Case: 08-3078 Document: 003110585945 Page: 1 Date Filed: 07/07/2011
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
Nos. 08-3078, 08-4454, 08-4455, 08-4456, 08-4457, 08-4458, 08-4459, 08-4461,
08-4462, 08-4463, 08-4464, 08-4465, 08-4467, 08-4468, 08-4470, 08-4471, 08-4472
08-4475, 08-4477, 08-4478 & 08-4652
PROMETHEUS RADIO PROJECT
FEDERAL COMMUNICATIONS COMMISSION;
UNITED STATES OF AMERICA
Prometheus Radio Project, Petitioner in Nos. 08-3078/08-4468
Media Alliance, Petitioner in No. 08-4454
Free Press, Petitioner in No. 08-4455
Newspaper Association of America, Petitioner in No. 08-4456
Fox Television Stations, Inc., Petitioner in No. 08-4457
Sinclair Broadcast Group, Inc., Petitioner in No. 08-4458
The Scranton Times, L.P., Petitioner in No. 08-4459
Cox Enterprises, Inc., Petitioner in No. 08-4461
Belo Corporation, Petitioner in No. 08-4462
Morris Communications Company, LLC, Petitioner in No. 08-4463
Gannett Company, Inc., Petitioner in No. 08-4464
CBS Corporation, Petitioner in No. 08-4465
Office of Communications of the
United Church of Christ, Inc., Petitioner in No. 08-4467
Tribune Company, Petitioner in No. 08-4470
Bonneville International Corporation, Petitioner in No. 08-4471
National Association of Broadcasters, Petitioner in No. 08-4472
Clear Channel Communications, Inc., Petitioner in No. 08-4475
CBS Broadcasting Inc., Petitioner in No. 08-4477
Media General Inc., Petitioner in No. 08-4478
Coalition of Smaller Market Television Stations;
Raycom Media Inc., Petitioner in No. 08-4652
On Petition for Review of An Order of
the Federal Communications Commission
Case: 08-3078 Document: 003110585945 Page: 2 Date Filed: 07/07/2011
(FCC Nos. 00-244 / 01-235/317 / 02-277 / 04-228 /
06-121 / 07-217/294 and 73FR9481)
Argued February 24, 2011
Before: SCIRICA, AMBRO and FUENTES, Circuit Judges
(Opinion filed July 7, 2011)
Angela J. Campbell, Esquire
Adrienne T. Biddings, Esquire
Institute for Public Representation
600 New Jersey Avenue, N.W.
Washington, DC 20001
Counsel for Petitioners, Prometheus Radio Project;
Media Alliance; Office of Communications
of the United Church of Christ, Inc.
Parul Desai, Esquire
Andrew J. Schwartzman, Esquire (Argued)
Media Access Project
1625 K Street, N.W., Suite 1000
Washington, DC 20006
Counsel for Petitioner, Prometheus Radio Project;
Marvin Ammori, Esquire
Coriell S. Wright, I, Esquire (Argued)
501 Third Street, N.W., Suite 875
Washington, DC 20001
Counsel for Petitioner, Free Press
Clifford M. Harrington, Esquire
Jack McKay, Esquire
Paul A. Cicelski, Esquire
Pillsbury, Winthrop, Shaw & Pittman
2300 N Street, N.W.
Case: 08-3078 Document: 003110585945 Page: 3 Date Filed: 07/07/2011
Washington, DC 20037
Counsel for Petitioner, Sinclair Broadcast
Bruce T. Reese, Esquire
Bonneville International Corporation
55 North 300 West
Salt Lake City, UT 84101
Lewis A. Tollin, Esquire
Craig E. Gilmore, Esquire
Kenneth E. Satten, Esquire
Wilkinson Barker Knauer
2300 N Street, N.W., Suite 700
Washington, DC 20037
Counsel for Petitioner, Scranton Times/Scranton Tribune;
Bonneville International Corporation
Jonathan H. Anschell, Esquire
CBS Broadcasting Inc.
4024 Radford Avenue
Studio City, CA 910604
Susanna M. Lowy, Esquire
CBS Broadcasting Inc.
51 West 52nd Street
New York, NY 10019
Counsel for Petitioner, CBS Broadcasting Inc.
Jessica Marventano, Esquire
Sr. Vice President Government Affairs
Clear Channel Communications, Inc.
701 8th Street, NW, Suite 350
Washington, DC 20001
Counsel for Petitioner, Clear Channel Communications, Inc.
Eve Reed, Esquire
John E. Fiorini, III, Esquire (Argued)
James R.W. Bayes, Esquire
Richard E. Wiley, Esquire
Kathleen A. Kirby, Esquire
Case: 08-3078 Document: 003110585945 Page: 4 Date Filed: 07/07/2011
Andrew G. McBride, Esquire (Argued)
Kurt A. Wimmer, Esquire
Helgi C. Walker, Esquire (Argued)
Jamie Alan Aycock, Esquire
Martha E. Heller, Esquire
Maria L. Mullarkey, Esquire
Richard J. Bodorff, Esquire
Christiane M. McKnight, Esquire
Wiley Rein LLP
1776 K Street, N.W.
Washington, DC 20006
Counsel for Petitioners, Newspaper Association of America;
Clear Channel Communications, Inc.;
Belo Corporation; Gannett Company, Inc.;
CBS Corporation; CBS Broadcasting Inc.
Ellen S. Agress, Esquire
1211 Avenue of the Americas, 28th Floor
New York, NY 10036
Maureen A. O’Connell
444 North Capitol Street, N.W., Suite 740
Washington, DC 20001
Counsel for Petitioner, Fox Television Stations, Inc.
Carter G. Phillips, Esquire
Ryan C. Morris, Esquire
James C. Owens, Jr., Esquire
Mark D. Schneider, Esquire
Virginia A. Seitz, Esquire (Argued)
Jennifer B. Tatel, Esquire
R. Clark Wadlow, Esquire
James P. Young, Esquire
1501 K Street, N.W.
Washington, DC 20005
Counsel for Petitioner, Tribune Company;
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Fox Television Stations Inc.
George L. Mahoney, Esquire
Media General, Inc.
333 East Franklin Street
Richmond, VA 23219
Counsel for Petitioner, Media General Inc.
Michael D. Hays, Esquire (Argued)
Kevin F. Reed, Esquire
M. Anne Swanson, Esquire
John R. Feore, Jr., Esquire
1200 New Hampshire Avenue, N.W., Suite 800
Washington, DC 20036
Counsel for Petitioner, Fox Television Stations, Inc.;
Cox Entertainment, Inc.; Media General Inc.
Jane E. Mago, Esquire
Jerianne Timmerman, Esquire
National Association of Broadcasters
1771 N Street, N.W.
Washington, DC 20036
Elaine J. Goldenberg, Esquire (Argued)
Joshua M. Segal, Esquire
Jenner & Block
1099 New York Avenue, Suite 900
Washington, DC 20001
Counsel for Petitioner, National Association
Robert A. Long, Jr. Esquire
Enrique Armijo, Esquire
Covington & Burling
1201 Pennsylvania Avenue, N.W.
Washington, DC 20004
Counsel for Petitioner, Coalition of Smaller
Market TV Stations; Raycom Media Inc.
Case: 08-3078 Document: 003110585945 Page: 6 Date Filed: 07/07/2011
Christopher Murray, Esquire
1101 17th Street, N.W., Suite 500
Washington, DC 20036
Glenn B. Manishin, Esquire (Argued)
Duane Morris LLP
505 9th Street, N.W., Suite 1000
Washington, DC 20004
Counsel for Intervenor-Petitioner,
Consumer Federation of America;
Austin C. Schlick
Jacob M. Lewis (Argued)
Acting Deputy General Counsel
Daniel M. Armstrong, III
Associate General Counsel
Matthew Berry, Esquire
James M. Carr, Esquire
P. Michele Ellison, Esquire
Joseph R. Palmore, Esquire
C. Grey Pash, Jr., Esquire
Federal Communications Commission
Office of General Counsel
445 12th Street, S.W.
Washington, DC 20554
Christine A. Varney
Assistant Attorney General
Nancy C. Garrison, Esquire
Catherine G. O’Sullivan, Esquire
Robert J. Wiggers, Esquire
Robert B. Nicholson, Esquire
United States Department of Justice
950 Pennsylvania Avenue, N.W.
Washington, DC 20530
Counsel for Respondents, Federal Communications Commission;
Case: 08-3078 Document: 003110585945 Page: 7 Date Filed: 07/07/2011
United States of America
OPINION OF THE COURT
AMBRO, Circuit Judge
Table of Contents
Background and Procedural History ........................................................................... 9
A. Our Review of the Commission’s 2003 Report and Order ....................................... 9
Newspaper/Broadcast and Radio/Broadcast Cross-Ownership Rules ................ 9
Local Television Ownership Rule .................................................................... 10
Local Radio Ownership Rule ............................................................................ 11
Dual Network Rule ........................................................................................... 12
Promoting Minority Ownership: Definition of Eligible Entities in Transfer
Rule and MMTC Proposals ....................................................................................... 12
B. The Commission’s 2006 Quadrennial Review, 2008 Order, and Diversity Order .. 12
Newspaper/Broadcast Cross-Ownership (“NBCO”) Rule ............................... 13
Radio/Broadcast Cross-Ownership Rule .......................................................... 14
Local Television Ownership Rule .................................................................... 14
Local Radio Ownership Rule ............................................................................ 15
Diversity Order ................................................................................................. 15
Subsequent Procedural History ......................................................................... 16
II. Jurisdiction and Standard of Review ......................................................................... 17
A. Standard of Review under the APA ........................................................................ 18
B. Standard of Review under Subsection 202(h) ......................................................... 18
III. Newspaper/Broadcast Cross-Ownership (“NBCO”) Rule ........................................ 19
A. Notice and Comment Process .................................................................................. 20
B. The FCC Failed to Meet the APA Notice and Comment Standard ......................... 24
The APA Standard ............................................................................................ 24
Analysis of Compliance with the APA Standard .............................................. 25
C. Permanent Waivers of Cross-Ownership Rule ........................................................ 30
IV. Radio/Television Cross-Ownership Rule .................................................................. 34
V. Local Television Ownership Rule ............................................................................. 36
A. Retention of the Pre-2003 Rule ............................................................................... 36
B. Retention of the “Top Four/Eight Voices” Test ...................................................... 38
C. Declining to Tighten the Television “Duopoly Rule” ............................................. 40
VI. Local Radio Ownership Rule .................................................................................... 41
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VII. Retention of the Dual Network Rule ......................................................................... 43
VIII. Constitutionality of Media Ownership Rules ............................................................ 44
IX. The Diversity Order and the Issue of Minority and Women Broadcast Ownership . 45
A. Prometheus I
Remand on Minority and Women Ownership Issues ........................ 45
B. Rulemaking Process regarding Minority and Female Ownership Issues during the
2006 Quadrennial Review ............................................................................................. 47
The FNPR in 2006 and Second FNPR in 2007 ................................................ 47
C. The Diversity Order and Third FNPR in 2008 ........................................................ 49
D. The Eligible Entity Definition is Arbitrary and Capricious..................................... 50
X. Conclusion ................................................................................................................. 54
In Prometheus Radio Project v. F.C.C.
, 373 F.3d 372 (3d Cir. 2004) (“Prometheus
”), we considered revisions by the Federal Communications Commission (the “Commission”
or “FCC”) to its regulations governing broadcast media ownership promulgated following its
2002 Biennial Regulatory Review. See 2002 Biennial Regulatory Review—Review of the
Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202
of the Telecommunications Act of 1996, Report and Order and Notice of Proposed
, 18 F.C.C.R. 13,620, 2003 WL 21511828 (July 2, 2003) (the “2003 Order”). We
affirmed the Commission’s authority to regulate media ownership but remanded aspects of
the Commission’s 2003 Order that were not adequately supported by the record, including its
numerical limits for local television ownership, local radio ownership rule, rule on cross-
ownership of media within local markets, and repeal of the failed station solicitation rule. Prometheus I
, 373 F.3d
at 382, 421.
In these consolidated appeals, we consider the Commission’s most recent revisions to
its media ownership rules. In December 2007, following its 2006 Quadrennial Regulatory
Review, the Commission announced an overhaul of its newspaper/broadcast cross-ownership
rule and granted permanent waivers of the rule to five specific newspaper/broadcast
combinations. 2006 Quadrennial Regulatory Review—Review of the Commission’s
Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the
Telecommunications Act of 1996, Report and Order and Order on Reconsideration
F.C.C.R. 2010, 2055-56, 2008 WL 294635 (Dec. 18, 2007) (the “2008 Order”). It chose to
retain its radio/television cross-ownership rule and local television and radio ownership rules
in existence prior to the 2003 Order.1 It also retained its failed station solicitation rule, and
set out a series of other measures to address broadcast ownership diversity, in a separate
order. See Promoting Diversification of Ownership in the Broadcasting Services
Quadrennial Regulatory Review—Review of the Commission’s Broadcast Ownership Rules
1 The versions of these rules in the 2003 Order never went into effect because we stayed that
order pending our review and continued the stay in Prometheus I
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and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996,
Report and Order and Third Further Notice of Proposed Rulemaking
, 23 F.C.C.R. 5922,
2008 WL 612180 (Dec. 18, 2007) (the “Diversity Order”).
The 2008 Order was challenged by multiple parties. In 2009, the FCC moved for
voluntary remand of the 2008 Order. We denied that opposed motion.
Today we affirm the 2008 Order with the exception of the newspaper/broadcast cross-
ownership rule, for which the Commission failed to meet the notice and comment
requirements of the Administrative Procedure Act (the “APA”), 5 U.S.C. §§ 551 et seq.
also remand those provisions of the Diversity Order that rely on the revenue-based “eligible
entity” definition, and the FCC’s decision to defer consideration of other proposed
definitions (such as for a socially and economically disadvantaged business (“SDB”)), so that
it may adequately justify or modify its approach to advancing broadcast ownership by
minorities and women.
BACKGROUND AND PROCEDURAL HISTORY
We need not reiterate our lengthy discussion of the history and parameters of the
Commission’s regulatory authority contained in Prometheus I
373 F.3d at 382-86.
However, to place our decision in context, we briefly recount the Commission’s 2003
modifications to its ownership rules, the resulting objections, and our decisions with respect
to each rule. We also summarize the Commission’s most recent modifications to its rules
arising out of its 2006 Quadrennial Regulatory Review process.
Our Review of the Commission’s 2003 Report and Order
In September 2002, the Commission issued a Notice of Proposed Rulemaking,
announcing that it would review six of its broadcast ownership rules in its 2002 Biennial
Regulatory Review. Id.
at 386 (citing 2002 Biennial Regulatory Review—Review of the
Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202
of the Telecommunications Act of 1996, Notice of Proposed Rulemaking
, 17 F.C.C.R. 18,503,
¶ 6, 2002 WL 31108252 (2002) (the “2002 Notice”)). In 2003, it issued an Order modifying
the rules. See 2003 Order
. We provide below a brief description of the rules, and the actions
we took with respect to each.
Newspaper/Broadcast and Radio/Broadcast Cross-Ownership
Starting in 1975, the Commission banned common ownership of a full-service
broadcast television station and a daily public newspaper. Prometheus I
, 373 F.3d
(citing Amendment of Sections 73.35, 73.240, and 73.636 of the Commission’s Rules Relating
Case: 08-3078 Document: 003110585945 Page: 10 Date Filed: 07/07/2011
to Multiple Ownerships of Standard, FM and Television Broadcast Stations
, 50 F.C.C.2d
1046, 1975 WL 30457 (1975)). Prior to 2003, it also regulated common ownership of
television and radio stations. Id.
In its 2003 Order, the Commission determined that the
existing rules were no longer in the public interest, repealed them, and replaced them with a
single set of Cross-Media Limits using a methodological tool called the “Diversity Index.”2 Id.
at 387-88. In Prometheus I
, we upheld the Commission’s decision that a complete ban
on newspaper/broadcast cross-ownership was no longer necessary to protect diversity, but
that continuing to regulate cross-ownership was in the public interest. Id.
However, we did not uphold the Cross-Media Limits themselves because the Commission
had failed to provide reasoned analysis to support them. Id.
at 402-12. Specifically, we
concluded that it “did not justify its choice and weight of specific media outlets . . . [selected]
for inclusion in the Diversity Index,” “did not justify its assumption of equal market shares . .
. [for] all outlets within the same media type (that is, television stations, daily papers, or radio
stations),” and “did not rationally derive its Cross-Media Limits from the Diversity Index
at 404, 408, 409.
