Hispanic Information & Telecommunications Network, Inc. v. F.C.C., 88-1335

• Decision Date: 24 January 1989
• Docket Number: No. 88-1335,88-1335
• Citation: 865 F.2d 1289
• Parties: , 51 Ed. Law Rep. 431 HISPANIC INFORMATION & TELECOMMUNICATIONS NETWORK, INC., Appellant, v. FEDERAL COMMUNICATIONS COMMISSION, Appellee, Daytona Beach Community College, Intervenor.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1289

865 F.2d 1289

275 U.S.App.D.C. 190, 51 Ed. Law Rep. 431

HISPANIC INFORMATION & TELECOMMUNICATIONS NETWORK, INC., Appellant, v. FEDERAL COMMUNICATIONS COMMISSION, Appellee Daytona Beach Community College, Intervenor.

No. 88-1335.

United States Court of Appeals District of Columbia Circuit.

Argued Dec. 13, 1988.

Decided Jan. 24, 1989.

Appeal of an Order of the Federal Communications Commission.

Benjamin Perez, with whom Robert E. Kelly was on the brief, for appellant.

Sue Ann Preskill, Counsel, F.C.C., with whom Diane S. Killory, Gen. Counsel and Daniel M. Armstrong, Associate Gen. Counsel, F.C.C., were on the brief, for appellee.

Lawrence M. Miller was on the brief for intervenor.

Before WALD, Chief Judge and ROBINSON and EDWARDS, Circuit Judges.

Opinion for the Court filed by Chief Judge WALD.

WALD, Chief Judge:

This case involves the allocation of franchises in the Instructional Fixed Television Service ("ITFS"). The appellant, Hispanic Information & Telecommunications Network ("HITN"), challenges an order of the Federal Communications Commission ("FCC" or "the Commission"), which dismissed HITN's application and granted an ITFS permit to Daytona Beach Community College ("DBCC"). HITN contends that the Commission misapplied its own rules by granting an absolute preference to the local applicant; that it improperly failed to provide a comparative hearing; that it failed to furnish HITN with notice that a competing application had been filed; and that the grant of more than four channels to DBCC was a violation of FCC regulations. For the most part we conclude that the Commission acted properly. We believe, however, that the agency failed to consider the proper criteria in determining that the DBCC application would not violate the four-channel rule. We therefore remand to the Commission for further consideration of this issue.

I. FACTS

A. History of ITFS

The Instructional Television Fixed Service was created in 1963. See Educational Television, 39 F.C.C. 846 (1963) ("1963 Report"), recon. denied, 39 F.C.C. 873 (1964). ITFS was designed principally for use by educational institutions: the FCC stated that "the most important function of the new service would be to reach groups of students assembled in classrooms or other similar places for the specific purpose of using the instructional material so transmitted." 1963 Report, 39 F.C.C. at 846. ITFS uses frequencies which cannot be received on an ordinary television. Instead, the programming is transmitted to specific "receive sites" at which students (or other viewers) are gathered to watch the material. Originally thirty-one channels were allocated to ITFS, see 1963 Report, 39 F.C.C. at 851. ¹ In 1971 this number was reduced to twenty-eight. ² See Instructional Television, 30 F.C.C.2d 197, 200 (1971). The regulation as originally promulgated limited licensees to the use of five channels in a given area, see 1963 Report, 39 F.C.C. at 852, 863; in 1966 this limit was reduced to four. See Instructional Television Fixed Service, 7 Rad.Reg.2d (P & F) 1768, 1770 (1966).

In the first two decades after the creation of ITFS, the Commission noted both an underutilization of the medium for educational purposes and an increasing demand for the frequencies by other potential users. Most notable among these competitors were providers of programming in the Multipoint Distribution Service ("MDS"). ³ In 1983, the Commission reallocated eight channels to MDS use, leaving twenty for ITFS. ⁴ See Instructional TV Fixed Service, 94 F.C.C.2d 1203, 1236-37 (1983). The FCC also liberalized the restrictions on ITFS programming by permitting ITFS stations to lease channel capacity to commercial programmers (such as MDS providers) during those times when educational programming was not being presented.

