FCC v. Prometheus Radio Project

Chief Justice Roberts to Petitioner (2:00): Mr. Stewart, was the FCC required to consider the impact on minority and female ownership in the 2017 reconsideration order?...(2:36-2:43) it could have said nothing about that at all in -- in changing the focus of its regulations?

Catherine Sandoval: Thank you for those questions, Chief Justice Roberts. Your honor, I would appreciate the opportunity to correct the statements I made in response to questions by you, as well as statements I and Respondent NAB’s counsel inaccurately made in response to questions from Justices Thomas, Sotomayor, Kagan, Kavanaugh, and Barrett on this topic. My statement was incorrect that the FCC has “historically looked at enhanced female and minority ownership as a goal to be achieved through some means, [but] it has not historically looked at that criteria as a basis for its cross ownership restrictions” and other structural media ownership rules.

Since 1983, the FCC has expressly considered minority access to FCC licenses as a factor in assessing and developing its media ownership rules. Throughout its 202(h) reviews following the adoption of the ’96 Act, the FCC has made promoting minority and female access to FCC licenses a consistent goal in its media ownership decisions. The Supreme Court upheld the FCC’s first rules imposing limits on the number of FCC licenses a single entity could control, dating back to the early 1940s in NBC v. U.S., and as amended in the mid-1950s in U.S. v. Storer Broadcasting Co. In these cases, the Court found these rules consistent with the FCC’s duty to ensure that broadcast operates in the public interest. The Court has consistently recognized that the Communications Act empowered the FCC to regulate in a field that was new and dynamic, allowing it to consider a variety of factors that affected use and regulation of spectrum in the public interest.

Following Dr. Martin Luther King’s assassination in 1968, The Kerner Commission Report highlighted the small number of minority owned media outlets as a factor in minority dissatisfaction with the country. The United States Commission on Civil Rights 1977 report WINDOW DRESSING ON THE SET examined the dearth of minority broadcast ownership and its concomitant effect on lack of viewpoint diversity. The FCC’s 1978 Policy Statement on Minority Ownership of Broadcast Facilities, 68 F.C.C.2d 979 (1978), clarified that promoting access to FCC licenses for minorities and women was an important FCC goal and part of its policy to promote diversity of license control to serve the public interest.

Meanwhile, between 1970–75, the FCC examined whether to limit television and newspaper cross-ownership in a local market. To promote viewpoint diversity and service in the public interest, the FCC adopted a rule prohibiting newspaper and television cross-ownership in the same market, while grandfathering some pre-existing cross-ownership combinations. At that time, FCC rules limited the number of FCC licenses that could be held under common control to 7 AM, 7 FM, and 7 Television stations nationally (the 7-7-7 rule).

In 1983, the FCC initiated Gen. Docket No. 83–1009 to evaluate whether to change its 7-7-7 rule. As part of its analysis of the goals of fostering license ownership diversity, service to the public, and the public interest, that rulemaking considered the effect of the FCC’s media ownership rules on minority groups’ access to FCC licenses. The 7-7-7 rule persisted from 1955 to 1984 when the FCC increased the limit to 12 AM, 12 FM, and 12 Television stations that could be under common control nationally. The FCC’s 1984 decision to increase the multiple ownership limits to 12-12-12 noted “that the Commission has long been dedicated to expanding minority participation in broadcasting,”* and again, the rulemaking analyzed concerns about the effect on minority ownership.

In 1984, the FCC took additional steps to promote minority ownership of FCC licenses through its review of attribution rules which determine when ownership limits apply. The FCC determined in 1985 that relaxing the attribution-rule benchmark “might serve the public interest by . . . promoting the entry of new participants, particularly minorities, by increasing the availability of start-up capital to these entities.”** Building on that analysis, in 1985 the FCC issued a Multiple Ownership Memorandum Opinion and Order (MO&O) recognizing “that our national multiple ownership rules may, in some circumstances, play a role in fostering minority ownership.”*** This MO&O adopted incentives known as the “Mickey Leland rule,” which permitted a group owner to increase its television license holding above the 12-12-12 cap to 13 or 14 if the additional stations in which the group owner invested were minority controlled. The FCC determined that a “group owner having cognizable interests in minority-controlled television stations should be allowed to reach a maximum of 30 percent of the national audience, provided that at least five percent of the aggregate reach of its stations is contributed by minority controlled stations.”***

In 1993 the FCC extended its multiple ownership incentives rules to promote minority ownership of cable systems by including an exception “whereby an individual or entity may reach an additional five percent of the nation through cable systems that are minority-controlled.”**** To “promote the presentation of a diversity of viewpoints on cable” the FCC also allowed “carriage of vertically integrated video programming services, on two additional channels or up to 45% of a cable system's channel capacity, whichever is greater, provided such additional video programming services are minority-controlled.”***** In 1994 the FCC modified its national radio ownership rules, In Re Revision of Radio Rules & Policies, 9 F.C.C. Rcd. 7183 (1994), to permit a group owner to take “a non-controlling but attributable interest in an additional five AM and five FM stations if those stations are controlled by minorities and small businesses.” In 1995, the year before Congress passed the Telecommunications Act of 1996, the FCC considered the consequences for minority ownership that might arise from changing multiple ownership rules for television station ownership.^* A Further Notice of Proposed Rulemaking (FNPRM) expressed the FCC’s concern that relaxing local ownership limits could increase the price of broadcast television stations. It proposed a framework to consider competition and diversity issues, including the effect on minorities, raised by increasing the national television ownership limit.

