PROMETHEUS RADIO PROJECT *National Association of Broadcasters **Cox Media Group LLC, Intervenors
FEDERAL COMMUNICATIONS COMMISSION; UNITED STATES OF AMERICA Prometheus Radio Project and Media Mobilizing Project, Petitioners in No. 17-1107 Multicultural Media, Telecom and Internet Counsel and National Association of Black Owned Broadcasters, Inc., Petitioners in 17-1109 The Scranton Times, L.P., Petitioners in 17-1110 Bonneville International Corporation, Petitioners in 17-1111 * Prometheus Radio Project, Media Mobilizing Project, Benton Foundation, Common Cause, Media Alliance, Media Council Hawaii, National Association of Broadcasters Employees and Technicians Communications Workers of America, National Organization for Woman Foundation, Office of Communication of the United Church of Christ Inc., Intervenors *(Pursuant to the Clerk’s Order date 1/18/17) ** (Pursuant to the Clerk’s Order dated 2/7/17) PROMETHEUS RADIO PROJECT; MEDIA MOBILIZING PROJECT, Petitioners (No. 18-1092, 18-2943) INDEPENDENT TELEVISION GROUP, Petitioners (No. 18-1669) MULTICULTURAL MEDIA, TELECOM AND INTERNET COUNCIL, INC.; NATIONAL ASSOCIATION OF BLACK-OWNED BROADCASTERS, Petitioners (No. 18-1670, 18-3335) FREE PRESS; OFFICE OF COMMUNICATION, INC. OF THE UNITED CHURCH OF CHRIST; NATIONAL ASSOCIATION OF BROADCAST EMPLOYEES AND TECHNICIANS-COMMUNICATIONS WORKERS OF AMERICA; COMMON CAUSE, Petitioners (No. 18-1671)
FEDERAL COMMUNICATIONS COMMISSION; UNITED STATES OF AMERICA
June 11, 2019.
Petition for Review of An Order of the Federal Communications
Commission (FCC Nos. FCC-1: FCC-16-107; FCC-17-156;
J. Campbell Andrew J. Schwartzman James T. Graves Institute
for Public Representation Georgetown Law, Counsel for
Prometheus Radio Project, Media Mobilizing Project Counsel
for Intervenor Respondents
Foundation, National Association of Broadcast Employees and
Technicians Communication Workers of America, National
Organization for Women Foundation, Office of Communication
Inc. of the Church of Christ, Cheryl A. Leanza (Argued) Best
Best & Krieger, Counsel for Petitioners
Prometheus Radio Project, Media Mobilizing Project, Office of
Communication Inc. of the United Church of Christ, National
Association of Broadcast Employees and Technicians
Communications Workers of America, Common Cause Dennis Lane
(Argued) David D'Alessandro, Counsel for Petitioner.
Multicultural Media Telecom and Internet Council National
Association of Black Owned Broadcasters, Inc. Craig E.
Gilmore Kenneth E. Satten Wilkinson Barker Knauer. Counsel
for Petitioners Scranton Times LP, Bonneville International
N. Goodman (Argued) Law Offices of Jack N. Goodman. Counsel
for Petitioner Independent Television Group
Jessica J. Gonzalez Free Press Counsel for Petitioner Free
M. Johnson, Jr. General Counsel David M. Gossett Deputy
General Counsel Jacob M. Lewis (Argued) Associate General
Counsel James M. Carr Matthew J. Dunne (Argued) William Scher
Richard K. Welch Federal Communications Commission. Counsel
for Respondent Federal Communications Commission
Delrahim Assistant Attorney General Michael F. Murray Deputy
Assistant Attorney General Nickolai Gilford Levin Robert B.
Nicholson Robert J. Wiggers United States Department of
Justice Antitrust Division/Appellate Section. Counsel for
Respondent United States of America
C. Walker (Argued) Andrew G. I. Kilberg Gibson Dunn &
Crutcher. Counsel for Intervenor Petitioner/Respondent
National Association of Broadcasters
Getachew Common Cause. Counsel for Intervenor
Respondent/Petitioner Common Cause David
Mills Cooley. Counsel for Intervenor Petitioner Cox Media
F. King Rafael Reyneri Andrew Soukup Covington & Burling.
Counsel for Intervenor Respondent Fox Corp.
