cross- versity, because any in independent loss ownership of media properties. Order voices resulting from cross-ownership ¶ 442. Having examined the record evi- would, all but the most concentrated dence, the Commission reasonably con- markets, be by counterbalanced the ple- cluded that new limits were necessary “to thora of alternative voices. The Order check acquisition by any single entity concluded “competing media outlets of a dominant position in local media mar- ” abound in markets of all sizes.... Id. kets-not terms, economic but ¶ 365. Specifically, the sense of point- being able to dominate public toed the expanding-role debate-through of cable provid- combinations of cross-me- ing content, dia properties.” varied including local news affairs programming. Id. The vein, adopted FCC a meth- continued, noting: odology termed the Diversity Index to Internet, too, becoming a com- provide its new media cross-ownership
monly-used news, source for commen- framework with an empirical footing. The record, analysis on detailed Based certain account of takes
Diversity Index Index, the FCC Diversity consumers, the informed available outlets media Limits: media as Media following of those Cross importance adopted the relative con- news, and sources ¶ 391. media. these across centration Cross-Ownership Limits in Market Stations of Television
Number stations, radio newspapers, cross-ownership of No stations 1-3 television stations. television or newspaper and daily may a entity Single own television stations 4-8 up to half (1) station a television either: allowed stations of radio number maximum (2) rules; no television radio by the local as allowed many stations radio station Additionally, a cross-ownership rule. by the (two duopoly owns owner who television newspaper; stations) may own a television only may one own likewise, newspaper owner station. television cross-ownership limits. No television 9Over (“Mar- among ten firms equally shared ket Media crafting Cross noted, As (10 HHI of 1000 A”) have Diversity ket upon Limits, drew the FCC system firm count A squared). times Herfin- after the Index, modeled *74 evenly concen- A as Market treat (“HHI”). would The Index dahl-Hirschmann a having firm awith ten-market mea- trated to constructed originally was HHI of 30-30-5-5-5- breakdown share market context in the concentration market sure B”) mar- each (“Market because 5-5-5-5-5 mar- given if a competition; of economic contrast, the ten firms. contains ket the signaled high, too HHI was ket’s B Market that intuition the supports HHI monopolized. being of at risk was market concentrated, with vastly more actually is Diversity its used the FCC analogy, By Furthermore, unlike 2000. of an HHI markets media determine to Index recognizes the HHI system, count firm risk of highest presented large firms two merger between a objective Underlying concentration. a market a concentrated creates ownership influ- media premise If firms. two smaller merger between concen- highly so viewpoint, ences B, its in Market merged firms two 30% negatively ownership could media trated merger a while rise would HHI dissem- viewpoints diversity of impact the HHI increase would 5% firms two market. a within inated undis- would system firm count The 2050. HHI chose the FCC The same, mergers treat both cerningly firm simple a over metric concentration markets that both however, noting sen- greater former’s because count firms instead now have would The Id. 396. sitivity for concentration. viewpoint HHI adapted The FCC firms’ market squares of HHI sums media’s ascertaining different diversity by a higher given market. shares prefer- local news consumers’ shares it is. HHI, concentrated the more market’s 8, nationwide Study No. MOWG ences. market with an economic example, For identify respondents survey, asked (a have an monopoly) firm only one days seven past used sources (100 a mar- while squared), HHI of local affairs, news and current offering the reality watching broadcast channels on following answer choices: “television, their platforms. cable Id. 414. Addi- .radio, newspaper, Internet, magazines, tionally, local cable stations only avail- friends/family, other, none, know, don’t able to approximately one third of all cable and refuse.” Id. Study then subscribers. Thus, the FCC counted respondents asked identify only broadcast sources stations in its television they had used in the past 7 days percentage. for na- The Order also notes the ex- tional news. According to Study 8,No. clusion of cable from the Diversity Index leading five will sources news reviewed subsequent were reviews. television, radio, Such newspapers, reviews will Internet include follow-up MOWG magazines. questions In apportioning concerning media non-broadcast media. shares, however, the FCC decided to dis- count magazines entirely because they The FCC broke down newspapers into only accounted for 6.8% respondents’ daily and weekly subcategories, with the answers, only .6% of respondents iden- survey data indicating that 70.3% news- magazines tified as their “primary” source paper respondents read dailies and 29.7% of local or national news. Furthermore, read weeklies. The FCC used these
the Pew Research Center conducted a weights to divide the total newspaper study that only showed 4.2% of their re- (28.8%) share among (20.2%) daily sponses cited magazines news as a source (8.6%) weekly newspapers. Finally, the of local or national news. The FCC con- separated FCC the Internet into cable mo- cluded such figures small for local or na- dem users and “other users.” The Com- tional presaged news even figures lower mission’s studies demonstrated the appro- for local news only, because, with isolated priate break-down was 18.3% cable users exceptions, magazines most are national in and 81.7% dial-up or DSL users. There- focus. Accordingly, the FCC reasoned fore, of the 12.5% of the media market that magazines would have a negligible allocated to Internet, that percentage weight in the Diversity Index and should was broken down into 2.3% for users, cable *75 properly excluded, at least until the and for 10.2% dial-up and DSL users. next biennial review. After excluding Having apportioned shares among the magazines, and adjusting the remaining various media based on actual figures, use market shares accordingly, the user shares the FCC turned to weighing different out- of the remaining four media were 33.8% lets within the same Here, media. the television, 28.8% for newspapers, 24.9% Commission away moved from actual use for radio and 12.5%for the Internet. and attributed each outlet an equal share The FCC explored then any whether of of its media type.104 words, In other in a the media could be broken down into sub- market with ten stations, television the (i.e., media television into broadcast and FCC not did determine what percentage of cable, newspapers into daily and weekly). actually viewers received their local news The FCC decided to remove cable/satellite from each of the stations; ten it simply stations/providers from the pool voice be- apportioned each 10% of the television cause it was unclear whether Study share, the a meaning 3.4% share of the overall
No. respondents who they said received local news “market.” The FCC added local news from cable television were in commonly owned together shares to divide noted, 104. As the adopted a dif- many “stations,” websites, where or n policy ferent regard with to the Internet exist. mar- revealed calculations FCC’s The ex- For by owner. market shares sta- television fewer or three with sta- television kets ten with a market ample, Diversity Indices owned, average had commonly tions tions, which two cross-ownership any eight and that of 6.8 figures over share have would lead would Simi- markets of 3.4. in such small mergers than shares ten rather 3.4’s increases; Diversity cross-owned shares Index significant added larly, the FCC example, to prohibit For FCC decided media. consequently, different from ten with stations markets ten television cross-ownership with market any cross-ownership one In with stations stations. radio television fewer three figures have share would sta- combination television eight with four markets 2.5’s, than rather and nine 5.9, nine 3.4’s Indices Diversity tions, had base FCC Once 2.5’s. and ten ten 3.4’s 1000,105 deter- FCC near but below of shares the breakdown determined Diversity large dangerously mined owners, it independent amongst various daily from result increases Index to- them added shares those squared as duopoly mergers, newspaper-television Diversity Index for get gether newspa- daily mergers between as well C App. See Order question. market and more station a television per, for various Diversity Indices (calculating by the allowed stations half the radio markets). sample concluded the FCC Finally, rule. radio to determine sought then The FCC markets, low indices with large mar- sample various Diversity Indices for po- Diversity Index effects modest Tele- their number a function kets cross- any not need mergers, did tential cal- the FCC Specifically, stations. vision at all. ownership regulation every Diversity Index culated promulgat- not Diversity was Index 1-5, tele- 15 or 20 with in the U.S. Instead, ownership rule. as an ed calculated FCC then stations. vision develop- in the role supporting played a randomly se- for ten Diversity Indices Limits. Media of the Cross ment stations, 7 6 television markets lected Index, FCC Diversity stations, adopting stations, 8 television television Index is Diversity noted: “While sta- television and 10 television it is cer- absolutely precise, nor samples perfect, ten-market tions; chose the FCC judgment our to inform tool grouping tainly a useful station for each television us with media It many decision-making. provides range because so 6-10 station market- us informing television stations. about 6-10 guidance, markets have of relative data, a sense *76 FCC determined us Using giving this place and ¶ a market as 391. for a Diversity Order Index media.” average of different weights sta- stated, television the “cross-me- the number function As the Commission D. App. assump- that market. tions within on set a limits are based dia average in- calculated The FCC also record evi- from the directly tions drawn that in each tested in HHI crease ... the CML proceeding dence in cross-ownership from various ultimately would result rest[ ] ... Limits] Media [Cross Id. merger scenarios. about judgments independent our on at-risk for are most that markets kinds of analy- in that antitrust noted The FCC concentration, the kinds viewpoint moderately considered sis, is not a market threat greatest pose the that transactions 1000. HHI exceeds until its concentrated App. D. See Order ranged 753-928. kets mar these Diversity Average Indices 105. diversity.” end, Id. In the the mercial and noncommercial stations re- Diversity Index provided the Commission main in the market after the merger. 47 with a rough picture of the amount of 73.3555(b) § (2002). C.F.R.