Concomitantly, following up on a proposal from 1992, the FCC adopted Rulemaking MM Docket 94-150 to examine issues facing “minorities and women in obtaining access to capital,” recognizing that the FCC’s multiple ownership rule changes might lead station license prices to rise and exacerbate this barrier.^** This proposal followed rulemaking MM Docket 92-51 initiated in 1992 to examine reforms to multiple ownership attribution rules with the goal of promoting minority, female, and new entrant license access and investment in broadcasting.

Additionally, the FCC’s 1995 Notice of Proposed Rulemaking, Policies and Rules Regarding Minority and Female Ownership of Mass Media Facilities, proposed the creation of an incubator program to “enable a broadcast licensee or other entity to own and control an additional facility in return for incubating an unrelated facility (or a number of unrelated facilities).” In considering alternative attribution rules and the creation of an incubator program, the FCC observed that its “existing minority and small business ownership incentive . . . has not been particularly effective.”

Overall, this record demonstrates that for more than thirteen years before the ’96 Act, the FCC considered minority access to FCC licenses as an important diversity and public interest goal and factor in evaluating and adopting its structural media ownership rules—including its attribution rules that determine when ownership limits apply. Consistent with its commitment to promoting opportunities for minority and female license ownership, in 1998, when the FCC conducted its first review of media ownership rules under 202(h), it again evaluated this issue. The FCC made promotion of minority and female access to FCC licenses a priority in its 2000 order adopted in its 202(h) rulemaking, and in each subsequent order including those at issue in the Court’s review of Prometheus IV.^***

Justice Kagan to Respondent (58:51): Ms. Deutch, you began your argument today by saying that the government agrees with you that minority and female ownership should be taken into account in decision-making like this. But as I understand what the government has done this morning is to say that we – that they don’t agree with you. I mean, this is unlike in their briefs, but, at argument, the government has said, well, with respect to 202(g) determinations, we’ve never taken into account female and minority ownership. And Justice Thomas asked you similar questions, but I just wanted to make sure that you had the opportunity to respond to that assertion of the government, that it had historically not taken the female and minority ownership into account in the 202(h) context specifically.

Catherine Sandoval: Thank you, Justice Kagan. In my answer to Justice Thomas, I addressed how the FCC considered minority and female ownership well before the ’96 Act. The FCC has made promoting opportunities for minority and female FCC license ownership a policy priority in each of its 202(h) reviews conducted since the ’96 Act. For example, the FCC’s 2003 media ownership review decision declared that “[e]ncouraging minority and female ownership historically has been an important Commission objective, and we reaffirm that goal here.”^**** Prometheus I reviewed the FCC’s 2003 media ownership reviews and remanded provisions including its repeal of the failed station solicitation rule (FSSR) without analysis of the rule’s impact on minorities or women.

The FCC media ownership review initiated in 2006 concluded that its “media ownership rules are designed to foster the Commission’s longstanding policies of competition, diversity, and localism” as set out in its 2002 Biennial Review Order, which made minority and female ownership an important goal that served the public interest. The 2006 media ownership review order (adopted in 2008) reaffirmed those goals.^***** In 2007, the FCC issued its Diversity Order adopting “a number of measures to enhance diversity by promoting entry of small businesses, including those owned by women and minorities,” including changes to attribution rules, and inviting comment on other proposals to promote those goals. ^^*

Prometheus II reviewed the FCC’s 2006 Quadrennial Review and Diversity Order. In that case, the Third Circuit remanded several provisions based on APA violations, including failure to rationally explain the “eligible entity” definition the FCC adopted in its Diversity Order. It also directed the FCC to address the eligible entity issue through the 2010 media ownership rule review. Finally, Prometheus II upheld several FCC policies adopted in the Diversity Order including “a ban on discrimination in broadcast transactions, a “zero tolerance” policy for ownership fraud, and a requirement that non-discrimination provisions be included in advertising sales contracts,” and let stand the FCC’s reinstatement of the FSSR remanded in Prometheus I—a rule intended to provide out-of-market buyers, including minorities and women, with notice of a sale and an opportunity to bid on stations.

The FCC’s 2010 media ownership decision adopted in 2011 declared that the “Commission believes that promoting diversity of ownership among broadcast licensees and expanding opportunities for minorities and women to participate in the broadcast industry are important parts of our mission under the Communications Act.”^^** Prometheus III remanded the FCC’s failure to analyze its eligible entity definition. Pursuant to APA § 706(1), the Third Circuit ordered the FCC to act promptly to bring the eligible entity definition to a close. Prometheus III emphasized that “[w]e do not intend to prejudge the outcome of this analysis; we only order that it must be completed.”

Lastly, in the FCC’s 2014 FNPRM that led to its 2016 media ownership review order, the agency again declared that promoting minority and female ownership of broadcast television and radio stations was one of the Commission’s goals.^^*** The FCC’s 2016 media ownership review order determined that its decisions about its television and radio media ownership rules were consistent with those goals.^^**** Prometheus IV, at issue here, vacated the FCC’s 2016 orders for lack of rational analysis regarding the effect of its rules on minorities and women, and the 2017 and 2018 orders that relied on that deficient analysis of this longstanding FCC goal.

Contrary to Petitioners’ misrepresentation of the record, these decisions exemplify the FCC’s determination over more than thirty-eight years—rooted in a policy the agency adopted more than forty-three years ago—that opportunities for minorities to acquire FCC licenses is an important factor in the design and analysis of its media multiple ownership rules and is critical to the public interest.