FCC v. Prometheus Radio Project
Was the Third Circuit’s decision to vacate the Federal Communications Commission’s (FCC) three decisions adopted between 2016–2018 for its review of broadcast ownership rules required by Section 202(h) of the Telecommunications Act of 1996 erroneous under the Administrative Procedure Act?Advocates
- Malcolm L. Stewart, for Petitioner, the U.S. Government
- Helgi Walker, for Petitioner, National Assn. of Broadcasters
- Ruthanne M. Deutsch, for Respondent, Prometheus Radio Project, et al.
Between 2016–2018, the FCC issued three orders regarding its statutory review of media ownership rules, which section 202(h) of the Telecommunications Act of 1996 (’96 Act) requires the agency to conduct. Through assignment initially by judicial lottery, the Third Circuit issued four decisions between 2004–2019 analyzing APA challenges to FCC media ownership decisions, retaining jurisdiction with the U.S. government’s consent. In the fourth order in the Prometheus docket since 2004, the Third Circuit in Prometheus Radio Project v. FCC, 939 F.3d 567 (3d Cir. 2019) [Prometheus IV] determined that the FCC’s analysis in these three orders reflected arbitrary and capricious decision-making under the Administrative Procedure Act (APA). The first three Prometheus decisions remanded portions of the FCC’s media ownership rules on APA grounds including the FCC’s flawed analysis of the effects of its decisions on minority and female FCC license holding. The fourth Prometheus decision vacated the 2016–2018 decisions in their entirety and ordered the FCC to include a reasoned analysis of the effect of its rulemaking decisions on minority and female opportunities to acquire an FCC broadcast license. Since the FCC initiated its first analysis of media ownership rules in 1998 following the Telecom Act’s passage, the agency has characterized analysis of the effect of its media ownership rules on minorities and women as an important factor in determining whether to repeal, modify, or retain its broadcast ownership rules.
The FCC’s media ownership rules regulate issues including how many television or radio licenses an entity can control in a local market or nationally. These structural regulations include voting and equity interest thresholds that trigger application of those rules (known as attribution rules). The FCC first adopted structural rules limiting a common entity’s control of FCC broadcast licenses in the mid-1940s to promote diffusion of broadcast licenses, diversity, competition, and localism (service to local communities). The agency adopted these rules to ensure that broadcast serves the public interest consistent with the requirements of the Communications Act of 1934.
The ’96 Act lifted the limit on the number of radio stations an entity could own nationally and imposed a tiered limit on the number of radio stations that could be owned locally based on market size. Telecom Act Section 202(h) directed the FCC to biennially review its media ownership rules, including its rules restricting cross-ownership of a television station and a newspaper in a local market (newspaper-broadcast cross-ownership (NBCO) rule), and its cable-television cross-ownership rules. That statute directs the FCC to “determine whether any of such rules are necessary in the public interest as the result of competition. The Commission shall repeal or modify any regulation it determines to be no longer in the public interest.” In 2004 Congress set by statute the number of television station licenses an entity could control nationally at 39% of U.S. television households and lengthened the timeline for 202(h) proceedings to quadrennial.
The FCC orders at issue in this case involve three decisions adopted as presidential administrations changed. In 2016 when Barack Obama was President and Tom Wheeler was FCC Chair, the FCC adopted a decision that retained many of its media ownership rules. The FCC’s 2016 order retained the newspaper-broadcast cross-ownership rule, the local television ownership rule, and the local radio ownership rule based in part on the FCC’s determination that doing so did not harm its goal of promoting minority and female ownership of broadcast television and radio stations. FCC, Media 2016 Ownership Review Order, 31 FCC Rcd. 9864, ¶¶ 77, 125, 134 (2016).
The Third Circuit faulted on APA grounds the FCC’s analysis that led to that conclusion. The 2016 order compared incompatible datasets (National Telecommunications and Information Administration (NTIA) data gathered before 2000 and FCC 323 reports gathered after 1998) to analyze the effect of its media ownership rules on minority and female license ownership. The Third Circuit in Prometheus IV concluded that the FCC’s irrational analysis flunked the APA. “Attempting to draw a trendline between the NTIA data and the Form 323 data is plainly an exercise in comparing apples to oranges, and the Commission does not seem to have recognized that problem or taken any effort to fix it,” Prometheus IV concluded. (939 F.3d at 586).
