Functional Music, Inc. v. FCC

Citation274 F.2d 543
Decision Date07 November 1958
Docket NumberNo. 14374,14375.,14374
PartiesFUNCTIONAL MUSIC, INC., Appellant, v. FEDERAL COMMUNICATIONS COMMISSION, Appellee. FUNCTIONAL MUSIC, INC., Petitioner, v. UNITED STATES of America, Federal Communications Commission, Respondents.
CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)

Mr. Paul A. Porter, Washington, D. C., with whom Messrs. George Bunn and William P. Sims, Jr., Washington, D. C., were on the brief, for appellant in No. 14374 and petitioner in No. 14375.

Mr. Henry Geller, Atty., Dept. of Justice, with whom Messrs. Warren E. Baker, Gen. Counsel, Federal Communications Commission, Richard A. Solomon, Asst. Gen. Counsel, Federal Communications Commission, and Joel Rosenbloom, Counsel, Federal Communications Commission, were on the brief, for appellee in No. 14374 and respondents in No. 14375.

Mr. Daniel M. Friedman, Atty., Dept. of Justice, also entered an appearance for respondent United States of America in No. 14375.

Before EDGERTON, BAZELON and DANAHER, Circuit Judges.

Certiorari Denied October 12, 1959. See 80 S.Ct. 50.

Petition for Rehearing Denied January 15, 1959.

BAZELON, Circuit Judge.

Functional Music, Inc., seeks judicial review of rules promulgated by the Federal Communications Commission in 1955, which rules restrict the practices of FM licensees furnishing a radio music service on a subscription basis. In doubt as to whether review was authorized by § 402(a) or by § 402(b) of the Federal Communications Act, Functional initiated review proceedings under each provision as a precautionary measure.

Petitioner-appellant is the licensee of FM broadcasting station WFMF, Chicago. Since 1949 it has restricted its program format predominately to background music. Additionally, it has superimposed upon traditional broadcasting services, a subscription music operation.1 Subscribers, typified by restaurants, stores, schools and comparable institutions, receive petitioner's regularly scheduled broadcasts, but with all advertising matter received by the ordinary listener deleted. To effect this deletion, petitioner, immediately before and immediately after the broadcast of any advertising matter, transmits a supersonic signal which activates special equipment installed in subscribers' receivers to cut off and afterwards re-connect the broadcast signal. It is purportedly for the emission by petitioner of this inaudible signal that subscribers are willing to pay the subscription fee. Revenue resulting from the subscription service has, in fact, formed the major portion of petitioner's income. Petitioner, however, also receives substantial revenue from sale of time to advertisers for spot announcements. And among the general Chicago radio audience, WFMF has been highly popular.2

In 1950 the Commission, for the purpose of formulating a policy to govern "functional programming," commenced a study of the practices of broadcasters engaging in FM subscription services. Particular interest was manifest in the factor of program control by the subscribing party, since the Commission feared that background music programming, which is highly specialized and directly adaptable to subscribers' needs, was formulated in their interest rather than that of the general public. On December 31, 1953, the Commission released a notice of proposed rule making which suggested that functional music operations did not constitute broadcasting as defined by § 3(o) of the Communications Act.3 From this suggestion, the Commission concluded that functional programming was not properly transmittable by a station licensed to provide a broadcasting service. The Commission did not propose, however, discontinuance of the subscription service altogether; it recognized that the resulting revenue was vital to growth of the infant FM industry. Rather, it proposed that functional programming be relegated to a basis subsidiary to the regular broadcasting commitment by emission as a secondary signal on a multiplexed transmission system — a recently devised electronic system allowing transmission of multiple signals upon a standard allocated FM channel.4

After conducting hearings, the Commission in 1955 established rules which in substance adopted the changes proposed in 1955.5 The compulsory multiplexing requirement was postponed for a one-year period, however, due to a general unavailability of the requisite multiplexing equipment. From time to time, the multiplexing requirement was additionally postponed for like reason. In late 1957, shortly before the expiration of the most recent grace period, Functional Music petitioned the Commission to eliminate the multiplexing requirement altogether, or, in the alternative, to allow an additional blanket postponement of the multiplexing rules. On December 11, 1957, this petition was denied.6 From the Commission's refusal in March of 1958 to reconsider its decision of December 11, petitioner timely sought judicial review here, alleging the invalidity of the 1955 rules and hence the invalidity of the 1958 order implementing those rules.

