Rainbow Broadcasting Co. v. F.C.C., 90-1591

CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)
Citation949 F.2d 405
Docket NumberNo. 90-1591,90-1591
PartiesRAINBOW BROADCASTING COMPANY, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United States of America, Respondents, Press Television Corporation, Brevard Community College, Intervenors.
Decision Date08 November 1991

Petition for Review of an Order of the Federal Communications Commission.

Katrina Renouf, with whom Margot Polivy, Washington, D.C., was on the brief, for petitioner.

Sue Ann Kanter, Counsel, F.C.C., with whom Robert L. Pettit, General Counsel, and Daniel M. Armstrong, Associate General Counsel, F.C.C., and John J. Powers, III, Atty., Dept. of Justice, Washington, D.C., were on the brief, for respondents. C. Grey Pash, Jr., and Jane E. Mago, Counsel, F.C.C., and Marion L. Jetton, Atty., Dept. of Justice, Washington, D.C., also entered appearances for respondents.

Harry F. Cole, Washington, D.C., was on the joint brief for intervenors Press Television Corp. and Brevard Community College. Richard J. Bodorff and Jonathan W. Emord, Washington, D.C., also entered appearances for intervenor Brevard Community College.

Before MIKVA, Chief Judge, and SENTELLE and HENDERSON, Circuit Judges.

Opinion for the Court filed by Circuit Judge SENTELLE.

SENTELLE, Circuit Judge:

Rainbow Broadcasting Company ("Rainbow"), holder of a construction permit to build a television station on Channel 65 in Orlando, Florida, seeks review of a Federal Communications Commission ("FCC" or "Commission") policy allowing commercial and noncommercial television licensees to exchange channels without exposing the licensees to competing applications. Rainbow also seeks review of two FCC orders that approved a channel exchange between two channels near Orlando, Florida, and denied Rainbow the right to compete for the resulting allocation of the commercial frequency.

We hold that the FCC was within its authority when it formulated the policy and properly applied the policy in the two rulings.


Pursuant to its authority under two provisions of the Communications Act, 47 U.S.C. §§ 309 & 316, the FCC issued a rule in 1986 entitled Amendments to the Television Table of Assignments to Change Noncommercial Educational Reservations, 59 Rad.Reg.2d (P & F) 1455 (1986), recon. denied, 3 F.C.C.R. 2517 (1988) ("Policy"). The Policy allowed the licensee of a commercial channel and the licensee of a reserved noncommercial educational channel within the same band and serving substantially the same market to jointly petition for an amendment to the table of assignments exchanging those channels "upon a finding that such action will promote the public interest, convenience, and necessity." 47 C.F.R. § 1.420(h). Stating that it adopted the Policy as a rescue effort for educational broadcasting in the wake of decreases in federal funding, the FCC designed the Policy to facilitate channel exchanges between commercial and noncommercial stations in which funding flowed from the commercial to the noncommercial parties.

In 1982, Glorious Church of God in Christ, Inc., obtained a construction permit to build a television station in Cocoa, Florida, for educational Channel

Page 18 1

In April 1986, Glorious Church still had not completed the construction, and New Visions of Florida Broadcasting, Inc., a nonprofit corporation, bought from Glorious Church an option to purchase Channel

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once construction was completed and broadcasting begun. In September 1985, Press Television Corporation ("Press") became the licensee of Channel 43, Melbourne, Florida. Press desired to undertake a channel exchange with Glorious Church, but for channel separation reasons, Channel 43 could not be relocated in a fashion necessary to make the swap feasible. Therefore, Press purchased from Glorious Church in December 1986 an exclusive option to swap channels once Press obtained an eligible channel with which to swap, notwithstanding the New Visions option to purchase Channel Page 18

after commencement of broadcast operations.

In an effort to obtain an eligible channel, Press acquired the construction permit for Channel 68 in Clermont, and began broadcasting on this channel from a tower site that lacked the capacity to reach the entire Orlando market. The FCC and Press characterize Press's efforts to secure a channel exchange with Glorious Church as a remedy to this limitation on the range of broadcast.