D. Oxenford Wilkinson Barker Knauer. Counsel for Intervenor
Respondent Connoisseur Media LLC
A. Cicelski S. Jenell Trigg Lerman Senter. Counsel for
Intervenor Respondent New Corp.
Klindera Reed Jeremy J. Broggi Wiley Rein. Counsel for
Intervenor Respondent Nextar Broadcasting Inc.
Jeetander T. Dulani Pillsbury Winthrop Shaw Pittman. Counsel
for Intervenor Respondent Sinclair Broadcast Group Inc.
Before: AMBRO, SCIRICA, and FUENTES, Circuit Judges.
are again. After our last encounter with the periodic review
by the Federal Communications Commission (the "FCC"
or the "Commission") of its broadcast ownership
rules and diversity initiatives, the Commission has taken a
series of actions that, cumulatively, have substantially
changed its approach to regulation of broadcast media
ownership. First, it issued an order that retained almost all
of its existing rules in their current form, effectively
abandoning its long-running efforts to change those rules
going back to the first round of this litigation. Then it
changed course, granting petitions for rehearing and
repealing or otherwise scaling back most of those same rules.
It also created a new "incubator" program designed
to help new entrants into the broadcast industry. The
Commission, in short, has been busy. Its actions
unsurprisingly aroused opposition from many of the same
groups that have battled it over the past fifteen years, and
that opposition has brought the parties back to us.
these petitioners argues that the FCC did not go far enough,
and that the same logic by which it repealed the so-called
"eight voices" test of the local television
ownership rule (which forbade mergers that would leave fewer
than eight independently-owned stations in the market) should
also have led it to abolish the "top-four"
restriction in the same rule (which forbids mergers among two
or more of the four largest stations in a market). We
disagree; this was a reasonable exercise of the
Commission's policy-making discretion, as we held in the
first round of this litigation.
group of petitioners argues that the Commission's new
incubator program is badly designed, as its definition of
"comparable markets" for the reward waivers was
unlawfully adopted and would create perverse incentives. It
also argues that the Commission has unreasonably failed to
act on a proposal to extend the so-called "cable
procurement rules, " which promote diversity in the
cable television industry, to broadcast media. We disagree:
the "comparable markets" definition for the
incubator program was also a reasonable exercise of
discretion, and the FCC's failure to act on the
procurement rules proposal is not unreasonable so far.
however, agree with the last group of petitioners, who argue
that the Commission did not adequately consider the effect
its sweeping rule changes will have on ownership of broadcast
media by women and racial minorities. Although it did
ostensibly comply with our prior requirement to consider this
issue on remand, its analysis is so insubstantial that we
cannot say it provides a reliable foundation for the
Commission's conclusions. Accordingly, we vacate and
remand the bulk of its actions in this area over the last
three years. In doing so, we decline to grant the requested
extraordinary relief of appointing a special master to
oversee the FCC's work on remand.
avoid sounding like a broken record, we recount only in brief
the history of this case up through our most recent decision.
The full account of the entire saga can be found in our
earlier opinions. See Prometheus Radio Project v.
FCC, 373 F.3d 372, 382–89 (3d Cir. 2004)
("Prometheus I"); Prometheus Radio
Project v. FCC, 652 F.3d 431, 438–44 (3d Cir.
2011) ("Prometheus II"); and
Prometheus Radio Project v. FCC, 824 F.3d 33,
37–39 (3d Cir. 2016) ("Prometheus
the Communications Act of 1934, 47 U.S.C. § 151 et
seq., Pub. L. No. 73-416, 48 Stat. 1064 (1934), the
Federal Communications Commission has long maintained a
collection of rules governing ownership of broadcast media.
By preventing any one entity from owning more than a certain
amount of broadcast media, these rules limit consolidation
and promote a number of interests, commonly stated as
"competition, diversity, and localism." See,
e.g., Report and Order and Notice of Proposed
Rulemaking-2002 Biennial Regulatory Review, 18 F.C.C.R.