Local Television Ownership Rule
The local television ownership rule allowed one entity to own two television stations
in a market (a television duopoly) as long as at least one of the stations was not ranked
among the market’s four largest stations and at least eight independently owned and operated
stations (called “eight voices”) would remain post-merger. Id.
at 386. In 2003, the
Commission amended this rule to permit triopolies in markets with 18 or more stations and
duopolies in markets with 17 or fewer. Id.
at 386-87. The Commission also repealed its
failed station solicitation rule, which required applicants seeking waivers of the local
television rule to provide notice of the sale to potential out-of-market buyers before it could
sell a failed, failing, or unbuilt station to an in-market buyer. Id.
at 420. The failed station
solicitation rule was adopted in 1999 to alleviate concerns that the FCC’s decision to allow
local television duopolies—hence more concentration of ownership—would undermine
station ownership by minorities. Id.
We upheld the retention of the ban on cross-ownership
of the top four stations in a market (known as the “top four” restriction), and the relaxation of
the eight voices rule, but remanded the specific numerical limits for the Commission to
“support and harmonize its rationale.” Id.
at 415-16, 420. We also remanded its repeal of the
2 As we explained in Prometheus I
, the Diversity Index was a “developed [by the
Commission] as a measure of viewpoint diversity in local markets to identify those ‘at risk’
markets where consolidation would have a deleterious effect. . . . [It] is a highly modified
version of the formula for measuring market concentration—the Herfindahl-Hirschman
Index—applied by the Department of Justice and Federal Trade Commission to analyze
mergers.” 373 F.3d at 388 (internal citation omitted).
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failed station solicitation rule, as the Commission had failed to consider the effect on
minority ownership of the repeal despite the rule being the only existing regulation intended
to promote minority television ownership. Id.
Local Radio Ownership Rule
Congress established specific numerical limits on radio ownership in the
Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56, 110 (1996) (codified as
amended at 47 U.S.C. § 202(b)(1)) (the “1996 Telecommunications Act”). The 2003 Order
retained these limits, but replaced the “contour-overlap” method3 for determining radio
markets with a geographic method and announced that the Commission would include
noncommercial stations in the station count for each market. Prometheus I
, 373 F.3d at 387.
We upheld the new market definition and the inclusion of noncommercial stations but
remanded the numerical limits for further consideration, including the AM “subcaps.”4 Id.
423-426, 431-35. Specifically, we held that the Commission had failed to support its
proposition that the existence of five equal-sized competitors shows that local markets are
sufficiently competitive (or that the Commission’s limits would actually ensure five
competitors) and to explain why it was necessary to impose an AM subcap at all. Id.
3 As we explained in Prometheus I
to determine whether an entity may acquire a radio station under the
local radio rule, the Commission first must know how many radio
stations are in that station’s local market (called the ‘denominator’
figure). The size of the market determines which numerical limit
applies. Second, the Commission must determine how many radio
stations in that market would be owned by the same entity if the entity
acquired the station it proposes (called the ‘numerator’ figure). If this
figure is within the numerical limit, the transaction may proceed.
Under the contour-overlap methodology, the Commission calculates the
numerator by counting the acquiring entity’s radio stations that all
overlapping signal contours. . . . The Commission calculates the
denominator by counting all of the stations whose contours intersect
with at least one (not all) of the contours of another station in the
373 F.3d at 423 (emphasis in original).
4 “Subcaps” are ownership limits on stations within the same service—AM or FM. See 2003
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Dual Network Rule
Under the dual network rule, a television station is prohibited from affiliating with
more than one of the four largest networks. The top four restriction prohibits common
ownership by ABC, CBS, Fox, and NBC. Id.
at 388. We upheld the Commission’s decision
to retain this rule in 2003, as it was supported by ample record evidence. Id.
Promoting Minority Ownership: Definition of Eligible Entities in
Transfer Rule and MMTC Proposals
In Prometheus I
we concluded that the FCC had failed to consider proposals to
promote minority broadcast ownership that the Minority Media and Telecommunications
Council (the “MMTC”) had submitted during the Commission’s 2002 biennial review
proceeding. The 2003 Order proposed a separate proceeding to address proposals for
advancing minority and female ownership in broadcasting. See 2003 Order
(promising to issue a Notice of Proposed Rulemaking to address the MMTC's 13 specific
proposals). We remanded this decision (in effect, to defer consideration of these proposals)
and ordered the Commission to address them at the same time that it addressed the other
remanded issues from the 2003 Order. Prometheus I
, 373 F.3d at 421 n.59.
We also rejected concerns regarding the FCC’s new transfer rule that prohibits “the
transfer or sale of grandfathered [radio/television] combinations that violate its local
ownership limits except to certain ‘eligible entities’ that qualify as small businesses.” Id.
426-427 (internal citation omitted). In upholding the transfer rule, however, we
“anticipate[d] . . . that by the next quadrennial review the Commission will have the benefit
of a stable definition of SDBs, as well as several years of implementation experience, to help
it reevaluate whether an SDB-based waiver will better promote the Commission's diversity
objectives” than the small business definition it used in the rule. Id.
at 427-28 n.70.
B. The Commission’s 2006 Quadrennial Review, 2008 Order, and Diversity
In July 2006, the FCC began another quadrennial review. Marking the culmination of
the review process in December 2008, the FCC issued its 2008 Order containing changes to
its ownership rules made in response to our remand, and deemed necessary to the public
interest in the course of its own review, offering justifications for those changes, and issuing
five permanent waivers of its newspaper/broadcast cross-ownership rule. Simultaneously,
the FCC issued the Diversity Order in response to our remand and to carry out its statutory
duty to enhance opportunities for minorities and women in broadcast ownership.
We consider the proposed rule changes, the waivers, and the Diversity Order below.
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The following is a brief description of the rule changes made by the Commission following
its 2006 Quadrennial Review that are challenged by one or more of the parties.
Newspaper/Broadcast Cross-Ownership (“NBCO”) Rule
In its 2008 Order, the Commission abandoned the cross-media limits announced in the
2003 Order, declined to retain the ban abandoned in the 2003 Order (but still in existence due
to our stay), and adopted an entirely new rule. Under the new rule, the Commission will
consider newspaper/broadcast cross-ownership proposals on a case-by-case basis using a
four-factor test, set forth below, guided by reversible presumptions.
In the top 20 Designated Market Areas (“DMAs”), the Commission will presume “that
it is not inconsistent with the public interest for an entity to own . . . either (a) a newspaper
and a television station if (1) the television station is not ranked among the top four stations
in the DMA, and (2) at least eight independent ‘major media voices’ remain in the DMA;5 or
(b) a newspaper and a radio station.” 2008 Order
¶ 53. In all other markets, the Commission
will presume “that it is inconsistent with the public interest for an entity to own newspaper
and broadcast combinations.” Id.
at ¶ 63. However, the Commission will reverse that
negative presumption if either (1) the proposed combination initiates at least seven hours a
week of additional local news programming, or (2) the newspaper or broadcast outlet
qualifies as failed or failing. Id.
at ¶¶ 65-67.
presumptions, the Commission will consider the following
four factors in determining whether to approve a proposed combination:
(1) the extent to which cross-ownership will serve to increase
the amount of local news6 disseminated through the affected
media outlets in the combination; (2) whether each affected
media outlet will exercise its own independent news judgment;
(3) the level of concentration in the Nielsen DMA,7 and (4) the
5 “Major media voices” are defined in the 2008 Order “as full-power commercial and
noncommercial television stations and major newspapers.” 2008 Order
¶ 57. Major
newspapers “are newspapers that are published at least four days a week within the DMA and
have a circulation exceeding 5 percent of the households in the DMA.” Id.
6 In the 2008 Order, “[t]he term ‘local news’ includes traditional newscasts as well as
programming that addresses issues of local political interest or issues of public importance in
the market.” Id.
at ¶ 70.
7 A Nielsen DMA is a region in which residents receive the same or similar television
offerings. Market concentration is not further defined in the 2008 Order, and the FCC
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financial condition of the newspaper or broadcast station, and if
the newspaper or broadcast station is in financial distress, the
owner’s commitment to invest significantly in newsroom
at ¶ 68. However, the presumptions—negative and positive—present a “high
hurdle” for opposing parties to overcome. Id.
Radio/Broadcast Cross-Ownership Rule
The Commission also abandoned the cross-media limits proposed in 2003 with respect
to radio/broadcast cross-ownership. Instead, it announced that it would retain its pre-2003
rule (still in effect at that time due to our stay of the 2003 rule), which “limits the number of
commercial radio and television stations an entity may own in the same market, with the
degree of common ownership permitted varying depending on the size of the relevant
at ¶ 80. More specifically, an entity may own up to two television stations and
up to six radio stations (or one and seven) in a market where 20 independently owned media
“voices” would remain post-merger, and up to two television stations and four radio stations
where 10 voices would remain. Id.
at ¶ 80 n.259. An entity may own two television stations
and one radio station regardless of the number of voices remaining in the market. Id.
Local Television Ownership Rule
The Commission also chose to retain the pre-2003 local television ownership rule,
under which an entity may own two television stations in the same DMA if (1) the station
contours do not overlap; or
(2) at least one of the stations in the combination is not ranked
among the top four in terms of audience share and
at least eight independently owned
broadcast television stations would remain in the DMA after the combination. Id.
at ¶¶ 87,
96. It abandoned completely the relaxed numerical limits in the 2003 Order. Additionally,
the Commission reinstated the failed station solicitation rule.
announced that it “will not employ any single metric” in measuring concentration. Id.
73. Instead, the 2008 Order “stress[es] . . . that in future adjudicative proceedings addressing
proposed combinations parties are free to point to any metric of their choosing in arguing that
a proposed combination either should or should not be approved.” Id.
8 Note that all of these combinations must also comply with the local television and radio
ownership rules. Id.
at ¶ 80 n.259.
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Local Radio Ownership Rule
As it did in the 2003 Order, the Commission retained the numerical limits prescribed
by Congress in the 1996 Telecommunications Act (and the revised market definition we
upheld in Prometheus I
). See 2008 Order
¶¶ 110-11. However, it offered a new justification
for those limits and for the AM/FM subcaps, as we had rejected as unreasonable the
rationales given in its 2003 Order. Id.
at ¶¶ 130-34; Prometheus I
, 373 F.3d at 430-35.
The rule provides that
an entity may own, operate, or control (1) up to eight
commercial radio stations, not more than five of which are in the
same service (i.e.
, AM or FM), in a radio market with 45 or
more full-power, commercial and non-commercial radio
stations; (2) up to seven commercial stations, not more than four
of which are in the same service, in a radio market with between
30 and 44 (inclusive) full-power, commercial and non-
commercial radio stations; (3) up to six commercial radio
stations, not more than four of which are in the same service, in
a radio market with between 15 and 29 (inclusive) full-power,
commercial and non-commercial radio stations; and (4) up to
five commercial radio stations, not more than three of which are
in the same service, in a radio market with 14 or fewer full-
power, commercial and noncommercial radio stations, except
that an entity may not own, operate, or control more than 50
percent of the stations in such a market.
In its separate Diversity Order, the FCC adopted, with modifications, 13 proposals
submitted during the rulemaking proceeding and rejected 10 other proposals intended to
increase broadcast ownership by minorities and women. It also sought comment on nine
separate proposals in the accompanying Third Further Notice of Proposed Rulemaking (the
“Third FNPR”). Diversity Order
¶¶ 80-101. It did not consider proposed SDB definitions.
The Diversity Order adopts a number of measures to increase ownership opportunities
for “eligible entities,”9 which are defined to include all entities that qualify as small
9 The Diversity Order:
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businesses under the standards of the Small Business Administration (the “SBA”) for
industry groupings based on revenue. Among other provisions, the Diversity Order also
establishes several measures intended to eliminate fraud and discrimination in broadcast
Subsequent Procedural History
In March 2008, Common Cause and several other groups10 filed a Petition for
of the Commission’s 2008 Order. See Common Cause et al., Petition for
, MB Docket 60-121 (Mar. 24, 2008) (“Petition for Reconsideration”). In
[c]hanges [the Commission’s] construction permit deadlines to
allow “eligible entities” that acquire expiring construction
permits additional time to build out the facility; [r]evises the
Commission’s equity/debt plus . . . attribution standard;
[m]odifies the Commission’s distress sale policy . . . ; [a]dopts
an Equal Transactional Opportunity Rule that bars race or
gender in broadcast transactions; [a]dopts a “zero-tolerance”
policy for ownership fraud and “fast-track” ownership-fraud
claims and seeks to resolve them within 90 days; [r]equires
broadcasters renewing their licenses to certify that their
advertising sales contracts do not discriminate on the basis of
race or gender; [e]ncourages local and regional banks to
participate in SBA-guaranteed loan programs . . . ; [g]ives
priority to any entity financing or incubating an eligible entity in
certain duopoly situations; [c]onsiders requests to extend
divestiture deadlines in mergers in which applicants have
actively solicited bids for divested properties from eligible
entities; [c]onvenes an “Access-to-Capital” conference that will
focus on the investment banking and private equity communities
and opportunities to acquire financing; [a]nnounces the creation
of a guidebook on diversity . . . ; and [r]evises the exception to
the prohibition on the assignment or transfer of grandfathered
radio station combinations.
News Release, FCC, FCC Adopts Rules to Promote Diversification of Broadcast Ownership
(Dec. 18, 2007).
10 Those groups included the Benton Foundation, Consumers Action, the Massachusetts
Consumers’ Coalition, NYC Wireless, James J. Elekes, and the National Hispanic Media
Case: 08-3078 Document: 003110585945 Page: 17 Date Filed: 07/07/2011
July 2008, Citizen Petitioners11 filed for review of that Order in our Court. Subsequently,
several other petitions for review were filed before us, all of which were consolidated with
that of Citizen Petitioners. In December 2008, Citizen Petitioners filed a motion to hold
these cases in abeyance pending the FCC’s action on the Petition for Reconsideration. We
granted that motion and ordered the parties to show cause why the stay entered in 2003, and
continued in Prometheus I
, should not be lifted. On consideration of their responses, we
requested that the parties file status reports regarding the pending Petition for
Reconsideration and our stay. Order Requesting Status Reports, June 12, 2009. After
reviewing the status reports, we requested that the Commission advise us “when it expect[ed]
to issue its decision on reconsideration of the 2006 Quadrennial Regulatory Review
Requesting Further Information, Nov. 4, 2009 (emphasis in original).
In response, the Commission made clear that it was “already working hard to
reexamine” the issues raised in the Petition for Reconsideration. Thus, it did “not intend to
issue a decision on reconsideration of the 2008 Order
until that decision [could] be made
harmoniously with the current Quadrennial Regulatory Review.” Memorandum from Austin
C. Schlick, FCC General Counsel, to Marcia M. Waldron, Clerk, U.S. Court of Appeals for
the Third Circuit 1 (Nov. 25, 2009). The Commission requested that we “continue to hold
these cases in abeyance.” Id.
It asked that, in the alternative, we “remand the 2008 Order
the Commission so that it may revisit the determinations made in that order in conjunction
with” its 2010 Quadrennial Review. Id.
at 2.12 We declined to do either, and in March 2010
we lifted the stay and set a briefing schedule for the consolidated cases pending before us.
JURISDICTION AND STANDARD OF REVIEW
We have jurisdiction over the rule-making portions of the FCC’s 2008 Order under 47
U.S.C. § 402(a) and 28 U.S.C. § 2342(1).13
11 As in Prometheus I
, we use this designation to refer to those petitioners who have raised
anti-deregulatory challenges to the Commission’s 2008 Order. These petitioners are Free
Press; Media Alliance; Office of Communication of the United Church of Christ, Inc.
(“UCC”); and Prometheus Radio Project.
12 Specifically, the FCC asked that we “treat [its] alternative request as a formal motion for
voluntary remand.” Id.
at 5 n.2.
13 Although all of the challenges to the FCC’s 2008 Order were initially consolidated, we
recognized that the Court of Appeals for the D.C. Circuit has exclusive jurisdiction to review
FCC broadcast licensing actions under 47 U.S.C. § 402(b). Thus, we bifurcated the licensing
challenges and transferred them back to the D.C. Circuit. Order Deconsolidating Licensing
Appeals under § 402(b), Feb. 8, 2010.
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Standard of Review under the APA
In reviewing agency rulemaking, our standard of review is governed by the APA, 5
U.S.C. § 706. Under this standard, we must “hold unlawful and set aside agency action,
findings, and conclusions” that are “arbitrary, capricious, an abuse of discretion, or otherwise
not in accordance with law . . . [or] unsupported by substantial evidence.” Id.