These changes were prompted by the Commission's apparent belief that too much of the spectrum had been reserved exclusively for ITFS and that channel capacity was consequently being wasted. Soon afterwards, however, the Commission began to worry that the pendulum might swing too far in the opposite direction. The dramatic increase in ITFS applications prompted by the new leasing rules threatened to squeeze out local educational institutions seeking to provide the programming for which ITFS had originally been intended. The Commission emphasized "that the foundation of the service must continue to be that for which it was designed--the transmission of educational materials to accredited schools for the formal education of students enrolled there." Further Notice of Proposed Rule Making, 98 F.C.C.2d 1249, 1252 (1984) ("Further NPRM"). Of particular concern was the Commission's observation that "most nonprofit organizations which have applied for ITFS licenses have no local presence in the communities where facilities are sought." Id. at 1256. Though the FCC did not wish to exclude nonlocal applicants entirely, it clearly was worried by the prospect that a profusion of such applicants might make it difficult for traditional ITFS providers to obtain frequencies. The Commission therefore requested comments concerning possible means of accommodating local and nonlocal interests. See Further NPRM, 98 F.C.C.2d at 1257-58.

The Commission issued its new rules on June 20, 1985. See Second Report and Order, 101 F.C.C.2d 50 (1985) ("1985 Order"). The rules established a one-year "local priority period" beginning on July 28, 1985. All local applications filed during that period, as well as all local applications pending as of the beginning of that period, would be preferred to any mutually exclusive application filed by a nonlocal entity. Once the local priority period ended, mutually exclusive applicants for remaining frequencies would be compared using a point system. Local applications filed after the priority period would receive points, but would not be automatically preferred to nonlocal competitors.

HITN, along with other parties, sought reconsideration of the Commission's ruling. On March 14, 1986, the Commission issued an order modifying the 1985 Order in some respects. See Instructional Television Fixed Service (Reconsideration), 59 Rad.Reg.2d (P & F) 1355 (1986) ("Reconsideration"). The Reconsideration provided that all nonlocal entities whose applications were pending when the local priority period began would be given ninety days to amend their applications to include a local entity within their ownership structures. Applicants who successfully accomplished such amendments would be considered local applicants and could thus compete against other local parties under the comparative criteria. HITN did not seek judicial review of any aspect of the Reconsideration. ⁵

B. The Course of This Proceeding

Appellant HITN is a New York-based nonprofit educational organization which seeks to provide television programming targeted towards Hispanic viewers. On March 13, 1984, HITN filed an application for an ITFS station in Orlando, Florida which would use stations B1-B4. The application was placed on public notice on March 20, 1984.

On May 22, 1984, Daytona Beach Community College filed an application for an ITFS station in Deland, Florida. The Commission issued a public notice of the filing on May 29, 1984. The Deland station, as explained in DBCC's application, was intended to serve as part of an integrated ITFS system operating out of four Florida communities in which DBCC campuses are located. The Deland station would use channels B1-B4; the New Smyrna Beach station would use channels G1-G4; the Daytona Beach station would use channels D1-D4; and the Flagler Beach station would use channels B1-B4. Most of the programming would originate out of the Daytona Beach station and would be transmitted to the other three stations; it would then be retransmitted to various receive sites--such as schools and hospitals--in each of the four communities. ⁶ Occasionally, though, each of the stations would be used to originate programming. The four stations would follow identical programming schedules. Therefore, while the system as a whole would make use of twelve different channels (B1-B4, D1-D4, and G1-G4), only four discrete channels of programming would be presented at any given time.

DBCC's Deland application did contain one misstatement of fact which is relevant to the present dispute. Its application contained the affirmative statement that "[t]here are no B-group stations or applications within 50 miles." Joint Appendix ("J.A.") 4. The engineering firm which compiled DBCC's technical data apparently overlooked HITN's application, filed a short time previously, for a B-group station in Orlando. HITN's proposed Orlando site was located 33.8 miles from the proposed DBCC station in Deland.

Although HITN participated in the Commission's rulemaking proceedings, it heard nothing further about its Orlando application until October of 1986. It was then informed, by letter dated October 7, 1986, that its application had been rejected and that of DBCC accepted. Since the applications were mutually exclusive, since DBCC was a local and HITN a nonlocal applicant, and since HITN had failed to amend its application to substitute a local entity, the FCC's Mass Media Bureau had concluded that DBCC's proposal should be preferred. See J.A. 22. HITN petitioned for reconsideration. By letter dated April 28, 1987, the Chief of the Video Services Division denied the petition. See J.A. 32-35.

HITN then filed an Application for Review by the FCC. HITN first asserted that the DBCC system violated 47 C.F.R. Sec. 74.902(d), which provides that no licensee may be granted the use of more than four ITFS channels within the same area of operation. HITN also argued that the FCC had misconstrued the local priority rules announced in the Reconsideration and that a comparative hearing between the rival applicants was required. On April 6, 1988, the Commission affirmed the dismissal of HITN's...