In 2017, following the inauguration of Donald Trump as President and the appointment of Ajit Pai as FCC Chair, the FCC decided on reconsideration to repeal the newspaper-broadcast ownership rule, though it conducted no new fact-finding. The FCC’s 2018 Incubator Order sought to promote opportunities for small businesses, including those owned by minorities and women, by allowing broadcasters to invest in and “incubate” eligible entities in exchange for relief from some of the FCC’s structural ownership limits on the number of broadcast stations that could be owned locally.
Prometheus Radio Broadcasters, two television groups, and several public interest and industry organizations appealed the FCC’s decisions on APA grounds. After the Third Circuit vacated the FCC’s 2016, 2017, and 2018 decisions for APA violations, the U.S. Government and National Association of Broadcasters petitioned the U.S. Supreme Court to review the case, arguing Prometheus IV did not properly apply the APA and should have deferred to the FCC’s decisions.
At oral argument and in the briefs, Petitioners characterize the issue of the potential consequences of the FCC’s repeal, modification, or retention of its broadcast ownership rules on minorities and women as a side-issue whose importance the Third Circuit unduly elevated in its APA analysis. Petitioners argue that the FCC’s decisions, as reflected in its 2017 reconsideration order and 2018 Incubator order (which rely on the fact-finding and much of the analysis in the FCC’s 2016 order), should be allowed to go into effect to promote deregulation and enable broadcasters to compete with other media including the Internet.
Respondents argue this is a straightforward APA case. Respondents contend the FCC failed to explain its decision-making through rational analysis as the APA requires. Despite the FCC’s consistent statements that promoting minority and female ownership was an important goal in these proceedings, and its conclusion that the rules adopted do not conflict with those goals, Respondents argue the FCC failed to rationally analyze the record or explain its reasoning as the APA requires. Respondents emphasize that the FCC has considered the effect of its structural media ownership rules on minorities and women throughout its media ownership reviews and for more than a decade prior to that statutory process, making this an important issue the FCC must properly analyze under the APA.
At oral argument, Chief Justice Roberts and Justices Thomas, Sotomayor, Kagan, Kavanaugh, and Barrett asked whether the FCC was required to consider minority or female ownership in its media ownership rules or had a history of doing so. On multiple occasions, Malcom Stewart for Government Petitioners and Helgi Walker for Petitioner NAB misstated the record, ignoring the 35-year record of FCC consideration of minority and later female FCC license access in the development and analysis of FCC media ownership rules. As officers of the Court, Mr. Stewart and Ms. Walker have a duty to accurately represent the record. To make this ethical point, I offer an alternative response on behalf of Mr. Stewart, correcting the inaccurate representations of the FCC’s record. The answer informs the Court that the FCC considered minority ownership in designing and analyzing its media ownership rules since 1983, following its 1978 policy statement on promoting minority ownership of FCC licenses.
I also respond to a question Justice Kagan asked Respondent about this same issue. I detail how, for more than a decade prior to and throughout the FCC’s media ownership reviews mandated by the Telecom Act of ’96, the FCC considered minority ownership as a basis for adopting and modifying its media ownership rules.
For reference, I include citations to the different rules that I discuss below.
*In the Matter of Amendment of Section 73.3555, (Formerly Sections 73.35, 73.240, & 73.636) of the Commission’s Rules Relating to Multiple Ownership of Am, Fm & Television Broad. Stations, 100 F.C.C.2d 17, 46-49 (Gen. Docket No. 83–1009) (1984).
**In the Matter of Corp. Ownership Reporting & Disclosure by Broad. Licensees. Amendment of Sections 73.35, 73.240 & 73.636 of the Commission’s Rules Relating to Multiple Ownership of Standard, Fm, & Television Broad. Stations. Amendment of Sections 73.35, 73.240, 73.636 & 76.501 of the Commission’s Rules Relating to Multiple Ownership of Am, Fm, & Television Stations & CATV Sys. Reexamination of the Commission’s Rules & Policies, 97 F.C.C.2d 997, 1002 (1984).