§ 706(2)(a). As
the Supreme Court elaborated in Motor Vehicles Manufacturing Association of the United
States v. State Farm Mutual Automobile Insurance Company
The scope of review under the arbitrary and capricious standard
is narrow and a court is not to substitute its judgment for that of
the agency. Nevertheless, the agency must examine the relevant
data and articulate a satisfactory explanation for its action[,]
including a rational connection between the facts found and the
choices made. . . . Normally, an agency rule would be arbitrary
and capricious if the agency has relied on factors which
Congress has not intended it to consider, entirely failed to
consider an important aspect of the problem, offered an
explanation for its decision that runs counter to the evidence
before the agency, or is so implausible that it could not be
ascribed to a difference in view or the product of agency
463 U.S. 29, 43 (1983) (internal quotations and citations omitted).14
Standard of Review under Subsection 202(h)
Subsection 202(h) of the 1996 Telecommunications Act requires the Commission to
determine whether media concentration rules are “necessary in the public interest as the
result of competition” and to “repeal or modify any regulation it determines to be no longer
in the public interest.” § 202(h), 110 Stat. at 111-12.15 In Prometheus I
, we set out our
14 Moreover, “[w]e may not supply a reasoned basis for the agency’s action that the agency
itself has not given. . . . We will, however, uphold a decision of less than ideal clarity if the
agency’s path may reasonably be discerned.” Id.
at 43 (internal quotations and citations
15 Section 202(h) of the 1996 Telecommunications Act states the following: “Further
: The Commission shall review its rules . . . and shall determine whether
any of such rules are necessary in the public interest as the result of competition. The
Commission shall repeal or modify any regulation it determines no longer to be in the public
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standard of review under § 202(h) in detail. 373 F.3d 390-97. With no need to repeat that
detail here, we note our summary of the § 202(h) standard:
In a periodic review under § 202(h), the Commission is required
to determine whether its then-extant rules remain useful in the
public interest; if no longer useful, they must be repealed or
modified. Yet no matter what the Commission decides to do to
any particular rule—retain, repeal, or modify (whether to make
more or less stringent)—it must do so in the public interest and
support its decision with a reasoned analysis.
As we did in Prometheus I
, “[w]e shall evaluate each aspect of the Commission’s
Order accordingly.” Id.
NEWSPAPER/BROADCAST CROSS-OWNERSHIP (“NBCO”) RULE
All sides challenge the Commission’s decision to repeal its ban on
newspaper/broadcast cross-ownership in favor of a case-by-case approach guided by
presumptions and a four-factor test. Citizen Petitioners argue that the FCC failed to provide
adequate notice of the rule as required by the APA, that elements of the rule are unsupported
by the record evidence, and that several components are too vague and ill-defined to be
enforceable or to promote the public interest. In contrast, Deregulatory Petitioners16 contend
that the FCC erred by failing to relax the rule further. They also challenge the validity of the
rule under our Constitution’s First and Fifth Amendments. Several of the Petitioners point to
record evidence that they believe the FCC did not adequately consider in promulgating the
new NBCO rule. Because we conclude that the Commission did not meet the APA’s notice
and comment requirements for this rule, we do not reach any of these challenges to its
We, along with the Court of Appeals for the D.C. Circuit, have upheld the
Commission’s interpretation of “necessary” to mean “convenient,” “useful,” or “helpful,”
rather than “indispensable.” Prometheus I
, 373 F.3d at 393-94 (citing Cellco P’ship v. FCC
357 F.3d 88 (D.C. Cir. 2004)).
16 We refer to the following petitioners collectively as the “Deregulatory Petitioners”: Belo
Corporation; Bonneville International Corporation; CBS Broadcasting, Inc.; CBS
Corporation; Clear Channel Communications, Inc.; Coalition of Smaller Market Television
Stations; Cox Enterprises, Inc.; Fox Television Stations, Inc.; Gannett Company, Inc.; Media
General Inc.; Morris Communications Company, LLC; National Association of Broadcasters;
Newspaper Association of America; Raycom Media Inc.; Sinclair Broadcast Group, Inc.; The
Scranton Times, L.P.; and the Tribune Company.
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Notice and Comment Process
In remanding the Commission’s cross-media limits in Prometheus I
, we advised that
“any new ‘metric’ for measuring diversity and competition in a market be made subject to
public notice and comment before it is incorporated into a final rule.” 373 F.3d at 412. The
FCC’s “decision to withhold” its previous metric (the Diversity Index) from “public scrutiny
was not without prejudice” to the public’s ability to discuss and rebut it during comment, as
evidenced by its significant flaws, and the Commission thus should have noticed the
methodology publicly. Id.
We noted that our remand would “give the Commission an
opportunity to cure its questionable notice.” Id.
Two years after our remand, in July 2006,
the FCC issued a Further Notice of
to begin its 2006 Quadrennial Review and to request
comments on how to address our remand. 2006 Quadrennial Regulatory Review—Review of
the Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section
202 of the Telecommunications Act of 1996, Further Notice of Proposed Rulemaking
F.C.C.R. 8834, 2006 WL 2067989 (July 24, 2006). The FNPR contained only the following
paragraph directly relevant to revising the NBCO rule:
We invite comment on all of the issues remanded by the Prometheus
court regarding cross-ownership. Many of these
issues relate to the [Diversity Index (“DI”)]. In light of the
court’s extensive and detailed criticism of the DI, we tentatively
conclude that the DI is an inaccurate tool for measuring
diversity. Moreover, we recognize that some aspects of
diversity may be difficult to quantify. To the extent that we will
not use the DI to justify changes to the existing cross-ownership
rules, we seek comment on how we should approach cross-
ownership limits. Should limits vary depending upon the
characteristics of local markets? If so, what characteristics
should be considered, and how should they be factored into any
We seek comment on the newspaper/broadcast rule and
the radio/television cross-ownership rule. Are there aspects of
television and radio broadcast operations that make cross-
ownership with a newspaper different for each of these media?
If so, should limits on newspaper/radio combinations be
different from limits on newspaper/television combinations?
Lastly, are the newspaper/broadcast cross-ownership rule and
the radio/television cross-ownership rule necessary in the public
interest as a result of competition?
Case: 08-3078 Document: 003110585945 Page: 21 Date Filed: 07/07/2011
¶ 32 (emphasis added).
Two commissioners dissented in part from the order adopting the FNPR, criticizing its
“vague,” “open-ended” nature and its failure to discuss proposals to foster minority and
female ownership, among other “major flaws” and “infirmities.” Statement of Commissioner
Jonathan S. Adelstein, Concurring in Part, Dissenting in Part
, 21 F.C.C.R. 8834, 8865-67,
2006 WL 2067989 (July 24, 2006). Commissioner Adelstein noted that the FNPR failed to
give notice regarding any new metric for measuring diversity and that the Commission had
not committed to allowing public comment before such a measuring device would be
incorporated into “rules that are likely to change the media landscape for generations to
at 8866. Commissioner Copps similarly noted: “A transparent process is
especially critical for issues of this magnitude when the Notice asks broad, general questions
. . . . I do not see how we can be transparent and comply with the dictates of the Third
Circuit [in Prometheus I
] without letting the American people know about and comment on
any new standards of measurement that we adopt in developing our ultimate decision.” Statement of Commissioner Michael J. Copps
, Concurring in Part, Dissenting in Part
F.C.C.R. 8834, 8863, 2006 WL 2067989 (July 24, 2006).
Despite the brevity of the relevant portion of the FNPR, the FCC relied entirely on the
two sentences emphasized in this single paragraph as providing adequate notice of the new
NBCO rule adopted in its 2008 Order. FCC Br. 37. As its counsel reiterated at oral
argument: “I want to emphasize that for APA purposes we think that Paragraph 32 of the
further notice was sufficient, because all we have, all the agency is required to do is [set out]
general issues.” Oral Argument Transcript (“Tr.”) 92; see also
Tr. 87 (“Well[,] Paragraph 32
of the further notice . . . does have two sentences, but sentences that talk specifically to this
question relevant to newspaper broadcast co-ownership.”). Only when pressed at oral
argument did counsel add that the 2003 Order and our decision in Prometheus I
useful background for interested parties, but he stopped short of asserting that the FNPR
incorporated the entire record that preceded it: “Indeed, I would say that . . . parties who are
interested in any of these issues should have paid attention, not only to the Commission’s
2003 order but to this court’s opinion and to its instructions on remand in order to figure out
what the Commission was going to deal with and had to deal with in the 2008 Order, because
that was indeed in part a response to this court’s order on remand.” Tr. 94-95.
Following publication of the FNPR, there was an initial 90-day comment period and a
further 60 days for reply comments. However, after that period, the procedures followed by
the Commission were irregular. On November 22, 2006, the Commission announced that it
had commissioned 10 economic studies. Both of the Commissioners who had dissented from
the FNPR issued statements criticizing “the [poor] transparency of the process undertaken to
develop the studies and select the authors,” “the truncated period of time to complete the
Case: 08-3078 Document: 003110585945 Page: 22 Date Filed: 07/07/2011
studies,” and the peer review process proposed. News Release, FCC, Commissioner
Adelstein’s Comments on the FCC’s Media Ownership Studies
(Nov. 22, 2006); News
FCC, Commissioner Copps’ Comments on the FCC’s Media Ownership Studies
(Nov. 22, 2006).
On July 31, 2007, the FCC released the 10 studies (and large underlying data sets) and
asked for comments on those studies to be filed 60 days later, with 15 additional days to
submit reply comments. In a joint statement, Commissioners Copps and Adelstein criticized
the short time for public comment given the volume of data released and raised questions
about the peer review process.17 In September 2007, about halfway through the comment
period, the Commission released peer review analyses of the ownership studies and some
additional underlying data. A few days later, Free Press, Consumer Federation of America,
and Consumers Union filed a complaint with the Commission under the Data Quality Act
(“DQA”), 44 U.S.C. § 3516. Free Press et al., Complaint under the DQA and Motion for
Extension of Time
(Sept. 11, 2007) (“First DQA Complaint”). It alleged that the Commission
had (1) suppressed studies with results contrary to its purportedly predetermined goal of
relaxing the ownership rules;18 (2) violated the Office of Management and Budget’s
guidelines under the DQA, as well as the FCC’s own guidelines implementing the DQA,
because the FCC’s peer review process was “woefully inadequate” and the results of its
commissioned studies were not reproducible; and (3) failed to give peer reviewers and the
public enough time to comment on the studies. Id.
On November 1, 2007, the last day for
reply comments on the studies, the FCC posted to its website several additional peer review
comments, “revised” versions of four of the studies, and new peer review studies, but did not
extend the time for public comment. Free Press, Consumer Federation of America, and
Consumers Union responded by filing a second complaint alleging continued violations of
the DQA and the APA. Free Press et al., Second Complaint under the DQA and Motion for
Extension of Time
(Nov. 9, 2007).
17 “These are ten supposedly serious studies put together by teams of economists and analysts
over an eight month period,” the dissenting Commissioners noted, “[y]et the Commission
expects the public to analyze all ten studies, and reams of underlying data, and file comments
60 days from today! This is unfair, unnecessary, and ultimately unwise . . . .” News Release,
FCC, Joint Statement of Commissioners Michael J. Copps and Jonathan S. Adelstein on
Release of Media Ownership Studies
(July 31, 2007).
18 After allegations that two studies were suppressed, the Commission authorized an
Inspector General investigation and released what is purportedly “a controversial
memorandum by [the] then-chief economist of the FCC that laid out a research strategy
specifically designed to justify a preconceived goal—to repeal the newspaper-media cross-
ownership rule.” First DQA Complaint at 7.
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Between October 2006 and November 2007, the Commission held six public hearings
on media ownership in cities around the country. Citizen Petitioners object to the manner in
which the final public hearing, held on November 12, 2007, was handled, as the hearing date
and location (Seattle, Washington) were announced just 10 calendar days beforehand.
On November 13, 2007, then-FCC Chairman Kevin J. Martin published an Op-Ed in
The New York Times unveiling his own proposal for a new NBCO rule. He simultaneously
put out a Press Release (together, the “Op-Ed/Press Release”) that set a 28-day deadline for
the public to “comment” on his proposal. Responses were due December 11, 2007.
Commissioners Copps and Adelstein objected to his decision.19 On November 28, 2007,
Chairman Martin circulated an internal draft of the Order to the other Commissioners.
The Op-Ed/Press Release generated much criticism. The Senate Committee on
Commerce, Science, and Transportation, the FCC’s oversight committee in the Senate,
approved by unanimous consent a bill that, among other provisions, required the FCC to
delay its vote on the proposal until a meaningful notice and comment period occurred for the
NBCO rule. Media Ownership Act of 2007, S. 2332, 110th Cong. (2007).20 A similar bill
was introduced in the House of Representatives. Media Ownership Act of 2007, H.R. 4835,
19 Their separate press release included the following statement regarding notice and
The Martin rules are clearly not ready for prime time. Under the
Chairman’s timetable, we count 19 working days for public
comment. That is grossly insufficient. The American people
should have a minimum of 90 days to comment, just as many
Members of Congress have requested. . . .
There is still time to do this the right way. Congress and the
thousands of American citizens we have talked to want a
thoughtful and deliberate rulemaking, not an alarming rush to
judgment characterized by insultingly short notices for public
hearings, inadequate time for public comment, flawed studies[,]
and a tainted peer review process . . . .
News Release, FCC, Joint Statement of Commissioners Copps and Adelstein on Chairman
Martin’s Cross Ownership Proposal
(Nov. 13, 2007). They also disputed Chairman Martin’s
characterization of his proposed rule, noting that “[t]he proposal could repeal the ban in every
market in America, not just the top twenty . . . .” Id.
20 S. 2332 would have required FCC publication of any proposal to modify, revise, or amend
its ownership rules, followed by a 60-day comment period and 30 days for reply comments.
Case: 08-3078 Document: 003110585945 Page: 24 Date Filed: 07/07/2011
110th Cong. (2007) . On December 17, 2007, a bipartisan group of 25 Senators urged the
FCC to delay its vote scheduled for the next day “to provide a reasonable period for
comment” “that would normally accompany a rule change of this type,” and threatened to
revoke the new NBCO rule legislatively if the vote went ahead.21
The hours before the final vote were a scramble. The 2008 Order was not circulated
to the Commissioners until 9:44 p.m. the night before the vote. Even that draft had sections
missing. The Commissioners received a new version of the NBCO rule at 1:57 a.m. on the
day of the vote. At 11:12 a.m. that same morning, another version of the NBCO rule was
circulated that contained revisions to the four-factor test that would be employed in every
case. Nevertheless, later that same day the Commission, by a three to two vote, adopted the
2008 Order and the Diversity Order.22
The FCC Failed to Meet the APA Notice and Comment Standard
The APA Standard
The APA requires agencies to provide notice of proposed rulemaking that contains
“either the terms or substance of the proposed rule or description of the subjects and issues
involved.” 5 U.S.C. § 553(b). Following notice, “the agency shall give interested persons an
opportunity to participate in the rulemaking through submission of written data, views, or
arguments with or without opportunity for oral presentation.” Id.
§ 553(c). As we stated in Prometheus I
, “‘the adequacy of the notice must be tested by determining whether it would
fairly apprise interested persons of the ‘subjects and issues’ before the agency.’” 373 F.3d at
411 (citing Am. Iron & Steel Inst. v. EPA
, 568 F.2d 284, 293 (3d Cir. 1977)).23
21 “We believe this denies the American public any real ability for input and fails to reflect
reasoned and transparent agency decision-making. Furthermore, we know you are aware that
the Senate Commerce Committee has unanimously passed a piece of legislation asking you to
defer action on December 18th. We believe you have shortchanged the comment process . . .
.” Letter from 25 United States Senators to the FCC 1 (Dec. 14, 2007).
22 In a nearly unanimous voice vote, the United States Senate passed a joint resolution
disapproving the NBCO rule. S.J. Res. 28, 110th Cong. (2008).
23 The FCC also points us to the logical outgrowth doctrine to assess its compliance with the
APA. FCC Br. 38. Stated inversely, that doctrine asks if the “substance of an agency’s final
rule strays too far from the description contained in the initial notice . . . .” Council Tree
Commc’ns, Inc. v. FCC
, 619 F.3d 235, 249 (3d Cir. 2010).
If so, the final rule is not a
“logical outgrowth” of the rule proposed in the notice, and “the agency may have deprived
interested persons of their statutory right to an opportunity to participate in the rulemaking.”