media diversity concentration in markets, This rule was remanded the Commis- changes how as a result cross-media sion by the Court of Appeals for the combinations D.C. could affect level di- Sinclair, Circuit
versity in
Number top-four (per operation of the No combinations four or fewer_restriction)._ combined, long as both as may be Two stations top four. the not in combining are stations the to seventeen
five combined, long two as as may be Three stations top in the combining are not stations the four. more eighteen or Id. diversity. protects necessarily also common the found Commission The Additionally, ¶¶ the 178, 180. in local stations television ownership of sta broadcast that television out pointed welfare in consumer “result can markets contributing media eliminating only re- the efficiencies,” not tions are enhancing markets. diversity in increasing opportu- local viewpoint expenses to dundant news counter- sources “cross-promotion other Numerous nities for ¶ efficien- video 147. These Id. available, the delivered even within programming.” to 26,-909-52 26,901, broadcasters local See, enable F.C.C.R. e.g., cies would market. pro- digital with cable compete ¶¶ better 15-111. transition the “spur would viders restriction, the top-four regard In to iden- FCC television,” digital to markets, “in local explained, Id. interest. in the goal tified as between general separation there is ¶ 148. four-ranked top shares audience not found was ownership common Such the other shares and audience stations on audience effect a detrimental to have ¶ 195. market.” stations ¶ the Com- Importantly, Id. 150. ratings. lead often Therefore, mergers these “owners/operators that concluded mission in market consoli- increases significant have combinations of same-market found addition, the Commission In dation. pro- to offer ability and incentive top-four stations that combinations needs to the responsive gramming public interest likely yield were less and that communities of their interests improved or local news in terms benefits Id. they do.” cases, what many ¶ 199. technology. Id. ... ¶ data fact, share “[a]udience specific justified further The FCC two ownership of that common reveals own- in its local television caps numerical generally has stations television broadcast Department by employing ership rule Id. 150. ratings.”- improved audience Commis- Trade and Federal of Justice Commission, new According to evaluating approach” “standard sion’s diversity compromise rule does hori- an increase harms competitive caps ensure modified because the goals noted, the as concentration: zontal twelve in markets firms least six In devel- Index. Herfindahl-Hirschmann Commis- 207. The more stations. tiers, the oping new addi- permit it would explained sion merger used the HHI FCC looked with less in markets tional concentration as of 1800 an HHI selecting analysis, stations because twelve television com- suspect competitively benchmark in- justified an of local economies guide- merger binations. DOJ/FTC as markets concentration in market crease level of 1800 the HHI recognize lines Indeed, the Com- get smaller. concen- for “moderate” level the maximum television its local noted mission upper selected FCC tration. competition— protect designed rule —
457
bound for
concentration,
moderate
instead
sion relaxed its rules to permit common
1000,
lower bound of
in recognition
ownership of radio stations in line with the
of the competitive pressures
by
exerted
size of various local market
tiers. Revi
¶
the cable networks.
192. The own-
sion
Radio Rules
Policies,
7
of
ership rules ensure
in
markets with
¶
2755,
F.C.C.R.
40,
2776
458 radio broadcast of number the in
increase 202(b)(2). The § operation.”
stations below: are summarized
limits party- a of stations Number of the may own which (AMor service same party a of stations Number commercial of Number own:___FM):_ market:_may stations more_8_5_ or45 44_7_4_ and 30
between 29_6_4_ and 15
between exception that a the [with 5 own party cannot of the stations 50% such market!3 fewer_in or14 Adopted Pursuant Rules and Rules Other will by Congress imposed limits new Telecommunications 202 Act to Section the 1996 reviewed regularly of 11,091-94, 11,058, biennially 1996, 15 F.C.C.R. review Act FCC required of review, ownership (2000). its media 791562 (now quadrennially) WL 2000 found it those that its repeal concern modify or expressed and rules interest.” identify “necessary in markets defining method 202(h). Act, § to “unrealis 1996 led in the market ing stations “illogical” results,” these both and were instituted Congress tic time theAt 11093- intent.” Congress’ a radio “contrary defined FCC changes, the by the Therefore, covered 65, area geographic as the 94 pro- stations comment seeking of the contours a overlapping proceeding commenced See ownership. modify for common it should posed how on whether (1995). 73.3555(a)(1) Under § the dimen C.F.R. in which way “determine^ determined definition, markets were local count[s] markets of radio sions com- “principal to stations’ reference with in them.” of stations number Definition area essentially, munity 25,077 Markets, contour”— 15 F.C.C.R. Radio a certain at signal a station’s reached even (2001). The FCC WL 1827671 73.3555(a)(3). id. See strength. level of rulemaking with tually consolidated stations, combination proposed For each ra regarding proceeding another num- by “the defined was local market Policies rules, Rules dio commu- principal whose ... stations ber Radio Ownership Multiple Concerning in part, or overlap, whole nity contours Markets; in Local Stations Broadcast community contours of principal Market, 16 F.C.C.R. Radio Definition to be proposed were stations” pro the entire rolled 19,861 and then in the 1996 Nothing commonly owned. See review. biennial the 2002 ceeding into defin- methodology for Act addressed 18,506. NPRM, F.C.C.R. Omnibus the num- identifying radio markets ing Act, pur- rec- in a market of the passage stations of radio Since the ber trans- ownership rules. dramatic of the demonstrates poses evidence ord In each industry. in the radio formation rulemaking to initiated The FCC of U.S. 20% about years, last six markets. of radio definition change the hands changed have radio Reg’y Review—Review Biennial From deal-making. frenzy of Ownership Broadcast the Commission’s *80 2002, the number of radio stations owners non-commercial stations that are licensed by declined 34% though even the number to a community in the relevant Arbitron of commercial stations by increased 5.4%. Metro,109as well as stations located outside Within markets, individual small numbers the Metro attract a minimum level of large owners often dominate. The audi- listenership in Metro, ¶¶ the 279-81, see id. ence shares the top four firms in smaller 295, in calculating the relevant local radio markets are higher even in larger market.
markets. The audience share of top the The Commission identified several flaws four firms in markets 51-100 and 101-289 in the manner in which it presently defines is 92.5% and 93.9% respectively. This has markets, radio the contour-overlap led market high concentrations, as mea- ¶239. definition. Id. major One by flaw is sured HHI. When conducting its known as the “Pine problem Buff’ review, biennial the FCC was faced ' “numerator-denominator” with significant inconsistency. consolidation in radio mar- The FCC described the kets. inconsistency this way: In the issue, Order at
determined that it should retain party the nu- [A] is deemed to own only those merical in limits the local rule, radio but stations represented are it should revise the contour overlap numerator, ie., stations that have mutu- method. The FCC proposed to replace ally overlapping principal community the contour-overlap methodology with a contours. In calculating the denomina- geographic methodology, based on the Ar- tor, however, any radio station whose bitron Metro Survey Arbitron, Areas. principle community contour overlaps the principal radio rating service in the the principal community contour of at country, (called has defined radio markets least one of the radio stations in the Metros) Arbitron for most of the more numerator is counted as being populated urban areas the country. market, regardless of who owns the sta- Arbitron Metros are based on Metropoli- tion. result, aAs the denominator may tan Areas by established Office include radio stations that are by owned Management and Budget. party same that owns the radio sta-
The geography-based, tions represented Arbitron Market the numerator. definition relies on the market Because those definitions stations are counted in of Arbitron radio rating service, denominator, a private they by definition entity that measures local “in” market, radio station but they would not audiences for its customer stations. See count against party’s ownership limit ¶¶ 275-76.108 Additionally, in that market unless their principal Agency decided to include commercial and community contours overlap princi- 108. The recognized, "Arbitron one kind of radio definition some markets do Metros not cover country.” the entire Or- and a different kind definition in others der 282. Metros, There are 287 Arbitron does not render the rule irrational. which cover of the 60% commercial radio stations, counties, 30% 78% of 109. "Metro” is geo- Arbitron's term population age States, above 12 in the United market, graphic radio consisting particu- of a including Puerto Accordingly, Rico. Id. county lar or set of counties with a boundary Commission initiated new rulemaking pro- ¶¶ 275, defined Arbitron. See Order 277 & ceeding “develop radio market definitions n. 582. ¶283. non-Metro areas.” Id. The use of pro- “minimize only could made radio of all the community contours pal system.” of that aspects blematic numerator. ¶ 285. ¶ 253. con approach contour-overlap inconsistency Numerator-denominator *81 principles, antitrust traditional trary to First, be- problems. potential two
causes
mar
geographic
“relevant
employ
which
in the
stations
commonly owned
cause
analysis.
competition
of
purposes
for
kets”
num-
in the
counted
are not
denominator
signal-based
are
stations
Though radio
radio
its own
could use
erator,
party
a
effectively addressed
the FCC
products,
market
of
size
a
the
to increase
stations
“[rjadio stations
noting:
by
point
this
ownership
higher
a
into
itself
“bump”
the
land,”
“people
people, not
serve
occurrence, ac-
The more common
tier.
around
to be clustered
tend
United States
the inconsis-
FCC, is that
the
cording to
¶ 273.
