Office of Communication, Inc. v. F.C.C.

• Decision Date: 09 May 2003
• Docket Number: No. 02-1039.,02-1039.
• Citation: 327 F.3d 1222
• Parties: OFFICE OF COMMUNICATION, INC. OF THE UNITED CHURCH OF CHRIST, et al., Petitioners, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents. Association of Public Television Stations, Intervenor.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1222

327 F.3d 1222

OFFICE OF COMMUNICATION, INC. OF THE UNITED CHURCH OF CHRIST, et al., Petitioners, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents.

Association of Public Television Stations, Intervenor.

No. 02-1039.

United States Court of Appeals, District of Columbia Circuit.

Argued March 10, 2003.

Decided May 9, 2003.

Harold Feld argued the cause for petitioners. With him on the briefs was Andrew J. Schwartzman.

Daniel M. Armstrong, Associate General Counsel, Federal Communications Commission, argued the cause for respondents. With him on the brief were Catherine G. O'Sullivan and Andrea Limmer, Attorneys, U.S. Department of Justice, Jane E. Mago, General Counsel, Federal Communications Commission, and Rodger D. Citron, Counsel. C. Grey Pash, Jr., Counsel, entered an appearance.

Kevin C. Newsom argued the cause for intervenor. With him on the brief were Robert A. Long, Jr., Marilyn Mohrman-Gillis and Lonna Thompson.

Before: RANDOLPH and ROGERS, Circuit Judges, and WILLIAMS, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge ROGERS.

ROGERS, Circuit Judge:

The Office of Communication, Inc. of the United Church of Christ, the Alliance for Community Media, and the Center for Digital Democracy (hereafter "the UCC"), petition for review of the Commission's Order clarifying that noncommercial public television stations may offer subscription services, including advertiser-supported subscription services, on their excess digital capacity. In re Ancillary or Supplemental Use of Digital Television Capacity by Noncommercial Licenses, 16 F.C.C.R. 19,042, 2001 WL 1230711 (2001) ("2001 Order"). The UCC contends that the 2001 Order is contrary to both the plain language of § 399b of the Communications Act, 47 U.S.C. § 399b, and Commission precedent. We hold that the Commission reasonably interpreted § 399b to prohibit only "broadcast" and not other transmissions of advertisements by these stations. We further hold that the Commission adequately addressed its precedent by explaining that the high costs of digital technology required greater flexibility, that digital technology offers enough capacity that public stations can offer subscription services while still preserving their primary use for public educational broadcasts, and that some prior Commission decisions had authorized such stations to operate their facilities for commercial purposes on a limited basis. Accordingly, we deny the petition for review.

I.

In 1997, the Commission issued its Fifth Report and Order implementing the rules to manage the transition of the nation's television technology to digital format. See In re Advanced Television Sys. & Their Impact upon the Existing Television Broad. Serv., 12 F.C.C.R. 12,809, 1997 WL 193828 (1997). As summarized by the Commission, that Order established standards for license eligibility for digital broadcasting, specifically requiring that broadcasters continue to provide one free over-the-air television service in accordance with § 336 of the 1996 Telecommunications Act. In re Ancillary or Supplementary Use of Digital Television Capacity by Noncommercial Licensees, 14 F.C.C.R. 537, 537, 1998 WL 808448 (1998) (notice of proposed rule making) ("NPRM") (citing 47 U.S.C. § 336). The Commission also permitted digital television licensees to "provide ancillary or supplementary services provided these services do not derogate the free digital television service." Id. Because the Commission did not differentiate between commercial and noncommercial licensees,¹ the Association of Public Television Stations ("APTS"), a national representative of noncommercial television broadcast licensees that is an intervenor in the instant case, moved for clarification as to whether public television stations would be able to use excess digital television spectrum capacity to generate revenue through the provision of ancillary or supplemental services. Id. In response, the Commission issued a Notice of Proposed Rulemaking and opened a new proceeding, id. at 538, during which it received comments from APTS, the UCC, and other parties.