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To assess whether the public was fairly apprised of a new rule, a reviewing court asks
“whether the purposes of notice and comment have been adequately served.” Am. Water
Works Ass’n v. EPA
, 40 F.3d 1266, 1274 (D.C. Cir. 1994) (internal quotation and citation
omitted); see also Natural Res. Def. Council v. EPA
, 279 F.3d 1180, 1186 (9th Cir. 2002).
Among the purposes of the APA’s notice and comment requirements are “(1) to ensure that
agency regulations are tested via exposure to diverse public comment, (2) to ensure fairness
to affected parties, and (3) to give affected parties an opportunity to develop evidence in the
record to support their objections to the rule and thereby enhance the quality of judicial
review.” Int’l Union, United Mine Workers of Am. v. Mine Safety & Health Admin.,
1250, 1259 (D.C. Cir. 2005). In addition, “a chance to comment . . . [enables] the agency [to]
maintain a flexible and open-minded attitude towards its own rules.’” McLouth Steel
Prods. Corp. v. Thomas
, 838 F.2d 1317, 1325 (D.C. Cir. 1988) (internal citation omitted).
To achieve those purposes,
there must be an exchange of views, information, and criticism
between interested persons and the agency. . . . Consequently, the
notice required by the APA . . . must disclose in detail the thinking
that has animated the form of a proposed rule and the data upon
which that rule is based. . . . [A]n agency proposing informal
rulemaking has an obligation to make its views known to the
public in a concrete and focused form so as to make criticism or
formulation of alternatives possible.
Home Box Office, Inc. v. FCC
, 567 F.2d 9, 35-36 (D.C. Cir. 1977) (emphasis added) (internal
citations and footnotes omitted).
In sum, “[t]he opportunity for comment must be a meaningful opportunity.” Rural
Cellular Ass’n v. FCC
, 588 F.3d 1095, 1101 (D.C. Cir. 2009). That means enough time with
enough information to comment and for the agency to consider and respond to the comments.
Analysis of Compliance with the APA Standard
No party disputes that Chairman Martin’s Op-Ed/Press Release did not satisfy the
APA’s notice requirements. The proposal was not published in the Federal Register, the
views expressed were those of one person and not the Commission, and the Commission Id
. However, the doctrine appears not to apply here because the NBCO rule in the 2008
Order is brand new. “The logical outgrowth doctrine does not extend to a final rule that is a
brand new rule, since something is not a logical outgrowth of nothing . . . .” Id.
(internal quotations and citations omitted).
Case: 08-3078 Document: 003110585945 Page: 26 Date Filed: 07/07/2011
voted days after substantive responses were filed, allowing little opportunity for meaningful
consideration of the responses before the final rule was adopted. In effect conceding these
points, the FCC states that the Op-Ed/Press Release is “immaterial” to its compliance with
the APA’s notice requirement. FCC Br. 38 n.10.
As noted earlier, the Commission relies on paragraph 32 of the FNPR to satisfy its
notice obligations under the APA. Id.
at 37. It argues that “[a] notice that contains no rule
proposals complies with the APA so long as it is ‘sufficient to fairly apprise interested parties
of all significant subjects and issues involved.’” Id.
(quoting NVE, Inc. v. Dep’t of Health &
, 436 F.3d 182, 191 (3d Cir. 2006)). However, an agency also “must ‘describe
the range of alternatives being considered with reasonable specificity. Otherwise, interested
parties will not know what to comment on, and notice will not lead to better-informed agency
decision-making.’” Horsehead Res. Dev. Co., Inc. v. Browner
, 16 F.3d 1246, 1268 (D.C.
Cir. 1994) (internal citations omitted).
On these facts, we cannot conclude that the Commission met this obligation, as we fail
to see how the FNPR, with its two general questions related to the NBCO rule, and the
irregular comment period that followed, satisfy the APA. The FNPR makes plain that the
FCC was planning significant revision to the NBCO rule and looking for an alternative to the
Diversity Index for measuring diversity. Paragraph 32 of the FNPR asks only whether cross-
ownership limits should vary “depending upon the characteristics of local markets,” and, “if
so, what characteristics should be considered . . . ?”
While the new rule varies limits depending on characteristics of markets—
specifically, market size and the number of media voices—it was not clear from the FNPR
which characteristics the Commission was considering or why. The phrase “characteristics
of markets” was too open-ended to allow for meaningful comment on the Commission’s
approach. In addition, many central elements of the rule are not based on “characteristics of
markets” at all. For example, key aspects of the rule rely on: the amount of “local news”
produced by an individual station involved in a potential merger and how that term is
defined; the definition of “major media voices,” including what counts as a major newspaper;
how “market concentration” is measured; whether a station is “failing”; whether a station
exercises “independent news judgment” and how that term is defined; and whether a case-by-
case approach or a categorical approach to proposed mergers would better serve the public
interest. The FNPR also did not solicit comment on the overall framework under
consideration, how potential factors might operate together, or how the new approach might
affect the FCC’s other ownership rules. These were significant omissions.
Our dissenting colleague suggests that the FNPR subsumes the entire record
surrounding the 2002 Biennial Review, including the 2002 Notice, the 2003 Order, and our
decision in Prometheus I
. As noted above, the FCC did not argue this. Rather, it contended
Case: 08-3078 Document: 003110585945 Page: 27 Date Filed: 07/07/2011
that “the four corners of [the FNPR were] sufficient” under the APA. Tr. 88. But even if the
FNPR implicitly incorporated those sources, it still did not provide sufficient notice of the
Commission’s new approach to cross-ownership. During the 2006 Quadrennial Review, the
FCC departed entirely from its approach in the 2003 Order and adopted a rule with
significant elements that were not previously noticed in 200224 or analyzed in the 2003 Order
or our remand. Although it was clear from those sources, taken together, that the
Commission was planning to overhaul its approach to newspaper/broadcast cross-ownership,
they did not contain enough information about what it was planning to do, or the options it
was considering, to provide the public with a meaningful opportunity to comment. Until
Chairman Martin’s November 2007 personal Op-Ed/Press Release, the public did not know
even what options he was considering, let alone the Commission.
In further support of our conclusion, we note that the FNPR is sparse in comparison to
the Commission’s May 2010 Notice of Inquiry initiating its 2010 Quadrennial Review of the
ownership rules. See 2010 Quadrennial Regulatory Review—Review of the Commission’s
Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the
Telecommunications Act of 1996, Notice of Inquiry
, 25 F.C.C.R. 6086, 2010 WL 2110771
(May 25, 2010) (the “2010 NOI”). The 2010 NOI is much more specific and covers many
more issues. It contains many pages of questions regarding potential approaches to the
NBCO rule, discusses data motivating the Commission’s questions, and inquires into various
regulatory options. For example, it asks:
With regard to the newspaper/broadcast cross-ownership rule,
should the Commission treat newspaper-television combinations
differently from newspaper-radio combinations, as we do in the
2006 presumptive standard? Are some goals or metrics more
relevant for one or the other type of combinations? Are particular
market participants more heavily affected by the rule? Which
elements of market structure are most important for measuring the
effects of this rule on our policy goals? Would relaxing the
newspaper/broadcast cross-ownership rule result in economies of
scale and scope that could help newspapers to survive?
24 We note that the FNPR contrasts with the 2002 Notice, which “outline[d] . . . a variety of
different approaches that might serve the public interest,” 2002 Notice ¶ 34, and sought
comment on them, while the FNPR did not present options or seek comment on different
2002 Notice ¶¶ 34-53 with FNPR
¶¶ 28-32. Even with that, we still
expressed concerns in Prometheus I
about the 2002 Notice because of the FCC’s failure to
notice the methodology underlying its approach to cross-ownership in the 2003 Order. 373
F.3d at 411-12.
Case: 08-3078 Document: 003110585945 Page: 28 Date Filed: 07/07/2011
Alternatively, do the problems faced by newspapers result from
extraneous factors that make relief in this area irrelevant? For
example, statistics show that fewer people are reading newspapers
and, instead, are increasingly getting news and information from
nontraditional sources. Statistics also demonstrate an increase in
the degree of penetration of new media, including online websites,
and social media. Given the fragmentation of sources of news,
would structural relief help newspapers sufficiently to result in a
net gain in local news and information? Should any such relief
operate via a revised rule or via a waiver standard? If the latter,
what type of waiver standard should be applicable? Is the
presumptive standard adopted in the 2006 Quadrennial Review
able to further our competition, diversity, and localism
goals as well as result in economies of scale and scope that could
help newspapers survive? Is a rule that relies on presumptions
preferable in order to achieve our goals? What factors should a
relaxed rule or waiver standard take into account? Should any
relaxation of the rule continue to account for the number of voices
in a community? For instance, is there a basis in the current
marketplace for finding that cross-ownerships only in the largest
markets would be in the public interest? Should it take into
account market share of the media entities that would be
combined? If the number of voices is relevant, how should voices
be defined for this purpose?
2010 NOI ¶ 87; see also id.
at ¶¶ 90-100 (detailing “structural” inquiries regarding use of
“bright line rules,” “case-by-case approach,” “hybrid approach,” and “broad cross-media
at ¶¶ 101-06 (inquiring into effect of “digital contours” and “national
broadband plan” on NBCO and other ownership rules).
Moreover, a comparison of the comments submitted during the official comment
period (July 24, 2006 - January 16, 2007) and the responses to the Chairman’s Op-Ed/Press
Release (November 13, 2007 - December 11, 2007) indicates that interested parties were
prejudiced by the inadequacy of the FNPR. During the official comment period, some
commenters noted that their submission would be limited because the FNPR “makes no
proposals and suggests no options.” Comments of UCC et al.
, MB Docket No. 06-121 at 60
(Oct. 23, 2006) (“10/23/06 UCC Comments
”). Indeed, in an 87-page submission, there was
only one paragraph
on how a relaxed approach to cross-ownership “might work” if the FCC
eliminated the existing ban, but over 11 pages discussing data on the benefits of retaining a
ban and several more pages regarding closing “loopholes” in the ban. 10/23/06 UCC
Case: 08-3078 Document: 003110585945 Page: 29 Date Filed: 07/07/2011
at 61-74. These comments, like many others, were largely limited to discussing
whether the ban should be retained or eliminated. See, e.g.
, Comments of Bonneville
, MB Docket No. 06-121 at 15 (Oct. 23, 2006) (arguing that the ban
should be eliminated); Comments of Belo Corp.
, MB Docket No. 06-121 at 9-10 (Oct. 23,
(same); Comments of AFL-CIO
MB Docket No. 06-121 at 57 (Oct. 23, 2006) (urging
retention of the ban); Comments of American Federation of Radio and Television Artists
Docket No. 06-121 at 20-22 (Oct. 23, 2006) (same). This occurred, we suspect, in large
measure because a discussion of the actual issues involved—including the factors,
presumptions, and exceptions the FCC was considering—was impossible based on the sparse
In contrast, responses to Chairman Martin’s Op-Ed/Press Release began to raise for
the first time substantive issues with his new approach to cross-ownership. For example, the
response submitted by Consumers Union, Consumer Federation of America and Free Press
on December 11, 2007 (“12/11/07 Response”) began to discuss the following issues, among
others, that had not been noticed in the FNPR: the eight-voices test and considerations
regarding how it should be employed in a newspaper/broadcast cross-ownership rule; options
for how market concentration should be measured if it is to be used as a factor in allowing
mergers (which they argue is a new “metric” that had to be noticed under Prometheus I
was still too vague in the Op-Ed/Press Release for a meaningful response); the implications
of the distinction between increased local news on a particular station (or merged entity) and
increased local news production in the overall market (which they argue should be the
appropriate level of analysis); and other perceived ambiguities in Chairman Martin’s
proposal that they argued could change the effects of the rule considerably depending on how
various terms are defined and how the factors and presumptions work together. 12/11/07
Response at 12-39. Regardless whether the FCC eventually rejected the views expressed in
those responses (as it would have been free to do after considering them fully and with
plausible reasoning after adequate notice), they merit consideration in a rulemaking of great
The APA requires that the public have a meaningful opportunity to submit data and
written analysis regarding a proposed rulemaking. 5 U.S.C. § 553(c). Yet, commenters did
not have sufficient time to do so after the Op-Ed/Press Release. The Chairman gave only 28
days for response, not the usual 90 days. As Consumers Union, Consumer Federation of
America, and Free Press stated, “[s]ince the time frame allowed for a response to the
Chairman’s off-the-cuff proposal was short, we rely primarily on the evidence already in the
record.” 12/11/07 Response
at 17. After the FCC began to formulate an approach to this
important and complex rule, the public was entitled to “a new opportunity to comment” in
which “commenters would  have their first occasion to offer new and different criticisms
which the Agency might find convincing.” BASF Wyandotte Corp. v. Costle
, 598 F.2d 637,
Case: 08-3078 Document: 003110585945 Page: 30 Date Filed: 07/07/2011
642 (1st Cir. 1979); see also Natural Res. Def. Council
, 279 F.3d at 1186.
In addition, the FCC had an obligation to remain “open-minded” about the issues
raised and engage with the substantive responses submitted. Rural Cellular Ass’n
, 588 F.3d
at 1101 (“in order to satisfy [the APA], an agency must . . . remain sufficiently open-
minded”); McLouth Steel Products
, 838 F.2d at 1325. The timeline reveals, however, that
the Commission could not have done so. Two weeks before the Chairman’s response period
closed, and before most of the responses were received, a draft of the order was circulated
internally. The final vote occurred within a week of the response deadline. This is not the
agency engagement the APA contemplates.
In this context, we have little choice but to conclude that the FCC did not, through the
FNPR, fulfill its “obligation to make its views known to the public in a concrete and focused
form so as to make criticism or formulation of alternatives possible.” Home Box Office,
F.2d at 36. The two sentences in paragraph 32 of the FNPR are simply too general and open-
ended to have fairly apprised the public of the Commission’s new approach to cross-
ownership. Criticism and the formulation of alternative options only began to be possible
after the Chairman’s Op-Ed/Press Release, and there is no dispute those documents did not
satisfy the APA’s requirements. For these reasons, we vacate and remand the NBCO rule for
failure to comply with the APA’s notice and comment requirements.25 We expect the
Commission to comply with this remand in the context of its ongoing 2010 Quadrennial
Permanent Waivers of Cross-Ownership Rule
In its 2008 Order, the FCC granted five permanent waivers of its NBCO rule—one to
Gannett Company, Inc.’s newspaper/broadcast combination in Phoenix, Arizona, and four to
Media General, Inc.’s combinations in Myrtle Beach-Florence, South Carolina; Columbus,
25 Because we vacate the NBCO rule in the 2008 Order, the rule in existence prior to that
order will remain in effect until the FCC promulgates new cross-ownership regulations. See,
, Council Tree
, 619 F.3d at 258 (“vacating [an FCC] rule will mean that” the prior rule
“will once again” govern the regulated activity); Abington Mem. Hosp. v. Heckler
, 750 F.2d
242, 244 (3d Cir. 1984) (“vacating or rescinding invalidly promulgated regulations has the
effect of reinstating prior regulations”) (citing Action on Smoking and Health v. CAB
F.2d 795, 797 (D.C. Cir. 1983)); Paulsen v. Daniels
, 413 F.3d 999, 1008 (9th Cir. 2005)
(“The effect of invalidating an agency rule is to reinstate the rule previously in force.”).
26 We note our dissenting colleague’s concern that the 2010 Quadrennial Review be allowed
“to run its course.” Nothing in our decision today prevents the FCC from fulfilling its
obligations on remand in the course of that ongoing review.
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Georgia; Panama City, Florida; and in the Tri-Cities DMA in Tennessee/Virginia. 2008
¶ 77. Temporary waivers for these combinations were pending when the quadrennial
review proceeding ended. The FCC justified its decision to grant these waivers on the
ground that it took similar action in 1975, when it grandfathered certain combinations while
imposing an outright ban. Id
. It stated that “divestiture introduces the possibility of
disruption for the industry and hardship for individual owners,” and asserted that “the public
interest warrants a waiver [in these cases] in light of the synergies that have already been
achieved from the newspaper/broadcast station combination[s].” Id.
Citizen Petitioners disagree, arguing that these waivers are unprecedented in number
and scope. They also contend that the waivers are not analogous to those granted in 1975
because the combinations here were acquired in a post-regulatory world (that had been
characterized by a complete ban before the mergers occurred). Although we have several
concerns about these permanent waivers,27 we conclude that we do not have jurisdiction to
reach the merits of Citizen Petitioners’ claims.