Id.
centers.”
specific population
stations
radio
to own
party
a
tency allows
the
fact that
the
by
is demonstrated
This
having
without
market
relevant
in the
the
of
only 30%
Metros cover
Arbitron
party’s
the
against
count
stations
those
States, but cover
in the United
counties
contour-overlap
The
limits.
ownership
age
the
above
population
78%
to cir-
entities
allows
thus
methodology
noteworthy
¶282.
also
It is
twelve.
Id.
limits,
are
cumvent
treats
often
Department
the Justice
that
and “to
competition
promote
intended
market
relevant
as the
Metros
Arbitron
concentration
excessive
against
protect
States
United
See
purposes.
¶
antitrust
Id.
markets.”
in local radio
levels
Sys. Corp.,
Radio
Am.
Corp. and
v. CBS
irration-
this
also
FCC
determined
The
Competi
Judgment and
Final
Proposed
methodology
contour-overlap
in the
ality
Statement,
Reg.
Fed.
Impact
tive
commonly owned
If
fixed.
not be
could
1998).
fact
“The
(Apr.
18044-45
the denomina-
excluded
are
stations
congruent with
are not
signals
radio
that
contingent
be
would
size
tor,
market
then
undermine
not
does
geographic boundaries
station,
distinc-
“a
what
who owned
upon
areas
relying
geographic
logic of
unprincipled
be both
tion
would
that
¶ 273.
markets.”
define radio
competi-
history of
in the
unprecedented
“subjective market”
addition,
commonly
If all
analysis.” Id.
tion
Because
has other drawbacks.
problem
are in-
denominator
in the
stations
owned
are
signal contours
larger
stations with
numerator,
owner-
party’s
“a
cluded
markets,
larger
create
radio
likely to
may
particular
level in
ship
methodology dispro-
contour-overlap
far
stations
outlying
by
inflated
overly
the consolidation
encourages
portionately
Id. Fur-
concentration.”
from the area
sta-
to smaller
relative
stations
powerful
a mod-
adoption
ther,
interim
the FCC’s
overlap
may
Also,
stations
tions.
radio
non-
methodology for
contour-overlap
ified
“mar-
given
of a
portion
very small
only a
repudiate
does
areas
Metro
Arbitron
mar-
that
they
part of
while
ket.” So
tem-
concluded
FCC
findings.
these
to serve
may be unable
ket,
these
unavoid-
was
method
the old
use
porary
af-
or advertisers
the listeners
effectively
of the rulemak-
pendency
during
able
Fi-
consolidation.
proposed
by
fected
because
283. And
ing process.
is
every “market”
fact
nally,
well-understood,
it at least
was
method
ability to
the FCC’s
unique frustrates
orderly pro-
of permitting
had
benefit
of con-
compute
level
benchmark
applications.
station
cessing of radio
area.
given
in a
solidation
adjustments
however,
noted,
FCC
The FCC not only discussed the flaws in new rule
fact lead to increased
the contour-overlap methodology but
diversity
and stating that “diversity and its
addressed concerns
about
raised
the Arbi-
effects” are “elusive concepts” and “not
tron
defined”).
Metro methodology.
easily
As the FCC
“To restrict the Commis
conceded, “any methodology
sion’s
we
action
develop
cases
which tangible
may create anomalous
evidence appropriate
situations
judicial
in certain
determi
instances. But
we
nation
agree
cannot
available
would disregard
our
major
inability to
reason for
perfection
achieve
every in-
creation
administrative
agencies,
justifies
stance
better
maintaining
equipped as they
are for
current
weighing
system.”
intangibles
by specialization,
263. The FCC
established
*82
insight gained
safeguards
through
parties
experience,
deter
by
from
attempt-
more
procedure.”
flexible
ing to manipulate
v.
FCC
RCA
Aribtron market defini-
Communications,
86,
346
96,
U.S.
tions. Specifically, a
73
radio
S.Ct.
station licensed
998,
(1953) (internal
reasonable mo- being licenses of station number general comports broadcasting that help pre- few by a owners nopolized “de- theory,” the competition power. market formation vent greater permit the rule to relax cline[d] may have struck parties interested While Commis- 290. The consolidation.” sug- point, at a different the balance restrictive against decided also sion mar- different promoted rules that gested how- recognized, limits. Commis- structures, the line was ket of concentration levels greater ever, “that 814-15, NCCB, 436 U.S. draw. sion’s to potential to ensure needed may be supports record 98 S.Ct. mar- in smaller stations viability radio arbi- decision, is neither reasonable Id. 292. kets.” capricious. nor trary television, the Com- broadcast As with its rule revised The Commission shares audience that radio found mission part stations noncommercial count time, appropriate and an over change can to account order radio the local must structure markets of radio evaluation com- exert that such the fact ra- provide licenses account into take *83 pro- listening and in the pressures petitive provide to capacity with dio stations ¶ 239. Order ¶ markets. gram production 288. id. See programming. more popular “noncommer- because found Agency The equal assumption The Commission’s listen- significant a ... receive cial stations ownership limits its choosing shares when markets,” respective in their ing share considerations. of these account takes pres- competitive “exerts their existence that recognized over The Commission in stations radio all other sure sta- a radio in investment of a firm’s life ¶ Additionally, non- 295. Id. market.” in of all stations share tion, market determining count According- commercial substantially. can shift market The FCC Id. local market. of the that size approach chose ly, the Commission prohibit it would also determined having as all stations counts vio- combinations of station transfer for listeners. compete to capacity similar at the ownership rule local radio ownership late radio local evaluating the exception sale, subject a limited to time of “both sought limits, the Commission ¶ 489. entities.”110 “eligible for sales radio market competitive healthy, a ensure al- disadvantages of found signif- FCC owners achieve enabling radio by of combinations transfer lowing the though consolidation icant efficiencies ownership limits with the comport do facilities,” the same while broadcast con- countervailing outweighed are not consolidation that such “ensuring] time expectancy. siderations, owners’ as such incen- competitive stifl[e] ... does not ¶ Id. 487. ¶293. tives.” Sales that Joint determined The FCC determi- the Commission’s agree I with attributable should Agreements111 radio sta- limits on that numerical nation entity held the transferor entity unless "eligible entities” defined FCC years. three for minimum combination dollars or less six million companies with ¶Id. 490. Only en- such revenue. annual non-compliant combina- may acquire tities Agreement au- Sales typical Joint radio may 111. A not transfer Eligible entities tions. advertising time to sell the broker after the thorizes acquired combination grandfathered paid to a fee return for station non-eligible the brokered ato of this Order adoption date the brokering licensee under cast new cross-ownership justified is under rules.112 Id. 317. Where an entity 202(h) § owns supported by record evi- or has an attributable interest in one dence, and the Commission’s decision to more stations in a market, local joint radio retain some limits on common ownership advertising sales of another station of different-type media outlets was consti- market for more than percent tutional and did not 202(h). violate For brokered station’s advertising per time the Local Television Ownership Rule, I week will result in counting the brokered agree the Commission’s decision to retain station toward the brokering licensee’s the top-four justified restriction is and the ownership caps. Id. The justified FCC threshold challenges to the Commission’s this change in the attribution rule regulatory approach fail. For the Local finding that in-market JSAs above the 15% Radio Rule, Ownership agree I the Com- threshold convey the brokering entity a justified mission the switch to Arbitron degree of “influence or control” sufficient Markets, the Commission was war- to warrant attribution under in . ranted including noncommercial sta- rules. Id. 318. The gave FCC licensees tions, and the transfer restriction and at- years two from the effective date of its tribution of Joint Sales Agreements should Order to terminate sales and programming be upheld. I now turn to those areas agreements that do not comply with the where the majority finds the Commission’s modified rules, radio ownership and decisions unsupported.
declined to any allow transfers on non-
compliant combinations that included the IV. Engaging Flaws Found newly attributable sales and programming by the Majority *84 agreements. ¶¶325, 491. I find the A. Cross-Ownership Rule and the Di- Commission’s conclusions in the Local Ra- versity Index dio Ownership Rule to reasonable, be
clearly
arbitrary
not
and capricious.
The majority criticizes
weight
the
given
to the Internet
Index,
Diversity
as
For the
stated,
reasons
I believe the
well as the Commission’s decision to attrib-
Agency sufficiently supported its rule
ute equal market shares to different out-
changes.