***In the Matter of Amendment of Section 73.3555 (Formerly Sections 73.35, 73.240 & 73.636) of the Commission’s Rules Relating to Multiple Ownership of Am, Fm & Television Broad. Stations, 100 F.C.C.2d 74, 94–95 (1985).
****In the Matter of Policies & Rules Regarding Minority & Female Ownership of Mass Media Facilities, 10 F.C.C. Rcd. 2788, 2789 n. 9 (1995) (citing Second Report and Order, MM Docket No. 92-264, 8 FCC Rcd 8565, 8578 (1993).
*****Second Report and Order, MM Docket No. 92-264, 8 FCC Rcd 8565, 8596 (1993).
^*In the Matter of Review of the Commission’s Regulations Governing Television Broad., 10 F.C.C. Rcd. 3524) (1995).
^**In the Matter of Review of the Commission’s Regulations Governing Attribution of Broad. Interests; Review of the Commission’s Regulations & Policies Affecting Inv. in the Broad. Industry; Reexamination of the Commission’s Cross-Interest Policy, 10 F.C.C. Rcd. 3606 (1995).
^***In Re 1998 Biennial Regulatory Review-Review of Commission’s Broad. Ownership Rules, 15 F.C.C. Rcd. 11058, 11073 (2000).
^****In Re 2002 Biennial Regulatory Review-Review of the Commission’s Broad. Ownership Rules & Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, 18 F.C.C. Rcd. 13620, 13634 (2003) (citing e.g., Statement of Policy on Minority Ownership of Broadcast Facilities, 68 F.C.C.2d 979 (1978); 1985 Multiple Ownership MO&O, 100 FCC 2d 74 (1985); Policies and Rules Regarding Minority and Female Ownership of Mass Media Facilities, 10 FCC Rcd 2788 (1995); 1998 Biennial Regulatory Review – Streamlining of Mass Media Applications, Rules, and Processes; Policies and Rules Regarding Minority and Female Ownership of Mass Media Facilities, 13 FCC Rcd 23056, 23095 (1998) (adopting competitive bidding rules consistent with 47 U.S.C. § 309(j)(3)(B) (requiring the Commission, in designing systems of competitive bidding for broadcast licenses, to “promot[e] economic opportunity and competition and ensur[e] that new and innovative technologies are readily accessible to the American people by avoiding excessive concentration of licenses and by disseminating licenses among a wide variety of applicants, including … businesses owned by members of minority groups and women”)); Section 257 Proceeding to Identify and Eliminate Market Entry Barriers for Small Businesses, 11 FCC Rcd 6280 (1996); Section 257 Proceeding to Identify and Eliminate Market Entry Barriers for Small Businesses, Report, 12 FCC Rcd 16802 (1997)).
^*****In the Matter of 2006 Quadrennial Regulatory Review — Review of the Commissions Broad. Ownership Rules & Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, 23 F.C.C. Rcd. 2010, 2016–2017 (2008).
^^*Promoting Diversification of Ownership in the Broadcasting Services, Report and Order and Third Further Notice of Proposed Rulemaking, MB Docket No. 07-294, 23 FCC Rcd. 5922 (2007) [hereinafter Diversity Order]).
^^**In the Matter of 2010 Quadrennial Regulatory Review — Review of the Commissions Broad. Ownership Rules & Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996 Promoting Diversification of Ownership in the Broad. Services, 26 F.C.C. Rcd. 17489, 17544–17545 (2011).
^^***In the Matter of 2014 Quadrennial Regulatory Review of the Commission’s Broad. Ownership Rules & Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, Further Notice of Proposed Rulemaking, 29 F.C.C. Rcd. 4371, 4400 (2014).
^^****FCC, Media 2016 Ownership Review Order, 31 FCC Rcd. 9864, ¶¶ 77, 125, 134 (2016).FCC v. Prometheus Radio Project on Oyez: https://www.oyez.org/cases/2020/19-1231