Under 47 U.S.C. § 405(a), a party seeking judicial review of an FCC “order, decision,
report, or action” must file a petition for reconsideration if it “(1) was not a party to the
proceedings resulting in such order, decision, report, or action, or (2) relies on questions of
fact or law upon which the Commission . . . has been afforded no opportunity to pass.” It is
undisputed that Citizen Petitioners did not file a petition for reconsideration of the FCC’s
Between 1975 (the year the newspaper/broadcast cross-ownership ban went into
effect) and 2008 the FCC granted a total of four waivers. In the 2008 Order, it granted five,
without articulating the standard it applied. We doubt that the Commission had the
opportunity to consider fully the merits of the waivers—indeed, some of the Commissioners
only had 12 hours’ notice that the waivers would be included, as they were not added to the
draft Order nor circulated to the full Commission until the night before the vote. This is
particularly troubling because, by the FCC’s own standards, the combinations are significant.
Media General combined a top-four ranked network-affiliated television station and a daily
newspaper in each of its four markets. As the FCC recognizes, top-four stations are “the
most influential providers of local news [in a] market,” and combinations involving them
pose a heightened threat to diversity. Id.
at ¶ 61. Similarly, Gannett acquired a top-ranked
broadcast station and a daily newspaper.
We also have concerns about the propriety of the decision-making process. In the 10
months before the 2008 Order was adopted, representatives of Media General (which
received four of the five waivers) visited or called the Commission 37 times. See Media
General Notice of Ex Parte Communication
, MB Docket Nos. 06-121 and 02-277 (Nov. 20,
Case: 08-3078 Document: 003110585945 Page: 32 Date Filed: 07/07/2011
grant of the waivers before seeking judicial review. Because we conclude that the FCC has
not been afforded an opportunity to pass on Citizen Petitioners’ objections to the permanent
waivers, they have failed to meet the requirements of § 405(a)(2) and we lack jurisdiction to
hear their challenge.28
Citizen Petitioners’ arguments that the objections were before the Commission, or in
the alternative that administrative exhaustion would be futile, do not persuade us otherwise.
First, the Citizen Petitioners contend that, because the waivers were placed in the draft order
the night before the vote, the Commission had the opportunity
to consider the dissenting
Commissioners’ objections to granting the waivers, which are substantially similar to Citizen
Petitioners’ objections. Citizen Petitioners Reply Br. 23. They cite Office of Communication
of United Church of Christ v. FCC
, 465 F.2d 519 (D.C. Cir. 1972), in which judicial review
was not precluded by § 405 because “the dissenting Commissioners . . . raise[d] the very
argument pressed . . . by the [petitioners],” and thus the argument “was surely before the
Commissioners at the time of their decision.” Id.
We believe that case is distinguishable. Here, it is far from clear whether the full
Commission considered the dissenters’ arguments given the brief time for discussion
between the introduction of the waivers into the Order and the vote. In addition, the two
dissenting Commissioners’ arguments against the waivers were short (one to two sentences
each) and focused on the process by which these waivers were adopted rather than their
substance. See Dissenting Statement of Commissioner Michael J. Copps
, 23 F.C.C.R. at
2116 ; Dissenting Statement of Commissioner Jonathan S. Adelstein
, 23 F.C.C.R. at 2124.
Second, Citizen Petitioners argue that it would be futile for them to seek
reconsideration because the FCC majority has refused to address the concerns of the
dissenting Commissioners and Common Cause, which filed a petition for reconsideration
challenging the permanent waivers in March 2008. See
Petition for Reconsideration. We are
skeptical that the facts here establish the futility of reconsideration such that this rare
exception should apply.
28 The FCC and Deregulatory Petitioners argue that, if section 405(a) does not bar our
review, we should construe Citizen Petitioners’ challenge to the waivers as an objection to a
licensing proceeding over which the D.C. Circuit Court has exclusive jurisdiction under
section 402(b). Because the waivers were granted as a part of the 2008 Order, which does
not grant or deny any licenses, we arguably have jurisdiction to hear Citizen Petitioners’
claims. However, because they have failed to exhaust their remedies under section 405(a),
we need not reach this claim.
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It is true that the waiver requests had been before the FCC for some time prior to the
2008 Order. Media General and Gannett acquired the combinations at issue prior to 2001. 2008 Order
¶ 77. They then requested temporary waivers during their license renewal
proceedings. Free Press, a Citizen Petitioner, filed objections to the waiver requests. Those
proceedings were still pending at the time the 2008 Order was issued. Subsequently, the
FCC granted the license renewals and found that the issue of the temporary waivers had been
rendered moot by the 2008 Order, which granted permanent waivers and thus effectively
concluded the adjudicatory license-renewal proceedings. Free Press filed a timely petition
for review of those license renewals in April 2008, which remains pending after more than
Citizen Petitioners argue that the FCC is playing an administrative “shell game,” and
has denied Free Press’s right to be heard by failing to address in the 2008 Order its licensing
renewal objections when the Commission granted the waivers, and now failing to pass on
Free Press’s petition for review of the licenses. Citizen Petitioners Reply Br. 27. Even
though the Commission failed to respond to the initial objections of Free Press, and has not
acted on its petition for review of the license renewals, this is not the proceeding in which
Free Press may seek relief from those decisions. Rather, it must challenge the FCC’s
licensing decisions in the Court of Appeals for the D.C. Circuit, which has exclusive
jurisdiction over licensing proceedings under 47 U.S.C. § 402(b).
Third, that Common Cause (not a party to this action) filed a petition for
reconsideration on which the FCC has yet to pass does not resolve matters. Citizen
Petitioners claim that the lapse of time between that filing and this litigation (three years)
demonstrates that the FCC has had the opportunity to rule on these arguments, and that
further delaying judicial review is futile. Citizen Petitioners Reply Br. 23.
Though a close
question, we disagree. While at some time the FCC’s delay in deciding Common Cause’s
petition would establish the futility of requiring administrative exhaustion, we do not think
that time is now, as the FCC has informed us that it intends to consider Common Cause’s
petition “harmoniously with the  Quadrennial Review.” Memorandum from Austin C.
Schlick, FCC General Counsel, to Marcia M. Waldron, Clerk, U.S. Court of Appeals for the
Third Circuit 1 (Nov. 25, 2009).29
In this context, we conclude that we do not have jurisdiction to hear the Citizen
Petitioner’s challenge of these permanent waivers.
29 Though we do not believe that enough time has elapsed for reconsideration to be rendered
futile, such a time may come if, for example, the FCC fails to act by its self-imposed
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RADIO/TELEVISION CROSS-OWNERSHIP RULE
In the 2008 Order, the FCC retained its radio/television cross-ownership rule initially
adopted in 1999. In 2003, however, it determined that the rule was no longer necessary
because the combination of the local ownership rules and the cross-media limits would
provide sufficient protection of viewpoint diversity. FCC Br. 70. However, we invalidated
the cross-media limits in Prometheus I
because the Commission failed to “provide a reasoned
analysis to support the limits that it chose.” 373 F.3d at 397. Thus, in the 2008 Order the
FCC found it necessary to “adopt diversity protections to act in their place,” and opted to
retain the 1999 rule. 2008 Order
That rule is that a party may: own up to two television stations and up to six radio
stations, or one television station and seven radio stations, in a market where at least 20
independently owned media “voices” would remain post-merger; two television stations and
up to four radio stations in a market where 10 independently owned media “voices” would
or two television stations and one radio station regardless of the number of media
voices in the market. Id.
at ¶ 80 n.259. Combinations that are otherwise permissible under
this rule also may be limited by the local television and radio ownership rules. Id.
Only Deregulatory Petitioners challenge the retention of this rule. The National
Association of Broadcasters (“NAB”) and CBS argue that the FCC fails to provide an
explanation for why the rule is necessary and sufficient to protect diversity of ownership in
light of the existence of the local ownership rules that also protect diversity. NAB Br. 60-61;
CBS Br. 20-21. We disagree, as the Commission has provided a reasoned explanation of its
The record does not indicate that local radio and television
ownership limits provide sufficient protection to assure a
diversity of viewpoints in those media markets. Local service-
specific limits are chiefly concerned with competition and
rivalry among entities providing the same service. In contrast,
cross-ownership rules aim to maintain a vibrant marketplace of
ideas to ensure a diversity of editorial content. What the
Commission said in 1999 remains true today – the fact that
‘[t]he public continues to rely on both radio and television for
news and information’ supports the conclusion that ‘the two
media both contribute to the ‘marketplace of ideas’ and compete
in the same diversity market.’ Because the two media ‘serve as
substitutes at least to some degree for diversity purposes,’ there
remains a need to retain a cross-ownership rule ‘to ensure that
viewpoint diversity is adequately protected.’
Case: 08-3078 Document: 003110585945 Page: 35 Date Filed: 07/07/2011
¶ 84 (citations omitted).
NAB also argues that diversity of ownership does not necessarily promote viewpoint
diversity—and may have the opposite effect. NAB Br. 60-61. Although the FCC does not
dispute this, it notes that the record contained “evidence that commonly owned media outlets
can also share (and promote) the same viewpoint.” FCC Br. 71 (citing 2008 Order
¶ 49). It
noted further that the record provides examples of “existing media outlets, such as
newspapers, introducing a new media outlet into the market, such as an Internet website, but
using both outlets to provide the same local content for consumers.” 2008 Order
(citing Comments of Consumers Union, et al.
, MB Docket No. 06-121 at 136-47 (Oct. 1, 2007); Comments of AFL-CIO
, MB Docket No. 06-121 at 24-26, 28-29, 32 (Oct. 23, 2006) (stating
that cross-owned media properties serve as cross-promotional vehicles rather than as
independent editorial voices, citing examples in Austin, Texas and Los Angeles, California); Comments of American Federation of Television and Radio Artists
, MB Docket No. 06-121
at 21-22 (Oct. 23, 2006) (stating that media conglomerates impose homogenous editorial
views across commonly owned property)). We believe that, in this light, the FCC plausibly
justified its position that “‘diversification of ownership would enhance the possibility of
achieving greater diversity of viewpoints.’” FCC Br. 71
(quoting FCC v. Nat’l Citizens
Comm. for Broad.
, 436 U.S. 775, 796 (1978) (“NCCB
CBS asserts that the rule is no longer in the public interest in light of record evidence
that the media market is growing more diverse and competitive. CBS Br. 23-27. While the
FCC acknowledged this trend, it found that “traditional media . . . are the most frequently
used and most important sources of local and national news . . . .” 2008 Order
Although CBS claims that a “revolution” has transpired “in the media marketplace,” CBS Br.
21, the record supports the FCC’s conclusion that new media such as the Internet and cable
still do not outrank newspapers and broadcast stations as sources of local news. 2008 Order
¶ 57 (citing Media Ownership Study No. 1
(indicating that “38.2 percent of all respondents
consider broadcast television stations and 30.1 percent consider local newspapers ‘the most
important source of local news or local current affairs’ whereas only 6.7 percent of all
respondents say the same concerning the Internet”)). Similarly, the FCC was justified in
treating broadcasters differently than cable operators (which face no cross-ownership
restrictions but must comply with local ownership rules) because “cable television is not
nearly as significant a source of local news as the broadcast media,” and therefore “mergers
involving [those] systems do not pose a serious threat to viewpoint diversity.” FCC Br. 73
(citing 2008 Order
¶ 58; Prometheus I
, 373 F.3d at 405).
Next, CBS analogizes this rule to a cable/broadcast cross-ownership rule invalidated
by the D.C. Circuit Court in Fox Television Stations, Inc.
, 280 F.3d 1027, 1048 (D.C. Cir.
2002). But the rule at issue in that case is distinguishable—here, the radio/broadcast rule
Case: 08-3078 Document: 003110585945 Page: 36 Date Filed: 07/07/2011
permits cross-ownership within limits; in Fox
, cross-ownership was banned entirely. Id.
1035. It was the rule’s “across-the-board prohibition” that the Court found impossible to
reconcile with the FCC’s simultaneous finding that common ownership of two broadcast
stations would not necessarily compromise diversity. Id.
at 1052. Here there is no such
conflict, and no complete ban.
Further, CBS complains that the rule “fails to meaningfully differentiate among
markets” because the majority of markets have more than 20 voices. CBS Br. 22. We do not
see the significance of this observation, as CBS “never explains why applying the least strict .
. . limitation would be unreasonable.” FCC Br. 74.
Finally, CBS objects that the rule treats radio stations as though they are equivalent to
television stations in certain respects (i.e.
, by allowing a substitution of one radio station for
one television station in larger markets), while recognizing that radio stations have a lesser
effect on diversity. CBS Br. 28. The FCC notes that this amounts to a challenge of the
“eight outlet” ownership rule per market (see additional discussion in section V.B). FCC Br.
75. It argues that the limit on total outlets was “in keeping with its concern with the overall
impact on the number of commonly-owned outlets within a local market.” Id.
The FCC also
argues that it was reasonable to conclude that “broadcasters should have the flexibility to
purchase an additional radio
station instead of a second television station, since the latter
would form a combination that would be[,] if anything[,] less worrisome from the standpoint
of diversity.” Id.
(emphasis in original).
We agree. As the Commission notes, it has “wide
discretion” when making policy judgments such as this. Id.
(citing AT&T Corp. v. FCC
F.3d 607, 627 (D.C. Cir. 2000)).
LOCAL TELEVISION OWNERSHIP RULE
Retention of the Pre-2003 Rule
In 2003, the FCC relaxed the local television ownership rule to allow an entity to own
two television stations in markets with 17 or fewer stations and three in markets with 18 or
more stations (but retained the prohibition on combinations that include the top four stations
in the market). In Prometheus I
, we noted that these revised numerical limits on television
station ownership assumed equal market shares among stations, which was unsupported by
the record, and remanded for the Commission “to support and harmonize its rationale.” 373
F.3d at 419-20.
In its 2008 Order, the FCC decided to retain the pre-2003 local television ownership
rule. Under this rule,
an entity may own two television stations in the same [DMA] if:
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(1) the Grade B contours30 of the stations do not overlap; or (2)
at least one of the stations in the combination is not ranked
among the top four stations in terms of audience share, and
least eight independently owned and operating commercial or
non-commercial full-power broadcast television stations would
remain in the DMA after the combination.
2008 Order ¶
87 (emphasis in original).
As the FCC acknowledges, this decision represents a reversal from its 2003
determination that the rule was no longer necessary. Citing the explosion of media outlets
since 1999, several Deregulatory Petitioners challenge the rule as overly restrictive. See, e.g.,
Sinclair Br. 28-29; CBS Br. 33-39. Their arguments do not persuade us.
First, in the 2008 Order the FCC found that “eliminating the rule could harm
competition among broadcast television stations in local markets.” 2008 Order ¶
101. It did
not ignore the “explosion” of media outlets in the industry; it simply concluded that, despite
these changes, the rule remained “necessary in the public interest to protect competition for
viewers and in local television advertising markets.” Id.
Second, the FCC eliminated the rule in 2003 in part because it was “premised on the
notion that only local TV stations contribute to viewpoint diversity and [did] not account for
the contributions of other media . . . .” 2003 Order ¶
133. In 2008, the Commission clarified
its rationale: while it acknowledged that “the local television ownership rule is no longer
necessary to foster diversity because there are other outlets for diversity of viewpoint in local
markets,” it concluded that the rule was still necessary to promote competition among
broadcast television stations. 2008 Order ¶¶
100, 101. Therefore, to the extent that the FCC
decided that the rule was no longer necessary in the public interest because it was not
necessary to promote diversity of viewpoint, that is no longer its justification. And, contrary
to NAB’s assertion that the FCC is conflating diversity and competition, the benefits of the
latter are distinct—“[c]ompetition . . . provides an incentive to television stations to invest in
better programming and to provide programming that is preferred by viewers,” whereas the
goal of diversity is to ensure that local media markets contain a variety of viewpoints. Id.
97. Moreover, that the rule may advance the dual goals of competition and viewpoint
diversity does not mean that the FCC’s rationale—premised on competition alone—is
30 A “Grade B station contour is the geographical representation of an area served by a
specified television signal strength.” FCC Br. 22 n.6 (citing 47 C.F.R. § 73.683). In other
words, it is the radius within which the majority of people can receive the station’s signal a
majority of the time. See
47 C.F.R. § 73.684.
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CBS argues that the FCC acted arbitrarily and capriciously by failing to consider
whether to allow triopolies (common ownership of three television stations) in large, diverse
markets. CBS Br. 31. But, as the FCC points out, it is only obligated to give a rational
reason for retaining existing limits as necessary in the public interest; it need not address
other solutions to the same problem. FCC Br. 79 (citing Ass’n of Public-Safety Commc’n
Officials-Int’l, Inc. v. FCC
”), 76 F.3d 395, 400 (D.C. Cir. 1996) (“[T]he fact that
there are other solutions to a problem is irrelevant provided that the option selected is not
irrational.”) (quotations and citation omitted)). We believe the FCC has offered rational
reasons for retaining this rule.