The Commission’s decisions
lets within the same media type. The
were neither
arbitrary
capricious,
nor
majority also finds the Commission incon-
were supported by the record and are in
sistently derived the Cross Media Limits
the
interest. The majority affirms
from the Diversity Index. Finally,
some of the Commission’s conclusions as
majority requires specific
of
notice
the Di-
well.
I concur with
majority
in its
versity Index on remand.
affirmance of certain of the Commission’s
conclusions. For
the Cross-Ownership
Before addressing
conclusions,
these
Rules, I agree the Commission’s decision bears reiterating, as
Supreme
Court
d
not to retain a
on
ban
newspaper/broad-
recognize
NCCB,
FCC v.
that “[d]i-
the licensee.
generally given
The broker is
television. Revision Radio Rules and Poli-
of
authority
to "hire a sales force
cies,
for the
2755, 2788-89;
7 F.C.C.R.
Review the
of
station,
brokered
advertising
set
prices, and
Regulations
Commission’s
Governing Attribu-
make other
regarding
decisions
the sale of
tion
Interests,
Broadcast and
Cable/MDS
of
advertising time.” Order 316.
12,559, 12,612,
F.C.C.R.
versity and news local independent provided cable alone let easily defined concepts, not transmitting broadcast merely opposed qualitative making measured without Internet majority finds The signals. and First policy both judgments by pro- news local transmits largely at 796- 436 U.S. grounds.” Amendment newspa- for local platform (internal another quotations viding 97, 98 S.Ct. majority The stations. Agency’s and broadcast pers omitted). reviewing discount line-drawing must somehow the FCC holds choices methodological that re- on websites relied determi- that areas, responses the Commission’s in these Sinclair, by a broad- reported information See published deference. deserve nations Furthermore, provide or agree counterpart, I newspaper 159. cast at F.3d in- significant of that explanation evidence persuasive the Commission’s rule, Internet. final not the news on is dependent Index local Diversity upon, relied consideration the sole nor the FCC’s point, reference provide To to provide tool created rather a but Internet and the cable between distinction foot- empirical Limits with Media Cross the Commission’s distinguishable choice and such, Agency’s ing. As conflicting definition unsupported granted should be a metric formulation at 162- 284 F.3d See “voices” Sinclair. shown it can be unless deference case, Appeals the Court 65. In short of majority falls The unreasonable. eight choice noted the Circuit the D.C. showing. such the definition voices competing local television in the Commission’s voices Internet to the Weight Attributed 1. line matters quintessentially “are rule diversity is concludes Order exper invoking drawing provide by outlets measured best results.” projecting tise in majority claims news. Com invalidated the the court But too much grants Diversity Index because definition voices mission’s Internet, understating the weight to the why it explain adequately FCC did and overstat- concentration level of market *85 television only broadcast included mar- diversity given in a of ing the level court also The at 165. as voices. Internet conceding the Although ket.113 its explain failed the Commission found ma- diversity, viewpoint contributes in its of “voices” definitions different Commis- states, that the “we believe jority ownership cross rule and its Internet to the weight much gave too sion at 162. rule. Id. But Limits.” deriving the Cross-Media in not arbi- line-drawing is the Commission’s Sinclair, in at issue In the Order majority has sub- trary capricious. or lim- reasons two provided that of FCC. judgment stituted was The first of voices. iting its definition ... point “at no Study, which Roper finds the exclu- majority Although to non-broadcast broadcast eompare[d] Index Diversity sion of cable news, as much less of as sources differential television holds the FCC’s justified, it be Roper Rather news. of local is sources cable versus the Internet treatment nearly 70% indicated that study simply cable excluded The FCC unsupported. major- This makes versity.” Order creat- at the outset 113. I note persuasive. even less ity's intention conclusion Diversity with the Index ed the viewpoint di- level the true "understat[e] get adults most their news from presents televi evidence on the substitutability of ” sion .... Id. at 163. The second reason various media as news sources. See Order “involved ‘the questions unresolved about 409. The studies by relied on the Com- the extent to which mission, [non-broadcast] alter the Diversity Index, and resulting widely natives are accessible provide Cross-Ownership Rule represent a reason- meaningful substitutes to able approach broadcast sta to establish guide- rational ” tions.’ (quoting lines and Local Owner are not arbitrary capricious. or ship Order P. 50,651). Fed. Reg. Contending the Internet provides pre- The Commission concluded that “in the dominantly news, national the majority absence of ‘definitive empirical studies disputes whether the Internet is a signifi- quantifying the extent to which the various cant source of local news. The majority are media substitutable in local markets,’ also notes that most people who go online questions’ ‘unresolved on substitutabili for local merely news check the websites ty precluded further relaxation local of their local newspaper or broadcast sta- ownership restrictions.” Id. The court de tions. survey relied on the Com- termined that this “wait-and-see approach mission, Study MOWG No. not did iden- ... squared cannot be with [the Commis tify which respondents websites used as statutory sion’s] ... ‘repeal mandate sources local news.114 This omission can modify’ any rule that not ‘necessary in be fine-tuned on the next reviews, round of ” interest.’ Id. (quoting Fox but, my mind, because it does not ap- Stations, Television 1042.). 280 F.3d at proach the level of arbitrary or capricious action, it need not Order, remanded, further Commission’s method- delaying the implementation ologies, analyses studies and Com- signifi- mission’s rules. The cantly more comprehensive re- than in the sponds that the Internet provides Local Ownership online- Order reviewed Sin- only news sites Salon.com,115 such clair. The Commission on- presented has val- line-only collections of id news reasons to such as exclude cable from the Diver- Drudge Report,116and sity provides Index otherwise while including the Internet at a a vast universe of information weight not con- 12.5%. Although perfect, tained local newspapers or broadcasts.117 MOWG are a significant studies improve- Order 427. ment over the study Sinclair, which did not compare broadcast television to cable Although formal local news sites on television as a source of news. In the Internet are occasionally online platforms here, reviewed the Commission for newspapers and stations, broadcast in- *86 114. majority The follow-up discusses a ques- Drudge 116. The Report (www.drudgere- tion where respondents port.com) who used is online Internet collection of news that as a news source is not independently produced, were though asked sites they which is independently had news past prioritized used in days seven as dis- a source of played. local or national news. predomi- The most response nant (34.9%). was "other” any- If 117. majority The criticizes the Commission thing, response this varied, demonstrates that citing for two websites specialize that do not independent sources on exist the Internet. independent local news-www.salon.com and www.drudgereport.com. These sites were (www.salon.com) 115. Salon.com is an online compilations noted as unique of news to the subscription magazine with independently Internet. The required Commission is not produced content, though much of this con- provide examples independent of local web- tent qualify does not as "local” news. sites in the Order. The gap. record fills this from General, as those as well Media receive news may nonetheless
dividuals (referenced the Or Corporation Hearst directly local websites various from a ¶ of 365) to the existence pointed der at “news,” rather own their transmit local, independent of number significant Comments Reply “news.” it as collect of Comments Internet.118 on the websites the Com- Inc., Gen., at As 15-16. Media local with of examples websites providing many local “[although noted, mission examples these noted explicitly content maintain broadcast newspaper and with the websites a fraction represented content, does not news websites Wide the World existing on content sources of news the extent plumb begin Comments, 22- ¶ Media General See agree. I Web. 427. Internet.” on way in (“Indeed, no there is n. 50 should FCC contends majority result ever work could General’s Media In- responses suggesting discounted have With list.... complete an exhaustive plat- to online constrained use ternet was easily work, could have totals assum- Even media. real world forms Order, the In its quadrupled.”). trebled data to sufficient had the Commission ing ex websites 30 million noted biennial calculation such make meteoric in 2000. Order isted an inap- was 12.5% review, not clear it is sites, as well as number in the growth the Inter- to attribute weight propriate further belie of sites number the sheer the In- growth, Internet future With net. lo independent majority’s contention generation next familiarity ternet in substantial does not exist cal content infor- that local users, the fact media formulating Internet. on the amount of one’s outside received can be mation made Index, the Commission Diversity likely its locality, the Commission geographic of view sources potential it looked clear share. media Internet understated number The sheer point. emphasize that only considerations These supports Internet on the outlets available weight for appropriate determining 12.5%. at inclusion the Internet’s as sci- much art media source each reason- 12.5% was ence, choice of and the signifi- Moreover, contains a the record able. govern- for local of websites cant number See, organizations. civic Order, ment bodies the Com- in the places several At Comments, Docket MM Corp. e.g., Hearst weight for chosen supported its mission A, As Apps. C. 01-235, 11 & n. No. Diversity Index. The in the Internet “[tjhere found, ais virtual an unre- found, provides web “[t]he FCC In- sources on of information universe dissemination for the forum strained not main- are websites and there ternet 119. The ideas.” Order consumption conveying media existing news by tained that the Internet found fringe po- everything information source commonly-used becoming “is We civic events. to local groups litical community affairs and news, commentary, are that these pretend cannot information.” national/international only a small simply ‘diversity’ mix because ¶365. amply sup- findings These them.” Order may visit people number See Media evidence. ported record *87 ¶ “to ac- responds majority 427. The 9; Media Comments, see App. Gen. of infor- ‘universe Commission’s] cept [the Comments Reply Comments. Gen. nu- existence of does not discredit sites com- referenced websites 118. Some the rec- websites cited in independent newspapers merous platforms for are online ments ord however. of such The existence stations. broadcast mation’ characterization of the purview Internet’s within the Agency. Their viewpoint diversity, we would also have to inclusion is neither arbitrary nor capri- disregard the professed in- cious.120 tent focus its consideration of viewpoint Beyond specific websites, factors, other diversity on media outlets.” The majority Order, discussed support the weight continues, governments “local not, the Commission attributed to the Internet. themselves, ‘media for viewpoint- outlets’ According to Commission, the Internet diversity purposes. Like entities, many lends itself to viewpoints diverse because they just happen to particular use a media of its combination of breadth and accessi- outlet —the Internet —to disseminate infor- bility. As the noted, “accessing