The Commission concluded in the 2001 Order on review that noncommercial public television stations could use their excess spectrum for revenue-generation through the provision of ancillary or supplementary services, including the provision of subscription television, so long as those activities did not interfere with the primary operation of the station as a nonprofit, noncommercial, educational broadcaster that must also at all times provide one free over-the-air television broadcast service. 2001 Order, 16 F.C.C.R. at 19,048-50. Upon considering comments on whether any of the revenue-generating ancillary or supplemental services could be advertiser-supported, particularly advertising that is provided over subscription television, see NPRM, 14 F.C.C.R. at 549-50, the Commission concluded that advertising would only be permitted for "non-broadcast" services, and that pursuant to its decision in In re Subscription Video, 2 F.C.C.R. 1001, 1987 WL 343713 (1987), subscription television services were "non-broadcast" and therefore could be provided on an advertiser-supported basis by noncommercial public television stations. 2001 Order, 16 F.C.C.R. at 19,052-56. The Commission reiterated that advertising would not be permitted on "broadcast" services, and that the ancillary "non-broadcast" services could not interfere with the station's obligation to serve primarily as a noncommercial broadcaster. Id. at 19,053-56.

II.

In its petition for review, the UCC contends that the 2001 Order violates § 399b because it is contrary to the plain language of § 399b and that the Commission erred in relying upon the definition of broadcasting from its 1987 Subscription Video decision on the ground that Congress was assuming a different definition of broadcasting when it enacted § 399b in 1981. The UCC further contends that the FCC has inadequately explained its departure from agency precedent that prohibited broadcasting of advertisements by noncommercial public television stations and restricted the transmission of subscription television by those stations.

The court's review of the Commission's 2001 Order is confined to determining whether it is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). Our review is thus deferential, presuming the validity of the Commission's action, and the court must affirm unless the Commission failed to consider relevant factors or made a clear error in judgment. Davis v. Latschar, 202 F.3d 359, 365 (D.C.Cir.2000); see, e.g., Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415-16, 91 S.Ct. 814, 823-24, 28 L.Ed.2d 136 (1971), abrogated on other grounds by Califano v. Sanders, 430 U.S. 99, 97 S.Ct. 980, 51 L.Ed.2d 192 (1977). For challenges to the Commission's construction of the statute it administers, the court's review is governed by the familiar framework in Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). Under the first step of the analysis the court must determine "whether Congress has directly spoken to the precise question at issue." Id. at 842, 104 S.Ct. at 2781, "If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress." Id. at 842-43, 104 S.Ct. at 2781 (footnote omitted). For this purpose the court "must first exhaust the traditional tools of statutory construction," including legislative history and statutory structure. Bell Atl. Tel. Cos. v. FCC, 131 F.3d 1044, 1047 (D.C.Cir.1997) (quotations omitted). Under the second step of the analysis, if "Congress has not directly addressed the precise question at issue," the court must decide whether the agency's action is a "permissible construction of the statute," to which the court must defer. Chevron, 467 U.S. at 843, 104 S.Ct. at 2782. The court's review of the Commission's interpretation of its own regulations, in turn, is more deferential, giving "controlling weight" to the Commission's interpretation "unless it is plainly erroneous or inconsistent with the regulation." High Plains Wireless, L.P. v. FCC, 276 F.3d 599, 606 (D.C.Cir.2002) (quotation omitted); see Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512, 114 S.Ct. 2381, 2386-87, 129 L.Ed.2d 405 (1994).

A.

Subsection (a) of § 399b defines "advertising" as any message or other programming material which is broadcast or otherwise transmitted in exchange for any remuneration and which is intended —

(1) to promote any service, facility, or product offered by any person who is engaged in such offering for profit;

(2) to express the views of any person with respect to any matter of public importance or interest; or

(3) to support or oppose any candidate for political office.

47 U.S.C. § 399b(a). Subsection (b) then restricts the types of services that can be offered:

(1) Except as provided in paragraph (2), each public broadcast station shall be authorized to engage in the offering of services, facilities, or products in exchange for remuneration.

(2) No public broadcast station may make its facilities available to any person for the broadcasting of any advertisement.

According to the UCC, the Commission's 2001 Order violates the plain language of § 399b by allowing the transmission of advertisements by public broadcasting stations. The UCC maintains that the broad language in § 399b(a), which includes messages "otherwise transmitted" within the definition of "advertising" as well as the blanket prohibition of § 399b(b) on "any person" using facilities to broadcast advertising, necessarily means that the Commission's distinction between "broadcast" and "non-broadcast" services does not apply in the context of § 399b. But, as the Commission responds, the...