Retention of the “Top Four/Eight Voices” Test
As noted, the local television ownership rule specifies that an entity may own two
television stations in a single market if (1) the signal contours do not overlap; or
(2) at least
one of the stations is not ranked among the top four and
at least eight independently owned
stations would remain operating in the market after the combination. 2008 Order
Several Deregulatory Petitioners challenge this part of the rule. Sinclair argues that
the FCC fails to articulate why it has chosen eight voices as necessary to promote
competition. Sinclair Br. 34. This is not true. The FCC explained that it chose “eight
ensure that each market includes four stations affiliated with the
four major networks in each market (i.e.
, ABC, NBC, CBS, and
Fox), plus at least an equal number of independently owned-
and-operated broadcast television stations that are not affiliated
with a major network. Preserving the independent ownership in
each local market of four stations . . . will help to ensure that
local television stations, spurred by competition, will provide
dynamic and vibrant alternative fare, including local news and
public affairs programming. . . . [T]he Commission . . . has
found that there is generally a significant gap between the top
four stations in a market and the remaining stations. In light of
this concentration among the top four stations in most markets,
we believe that it is prudent to require the presence of at least
four (rather than two) competitors not affiliated with a major
network in order to ensure vibrant competition in the local
Case: 08-3078 Document: 003110585945 Page: 39 Date Filed: 07/07/2011
¶ 99. This was clearly a line-drawing exercise (which is “the agency’s
, 220 F.3d at 627), and the FCC has reasonably explained its decision
to draw the line at eight voices.
Sinclair also argues that retaining this rule violates the D.C. Circuit Court’s mandate
in Sinclair Broadcast Group v. FCC
, 284 F.3d 148 (D.C. Cir. 2002). In that case, the Court
held that the FCC had “failed to demonstrate that its exclusion of non-broadcast media from
the eight voices exception is ‘necessary in the public interest’ under § 202(h) of the 1996
[Telecommunications] Act,” and rejected its diversity-of-viewpoint rationale. Id.
Here, the FCC has offered a new and reasonable rationale for this policy choice—
competition. As it explained:
The local television ownership rule counts only broadcast
television stations as voices because the local television
ownership rule is designed to preserve competition in the local
television market. The radio/television cross-ownership rule, by
contrast, is designed to protect viewpoint diversity and thus
takes into account a broader range of voices than does the local
television rule. Furthermore, we count more voices in the
radio/television cross-ownership rule than in the
newspaper/broadcast cross-ownership rule because newspapers
and television station combinations involve the two most
important types of sources for news and information.
¶ 80 n.259. Contrary to NAB’s claim, the FCC concluded that the rule does not
depend on the effect of other video programming because the purpose of the rule is to
promote competition among the stations themselves. FCC Br. 82 (citing 2008 Order
Finally, the FCC also provided rational explanations for preserving its “top four”
exception. Sinclair and CBS argue that the record lacks evidence that mergers or joint
operations of top four stations harm competition (and fail to account for marketplace
realities), and thus that this portion of the rule is unsupportable. Sinclair Br. 42-48; CBS Br.
39-46. But, consistent with its 2003 Order, the FCC found that “combinations of top four
stations should be prohibited because mergers of those stations would be the most deleterious
to competition” that “would often result in a single firm with a significantly larger market
share than the others” and “would reduce incentives to improve programming that appeals to
mass audiences.” 2008 Order
¶ 102. It also found, as it did in its 2003 Order, that “a
significant ‘cushion’ of audience share percentage points continues to separate the top four
stations from the fifth-ranked stations.” Id.
We upheld the same determination in Prometheus I
373 F.3d at 417-18 ( “[W]e must uphold an agency’s line-drawing decision
when it is supported by the evidence in the record. . . . Here there is ample evidence in the
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record to support the Commission’s restriction on combinations among the top-four stations
as opposed the top-three or some other number.”). We do so again here.
Declining to Tighten the Television “Duopoly Rule”
Citizen Petitioners argue that the FCC’s decision not to tighten the duopoly
component of the local television rule, which allows entities to own two television stations in
some markets under the circumstances described above, was arbitrary and capricious.
Citizen Petitioners Br. 43-47. They assert that the FCC failed to consider the effect of the
transition to digital television, which allows stations to broadcast multiple streams of
programming (“multicast”) over a single channel (for example, a regular station and a high-
definition station for the same station affiliate in a DMA) and generate new revenue without
the need to purchase multiple stations in a single market. Id.
In its 2008 Order, the FCC rejected calls to tighten the duopoly rule, stating that
“owning a second in-market station can result in substantial savings in overhead and
management costs,” and finding that “these potential significant benefits of duopolies . . . in
markets with a plethora of diverse voices, outweigh commenters’ . . . claims that duopolies
harm diversity and competition.” 2008 Order
¶ 98. In its brief and at oral argument, the
FCC addressed Citizen Petitioners’ concerns by contending that the digital transition was not
completed until June 2009, and it was reasonable to “move cautiously and not rely on an
incomplete transition to a new technology as a basis for making the local television rule more
restrictive.” FCC Br. 84. It added that Citizen Petitioners are free to raise this issue in the
2010 Quadrennial Review. Id.
While it may have been preferable for the FCC to address the implications of the
digital transition in the 2008 Order itself, we do not believe that its failure to do so amounts
to arbitrary and capricious action. First, the digital transition was not complete at the time the
2008 Order was issued, so it is not clear that the FCC “entirely failed to consider an
important aspect of the problem” as it existed during its 2006 Quadrennial Review. State
463 U.S. at 43. Second, the Commission based its decision to retain the rule on
findings that the post-1999 rule has not been shown to harm competition among stations in
local markets. Thus, the FCC did not need to promulgate a more restrictive rule just because
entities may gain similar economies of scale and generate new revenue by multicasting.
Finally, as mentioned by the FCC, Citizen Petitioners are free to raise this issue in the 2010
Quadrennial Review in light of the completed digital transition.31
31 Citizen Petitioners also argue that the local television rule should be tightened because
allowing duopolies has harmed minority and female ownership according to an FCC-
Commissioned study. Citizen Petitioners Br. 49-50 (citing Allen S. Hammond, IV et al.
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LOCAL RADIO OWNERSHIP RULE
In its 2008 Order, the FCC retained its local radio ownership rule. 2008 Order
That rule allows an entity to “own, operate, or control” from five to eight commercial radio
stations, only three to five of which may be in the same service (AM/FM), depending on the
number of full-power commercial and non-commercial stations in the market. Id.
limits were initially set by Congress as part of the 1996 Telecommunications Act and
retained by the Commission in 2003. FCC Br. 84-85 (citing 2003 Order
¶¶ 239, 294). In Prometheus I
, we upheld the FCC’s use of a numerical limits approach “‘to guard against
consolidation . . . and to ensure a market structure that fosters opportunities for new entry
into radio broadcasting.’” 373 F.3d at 431-32 (citing 2003 Order
¶ 291). However, we
remanded its decision to retain the existing numerical limits because the FCC’s rationale that
they ensure equal-sized competitors did not adequately explain the limits chosen. Id.
In the 2008 Order, the FCC abandoned its justification from 2003. 2008 Order
Instead, it “rest[ed its] decision on [the] conclusion that relaxing the rule to permit greater
consolidation would be inconsistent with the Commission’s public interest objectives of
ensuring that the benefits of competition and diversity are realized in local radio markets,”
while “[m]aking the numerical limits more restrictive would be inconsistent with Congress’
decision to relax the local radio ownership limits in the 1996 Telecommunications Act and
would disserve the public interest by unduly disrupting the radio broadcasting industry.” Id.
To support this balancing rationale, the FCC pointed to statistics that show significant
consolidation in the radio broadcast industry and an increase in advertising rates after 1996,32
while recognizing that prior to 1996 “the local radio ownership rules did not effectively
recognize that a certain level of consolidation can be efficient” and any tightening of the
rules would result in widespread divestitures, “undermine settled expectations,” and “thus be
a significant shock to the market.” Id.
at ¶¶ 119, 120. Given these findings, and the guidance
provided by Congress in the 1996 Telecommunications Act, the FCC has demonstrated that Impact of the FCC’s TV Duopoly Rule Relaxation on Minority & Women Owned Broadcast
(June 2007) (“Media Ownership Study 8”). However, the study they
cite was discounted by the FCC because a peer review concluded that it suffered from serious
logical flaws. FCC Br. 102 n.32 (referring to Congressional Research Service Report, The
FCC’s 10 Commissioned Economic Research Studies on Media Ownership: Policy
34 (Dec. 5, 2007) (“CRS Report”) (noting, among other factors, the failure of
Media Ownership Study 8 to control for elimination of a minority tax certificate program)).
32 For example, the number of commercial radio station owners declined 39% between 1996
and 2007, and the largest commercial firm in each market has, on average, 46% of that
market’s total radio advertising revenue, while the top two have 74%. Id.
at ¶ 118.
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the existing numerical limits are necessary in the public interest.
Clear Channel contends that the FCC ignored record evidence and failed to support its
decision with reasoned analysis. Clear Channel Br. 17. We disagree. The Commission cited
the very study Clear Channel claims it ignored (finding that consolidation has no effect on
advertising prices), but it chose to credit another study in the record that reached the opposite
conclusion (consolidation caused advertising prices to double). FCC Br. 87. Also, the FCC
did not rely on an “irrelevant consideration” when it noted an increase in radio consolidation
at the national level (as opposed to within local markets), because record evidence shows
(and the Commission cited) significant consolidation in local markets as well. FCC Br. 87-
88 (citing 2008 Order
¶ 118). Also contrary to Clear Channel’s contentions, the FCC was
not required to demonstrate that its rule was superior to that proposed by Clear Channel, but
rather that its chosen rule was based on “reasoned analysis supported by the evidence before
the Commission.” APCO
, 76 F.3d at 398.
The FCC was also justified in retaining the AM/FM “subcaps.” It adopted the
subcaps to “‘prevent one entity from putting together a powerful combination of stations in a
single service that may enjoy an advantage over stations in a different service.’” FCC Br. 89
(quoting Revision of Radio Rules and Policies
, 7 F.C.C.R. 2755, 2778, ¶ 44 (1992)). In Prometheus I
, we upheld the subcap on FM stations but ruled that the FCC had failed to
explain adequately its decision to retain the subcap on AM ownership and requested it to do
so on remand. 373 F.3d at 434-35.
In the 2008 Order the FCC provided an adequate explanation. Specifically, it
recognized the “significant technical and marketplace differences between AM and FM
stations,” and found that eliminating the subcaps “would be inconsistent with our interest in
protecting competition in local radio markets.” 2008 Order
¶ 134. And, while the
Commission acknowledged that “in many cases, these differences between AM and FM
stations militate solely in favor of FM ownership limits due to factors such as AM stations’
lesser bandwidth, inferior audio signal, and smaller radio audiences,” it found that there was
evidence supporting AM limits as well. Id.
“For example, . . . AM stations are ranked
number one in 11 of the [top-50 markets], and . . . seven additional top-50 markets had AM
stations rated among the top three stations. Thus, in certain local markets with top-ranked
AM stations,” the FCC found that “the AM subcaps are necessary to prevent excessive
market power from being concentrated in the hands of one station owner.” Id.
also comments in the record warning that “‘large companies could bid up the price of AM
stations and further erode th[e] abysmally low representation’ of minority and female radio
station owners.” Id.
at ¶ 133 n.423 (citing 10/23/06 UCC Comments
at 85). Together these
findings are adequate to justify maintaining the cap on AM ownership, as there was evidence
in the record that AM stations are significant radio voices in many of the top markets, and
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that their further consolidation could injure the public interest, including harm to the goal of
promoting minority and female ownership.
Finally, we disagree with Clear Channel’s contention that the transition to digital radio
will obviate any perceived differences between AM and FM stations, and therefore the need
for subcaps. First, digital radio is still in its early stages. As the FCC points out, as of July
2009 only 6% of AM radio stations were authorized to transmit digital signals. FCC Br. 91
n.27. Also, its 2008 Order recognized that the digital transition may actually exacerbate the
technical differences between AM and FM stations because “FM stations have rights to more
spectrum and are further along in their digital transition.” 2008 Order
¶ 132 (citing 10/23/06
at 84). Although the digital transition may ultimately have a significant
effect on the technological and economic advantages of FM stations, it has not yet done so.
Thus, the FCC was justified in declining to rely on it in evaluating this rule.
RETENTION OF THE DUAL NETWORK RULE
In its 2008 Order, the FCC retained its dual network rule, which “permits common
ownership of multiple broadcast networks, but prohibits a merger between or among the ‘top
four’ networks.” 2008 Order
¶ 139. The FCC determined that the rule was still necessary in
the public interest because the “vertical integration of each of the top four networks,” and
their operation as a “strategic group in the national advertising market,” raise concerns that
mergers would allow the merged firm to “reduce its program purchases and/or the price it
pays for programming.” Id
The FCC reasoned that “these competitive harms
would reduce program output, choices, quality, and innovation to the detriment of viewers.” Id.
It also concluded that such mergers would harm localism, because it would “reduce the
ability of affiliates to bargain with the network for favorable terms of affiliation, reducing
affiliates’ influence on network programming, and thereby diminishing the ability of the
affiliates to serve their communities.” Id.
This rule was not challenged in Prometheus I
. Very few parties filed comments
advocating for a relaxation of the rule, and but two—Fox and CBS—suggested repeal. Only
CBS now challenges the rule before us by asserting that the FCC “failed to identify the
characteristics that make the four named networks unique” or “why the networks’ supposed
‘uniqueness’ should result in a regulatory disadvantage . . . .” CBS Br. 47. We disagree.
As outlined above, the FCC identified several unique features of the four networks—
including their vertical integration and operation as a strategic group. See 2008 Order
In addition, it noted that the “top four networks supply their affiliated local stations with
programming intended to attract mass audiences and advertisers that want to reach such a
large, nationwide audience. By contrast, the emerging networks target more specialized,
niche audiences similar to cable television networks.” Id.
at ¶ 139 n.439.
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We also disagree with CBS that the variety of broadcast and cable networks makes the
rule unnecessary. CBS Br. 49. As the FCC reasoned, “the four largest broadcast networks
serve a unique role in the electronic media and . . . no other networks, cable or broadcast,
reach nearly as large an audience as they do.” Id.
at ¶ 141 n.451. Therefore, even though
the FCC has elsewhere described today’s media marketplace as “dynamic” and
“competitive,” it was not inconsistent to retain the dual network rule based in part on the
harm to competition that would result from mergers of the top four networks. See id.
Br. 50; FCC Br. 96.
VIII. CONSTITUTIONALITY OF MEDIA OWNERSHIP RULES
Deregulatory Petitioners argue that all of the FCC’s media ownership rules are
Media General Br. 40-60; Cox Br. 39-49; CBS Br. 53-59; Tribune Br.
32-33, 39-40, 47-50; NAA Br. 44; Clear Channel Br. 33-38; Sinclair Br. 49-52. Primarily, as
they did in Prometheus I
Deregulatory Petitioners ask us to overturn the “scarcity” doctrine.
That doctrine establishes that “[i]In light of [their] physical scarcity, Government allocation
and regulation of broadcast frequencies are essential . . . .” NCCB
, 436 U.S. at 799. We
continue to “decline [Deregulatory Petitioners’] invitation to disregard precedent.” Prometheus I
373 F.3d at 401. “The abundance of non-broadcast media does not render the
broadcast spectrum any less scarce.” Id.
at 402. The Supreme Court’s justification for the
scarcity doctrine remains as true today as it was in 2004—indeed, in 1975— “many more
people would like to access the [broadcast spectrum] than can be accommodated.” Id.
, 436 U.S. at 799).
We agree with the FCC that the rules do not violate the First Amendment because they
are rationally related to substantial government interests in promoting competition and
protecting viewpoint diversity. FCC Br. 97 (citing NCCB
, 436 U.S. at 799-800 (upholding
substantial government interests in promoting diversified mass communications and
viewpoint diversity)). In NCCB
, the Court said that limiting common ownership was a
reasonable means of promoting these interests. NCCB
, 436 U.S. at 796. Therefore, as we
did in Prometheus I
, we hold that the “Commission’s continued regulation of the common
ownership of newspapers and broadcasters does not violate the First Amendment rights of
either.” 373 F.3d at 402.