mation.” Web content ais highly individualized ac- tivity.” Order 118. Simply typing a
I agree cannot with the majority’s char- search into a search engine produce can acterization. Government web sites are numerous relevant websites. The breadth media outlets within the media type of the of the Internet allows access specific Internet. Particular websites-—like sta- issues at the click of a mouse. For exam- tions within the television and radio medi- ple, a recent search revealed a number of ¶427 ums—are outlets. See Order & n. relating websites to the extension of a bike 939 (referring websites, stations, and path Schuylkill on the River in Center City publications as sources,” “information Philadelphia. e.g., See http://freetheriver- media). “types” Also, (newsletter park.typepad.com/ path ac- has not government excluded and civic or- (last cess advocacy group) visited June ganization websites from its consideration 2004); http://www.centercityresidents.org/ in the Diversity Index. The Commission (letter SRPaccess.htm support park specifically avoided this sort of content access from Center City Resident’s Associ- analysis. See id. 424. These sites are ation) (last 2004). visited June relevant to diversity so long they as pro- vide news and current affairs. major- Moreover, the Internet is unconstrained ity falls short of these showing sites fail provides to and a forum for a limitless num- provide this Again, service.119 the choice ber of voices and viewpoints. Recognizing not to exclude local government web the potential sites for viewpoint dissemination, from the diversity mix is a choice properly political groups have taken message their 119. To cite one of examples, multitude of City Council homepage, which contains the website City for the of Philadelphia, bios, member committee information as well www.phila.gov., specific has a section for agendas. as council See www.phila.gov/city- Philadelphia news. See www.phi- council/index,html. la.gov/news. This section of the posts website many news releases of interest to Philadel- 'following 120. The provides list some of phia residents and others. The website also the websites cited in the record: www.al- contains mayoral link to initiatives. banycounty.com, www.sfgov.org, www.sa- http://www.phila.gov/mayor/initiatives/in- nantonio.gov, www.cityofseattle.net, dex.html. These services are substantially dif- www.phila.gov,www.acps.kl2.va.us, ferent provided from those by comics and www.cityofglensfalls.com. These are local classified advertisements. See Order 424 government and chamber of commerce (explaining the Commission would not count websites that include comics or information such classifieds newspaper of a to- government minutes, ward viewpoint meeting diversity city budget because "it is not clear reports, news, the service anything community has to do local hu- affairs.”). news stories, and current man web- interest and calendars of site also a link contains to the Philadelphia events. *88 the throughout day a 24-hours content Larry e.g., See masse. en Internet the world. Network Social Politics:
Fish, New Web 2004, at B1 27, April Inquirer, Phila. ing, ¶ 118. Order of the use candidates’ political (discussing ref- websites reviewing numerous tool). After Media campaign as a Internet support- and FCC’s in the to a erenced alternative provide sites watchdog the comments, convinced I am ing num significant view specific political including reasonably acted New In Ruttenberg, Commission e.g., Jim See bers. at Diversity Index Ears Internet Eyes the and Critical Turns Site ternet now of Americans Times, at over 70% May With 12.5%. N.Y. Right, the reasonably acted site, online,121the FCC www.me- (describing Internet A21 addi- a significant as Internet counting commenta liberal diamatters.org, where Assigning marketplace. on conservative to the media counter tion and monitor tors commentators). percentage Internet a reasonable Internet on-air line within is a task specifically sprouted the overall have sites news event, any partic A news. discretion. Agency independent, range provide ar- Independent termed cannot weights be example assigned ularly good its see Philadelphia, Commission capricious. bitrary and Center Media million apportioning one over which to review the www.phillyimc.org, committed has independent review. Order to access next visited in its have shares people media Ass’n, See founding Family its 414; Am. since see also news Finally, in the Commission’s (discussing www.phillyimc.org/about.shtmh at 1166 F.3d such Internet over time policies possibilities “duty its teractive to evaluate permit is, chat rooms message they boards work—that as whether ascertain viewpoint dissemination virtually unlimited benefits actually produce they whether independent “sources.” they a multitude predicted from originally unique recognized omitted). (internal would”) The Commission quotations they relate to Diversity the Internet qualities bring should Each review diversity: . the Commis- metric whatever Index —or diversity to measure sion chooses —closer allow for media forms of other
Whereas in which individuals true manner to the and edito- of voices only a finite number Based on their information. actually get the Internet viewpoints, rially-controlled excluding the marketplace, today’s media an unlimited forum for provides Index, lim- or Diversity from Internet voices, admin- independently number have sent importance, iting Furthermore, bn content istered. arbitrary path. down an read, multi-media; it can Web is underlying and the Media Limits Cross simultaneously. heard viewed, worthy bench- Index constitute Diversity on Web- are stored pages Web Since con- can mark servers, accessing Web con- file hosting Rule. Ownership its Cross to refine tinue activity, individualized highly tent is clearly not rules The Commission’s to a Web access with any individual capricious. arbitrary available Web access all can browser ,Survey, avail- Tops 200 Million: Population that the number study indicates recent 121. A www.communicate.com/news_dis- topped has access able Internet of Americans million, nearly play.php?newsID=54. three-fourths See U.S. Online two. population older than *89 noted, As I believe the sup- I availability, would affirm the Commis-
ported its treatment Internet decision to on sion’s focus media availabili- Nonetheless, Cross-Media Limits. ty, rather than market Therefore, share. coming years, the Internet present will I would affirm the Commission’s use of challenges for the In Commission. future equal shares. Whether the assumption of quadrennial reviews, the may FCC want to equal market shares within media types is reconsider how the Internet fits into the perfect solution to a complex regulato- traditional concepts measuring view- ry problem in every market subject is point diversity, especially emphasis on legitimate no, debate. But I see principled By nature, news. the Internet is basis to invalidate the Commission’s rea- everywhere. uniform Its content is not approach. soned dependent on geographic or metropolitan In constructing the Diversity Index, the boundaries. fact This not should under- FCC concluded that actual use data is value this critical media important as an reliable for differentiating among media source for the dissemination of diverse in- types because a respondent who relies on formation. respect, new modes to television for local news will probably not diversity characterize may be required. switch to radio or newspaper because The Internet allows dentist in Iraq to inherent differences between the media. post a weblog daily entries pho- ¶ 409. itWhen came to weighing tos Baghdad for viewing anywhere in outlets within the medium, same however, the world. See http://healingiraq.blog- the Commission decided to focus on an (last spot.com 2004). visited May Be- outlet’s capacity to information, deliver cause this information may not qualify as rather than viewership or readership. news,” “local it does not follow it should be This decision is by supported certain ratio- excluded from viewpoint mix. diversity ¶¶ nales. Id. 421-25. Although independent is all-impor- news Although recognized other ap- tant, ability replicate and distribute proaches possible, were news on Internet, long after origi- adopted the “underlying assumption ... published date,
nal may cause the Com- that all outlets have‘at least similar tech- mission to rethink its emphasis sole on nical coverage characteristics.” Id. 421. “independent” sources when crafting fu- may While this be less true for radio sta- ture rules. tions, the Commission determined that Equal Market Shares Within Me- Arbitron Metros truncate the service ar- Type dia the Diversity larger, Index eas of powerful stations, equalizing service areas. Additionally, The majority finds the Commission did there are generally enough radio stations justify its decision to assign outlets of given in a per-station so the same media type equal market shares. share fairly small. Id. noted, As the FCC apportioned first shares based actual figures. use But The Commission found that substituta- when weighing outlets within the same bility within media types was much greater medium, it counted outlets equally.122 In than substitutability between types. media light of its expertise and delegated author- 422. So breaking up the entire ity to make these policy choices, kinds of media market based on viewership, and as well as the underlying goal of viewpoint each specific type media based on an equal only The Commission deviated approach from this with the Internet. See Order 426. *90 cur that Commission determined The a chose theory, Commission the