13620 ¶ 8 (July 2, 2003). By 1996, however, there was
growing sentiment that these rules were overly restrictive,
and so Congress passed the Telecommunications Act. Pub. L.
No. 104–104, 110 Stat. 56 (1996). Section 202(h) of
that Act requires the Commission to review the broadcast
ownership rules on a regular basis- initially biennial, later
amended to quadrennial, see Pub. L. No.
108–199, § 629, 118 Stat. 3, 99–100
(2004)-to "determine whether any of such rules are
necessary in the public interest as the result of
competition." Telecommunications Act, § 202(h). The
Commission "shall repeal or modify any regulation it
determines to be no longer in the public interest."
before we have passed on the Commission's performance of
its duties under § 202(h), or the lack thereof. In
Prometheus I we reviewed the results of the 2002
quadrennial review cycle. Then in Prometheus II we
reviewed the results of the 2006 review cycle, which included
the FCC's actions on remand from Prometheus I,
as well as a separate order adopting various policies
designed to promote broadcast media ownership by women and
Prometheus II the Commission failed to complete its
2010 review cycle prior to the start of the 2014 cycle, and
so in Prometheus III we reviewed not final agency
action pursuant to § 202(h) but rather, for the most
part, agency inaction. Although we found the FCC had
unreasonably delayed action on the 2010 and 2014 review
cycles, we declined to vacate the broadcast ownership rules
in their entirety, but noted such a drastic remedy could
become appropriate in the future if the Commission continued
dragging its feet. Id., 824 F.3d at 53–54.
Relatedly, we remanded a newly adopted rule governing the
treatment of joint sales agreements for purposes of the
television local ownership rule, reasoning that the FCC could
not have a valid basis for promulgating such a rule without
first having determined, as required by § 202(h), that
the local ownership rule itself should remain in place.
Id. at 58–60.
held that the Commission had unreasonably delayed a
determination on the definition of "eligible
entities." These are given certain preferences under the
ownership rules, see id. at 41, and the purpose of
these preferences was to encourage ownership by women and
minorities. The definition, however, was drawn from the Small
Business Administration's definition of small businesses,
and focused solely on a company's revenues. In
Prometheus I we had suggested that, on remand, the
FCC should consider adopting a different definition based on
the criteria for "socially and economically
disadvantaged businesses" ("SDBs").
See 373 F.3d at 428 n.70; see also 13
C.F.R. § 124.103 (defining socially disadvantaged
businesses). The Commission declined to adopt an SDB
definition, and in Prometheus II we held that the
revenue-based definition was arbitrary and capricious because
there was no evidence it would advance the goals of
increasing ownership by women and minorities. 652 F.3d at
Commission had not reached a determination one way or the
other by Prometheus III. Instead it had suggested-
in various documents issued after Prometheus II,
none of which constituted final agency action on the
matter-that it would reject a SDB definition, or the similar
"overcoming disadvantage preference"
("ODP") proposal, because it did not believe those
rules could survive constitutional scrutiny under the Equal
Protection Clause of the Fourteenth Amendment. See
824 F.3d at 45–48. It therefore indicated its tentative
plan to adopt the same definition we held unlawful in
Prometheus II, even though it still lacked evidence
that this would promote ownership diversity, because
promoting ownership by small businesses would be in the
public interest regardless. Id. at 46.
that the Commission "had more than enough time to reach
a decision on the eligible entity definition."
Id. at 48. This led to a remand and an "order
[to] the Commission . . . to act promptly to bring the
eligible entity definition to a close." Id. at
50. It was to "make a final determination as to whether
to adopt a new definition;" "[i]f it need[ed] more
data to do so, it must get it." Id. Finally, we
pointed out that we did "not intend to prejudge the
outcome" of the FCC's analysis, and that we would
review the merits of its eventual decision once that decision
had been made through a final order. Id. at
months after we decided Prometheus III, the
Commission followed through on its promise to take final
action on the 2010 and 2014 review cycles. Its Second
Report and Order, 2014 Quadrennial Regulatory Review, 31
F.C.C.R. 9864 (2016) (the "2016 Report &
Order"), retained all of the major broadcast
ownership rules-the newspaper/broadcast cross-ownership rule,
the radio/television cross-ownership rule, the local radio
ownership rule, and the local television ownership rule-in
their existing forms. It also adopted, again, a revenue-based
definition for eligible entities. It concluded that an SDB or
any related race- or gender-conscious definition could not
withstand constitutional scrutiny because, even though courts
might accept viewpoint diversity as a compelling governmental
interest, the evidence did not show a meaningful connection
between female or minority ownership and viewpoint diversity.