There is no basis for CBS and Clear Channel’s First Amendment claims that the
media ownership rules are impermissible attempts by the FCC to manipulate content. CBS
Br. 55-56; Clear Channel Br. 36-37. These rules apply regardless of the content of
programming. We also disagree with Sinclair’s assertion that the local television ownership
rule violates the First Amendment because it “singles out television stations.” Sinclair Br.
49. The D.C. Circuit Court rejected this argument in Sinclair
, as do we for the same reasons.
284 F.3d at 168.
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Although we remand the NBCO rule on other grounds, we deem lacking in merit
Media General and Cox’s argument that the rule violates their rights to equal protection
under the Fifth Amendment by treating newspapers differently from other media. Media
General Br. 56-60; Cox Br. 46-49. The Supreme Court has upheld this treatment, as we
recognized in Prometheus I
, and we are bound by that precedent. 373 F.3d at 401 (citing NCCB
, 436 U.S. at 801-02 (upholding the constitutionality of the 1975 newspaper/broadcast
cross-ownership ban)). Similarly, it was not unconstitutional for the FCC to decline to
regulate ownership of non-broadcast media; we still “cannot [assume] that these media
outlets contribute significantly to viewpoint diversity as sources of local
(emphasis in original). In any event, “it is the Supreme Court’s prerogative
to change its own precedent.” Id.
THE DIVERSITY ORDER AND THE ISSUE OF MINORITY AND WOMEN BROADCAST
Remand on Minority and Women Ownership Issues
In Prometheus I
we remanded two of the Commission’s decisions dealing with
broadcast ownership by minorities and women, and issued a caution regarding a third. First,
we held that the 2003 Order had arbitrarily repealed the Commission’s only rule—the failed
station solicitation rule (“FSSR”)—directed at enhancing minority ownership, while also
failing to consider the effects of its other rules on minority and female ownership more
broadly. The FCC adopted the FSSR during its review of its local television duopoly rule
“[t]o alleviate concerns that its decision to allow duopolies would undermine television
station ownership by minorities.” Prometheus I
, 373 F.3d at 420. The FSSR required
applicants seeking waivers of the local television rule’s requirements “to provide notice of
the sale to potential out-of-market buyers before it could sell the failed, failing, or unbuilt
television station to an in-market buyer.” Id.
We concluded that the FCC’s repeal of the
FSSR in its 2003 Order was arbitrary and capricious under the APA:
By failing to mention anything about the effect [the repeal of the
FSSR] would have on potential minority station owners, the
Commission has not provided “a reasoned analysis indicating
that prior policies and standards are being deliberately changed,
not casually ignored.” Greater Boston TV Corp. v. FCC,
F.2d 841, 852 (D.C. Cir. 1970). Furthermore, while the
Commission had promised in 1999 to “expand opportunities for
minorities and women to enter the broadcast industry,” . . . the
FSSR remained its only policy specifically aimed at fostering
minority television station ownership. In repealing the FSSR
without any discussion of the effect of its decision on minority
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television station ownership (and without ever acknowledging
the decline in minority station ownership notwithstanding the
FSSR), the Commission “entirely failed to consider an important
aspect of the problem,” and this amounts to arbitrary and
capricious rulemaking. State Farm,
463 U.S. at 43. . . . For
correction of this omission, we remand.
at 420-21 (internal footnotes and parallel citations omitted). We noted that “[r]epealing
[the Commission’s] only regulatory provision that promoted minority television station
ownership without considering the repeal’s effect on minority ownership is also inconsistent
with the Commission’s obligation to make the broadcast spectrum available to all people
‘without discrimination on the basis of race.’” Id.
at 421, n.58 (citing 47 U.S.C. § 151).
Second, we concluded that the FCC failed to consider proposals to promote minority
broadcast ownership that the MMTC had submitted during the 2002 Biennial Review (the
“MMTC Proposals”). The 2003 Order had proposed a separate proceeding to address
proposals for advancing minority and disadvantaged businesses and promoting diversity in
2003 Order ¶¶ 49-50 (promising to issue a Notice of Proposed
Rulemaking to address the MMTC’s 13 specific proposals). We remanded the Commission’s
decision to defer consideration of these proposals and stated that it should address them at the
same time that it addressed its ownership rules remanded from the 2003 Order. Prometheus
, 373 F.3d at 421, n.59.
Finally, we declined to accept Citizen Petitioners’ concerns regarding the FCC’s new
transfer rule that prohibited “the transfer or sale of grandfathered [radio/television]
combinations that violate its local ownership limits except to certain ‘eligible entities’ that
qualify as small businesses.” Id.
at 427. In upholding the transfer rule, we rejected as
premature “Citizen Petitioners’ contention that the Commission should have chosen ‘socially
and economically disadvantaged businesses’ (SDBs) as the waiver-eligible class instead of
Small Business Administration-defined small businesses.” Id.
at 428, n.70. We reached that
conclusion because the FCC had “noted that, because of pending legislation, the definition of
SDBs is currently too uncertain to be the basis of its regulation.” Id.
However, we noted that
we expected a long-awaited SDB definition to be forthcoming:
We anticipate, however, that by the next  quadrennial
review the Commission will have the benefit of a stable
definition of SDBs, as well as several years of implementation
experience, to help it reevaluate whether an SDB-based waiver
will better promote the Commission’s diversity objectives
[compared to the revenue-based definition of eligible entities
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at 428, n.70.
B. Rulemaking Process regarding Minority and Female Ownership Issues
during the 2006 Quadrennial Review
The FNPR in 2006 and Second FNPR in 2007
As discussed above, the Commission issued its FNPR in 2006, approximately two
years after our remand in Prometheus I
. The two Commissioners who dissented in part from
the order adopting the FNPR lamented its failure to discuss proposals to foster minority and
female ownership.33 Shortly thereafter, in August 2006, the Diversity and Competition
Supporters (“DCS”) filed a motion for withdrawal of the 2006 FNPR and issuance of a
revised FNPR. See
DCS, Motion for Withdrawal of the Further Notice of Proposed
Rulemaking and for the Issuance of a Revised Further Notice
(Aug. 23, 2006) (the “DCS
Motion”). The DCS Motion argued that, among other failings, the FNPR lacked discussion
of the MMTC Proposals and the SDB definition that our Prometheus I
decision stated the
Commission should consider during the course of its next rulemaking.
One year later, the FCC issued a Second Further Notice of Proposed Rulemaking
(“Second FNPR”) focused on minority and female ownership issues. 2006 Quadrennial
Regulatory Review—Review of the Commission’s Broadcast Ownership Rules and Other
Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, Second
Further Notice of Proposed Rulemaking
, 22 F.C.C.R. 14215, 2007 WL 2212878 (Aug. 1,
2007). The Second FNPR acknowledged the DCS Motion and agreed to “set forth in greater
detail” the MMTC Proposals. Id.
at ¶ 2.34 It also recognized the DCS’s argument that “the
concept of SDBs is central to most of the minority ownership initiatives proposed in the 2002
biennial review proceeding,” and “without a definition for SDBs, the Commission cannot
33 Commissioner Copps remarked that “if all we can do is ask a few pat questions and then
sweep this issue under the rug one more time, we are not laying the groundwork for
, Concurring in Part, Dissenting in Part
, 21 F.C.C.R. at 8864. He noted
that the FNPR would set the Commission on track to repeat the omissions that caused us to
remand these same proposals in 2004: “[T]his item fails to commit to specific efforts to
advance ownership by minorities. The Third Circuit” had remanded the Commission’s
earlier decision “sidelining proposals to advance minority ownership. Despite this, all we
can muster up here are a few questions about this glaring challenge.” Id.
34 Specifically, it invited comment on (1) the MMTC Proposals submitted for consideration
in the 2002 biennial review proceeding; (2) the MMTC Proposals listed in the 2003 Order
that we instructed the Commission to address on remand; and (3) “media-related
recommendations of the [FCC’s advisory] Diversity Committee.” Id.
at ¶ 10.
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effectively evaluate the existing small business cluster transfer policy or its other proposals,
as remanded by the Prometheus
at ¶ 7. Further, the Second FNPR noted the
contention that “the SDB definition has already been fully briefed in the Commission’s
proceeding examining market entry barriers,” in which public comment was solicited “on
constitutionally permissible ways to further the [Commission’s ownership-diversity related]
mandates . . . .” Id.
at ¶ 8 (citing § 257 of the 1996 Telecommunications Act and 47 U.S.C.
§309(j)(3)(b)). However, it did not provide descriptions of any existing proposals for SDB
definitions (as it did for the MMTC Proposals) or discuss the Commission’s analysis of
existing briefing on those proposals’ constitutionality or efficacy. Instead, it merely called
for general “comment on MMTC’s proposal that the Commission define SDBs for purposes
of analyzing policy initiatives in support of media ownership diversity.” Id.
at ¶ 9.35
Finally, the Second FNPR sought comment on “the extent to which the FSSR or
another construction of the rule could promote minority and female ownership;” on how
proposals regarding minority and female ownership “would satisfy constitutional standards”
in light of the Supreme Court’s ruling in Adarand Constructors, Inc. v. Peña
, 515 U.S. 200
(1995);36 and on “the Commission’s statutory authority to address issues of minority and
female ownership.” Second FNPR
¶¶ 12, 13, 14.
Several of the FCC-commissioned economic research studies on media ownership,
discussed above in regard to notice of the NBCO rule, attempted to address minority and
female ownership issues. However, as the Congressional Research Service (“CRS”)
concluded, “all the researchers (and the peer reviewers) agree that the FCC’s databases on
minority and female ownership are inaccurate and incomplete and their use for policy
analysis would be fraught with risk.” CRS Report at 54. The CRS Report noted that the
FCC would have difficulty complying with our remand with its existing data. “In its Prometheus
decision, the Third Circuit instructed the FCC to consider the impact of changes
35 The Second FNPR again asked “that commenters address whether use of a proposed
definition raises any constitutional concerns, practical concerns, or other considerations . . . .” Id.
It also consolidated the docket from an earlier proceeding in which this issue had been
briefed “with our review of the media ownership rules” in order “[t]o ensure full
consideration of this issue.” Id.
36 The Commission noted that “Adarand
requires that governmental classifications based on
race must be analyzed under strict scrutiny,” and that the Adarand
standard “was reaffirmed
in the Supreme Court’s decision upholding student body diversity in the context of higher
education.” Second FNPR
13 (citing Adarand
, 515 U.S. 200; Grutter v. Bollinger
U.S. 306 (2003); Parents Involved in Cmty. Schs. v. Seattle Sch. Dist. No. 1
, 551 U.S. 701
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in its media ownership rules on minority ownership. Without accurate data on minority (and
female) ownership, it is impossible to perform such analysis.” Id.
The Diversity Order and Third FNPR in 2008
The Commission’s 2008 Order reinstated the FSSR as a component of the local
television rule. 2008 Order
¶¶ 105, 109 (reinstating the rule and granting petitions for
“reconsideration of our decision to eliminate the [FSSR]”). Separately, the FCC adopted the
Diversity Order. That Order adopted 13 proposals submitted during the rulemaking
proceeding, with modifications, and rejected 10 other proposals. See Diversity Order
79. It also sought comment on nine additional proposals in the attached Third FNPR. Id.
¶¶ 80-101. The majority of the adopted proposals use the same “eligible entity” definition we
anticipated would change in Prometheus I
. The Commission did not consider proposed SDB
definitions, but sought further comment on “whether we can or should expand” the eligible
entity definition. Id.
at ¶ 80.
Most of the proposals adopted in the Diversity Order are designed to expand
opportunities for “eligible entities,” as defined by the SBA standards for industry groupings
based on revenue.38 Others include a “zero tolerance” policy for ownership fraud and a ban
on discrimination in broadcast transactions, the latter of which requires broadcasters to
certify that they did not discriminate when selling a station. In other words, the proposals
that the FCC adopted are either targeted at small businesses as such, or reinforce existing
prohibitions against discrimination.
The Commission rejected 10 sets of proposals advocated by DCS and Rainbow/Push
at ¶¶ 65-79. It did not address proposals offering race- and gender-neutral
means to increase opportunities for minority and female ownership put forward by UCC and
37 It also noted that “[t]he same problem arises with respect to the impact of each and every
media ownership rule on minority and female ownership,” which makes all of the FCC’s
media ownership rules vulnerable to being overturned “until the Commission has developed
a minority ownership database of sufficient accuracy to allow for reliable testing of the
impact of the rules on minority ownership.” Id.
(internal footnotes omitted).
38 According to the Diversity Order, the SBA “defines as a small business a television
broadcasting station that has no more than $13 million in annual receipts and a radio
broadcasting entity that has no more than $6.5 million in annual receipts.” Id.
at ¶ 6. The
SBA also considers revenue of parent companies, and eligible entities must satisfy “several
control tests” to “ensure that ultimate control rests in an eligible entity that satisfies the
revenue criteria.” Id.
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Free Press.39 It also did not consider multiple proposals before it that urged use of non-
revenue based definitions of eligible entities, such as SDBs. The Commission offered a
constitutional avoidance rationale to justify limiting its consideration of eligible entity
definitions, essentially arguing that it was sensible to avoid “constitutional difficulties that
might create impediments to the timely implementation” of its new rules, even though the
constitutional issue had already been the subject of two rounds of notice and comment. Id.
¶ 9. Instead, as noted, the attached Third FNPR sought comment once again regarding these
(seeking “comment on whether [the FCC] should adopt an alternative
definition of ‘eligible entity’ that would specifically identify [minorities and women]”).
Commissioners Copps and Adelstein both concurred in part and dissented in part from
the Diversity Order. Their dissents emphasized: (1) the poor and worsening state of minority
and female ownership, Copps, Diversity Order Dissent in Part
, 23 F.C.C.R at 5982 (“Racial
and ethnic minorities make up 33 percent of our population. They own a scant 3 percent of
all full-power commercial TV stations. And that number is plummeting.”); (2) the
Commission’s lack of data and failure to make efforts to collect the data required for
informed policy-making in this area, id.
at 5983 (“We should have started by getting an
accurate count of minority and female ownership—the one that the Congressional Research
Service and the Government Accountability Office both just found that we didn’t have. . . .
[W]e don’t even know how many minority and female owners there are . . . .”); (3) the
Commission’s slowness regarding the issue of diversifying broadcast ownership despite its
statutory mandate to do so, Adelstein, Diversity Order Dissent in Part
, 23 F.C.C.R at 5986;
(4) its failure to consider proposals that address minority and female ownership directly (such
as those using non-revenue based definitions of eligible entities), id.
at 5986-88; (5) the
unsupported “eligible entity” definition adopted, id.
at 5987; and (6) the Commission’s
failure to consider the potential harms the Diversity Order might have on the groups it
purports to help, id.
The Eligible Entity Definition is Arbitrary and Capricious
At a minimum, in adopting or modifying its rules the FCC must “examine the relevant
data and articulate a satisfactory explanation for its action[,] including a ‘rational connection
between the facts found and the choice made.’” State Farm
, 463 U.S. at 43 (internal
quotation omitted). Citizen Petitioners assert that the Diversity Order does not analyze the
adopted proposals’ effectiveness and presents no reliable data supporting the eligible entity
definition chosen to achieve the stated goal of the rulemaking exercise—increasing broadcast
39 These largely called for tightening and enforcing media ownership limits, instead of
relaxing them or retaining existing limits, to increase ownership opportunities for minorities
Case: 08-3078 Document: 003110585945 Page: 51 Date Filed: 07/07/2011
ownership by minorities and women. Citizen Petitioners Br. 53. We agree that the
Commission has not demonstrated that the eligible entity definition in the Diversity Order is
based on “reasoned analysis supported by the evidence before the Commission.” APCO
F.3d at 398.
First and foremost, the Diversity Order does not explain how the eligible entity
definition adopted would increase broadcast ownership by minorities and women. In the two
paragraphs that discuss the definition adopted, the Commission refers only to “small
businesses,” and occasionally “new entrants,” as expected beneficiaries. Diversity Order
6-7. The remaining two paragraphs of the FCC’s discussion (1) challenge the contention that
ownership by minorities and women might be diminished by the chosen eligible entity
definition,40 and (2) seek comment on taking action that would “increase the ownership of
broadcast stations by minorities and women specifically.” Id.
at ¶¶ 8-9. Nowhere in its
discussion does the FCC support its conclusion that this definition “will be effective in
creating new opportunities for broadcast ownership by . . . women and minorities.” Id.
at ¶ 9.
Second, it is hard to understand how measures using this definition would achieve the
stated goal. For example, by the Commission’s own calculations, minorities comprise 8.5%
of commercial radio station owners that qualify as small businesses, but 7.78% of the
commercial radio industry as a whole—a difference of less than 1%. See id.
at ¶ 8. Thus,
these measures cannot be expected to have much effect on minority ownership.