share out specific media of a programming me- rent individuals’ reflected compromise that predictor necessarily accurate an is not let regulato- the relevant and preferences dia E. See Maurice programming. future of provided The Commission ry problem. Grunes, and P. Antitrust and Allen Stucke to example sense following common the Ideas, L.J. 69 Antitrust Marketplace the ap- complementary of support two (“ ‘[Ejvidence pro (2001) past of 249, 277 proaches: logic, of not, a matter does duction change to able owner is station A radio a com of picture necessarily give proper a all-news, to format, classic rock say from compete.’ ability to pany’s future mar- on the impact change its thus as- markets could define if Even one a radio station But ideas. of ketplace marketplace of in sign market shares thereby not does to all-news switching histor- ideas, would these just reliable how of a televi- equivalent into the turn itself dynamic market be under market shares ic impact on does its station nor sion conditions?”) v. States United (quoting aof that ideas become marketplace 501, 415 U.S. Corp., Dynamics Gen. station. television (1974)). The L.Ed.2d 94 S.Ct. Id. jibe not with the this “does majority finds relative assign decision Commission’s “media outlets explained: FCC As the them- types media different weights distribution their expand rapidly can ” This statement assumes .... selves news) very low (including local content strategy adopt single a must ¶423. as- The FCC Id. marginal cost.” shares both within apportioning a media data within actual use serts that moreover, outlets, strategy this among a media reliable because not as type is program- account perfectly must de- conceivably increase or could outlet radio sta- newly acquired ming choices majori- The content. local news crease its Net- Shopping the Home as well as tions Shopping the Home example of ty cites view, imposes majority my work. an format as switching to news Network unreasonably high burden. of the Com- improbability example of adopting The noted Shop- Home That the position. mission’s most usage measure determine for- not switch likely ping will Network pub- news and for local prominent sources negate the Commission’s not mats does difficult determi- require lic affairs do can and shifts program explanation lo- content constitutes nations about which format.123 do switch Radio stations occur. example, the Commission For news. cal Furthermore, found reviews whether movie posed question television broadcasts added to news can Other should be considered. cost, light especially marginal at low determi- require similar areas would gray cross-ownership. the efficiencies goal Again, nations. change could affect programming Such a ac- content citizens prescribe what market share. many viewer-ship markets is affect the number shows record unprece- See emergence Act is talk radio. Thom the 1996 of liberal transfers since radio Over, 2002: Trends Hartmann, Review Right Radio Indus. Wing dented. Radio—the Move Clearly, Finance. Ownership, Format Coming, http://www.common- Liberals program- include these transfers to the extent (last visited dreams.org/views03/0519-03.htm choices, could be fluid. ming share 25, 2004.). May likely to example programming shift of a One cess, but to ensure large that a range goals, as well as industry characteristics. viewpoints are public. available Commission’s decision to attribute ¶ 425. The equal approach shares adopted within shares media equally was reason- by the Commission comports with able as it took account of permissible fac- goal. As one commentator tors light noted: FCC’s interest *91 goals.
In the marketplace of ideas ... what matters is the of number alternative in- 3. Deriving the Cross Media Limits formation outlets consumers, available to Diversity the Index not the current popularity ... of the The majority ideas contends the communicated each outlet. did not rationally
Each source of ideas derive its available to a Cross given Media Limits from the Diversity consumer is equally significant Index from a results. The majority correctly First Amendment *92 diversity might trans- that delays, lower of Although the loss administrative reduce of costs, transparency signifi- [the] a to add increase that owner action result were consistency in deci- ensure in the process, in the presence cant radio of the Com- As a result Id. 82. in sions.” limit further 50% a market warrants bright-line a adopt mission’s decision that properties of radio the number case-by-case approach, than a rather rule hold, if not the case such is might owner address always perfectly not the rules will any include tele- does not a combination market. given a diversity needs of properties. vision in nation- is inherent This characteristic added). (emphasis rules, my in view wide, prescriptive remand. require does not combi- duopoly newspaper/television A cross-fertiliza- diminishing al- majority finds nation realizes The combina- to the (newspaper/television comparison lowed combinations tion benefits limit) resulted in that first station radio and the newspaper a tion of station/50% increases, Index while Diversity Therefore, rea- higher it was radio. television or (newspaper/tele- disallowing combinations disallow the Commission for sonable in lower resulted duopoly), which vision even combinations newspaper/duopoly Media Limits But the Cross increases. might increase Diversity Index when Diversity solely on were based newspaper/televi- for lower than be fact, directly the Commission Index. It radio combinations. sion station/50% “incon- majority’s purported addressed the to deviate was rational sistency:” creating its Diversity Index from with, interest bene- begin To example high- Limits. This Media Cross (the bene- newspaper fits of primar- Limits that the Cross Media lights media) between fits of cross-fertilization cross-ownership impact ily address primarily likely are realized first owner- ignoring other without diversity, either station co-owned broadcast and efficien- competition goals like ship may be eco- Although there service. cy.124 owner to the nomic benefits Furthermore, the Diver- first task combinations, is not clear extensive markets, identify at-risk was to sity Index will accrue these benefits cross-ownership corn- identify at-risk then way; at least any meaningful public in But this deci- light HHI increases. their the Commis- majority also criticizes the sound discretion within sion is matter newspaper + 1 TV to allow sion's decision authority. line-drawing the Commission's combinations in radio station + station 50% binations. As the Commission com- tice of Diversity Index. This admoni mented: tion goes beyond the requirements notice of the Administrative
Using
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identify
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U.S.C.
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identify
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16 F.C.C.R.
2001 WL
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442 (emphasis
The “horizon-
(2001);
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tal” lines the Commission drew in its Cross
18,503,
F.C.C.R.
(2002).
Block, 749 F.2d evaluating approach” “standard sion’s notes, derived formulas majority theAs hori of an increase harms competitive re- to be not need do comments Herfin concentration: zontal market Id. will result. prejudice unless noticed (HHI). The DOJ/ Index dalh-Hirshmann the form ... take (“The may response recognize Merger Guidelines FTC entailing without studies scientific new level maximum as the of 1800 level HHI appellants consequences procedural So concentration. for “moderate” shown.”). The prejudice unless impose, rule to television designed its FCC empirical an provided Diversity Index limit. Order the 1800 within keep markets rule. final formulating the foundation noted, FCC selected ¶¶ As 192-93. empiri creating made in choices concentra moderate upper bound agency delegated within model cal were bound, lower tion, instead the rec by supported were authority and competitive recognition alleged lack not find I do ord. networks. the cable exerted pressures Every methodo prejudicial. to be notice ¶ 192. proponents have will choice logical corresponds of 1800 score An HHI are choices detractors, long-as so but giv- ain competitors equal-sized having six they val capricious, arbitrary and not ' FCC, in part, led the This market. en settled notice expand I id. would 18 stations in markets determine §of 553. requirements comment stations, three own more, entity could stations, an 5 to in markets with while Ownership Rule B. Local Television two stations. entity own could limit top-4 upholds majority *94 The two ownership of allowed The Commission but Ownership Rule the Local Television 12 sta- with less in markets stations numerical the chosen and vacates remands equal- its 6 undercuts though this tions— to harmonize Commission “for the limits eco- the goal- competitors sized —because support and better inconsistencies certain justify local broadcast nomics rationale.”126 assumptions its and as market concentration slight increases ¶201. The decreases. size numerical market specific the- justified FCC The the from National (radio on relied data and FCC rules in its intra-service caps in that station being of another owner the noted, complexity of Commis- 125. As ¶ ex- 225. The Order market." lengthy rule- requires rulemaking a sion's interest, public of the took account supra p. 438 n. The planation 91. making cycle. See "failed, failing, station” or unbuilt Diversity Index because suggestion that majority's localism, competition, or cannot contribute round of notice required an additional reasonably extend, de- diversity. Commission unnecessarily Id. The would comment rule 202(h) repealing the solicitation pro- § termined review delay,-the Commission’s would serve circumstances such cess. assets by preventing the licensee’s interest Com- "exiting] Id. The market.” also vacates remands majority public interest bene- "the mission concluded Failed Station repeal Commission's station, activating or unbuilt a dark fits of Rule, 7. In C.F.R. 73.3555 n. Solicitation n competition potential harm outweigh[ the] sup- view, adequately my explana- Commission's diversity.” Id. The noting, repeal rule ported its decision repeal demonstrates FSSR tion for the operation of associated "the efficiencies capri- arbitrary and not stations, was that its decision absent unusual two same-market cious, public interest. was in the circumstances, buyer always result will Association Broadcasters showing that The majority finds that by assuming equal small-market stations have a harder time market shares the FCC allowed combina- competing for revenue than stations in tions based on unrealistic percent- market larger Thus, markets. the local ages. television It maintains the Agency did not represents rule “graduated tradeoff rely be- share, on market but on a rudimenta- optimal tween competition in ry the delivered “head count” of outlets. According to (six owners) video market station and rec- the majority, the inconsistent treatment of ognition of the challenging nature of market share both within and between broadcast economics in small to rules mid-sized renders them arbitrary and capri- markets.” Id. 202. cious.128 In developing the new local my view, the justified
