Sinclair Broadcast Group, Inc. v. F.C.C.
| Citation | 284 F.3d 148 |
| Decision Date | 02 April 2002 |
| Docket Number | No. 01-1079.,01-1079. |
| Parties | SINCLAIR BROADCAST GROUP, INC., Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents. United Church of Christ, et al., Intervenors. |
| Court | United States Courts of Appeals. United States Court of Appeals (District of Columbia) |
Barry H. Gottfried argued the cause for petitioner. With him on the briefs were Martin R. Leader and Kathryn R. Schmeltzer.
John R. Feore Jr. and Scott Dailard were on the brief for amicus curiae Paxson Communications Corporation, urging reversal. Nina Shafran entered an appearance.
Joel Marcus, Counsel, Federal Communications Commission, argued the cause for respondents. With him on the brief were Jane E. Mago, General Counsel, Daniel M. Armstrong, Associate General Counsel, FCC, and Jacob A. Lewis, Attorney, U.S. Department of Justice.
Angela J. Campbell, Amy R. Wolverton, Andrew Jay Schwartzman and Harold Feld were on the brief for intervenors.
Before: SENTELLE and ROGERS, Circuit Judges, and WILLIAMS, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge ROGERS.
Recently, in Fox TV Stations v. FCC, 280 F.3d 1027 (D.C.Cir.2002), the court addressed the national television ownership caps, remanding the national caps for justification by the Federal Communications Commission and vacating the cable-broadcast cross-ownership rule. Id., at 1033. In so doing, the court construed § 202(h) of the Telecommunications Act of 1996, Pub.L. No. 104-104, 110 Stat. 56 ("1996 Act"), to "carr[y] with it a presumption in favor of repealing or modifying the ownership rules." Id., at 1048. The local television ownership rule now on review allows common ownership of two television stations in the same local market if one of the stations is not among the four highest ranked stations in the market and eight independently owned, full-power, operational television stations remain in that market after the merger. See Review of the Commission's Regulations Governing Television Broadcasting, Report and Order, FCC 99-209 (rel. Aug. 6, 1999), 64 Fed.Reg. 50,651 (Sept. 17, 1999) ("Local Ownership Order"), on recons., FCC 00-431 (rel. Jan. 19, 2001), 66 Fed.Reg. 9039 (Feb. 6, 2001) ("Reconsideration Order") (codified at 47 C.F.R. § 73.3555(b) (2002)). Sinclair Broadcasting Group, Inc. ("Sinclair") challenges the local ownership rule on three principal grounds: it contends that (1) limiting common ownership of television stations in a local market to those with eight independent voices is arbitrary and capricious, (2) failing to fully grandfather existing local marketing agreements violates § 202(g) of the 1996 Act, is impermissibly retroactive, and constitutes an unlawful taking of property in violation of the Fifth Amendment; and (3) the restrictions violate the First Amendment. We hold that the Commission has failed to demonstrate that its exclusion of non-broadcast media in the eight voices exception is not arbitrary and capricious. Accordingly, we remand the local ownership rule to the Commission for further consideration.
The duopoly rule prohibited common ownership or control of television stations with overlapping "Grade B" signal contours. See 47 C.F.R. § 73.3555(b) (1998). When the rule was promulgated in 1964, the television marketplace consisted only of 649 television stations and a small number of cable systems whose primary purpose was to retransmit the signals of over-the-air broadcast stations. In 1991, the Commission issued a Notice of Inquiry ("NOI"), launching an investigation into whether to relax restrictions on the television industry in view of changes in the video marketplace in the past 15 years, as reflected in a staff working paper. See Review of the Policy Implications of the Changing Video Marketplace, Notice of Inquiry, FCC 91-215 (rel. Aug. 7, 1991), 56 Fed.Reg. 40,847 (Aug. 16, 1991). We summarize the rulemaking background relevant to Sinclair's contention that the eight voices exception is arbitrary and capricious.