Third, the Commission referenced no
data on television ownership by minorities or
women and no
data regarding commercial radio ownership by women. This is because, as
the Commission has since conceded, it has no accurate data to cite. In May 2009, it
published a Report and Order and Fourth Further Notice of Proposed Rulemaking addressing
this issue. See Promoting Diversification of Ownership in the Broadcasting Services
Quadrennial Regulatory Review—Review of the Commission’s Broadcast Ownership Rules
and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996,
Report and Order and Third Further Notice of Proposed Rulemaking
, 24 F.C.C.R. 5896,
2009 WL 1229684 (May 5, 2009) (“Fourth FNPR”). It states:
40 In those two paragraphs, the Commission “disagree[d] . . . that adoption of this small
business classification ‘would actually be regressive and serve to diminish
at ¶ 8 (emphasis in original). It took issue with Free Press’s data that
“purport to show that minority owned commercial radio stations are less well represented
among SBA-defined small businesses (5.88 percent) than they are in the industry as a whole
(7.78 percent).” Id
. It argued that the correct interpretation of that data indicates that “at
least 8.5 percent, not 5.88 percent, of commercial radio stations owned by SBA-defined small
businesses are minority owned.” Id
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The Commission has long sought to promote broadcast station
ownership by minorities and women in order to foster diversity
in broadcasting. Although some of the Commission’s
initiatives—such as the now-repealed minority tax certificate
program—have had beneficial effects, the overall level of
minority and female ownership in the broadcast industry
remains dismal. Unfortunately, the Commission currently does
not possess reliable data
on the precise status of minority and
female ownership—data that we will need to establish and
maintain effective policies over time . . . .
¶ 1 (internal footnotes omitted) (emphasis added); see also id.
at ¶ 12 (“We
agree with commenters, study authors, and the [General Accounting Office] that the data we
have collected in the past . . . are not sufficiently reliable and comprehensive to form the
basis for effectively assessing ownership diversity and whether additional measures to
promote it are necessary.”). The “Order” portion of the Fourth FNPR sets in motion a
process for collecting better data as a basis for informed policy-making. “[W]e believe that
the changes we are adopting today,” it states, “adequately address commenters’ and the
[General Accounting Office’s] criticisms and will allow us to undertake studies that reliably
analyze minority and female ownership.” Id.
at ¶ 12. While this is certainly a welcome and
long overdue step, it does not remedy the existing data gap in the Diversity Order. We
anticipate that it will, however, lay necessary groundwork for the Commission’s actions on
In sum, the eligible entity definition adopted in the Diversity Order lacks a sufficient
analytical connection to the primary issue that Order intended to address. The Commission
has offered no data attempting to show a connection between the definition chosen and the
goal of the measures adopted—increasing ownership of minorities and women. As such, the
eligible entity definition adopted is arbitrary and capricious, and we remand those portions of
the Diversity Order that rely on it.41 We conclude once more that the FCC did not provide a
sufficiently reasoned basis for deferring consideration of the proposed SDB definitions and
41 We uphold those measures in the Diversity Order that do not rely on the unsupported
eligible entity definition. As numbered in the Diversity Order, these are the (4) Ban on
Discrimination in Broadcast Transactions; (5) “Zero Tolerance” Policy for Ownership Fraud;
(6) Non-Discrimination Provisions in Advertising Sales Contracts; (7) Longitudinal Research
on Minority and Women Ownership Trends; (8) Local and Regional Bank Participation in
SBA Guaranteed Loan Programs; (12) “Access to Capital” Conference; and (13) Guidebook
Case: 08-3078 Document: 003110585945 Page: 53 Date Filed: 07/07/2011
remand for it to do so before it completes its 2010 Quadrennial Review.42
Despite our prior remand requiring the Commission to consider the effect of its rules
on minority and female ownership, and anticipating a workable SDB definition well before
this rulemaking was completed, the Commission has in large part punted yet again on this
important issue. While the measures adopted that take a strong stance against discrimination
are no doubt positive, the Commission has not shown that they will enhance significantly
minority and female ownership, which was a stated goal of this rulemaking proceeding. This
is troubling, as the Commission relied on the Diversity Order to justify side-stepping, for the
most part, that goal in its 2008 Order.43
Stating that the task is difficult in light of Adarand
does not constitute “considering”
proposals using an SDB definition. The FCC’s own failure to collect or analyze data, and lay
other necessary groundwork, may help to explain, but does not excuse, its failure to consider
the proposals presented over many years. If the Commission requires more and better data to
complete the necessary Adarand
studies, it must get the data and conduct up-to-date studies,
as it began to do in 2000 before largely abandoning the endeavor. We are encouraged that
the FCC has taken steps in this direction and we anticipate that it will act with diligence to
synthesize and release existing data such that studies will be available for public review in
time for the completion of the 2010 Quadrennial Review.
In addition, we note that the Supreme Court has upheld targeted FCC efforts to
promote increased minority ownership. The Court has ruled that “the interest in enhancing
broadcast diversity is, at the very least, an important governmental objective” that justified
FCC policies designed to promote minority ownership in broadcasting. Metro Broadcasting
Inc. v. FCC
, 497 U.S. 547, 567 (1990), overruled on other grounds in Adarand
, 515 U.S. 200
(overruling use of intermediate scrutiny). The Court upheld such policies because “the
conclusion that there is a nexus between minority ownership and broadcasting diversity . . . is
corroborated by a host of empirical evidence,” id.
at 580, and “both Congress and the
Commission have concluded that the minority ownership programs are critical means of
promoting broadcast diversity.” Id.
43 The primary instance in which minority ownership was mentioned in the 2008 Order was
in the Commission’s reinstatement of the FSSR as a component of the local television rule. 2008 Order
¶ 105 (“To ensure that we do not negatively impact minority owners, we now
reinstate [the FSSR] in the waiver standard.”). In addition, in rejecting comments arguing
that the FCC’s presumption allowing mergers in the top 20 DMAs in its new NBCO rule
would further diminish minority ownership (because those stations would become acquisition
targets), the Commission argued that “although we believe that it is appropriate to adopt
measures to encourage minority ownership, as we do in the Diversity Order
that we adopt
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Promoting broadcast ownership by minorities and women is, in the FCC’s own words,
“a long-standing policy goal of the Commission, and is consistent with [the Commission’s]
mandate under [§] 309(j) of the Act.” Fourth FNPR
¶ 12. We recognize that there are
significant challenges involved in meeting this important policy goal that is shared by
Congress, the Commission, and the myriad interested parties who have participated in
rulemaking proceedings toward this end. However, the Commission appears yet to have
gathered the information required to address these challenges, which it needs to do in the
course of its review already underway. As ownership diversity is an important aspect of the
overall media ownership regulatory framework, see Prometheus I
, 373 F.3d at 420-21, we re-
emphasize that the actions required on remand should be completed within the course of the
Commission’s 2010 Quadrennial Review of its media ownership rules.
We vacate and remand the NBCO rule for the Commission to provide adequate notice
and an opportunity to comment in the context of its 2010 Quadrennial Review. We affirm
the other rules in the 2008 Order. We also vacate and remand those provisions of the
Diversity Order that rely on the existing eligible entity definition, and the FCC’s decision to
defer consideration of proposed SDB definitions, so that it may justify or modify its approach
to advancing broadcast ownership by minorities and women during its 2010 Quadrennial
Review. This panel retains jurisdiction over the remanded issues.
today, we do not think it is appropriate to deny minority owners the opportunity to sell their
stations . . . .” Id.
at ¶ 61 n.202. In justifying retaining its AM/FM subcaps, the FCC noted
that it received comments arguing that the subcaps prohibited expansion of ethnic and
foreign language programming, but others arguing that they “serve the public interest by
promoting new entry . . . particularly by small businesses, women, minorities, and
entrepreneurs. . . . New entry promotes outlet diversity, which in turn enhances diversity and
the public interest.” Id.
at ¶ 133. It also noted comments in the record warning that “large
companies could bid up the price of AM stations and further erode th[e] abysmally low
representation’ of minority and female radio stations owners.” Id.
at ¶ 133 n.423. Finally, it
briefly referenced comments in the record regarding the effect of consolidation of local radio
ownership on minority owners. Id.
at ¶ 128 n.403.
Case: 08-3078 Document: 003110585945 Page: 55 Date Filed: 07/07/2011
Prometheus Radio Project v. Federal Communications Commission
, No. 08-3078, etc.
SCIRICA, Circuit Judge
, concurring in part, dissenting in part.
The decision to vacate and remand the 2008 newspaper/broadcast cross-ownership
rule (“NBCO rule”) preserves an outdated and twice-abandoned ban,1 adopted in 1975,
on common ownership of a broadcast station and a daily newspaper in the same market.
Because I believe the Federal Communications Commission provided adequate notice
and opportunity to comment on the 2008 NBCO rule, I respectfully dissent from the
Court’s holding that the FCC failed to satisfy the Administrative Procedure Act’s
requirements. Moreover, because I believe potential objections to a new NBCO rule or
new Diversity Order need not be reviewed by this panel, I also dissent from the decision
to retain jurisdiction over parts of the ongoing 2010 Quadrennial Review. I would affirm
the 2006 Quadrennial Regulatory Review
, 23 FCC Rcd. 2010 (2008) (“2008 Order”), in
its entirety, permit the 2008 NBCO rule to go into effect, and allow the 2010 Quadrennial
Review to run its course.
In July 2006, the FCC issued a Further Notice of Proposed Rulemaking (“2006
FNPR”) stating the FCC was reconsidering the NBCO rule and seeking comment on
cross-ownership limits. See Further Notice of Proposed Rulemaking
, 21 FCC Rcd. 8834
(2006). The 2006 FNPR asked: “Should limits vary depending upon the characteristics
of local markets? If so, what characteristics should be considered, and how should they
be factored into any limits?” Id
. at 8848,
¶ 32. If this were the first notice in which these
issues were raised, more detail would likely have been required. But the context in which
these questions were asked was clear: The FCC announced it was reconsidering its cross-
ownership rules not only in the normal course of its own periodic review, but also in
response to our remand, see Prometheus Radio Project v. FCC
), 373 F.3d
372 (3d Cir. 2004), of the FCC’s cross-media limits promulgated following the 2002
Biennial Regulatory Review. See 2006 FNPR
, 21 FCC Rcd. at 8848, ¶ 32 (“We invite
comment on all of the issues remanded by the Prometheus
court regarding cross-
ownership. . . . To the extent that we will not use the [Diversity Index] to justify changes
to the existing cross-ownership rules, we seek comment on how we should approach
cross-ownership limits.”); see also 2002 Biennial Regulatory Review
, 18 FCC Rcd.
13620 (2003) (“2003 Order). Accordingly, and as is well known to the parties involved,
the NBCO rule is not just the product of one isolated rulemaking, but is instead the
outcome of an iterative and interactive process of statutorily prescribed agency review of
broadcast media regulation and our judicial review of that agency action.
1 The FCC first declined to retain the ban in its 2003 Order, then again in its 2008 Order.
Case: 08-3078 Document: 003110585945 Page: 56 Date Filed: 07/07/2011
In Prometheus I
, we remanded the cross-media limits promulgated in the 2003
Order. The FCC had previously initiated proceedings on the NBCO rule reviewed in Prometheus I
by issuing a Notice of Proposed Rulemaking (“2001 NPRM”). See Cross-
Ownership of Broadcast Stations and Newspapers; Newspaper/Radio Cross-Ownership
, 16 FCC Rcd. 17283 (2001). It sought comment on the possibility of
taking a case-by-case approach to determine whether a proposed cross-ownership
combination would be in the public interest. See 2002 Biennial Regulatory Review
FCC Rcd. 18503, 18506, ¶ 7, 18538-39, ¶¶ 106-11 (2002). Although in the 2003 Order
the FCC concluded “that, on balance, the benefits of precision that case-by-case review
of every transaction would provide were outweighed by the benefits of bright-line rules,” 2008 Order
, 23 FCC Rcd. at 2041, ¶ 54 (citing 2003 Order
, 18 FCC Rcd. at 13645, ¶ 82),
on remand the FCC “[e]stablish[ed] presumptions, as opposed to a bright line [rule,]
allow[ing] for the evaluation of proposed newspaper/broadcast combinations under
defined circumstances on a case-by-case basis,” id
. at 2039-40, ¶ 52.
The presumptions adopted in the 2008 Order were, in substantial part, proposed in
the 2001 NPRM. The 2001 NPRM proposed an NBCO rule that would allow a
newspaper/broadcast combination in circumstances in which the radio or television
station was not among the top four ranked stations in the market and at least eight media
voices would remain. The 2001 NPRM stated:
Another option for modifying the newspaper/broadcast cross-ownership
policies would be to combine the “market concentration” and “voice count”
standards. Under this approach, a combination would be permitted so long
as both parties do not have a certain market share (combined or individual),
and so long as a minimum number of voices would remain in the market
post-merger. This approach would be consistent with the recently revised
TV duopoly rule, which permits common ownership of two TV stations
within the same [Designated Market Area (“DMA”)] if both are not ranked
among the top four in the market, and at least eight independently owned
TV stations would remain in the DMA post-merger.
, 16 FCC Rcd. at 17300, ¶ 46. Moreover, the 2001 NPRM also discussed
whether the FCC should presume it is in the public interest in certain circumstances to
waive any ban on newspaper/broadcast cross-ownership, “such that combinations would
be permitted if one of the parties to the combination has failed, is failing, or if the
combination would result in new service.” Id
. at 17301, ¶ 49.
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Following our decision in Prometheus I
remanding the cross-media limits in the
2003 Order, the FCC established presumptions similar to those proposed in the 2001
NPRM. The FCC concluded:
[A] waiver of the cross-ownership ban is in the public interest in the
following circumstances: when a daily newspaper seeks to combine with a
radio station in a top 20 DMA, or when a daily newspaper seeks to combine
with a television station in a top 20 DMA and (1) the television station is
not among the top four ranked stations in the market and (2) at least eight
“major media voices” would remain in the DMA.
, 23 FCC Rcd. at 2022-23, ¶ 20. Moreover, for DMAs outside of the top 20,
the FCC presumes that a newspaper/broadcast combination is not in the public interest
unless: (1) the newspaper or broadcast station is “failed” or “failing” or (2) the proposed
combination results in a new source of a significant amount of local news programming. Id
. at 2047-49, ¶¶ 65-67.
On the facts of this case, it is difficult to believe that Citizen Petitioners, who
participated in all prior proceedings, were not fairly apprised of either “the terms or
substance of the proposed rule” or “a description of the subjects and issues involved” as
required by the Administrative Procedure Act (“APA”). 5 U.S.C. § 553(b)(3); see NVE,
Inc. v. Dep’t of Health & Human Servs.
, 436 F.3d 182, 191 (3d Cir. 2006). Citizen
Petitioners were given “fair notice,” Long Island Care at Home, Ltd. v. Coke
, 551 U.S.
158, 174 (2007), of all significant subjects and issues involved, see Fertilizer Inst. v.
, 163 F.3d 774, 779 (3d Cir. 1998). The 2006 FNPR made clear that, on remand
from Prometheus I
, the FCC was planning a significant revision of the NBCO rule
noticed by the 2001 NPRM and appearing in the 2003 Order, and was again considering
tailoring cross-ownership limits to local markets. See 2006 FNPR
, 21 FCC Rcd. at 8848,
¶ 32. Because the general framework of the 2008 NBCO rule was actually proposed in
the 2001 NPRM of the subsequently remanded 2003 cross-ownership rules, interested
parties would not have had to “divine [the FCC’s] unspoken thoughts,” CSX Transp., Inc.
v. Surface Transp. Bd.
, 584 F.3d 1076, 1080 (D.C. Cir. 2009) (internal quotation marks
omitted). Instead, Citizen Petitioners “should have anticipated the [FCC’s] final course
in light of the initial notice,” Covad Commc’ns Co. v. FCC
, 450 F.3d 528, 548 (D.C. Cir.
2006) (internal quotation marks omitted), and consequently I cannot conclude the 2008
NBCO rule was not at least a “logical outgrowth of the rulemaking proposal and record,” NVE
, 436 F.3d at 191. Accordingly, I respectfully dissent from the Court’s decision to
remand the NBCO rule for failure to comply with the APA’s notice and comment
Case: 08-3078 Document: 003110585945 Page: 58 Date Filed: 07/07/2011
For the foregoing reasons, I would uphold the FCC’s NBCO rule and allow the
2010 Quadrennial Review to proceed. In all other respects, I concur in the majority