tiers, majority concludes the FCC decision equal assume market shares. failed to justify its chosen numerical The majority limits. states The majority contends that allowing sought trio- to “ensure that markets polies in large markets does not ensure exceed the Merger Guidelines’ 1800 equal-sized six competitors will threshold for highly competitive markets.” emerge because the FCC does not take This statement portrays a heavier reliance into account existing respective audience Merger Guidelines than the Com- shares among given stations in a market. mission avowed. In discussing the rela- The majority also finds the FCC tionship cannot between its local television owner- cite “fluid” share as a ship basis for limits and Merger Guidelines, the regulation yet, elsewhere in the same Or- Commission strict, “a said: overly simplis- der, use market share jus- differentials as tic application of the Merger DOJ/FTC tification for retaining the top-four restric- Guidelines would potentially prohibit some tion. found, The FCC for example, “a welfare enhancing mergers and allow some ” general separation between the anticompetitive audience mergers.... shares of the top four-ranked [local] sta- The Commission also stated: tions audience shares of other Merger DOJ/FTC Guidelines ... stations in the market.” Order 195.127 are written not for a specific industry, Furthermore, the majority finds the FCC but rather guidelines intended for *95 did not cite empirical support for its application across all industries. Our “equal-sized firm” assumption, and that its rulés are formulated specific for a mar- assumption of equal shares, market id. ket—the delivery of program- video ¶ 134, to derive its ignores limits reality. ming based are on an extensive —and 127. The top-four Commission instituted its re- 128. majority The cites example the of Phila- part striction in generally due to the high delphia, where the duopoly owner Viacom market top-four of shares the many stations in acquire could a third potentially station and markets. But this justifica- was not the sole increase its audience share from to 25% 34%. tion for the rule. The Commission According deter- majority, to the merger such a mined, involving top "combinations the four- raise Philadelphia’s would HHI score to 2487. ranked stations are likely yield public less to But this assumes there competi- be no interest expanded benefits such as new or buyers tive for the television station. also It , local programming,” news since “such sta- fails to account for the antitrust of review tions already originating local news.” proposed mergers by Or- Department the Jus- of ¶ der "[flop 198. The four-ranked Finally, stations tice. proposed the combination likely also are more to have the made transi- competition would still face from 12 commer- [digital tion to DTV than television] stations, other cial and 5 noncommercial television ¶ stations.” Id. 199. as as a well host of additional media. per- competitive of misleading indicators in competition of extent on the
record to imputed can formance, be equal shares current our of the effect and this market Merger competitor. DOJ/FTC record This ownership rule. each TV local (“Where all firms n. 15 finely-tuned § 1.41 to craft Guidelines us allows basis, equal forward-looking have, industry. aon for this rule sales, Agency the securing likelihood did fact, So, 192. Id. shares.”). equal firms assign would will market no that “ensure” seek Merger Guidelines’ exceed discounts Moreover, majority markets. competitive highly for threshold limits that assertion Commission’s provided Merger Guidelines Instead diversity goals. Agency’s to the contribute in- from which point” “starting remain competitors that several “Ensuring final rule. dictated terest television the radio each within sup no evidence that majority finds that a number services, ensure we also as share equal ports re will viewpoint for outlets independent FCC found disagree. I sumption. market, thereby ensur every local inmain too fluid is market share a station’s promot be goal will diversity our ing that so its decision regulation, aas basis use ¶ 178. id. 129; see ed.” “capacity” a firm’s instead regulate out recognized have Commentators justified. programming deliver equally sources, be counted lets, should or innovation product Because of ideas: marketplace season, a each vary with choice program independently-owned I conclude is more fluid share firm’s in- of, for, ideas and sources or outlets Thus, focused the FCC industries. other each should generally formation program deliver capacity to a firm’s sellers separate as equally counted invest of a firm’s the life Id. Over ming. ideas, response with marketplace its station, the duration ain ment can reach they whom consumers to the shift can market breakdown license, the them), can reach (or consumers who recently example, For substantially. classification regard without vie now broadcast launched content. their current popularity ¶ 110. id. viewers. See “big four” new broadcast two recently as Owen, Reform, As Regulatory Bruce M. launched WB UPN were networks L. Rev. at St. DCL Mich. successfully-for compete-often both now markets, the in all not flawless Though See networks. “big four” viewers with assump- soundly justified http://www.viacom.com/prodbyunitl. e.g., underpin- shares equal market tion growing (discussing tin?ixBusUnit=30 in its limits of license its choice ning for network) (last visited of UPN popularity *96 assump- reviewing rule. In television local Pax 2004); also Comments May see in a differ- by the Commission made tions (noting Corp., at son Communications recently context, Circuit D.C. ent “likely to is discount the UHF retention wrote: larger a num emergence encourage rational appear assumptions These to networks broadcast competitive ber no obvious have record. We the current seven.”). Merger The existing join assertion verifying the FCC’s way of looked Guidelines, which characteristics general regarding caps, contem local license setting in its must defer ... We instances possibility plate the rec- in the absence judgment expert shares market revenue current where ord indicating evidence the Com- and the Commission “provide[d] a rea- assumption mission’s is a clear error of explanation soned for its action.” Id.
judgment, or
showing
the empiri-
As discussed, the FCC maintained the
cal assumption is facially implausible or
radio tiers
by
established
Congress in the
inconsistent.
1996 Act. The FCC'explained that retain
ing the existing tiers would result in five
Ass’n,
Am. Family
Id.
129 Citing
literature,
economic
C.
Ownership
Local Radio
FCC
Rule
found
equal-sized
that five
firms en
’
sure fragmented,
competitive markets.
The majority supports the Commission’s
See id. 289 n. 609. The FCC also conclud
use of numerical limits in
radio
ed
current
limits are not overly-restric
ownership rule but finds the Commission
tive based on data showing the top four
did not support its decision
retain
stations in each metro market are thriving
existing numerical
limits
established
in terms of revenue and audience share.
202(b).
majority
The
also vacates and
Id. 290.
remands the “five equal-sized firms” start-
majority
asserts the economic stud-
ing point, which undergirds the local radio
ies on which the FCC relied do not sup-
rule, claiming the Commission’s decision is
port
premise
its
that a market with five
not supported by “substantial evidence.”
equal-sized competitors
comparable
light
202(h),
§of
I agree that the Com-
terms of
performance
frag-
mission must explain its decision to main-
mented, structurally competitive market.
tain the existing limits. But I find the
See id.
289 n. 609 (citing
Selter,
R.
A
justified
Commission to have
its choices.
Simple Model
Imperfect Competition
First, in reaching
conclusion,
the ma-
Four
Where
Are Few and Six Are Many,
jority employs
high
too
a standard. The 2 Int’l J. Game Theory
(1973);
Louis
Commission’s conclusions do not need to Phillips, Competition Policy: A Game
be supported by “substantial evidence.” Theory Perspective Ch. 2 (Cambridge U.
Rather,
the Commission’s line-drawing is
1995);
Press
Timothy F. Bresnahan & Pe-
generally not overturned
peti-
“unless a
Reiss,
ter C.
Entry
Competition
tioner can demonstrate that
Markets,
lines Concentrated
J. Pol.
Econ.
drawn ... are patently unreasonable,
(1991)).
hav- 977-1009
The majority contends
ing no relationship to the underlying regu-
the Commission failed to respond
peti-
latory problem.” Sinclair,
the
equal-
five
that
assertion
Commission’s
the most
with
conflict
they
because
lowed
or actual-
emerge
“would
competitors
sized
Guidelines,
Merger
rewriting
recent
limits.”
numerical
under
emerged
have
ly
above
score
HHI
a
suggest
with simi-
groups
station
“radio
Certainly,
concentrated
highly
a
with
corresponds
have
[can]
radio
stations
lar numbers
151(c).
Guidelines
Merger
market.
power.”
market
levels
vastly different
however,
assertion,
a certain
favor
may
This
290.
The Commission
Order
adopt
to
reasonably supports
the Commission
require
it
if
not
does
structure
market
other
its
ignores
ap
the
that
is
structure
market
a
The
decision.
Commission
its
can be fluid.
shares
finding
various
station
between
body
choose
to
propriate
—that
the
in
to
relation
discussed
Additionally, as
structures
market
competitive
equally
Rule,
as-
an
Ownership
Television
Local
Fam
Am.
See
rules.
formulating its
when
in
sense
makes
shares
equal
sumption
(“Given that
at 1163
Ass’n,
F.3d
ily
the
has
each station
diversity, as
terms
choice
rational,
FCC’s
the
are
options
both
information.
disseminating
capability
discretion”).