A year after issuing its NOI, the Commission issued a Notice of Proposed Rulemaking to consider changes to several of the structural rules that governed the television industry. See Review of the Commission's Regulations Governing Television Broadcasting, Notice of Proposed Rulemaking, FCC 92-209 (rel. June 12, 1992), 57 Fed.Reg. 28,163 (June 24, 1992) ("1992 Notice"). The Commission sought comments, with specific "facts, data, and studies," on "whether and how we might modify the contour overlap rule to afford broadcasters greater flexibility, yet avoid undue harm to our underlying competition and diversity concerns," and "whether we should further modify our local ownership rules to permit common ownership of television stations with overlapping contours under certain limited circumstances." In regard to the latter, the Commission sought comment on whether it should require that "a minimum number of separately-owned television stations remain in the market" after mergers of existing stations. The Commission observed that a minimum of six independently owned stations would provide outlet capacity for ABC, NBC, CBS, Fox, and two independents and permit mergers in 38 of the top 50 markets.
In 1995, the Commission issued a Further Notice of Proposed Rulemaking, proposing a new analytical framework for evaluating economic and diversity issues in view of developments that had altered the telecommunications landscape and changes in the local marketing agreements ("LMAs") rules for radio. See Review of the Commission's Regulations Governing Television Broadcasting, Further Notice of Proposed Rule Making, FCC 94-322 (rel. Jan. 17, 1995), 60 Fed.Reg. 6,490 (Feb. 2, 1995) ("Further Notice"). Among other things, the Commission sought guidance on the threshold number, "if any," as would be necessary to ensure a minimum number of independent voices in a community. The Commission observed that a merger-based standard, looking to the merger guidelines of the Justice Department and Federal Trade Commission, might be too low as their purpose lay in defining the point at which heightened antitrust scrutiny is required, and not in encouraging a wide array of voices and viewpoints. The Commission also sought comment on the extent to which television ownership rules should take into account the existence of other competing media. The Commission noted the prospect of increased penetration in the video marketplace by cable, direct broadcast satellite ("DBS"), and wireless cable, as well as the emergence of telephone video dialtone service, and the roles of radio and newspapers as sources of information and news. However, in view of evidence that several of these alternatives are "subscription services" and lack the public interest obligations of broadcast stations, the Commission requested evidence on the extent to which non-broadcast sources "can be considered for diversity purposes as substitutes for broadcast television." The Commission stated its "tentative beliefs" that, although it saw no reason to include other electronic media, cable ought to be included as a substitute for television stations for diversity purposes if information was provided that would enable the Commission to determine the extent to which cable should be counted. While acknowledging that the question was closer, the Commission further explained it could not consider "each radio station" and "each newspaper" as being the equivalent of a broadcast television station because television is more immediate than newspapers, has public interest obligations not shared by newspapers, has more visual impact than either newspapers or radio, and is used by more people as their primary news source than are either radio or newspapers. The Commission further stated, in regard to ownership caps, that guidelines may be necessary for counting LMAs capturing more than 15% of a station's airtime, similar to the radio LMAs rule, and sought information about the prevalence, purpose, and private and public benefits of LMAs in the television market. The Commission also sought comment on whether further relaxation of the "one-to-a-market" radio-television cross ownership rule was needed.
Then, on February 8, 1996, Congress enacted the Telecommunications Act of 1996, Pub.L. No. 104-104, 110 Stat. 56 ("1996 Act"). Focusing on the need to "promote the policies and purposes of this Act favoring diversity of media voices, vigorous economic competition, technological advancement, and promotion of the public interest, convenience, and necessity," 1996 Act § 257(b), Congress itself revamped the landscape for radio ownership and the national rules for television ownership while leaving the local rules for television to the Commission. Specifically, as to radio, the 1996 Act eliminated the numerical limit on national ownership and relaxed common ownership restrictions in local radio markets, provided a specific minimum number of radio station voices remained, depending on the size of the market and provided no party owned, operated, or controlled more than 50% of the stations in any market. See 1996 Act §§ 202(a) & (b); see also Implementation of Sections 202(a) and 202(b)(1) of the Telecommunications Act of 1996 (Broadcast Radio Ownership), Order, 61 Fed.Reg. 10,689 (March 15, 1996). As to television, the 1996 Act eliminated the nationwide cap on common ownership and increased the national audience reach limit from 25% to 35%, allowing common ownership of television stations provided no single entity dominated more than 35 percent of the national viewing audience. See 1996 Act § 202(c)(1); Fox TV Stations, 280 F.3d at 1033. Regarding local television ownership rules, Congress directed the Commission to "conduct a...
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