While the parties have not specifically put in question our jurisdiction to examine the validity of the 1955 rules in these proceedings, jurisdiction is, of course, always a threshold consideration.

The rules here attacked were initially promulgated in 1955. It very well may be that they were then sufficiently final to support judicial review.7 No such review had been sought, however. And as to those rules, the statutory period specified for review of, or appeal from, Commission orders and decisions has now long since passed.8 Nevertheless, we are persuaded that judicial examination is now permissible.9 As applied to rules and regulations, the statutory time limit restricting judicial review of Commission action is applicable only to cut off review directly from the order promulgating a rule. It does not foreclose subsequent examination of a rule where properly brought before this court for review of further Commission action applying it. For unlike ordinary adjudicatory orders, administrative rules and regulations are capable of continuing application; limiting the right of review of the underlying rule would effectively deny many parties ultimately affected by a rule an opportunity to question its validity. And see Columbia-Broadcasting System v. United States, 1941, 316 U.S. 407, 421, 62 S.Ct. 1194, 86 L.Ed. 1563, for example, where the Supreme Court clearly contemplated the continuing availability of review of Communications Commission rules and regulations.

Sections 402(a) and 402(b) of the Communications Act, under which these review proceedings have been initiated, are by definition mutually exclusive.10 The proper delineation of these two provisions has been a source of considerable difficulty to litigants in the past.11 Functional argues that the Commission's 1958 decision, affirming the December 11, 1957 order to multiplex, effected a modification of its broadcasting license and therefore that appeal will lie under § 402(b).12 Paradoxically, determination of this question is dependent upon resolution of the merits of the appeal.13 For whether or not a modification occurred as a result of the 1958 order depends upon the validity of the rules. If the 1955 rules were valid, the license was modified in that year; petitioner's license was renewed subsequent to promulgation of the rules, and a licensee takes his license subject to all valid outstanding rules and regulations.14 On the other hand, if the rules were invalid, they are a nullity and therefore incapable of effecting a modification of the license.15 In that event, it is the 1958 order, requiring petitioner, and those broadcasters similarly situated, to multiplex or discontinue functional programming, which imposes a modification and which therefore may be appealed from under § 402(b) (5).16

Consequently, we proceed to an examination of the 1955 rules. Those rules, restricting the operation of a subscription music service by FM licensees, rest on the Commission's determination that such functional programming is not broadcasting within the meaning of § 3(o) of the Communications Act. According to the Commission, various practices of functional broadcasters, namely, presentation of a highly specialized program format, deletion of advertising from subscribers' receivers, and exaction of a charge for these services, dictated a finding that functional music operations constitute point-to-point communications. And in its brief, the Commission sought to illustrate this conclusion by likening petitioner's functional music service to other services held to be point-to-point communications. In Bremer Broadcasting Co., 2 F.C.C. 79 (1935), for example, transmission of coded horserace results was held to be a service not covered by a license to broadcast. And similar treatment was accorded messages transmitted for a local police department (Adelaide Lillian Carrell, et al., 7 F.C.C. 219 (1939)), and programs furnishing spiritual, vocational and marital advice to specified listeners (Scroggin & Company Bank, 1 F.C.C. 194 (1935)).

However, the practices pointed to by the Commission do not form a basis for concluding that functional operations are non-broadcasting in nature. Nor do we believe that the cases cited in the brief are in point. For the Communications Act specifies that broadcasting is "the dissemination of radio communications intended to be received by the public * * *."17 And program specialization and/or control is not necessarily determinative of this requisite intent, and therefore dispositive of broadcasting status, as the Commission assumed. Broadcasting remains broadcasting even though a segment of those capable of receiving the broadcast signal are equipped to delete a portion of that signal. In contrast to the objectionable service...

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