Astroline Communications Co. Ltd. Partnership v. F.C.C., 86-1559

• Citation: 857 F.2d 1556
• Decision Date: 12 October 1988
• Docket Number: No. 86-1559,86-1559
• Parties: ASTROLINE COMMUNICATIONS COMPANY LIMITED PARTNERSHIP, Appellant, v. FEDERAL COMMUNICATIONS COMMISSION, Appellee, Arch Communications Corp., Intervenor.
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

Page 1556

857 F.2d 1556

273 U.S.App.D.C. 118

ASTROLINE COMMUNICATIONS COMPANY LIMITED PARTNERSHIP, Appellant, v. FEDERAL COMMUNICATIONS COMMISSION, Appellee Arch Communications Corp., Intervenor.

No. 86-1559.

United States Court of Appeals District of Columbia Circuit.

Argued Oct. 29, 1987.

Decided Sept. 27, 1988.

As Amended Oct. 12, 1988.

Thomas A. Hart, Jr., with whom Dan J. Alpert, Washington, D.C., was on the brief, for appellant.

David Silberman, Counsel, F.C.C. ("FCC"), with whom Diane S. Killory, General Counsel, FCC, and Daniel M. Armstrong, Associate General Counsel, FCC, Washington, D.C., were on the brief, for appellee.

Robert A. Beizer and R. Clark Wadlow, Washington, D.C., were on the brief for intervenor.

Before BUCKLEY and WILLIAMS, Circuit Judges, and LOUIS F. OBERDORFER, ^* U.S. District Judge for the District of Columbia.

Opinion for the court filed by District Judge OBERDORFER.

OBERDORFER, District Judge:

WTIC-TV serves Hartford, Connecticut, as an Ultra High Frequency ("UHF") television station operating on Channel 61. Arch Communications Corporation ("Arch") holds WTIC-TV's broadcast license. Until autumn of 1986, Arch was wholly owned by Arnold Chase. At that time, the Federal Communications Commission ("the Commission") approved a transfer of one hundred percent of the stock of Arch to Chase Broadcasting, Inc. ("CBI"), a corporation wholly owned by members of Arnold Chase's family; he held a five percent interest personally. The petition before us calls for review of the Commission's decision to approve this intra-family transfer.

I.

At the time CBI joined in the transfer application at issue, CBI's wholly owned subsidiary controlled WTIC-AM and WTIC-FM, radio stations licensed to the Hartford market. Consequently, CBI's attempt to acquire a UHF station also licensed to the Hartford community implicated a Commission rule proscribing common ownership or control of TV and radio stations in the same broadcast market:

[n]o license for an AM, FM, or TV broadcast station shall be granted to any party (including all parties under common control) if such party directly or indirectly owns, operates, or controls one or more such broadcast stations ...

when grant of the license will create a situation in which the broadcast signals of the newly licensed station encompass the "entire community of license" of the existing station. 47 C.F.R. Sec. 73.3555(b) (1987).

The one-to-a-market rule reflects the Commission's commitment to diversity in ownership and control of broadcast licenses in order to maximize competition, as well as to promote variety in programming sources and viewpoints. See Multiple Ownership of Standard, FM and Television Broadcast Stations, 22 F.C.C. 2d 306, 307 (1970), recon. granted in part on other grounds, 28 F.C.C. 2d 662 (1971). The Commission has also recognized, however, that UHF broadcasting has suffered from unique physical limitations rendering it inherently less competitive than VHF television. For instance, UHF stations must broadcast at higher and more costly power levels to match the broadcast capabilities of VHF stations. UHF frequencies, in addition, are more vulnerable to attenuation caused by natural obstacles such as terrain and foliage. See Improvements to UHF Television Reception, 90 F.C.C. 2d 1121, 1121 n. 1 (1982). In an effort to encourage the development of UHF television in spite of its inherent disabilities, the Commission has adopted an exception to its one-to-a-market rule:

This [proscription of multiple ownership] will not apply ... to any broadcast application where grant of such application would result in the [broadcast area] of an existing or proposed UHF station encompassing the entire community of license of an existing or proposed AM or FM broadcast station that is commonly owned, operated or controlled....

47 C.F.R. Sec. 73.3555, Note 4 (1987). The exception provides, further, that

[s]uch UHF overlap or community encompassment cases will be handled on a case-by-case basis in order to determine whether common ownership, operation, or control of the stations in question would be in the public interest.

Id.