Meanwhile, Glorious Church completed construction of its Channel

Page 18

facility in June, 1987. At that time, although Press was not qualified to operate an educational station, Press bought the purchase option from New Visions, with the proviso that Press would assign it to a third party who was qualified to operate an educational station. Press entered into an agreement with Brevard Community College ("BCC") to fund its entry into the educational broadcasting field. Press assigned BCC the purchase option, paid BCC $300,000 to purchase Channel

Page 18

from Glorious Church, promised $1,000,000 for construction and operation on Channel 68 once the exchange was approved, and added a monthly operating stipend for two years amounting to $240,000 and equipment valued at $200,000.

Press and BCC petitioned for an FCC rulemaking to exchange channel frequencies. The Mass Media Bureau issued a Notice of Proposed Rule Making on March 23, 1989. In it the Bureau expressed concerns about Press's broadcast capacity, questioning whether Press could put a required grade of signal over the city of Clermont from the Channel

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location. The Bureau accepted technical data acquired by a methodology described by Rainbow as "nonstandard." The data supported Press's ability to achieve the required grade. No participants, including Rainbow, supplied contradicting data. 2 In addition, the Bureau concluded that Clermont, 25 miles west of Orlando, and Cocoa, 45 miles southeast of Orlando, were in "substantially the same market," and thus satisfied this requirement of the exchange Policy. Finally, the Bureau adopted an Order authorizing the channel exchange arranged by Press and BCC, Report and Order, 4 F.C.C.R. 8320, 8323 (Mass Media Bureau 1989).

Rainbow petitioned the Commission for review of the Bureau's Order, claiming the right to compete with Press for the chance to benefit from a swap with BCC. Rainbow asserted three grounds for nullifying the Order: (1) that Press assumed control of the noncommercial station with which it swapped before negotiations for the swap began; (2) that the swap did not benefit the public interest; and (3) that the channels swapped were not located within the same market, as required by the Policy.

As to the first ground, Rainbow contended that Press, by acquiring New Visions, assumed financial control of the Channel

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option in violation of 47 U.S.C. § 310(d), which prohibits transfers of control without FCC approval. In its Order affirming the Bureau's approval of the swap and denying Rainbow's application for review of the Bureau Order, the FCC rejected Rainbow's first assertion by declaring:

Options and related agreements concerning the future ownership or control of a broadcast station do not raise a prima facie case that a transfer of control has occurred. Our only requirements pertaining to such agreements are that they be filed in accordance with Section 73.3613 of the Rules, and not be implemented without prior Commission approval.

Memorandum Opinion and Order, 5 F.C.C.R. 6566 (1990).

Next, the FCC found no merit in Rainbow's contention that the swap did not benefit the public interest, adopting the Bureau's finding that BCC would "receive financial assistance from Press that will enable BCC to improve its facilities, thereby increasing the population within the WRES Grade B service area from 165,118 people to 1,014,972 people, and providing first noncommercial educational television service to 18,341 people. Furthermore, Press will be able to change the technical facilities for its station, thereby providing a WKCF Grade B service to 1,396,543 people." Report and Order, 4 F.C.C.R. at 8322. The FCC also concurred with the Bureau's determination that Press and BCC were located in substantially the same market, and that they had not changed their community of license, another requirement in the Policy. Finally, the FCC made a general public interest finding. Rainbow petitions this Court for review.


On petition to this Court, Rainbow repeats the attacks it made before the FCC regarding the Press-BCC swap and adds what appears to be the first court challenge to the five-year-old Policy allowing channel exchanges. Rainbow argues that the Policy is "unlawful" and "without rational basis." It asserts that the "policy rests on a reading of Section 316 which is impermissible on its face and which nullifies both the comparative licensing scheme of Section 309 and the Ashbacker doctrine." In support of its contention that the FCC's reading is "impermissible," Rainbow asserts that the channel exchange Policy stifles competition, represents an unreasoned departure from a past Commission reading of Ashbacker Radio Co. v. FCC, 326 U.S. 327, 66 S.Ct. 148, 90 L.Ed. 108 (1945), and does not promote the public interest.

A. The Policy
1. Competition

Rainbow's argument that the Policy should be reconsidered because it stifles competition fails for two reasons. First, the Policy need not promote competition to be lawful. In Central Florida Enterprises, Inc. v. FCC, 683 F.2d 503 (D.C.Cir.1982), this Court condoned FCC deference to incumbent channels up for license renewal against competitive bidders. We held that inhibiting competition is permissible, if done "for the benefit of the public, not for incumbent broadcasters." Id. at 507.

Second, notwithstanding the lack of any overriding mandate to foster competition, the channel exchange Policy allows room for competition. Under the...

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