In
its
well within
is
of means
support
rules
ownership
the local
As
rules,
the Commission
its
structuring
well,
objectives
diversity
Commission’s
radio audi
that
into account
take
to
chose
reasonable,
clearly
and
shares
equal
time,130
and
change over
ence shares
id. 306
capricious. See
arbitrary and
not
must
structure
market
of radio
evaluation
ra-
limits on local
(“Our competition-based
provide
licenses
that
account
into
take
also
viewpoint di-
promote
ownership thus
dio
likely
capacity,
radio stations
num-
a sufficient
ensuring
only
versity, not
pro
popular
more
incentive,
provide
voices,
but
independent radio
ber
It would
288.
See
gramming.
fa-
structure
market
by preserving
provide
did not
station
if a radio
irrational
in the local
entry
encourages
cilitates
because
programming
popular
under-repre-
by new
market
media
share.
market
allotted
its
surpass
parties.”)
sented
ownership
determining appropriate
finds
majority
The
antitrust
use of
take
not
tiers,
it could
why
explain
not
“does
industry is
radio
de-
to the
when
account
theory tailored
share into
market
actual
not re
But in
The Commission
limits.”
numerical
riving
reasonable.
Merger Guide
wrote:
Order,
strictly follow
Commission
quired
majori
theAs
limits.
we incor-
creating its
reject arguments
in
lines
We also
regulation
analysis into
antitrust
share
a market
porate
ty recognizes,
we
rule or that
play
ownership
different
regulation
radio
FCC
pro-
may
applications
“flag”
have
majority
continue
While
roles.131
above
combinations
point,
pose radio station
a different
the balance
struck
Market
share....
Sin
certain
to draw.
the Commission’s
line was
however,
share,
be considered
must
clair,
F.3d at
other, but then
each
not mirror
rules need
(discussing the
& 123
supra p. 470
n.
See
following
for not
the criticizes
in-
in the radio
transfers
of license
increase
'
extent in
the same
Merger
Guidelines
dustry).
notes,
mar-
majority
radio
As the
both rules.
different,
due
part,
may be
identically
kets
rely
need
131. most
greater
available
number
its television
Merger
Guidelines
markets.
recognizes the
majority
radio
rules.
*98
conjunction with the overall structure of
market definition and counting method-
the industry in determining whether
ologies, we
rely
could not
with confi-
power
radio,
is present.
In
dence on those
pro-
numerical limits to
availability of a sufficient number of ra-
against
tect
undue concentration in local
dio
particular
channels is of
importance
result,
markets. As a
began
we
looking
in ensuring that competition can flourish
at revenue share in our “flagging” pro-
in local radio markets. The numerical
cess and the interim policy that we es-
caps and the
service limits are
AM/FM
tablished in the Local Radio Ownership
designed to
interest,
address that
and in
NPRM. Now that we have established a
our judgment, establishing a inflexible
system
rational
for defining radio mar-
market share limit
in
bright-line
our
kets and counting market participants,
little,
rule would add
any,
if
benefit.
we believe that the numerical
will
limits
We do not seek to discourage radio
be
protect
better able to
against harmful
earning market
share
firms
concentration
levels
local radio mar-
through investment in quality program-
that might
kets
otherwise threaten the
ming that
prefer;
listeners
objective
our
public interest.
prevent
is to
firms from gaining market
noted,
301. As
dominance through the consolidation of
based its switch to the Arbitron Metro
significant
a
number of key broadcast
market definition—which the majority af-
facilities. We do not
believe
devel-
firms—in part, on the difficulty
guard-
oping a market share limit
signifi-
ing against undue consolidation of market
cantly
objective.
advance that
share under the old contour-overlap meth-
added).
Order 300 (emphasis
(“[T]he
od. See Order 257
contour-over-
majority
points
also
out the Com-
lap system actually encourages consolida-
mission has previously
looked market
tion
powerful
radio stations because
share for measuring diversity
competi-
stations with larger signal contours are
tion in local radio markets. Again, the
likely
larger
create
markets,
radio
expressly
addressed
which make it more
likely
a party
change
policy
it
when wrote:
would be able
acquire
additional radio
recognize
We
that our conclusion differs
market.”).
stations in that
With a more
from the Commission’s view in 1992 that
definition,
rational market
which, accord-
an audience
cap
share
was necessary “to
ing to
Commission,
will make consoli-
prevent consolidation of the top stations
dation less
likely, was
arbitrary
particular
in a
local market.” But the
capricious for the Commission to de-em-
cap
audience share
was never intended
phasize market share in crafting its own-
to be more than a “backstop” to the new
ership limits.
numerical limits the Commission had es-
tablished, which
for the
order to
judicial
first
time
warrant
deference,
al-
lowed
party
an agency’s
to own multiple
line-drawing
radio
decision
must
in a
justified
local market.
by
audience
explanation
reasonable
cap
share
was eliminated
aas
run
result of
cannot
counter
the evidence. Sin
clair,
revisions
the local
162;
radio
owner-
F.3d
NCCB,
at
see ship rule that Congress
814-15,
mandated
U.S.
reasonable
PONNAPULA;
Krishna
Murali
markets.132
gramming
v.
upheld FCC
has
Court
Supreme
The
of
Attorney
ASHCROFT,
General
determinations
John
on factual
based
policy
America; James
of
pre
States
or
the United
judgmental
primarily
“that were
Immi
814,
Ziglas,
NCCB,
at
Commissioner
436 U.S.
W.
nature.”
dictive
Service;
factual
Naturalization
gration and
“complete
(noting
For rules. the Commission’s
firm advantage enjoy may single a service majority finds the 132. The Revision service.” subcap. in different stations of an AM over justify its retention failed Policies, 7 F.C.C.R. ade- Rules I believe Radio Order 294. Com- to- sub-caps. survives same rationale supported the 44. The quately FM stations AM explained will mission station day. on AM A limit as technological characteristics competition different have more robust create continue (AM formats programming Because, well different Com- as the frequency. within that news/tallc/sports or ethnic often have frequency is explained, the AM mission originally formats). sub-market, competition in this ensuring own ownership limits and FM adopted specific AM inter- consistent with frequency is putting entity from "prevent one order est. of stations together powerful combination notes perspective. deference to The ra- the way judgment tional to measure reaches the its ze- “share” of nith when assessing each source of rationality ideas the available to of given agency’s consumers, set of line-drawing therefore, endeavors, give is to see NCCB, each 436 equal 814-15, source U.S. at weight. 2096, 98 It is avail- S.Ct. but then ability and not takes issue usage of with the alternatives “seemingly that count, inconsistent” should manner in which because it the line makes no was sense drawn. view FCC’s role as regulating the popularity, opposed to the availability majority The overlooks the Commis consumers, of ideas and information. sion’s statement that the Diversity Index It unpopular is new that may ideas be of is a tool to help judgments make about greatest importance to the future. cross-ownership, not the final rule. See Such unpopular ideas are the essence of ¶¶ 391, 435. As the Commission diversity in the marketplace of ideas. emphasized, the “cross-media limits are Owen, Bruce based on M. a set Regulatory assumptions drawn di Reform: rectly from Telecommunications Act record 1996 and evidence FCC proceeding Media ... Rules, Ownership ultimately [and] 2003 Mich. rest[ ] on our 671, St. L. (2003). independent DCL Rev. judgments 692 about kinds of markets that are most at-risk for The majority, apparently, would have viewpoint concentration, and the kinds of chosen a different approach. But dis transactions pose greatest threat agreement with the Commission’s conclu to diversity.” added). Id. (emphasis sions on such matters does not render In looking to Index, the Diversity those conclusions arbitrary capricious. Commission did not judgment abdicate its The Commission is entitled to “implement for formula.. its view of the public-interest standard of the Act ‘so long as Diversity that view is based Index —or the on Cross Me- permissible consideration of dia Limits for that factors and pro- is matter —will not ” otherwise reasonable.’ vide perfect WNCN limits in every Listen local mar- Guild, ers’ U.S. at ket. As the S.Ct. Commission stated: NCCB, (quoting U.S. 98 S.Ct. [W]e are establishing rules of nationwide 2096). In breaking up media types by applicability. desire, therefore, We market share and media outlets equally, in provide the industry public and the with view, my incorporated clear, easy to administer rales reflective public preferences, media its diversity of common market trends and charac- these component interest public that, giv- any recognize teristics. We incremental- may likely to decline here market, lines we draw en benefits Indeed, increases. stations over-inclusive. number ly as the appear under in the nature permitted, inheres quality no owner will Given themselves. ownership rules proscriptive our local in accordance television two more than to hold cap, mar- size small to medium in a rely decided The Commission mar- in these one station ket, a limit crafting bright-line rules newspapers will kets owners ap- chose this The FCC rules. benefits, interest maximize provide rules “bright line because proach diversity. resources, reducing any loss outcomes, while conserve certainty