Appellant Astroline Communications Company Limited Partnership ("Astroline") and other petitioners challenged the Chase/CBI transfer application before the Commission. After consideration of the application and the protests, the Commission decided that CBI's proposal to acquire Arch, thus consolidating WTIC-TV with WTIC-AM and WTIC-FM, warranted approval under the Note 4 exception to the one-to-a-market rule. The Commission also denied a request for an evidentiary hearing lodged by appellant and other protestants. See In re Application of Arnold L. Chase and Chase Broadcasting, Inc., FCC 86-381 (Sept. 12, 1986), 61 Rad.Reg.2d (P & F) 111 (1986) ("Commission Opinion"), Joint Appendix ("J.A.") at 733.

The Commission's decisions are challenged here by Astroline, a minority-controlled company that owns and operates a UHF television station licensed to operate in Hartford. Astroline claims that the Commission's authorization of the proposed transfer arbitrarily deviated from its established criteria for granting Note 4 exceptions. In addition, Astroline here challenges the Commission's failure to grant petitioners' request for an evidentiary hearing.

We reverse the Commission's determination that a hearing is not warranted in this case and remand for further proceedings consistent with this opinion. Our disposition renders premature any consideration of whether, on the facts found and conclusions heretofore reached by the Commission without a hearing, the circumstances in this case justified the grant of a Note 4 exception to the one-to-a-market requirements of 47 C.F.R. Sec. 73.3555(b).

II.

We must appraise appellant's request for a hearing in its factual context. Arnold Chase's father, David, his sister, Cheryl, and her husband, Roger Freedman, own through holding companies 95 percent of the stock of CBI; as indicated, Arnold owns 5 percent. ¹ CBI, in turn, owns and operates radio stations WTIC-AM and WTIC-FM in Hartford, Connecticut, which stations are licensed to CBI's wholly owned subsidiary, The Ten Eighty Corporation ("Ten Eighty"). ²

At the time the transfer application at issue was filed, Arnold Chase held all of the stock of Arch. In and around 1981, while acting as president of Arch, Arnold also served as program director of WTIC-FM in Hartford. At the same time, Arnold held a 5.445 percent ownership interest in Ten Eighty, holder of the licenses for WTIC-AM and WTIC-FM.

In 1981, Arnold entered Arch in a competition for a permit to construct and operate a UHF television station broadcasting on Hartford's Channel 61. After the comparative hearing process had commenced, but before the Commission had issued a ruling, the proceeding was settled by agreement among the competing applicants. Arch's application to construct and operate Channel 61 was granted in September of 1983. Arch began operations on program test authority at Channel 61 one year later, and the station was officially licensed on March 29, 1985.

When originally seeking the UHF license for Arch, in apparent deference to the one-to-a-market rule, Arnold had proposed to sever his employment ties as program director of WTIC-FM and to divest his 5.445 percent ownership interest in Ten Eighty in the event that his application for the Channel 61 permit was granted. In 1984, after Arch won the UHF license but before operations had commenced, Arnold petitioned the Commission for relief from the divestment requirement. Arnold argued that amendments in the Commission's attribution of ownership rules made after the permit for Channel 61 had been awarded to him rendered his 5.445 percent interest in Ten Eighty noncognizable for multiple ownership purposes. The Commission agreed, concluding that so long as Arnold severed his employment relationship with WTIC-FM it was unnecessary for him to divest his relatively small interest in Ten Eighty to comport with the one-to-a-market rule.

Also in 1984, the Commission granted Arch's request for authorization to change the television station's call letters from "WETG(TV)" to "WTIC-TV," paralleling the call letters used by CBI's Hartford AM and FM stations. The change necessitated a Commission waiver of a regulation prohibiting the assignment of common call signs to stations in different broadcast services unless those stations are commonly controlled. See 47 C.F.R. Sec. 73.3550(i). In the course of pursuing that petition, Arch disclosed to the Commission that David Chase and Cheryl Chase Freedman had "tentatively decided to acquire a substantial equity interest in Arch." Commission Opinion, J.A. at 739, 61 Rad.Reg. (P & F) at 125. Nevertheless, Arnold and CBI main tained during the Note 4 transfer proceeding presently at issue that the family's 1984 plans to consolidate Arch and CBI were not "finalized" until the autumn of 1985, after Arch's WTIC-TV had realized substantial first-year losses. Id.

Undisputed facts reveal that the working relationship between CBI and Arch was quite close after the UHF station commenced full operation. The radio and television stations were not only controlled by father and son, respectively, but the stations also shared operations, finances, and services. The UHF and AM/FM stations engaged in cross-advertising, utilized the same sales representatives, and employed the same law firm. See id. at 126. In addition to their shared interest in CBI, Arnold and David were partners in family ventures, including limited partnerships from which Arch's UHF station leased its transmitter and technical facilities. See id. at 123.

At the time that Arch applied for the Channel 61 construction permit, it estimated that it would cost approximately $3 million to build and operate WTIC-TV for one year, including a $500,000 program budget. Actually, the state-of-the-art facility cost more than $12 million....