Id. ¶ 297. The Commission also declined to
adopt an ODP standard, reasoning that it would require
individualized assessment that is not compatible with the
smooth operation of the FCC's rules, and that such an
individualized assessment could run afoul of First Amendment
principles. Id. ¶ 306. On a related issue, the
Commission declined to implement an "incubator program,
" under which established broadcasters would be
encouraged to assist new entrants to break into the industry,
that would have employed an ODP standard. Finally, the
Commission reviewed a number of other proposals to increase
ownership diversity, rejecting most but noting some merit in
a proposal to extend the cable procurement rules, which
require cable companies to encourage minority-owned
businesses to work with them, to broadcast media. The
Commission did not adopt this idea, instead calling for
number of industry groups filed a petition for rehearing, and
in November 2017 the Commission granted that petition in its
Order on Reconsideration and Notice of Proposed
Rulemaking, 32 F.C.C.R. 9802 (2017) (the
"Reconsideration Order"). This Order made
sweeping changes to the ownership rules. It eliminated
altogether the newspaper/broadcast and television/radio
cross-ownership rules. It modified the local television
ownership rule, rescinding the so-called "eight
voices" test but retaining the rule against mergers
between two of the top four stations in a given market-albeit
now subject to a discretionary waiver provision. And it
announced the Commission's intention to adopt an
incubator program, although it left the formal implementation
of that program to a subsequent order. In this context, the
Reconsideration Order called for comment on various aspects
of the program, including how to define eligibility and how
to encourage participation by established broadcasters.
August 2018 the Commission issued the Report and Order-In
the Matter of Rules and Policies to Promote New Entry and
Ownership Diversity in the Broadcasting Services, 33
F.C.C.R. 7911 (2018) (the "Incubator
Order"). That Order established a radio incubator
program that would encourage established broadcasters to
provide "training, financing, and access to
resources" for new entrants in the market. Id.
¶ 6. Eligibility to receive this assistance was defined
using two criteria: an incubated entity must (1) qualify as a
small business under the Small Business Administration's
rules, and (2) qualify as a "new entrant, " meaning
that it must own no television stations and no more than
three radio stations. Id. ¶ 8. The eligibility
criteria make no overt reference to race, gender, or social
disadvantage, but the Commission concluded that using the
"new entrant" criterion would help boost ownership
by women and minorities, as a bidding preference for new
entrants in FCC auctions had that effect. Id. ¶
incentive for established broadcasters to participate in the
program, the Incubator Order grants the incubating entity a
reward waiver for the local radio ownership rules. Among
other options, the waiver may be used in any market
"comparable" to the one in which incubation occurs.
Id. ¶ 66– 67. This means that it must be
in the same market tier for purposes of the local radio rule,
and these tiers are defined by the number of stations in a
market. One tier runs from zero to 14 stations, another from
15 to 29, a third from 30 to 44, and finally the highest tier
includes all markets with 45 or more stations.
us are 10 different petitions for review challenging
different aspects of the Commission's actions since
Prometheus III. After the 2016 Report & Order
issued in November of that year, Prometheus Radio Project
("Prometheus") and Media Mobilization Project
("MMP") filed a petition for review in our Court.
About the same time, three other petitions for review of the
2016 Report & Order were filed in the D.C. Circuit Court
of Appeals: one by The Scranton Times, L.P.
("Scranton"); one by Bonneville International
Corporation ("Bonneville"); and one jointly by the
Multicultural Media, Telecom and Internet Council, Inc.
("MMTC") and the National Association of
Black-Owned Broadcasters ("NABOB"). The cases
before the D.C. Circuit were transferred here and the four
cases consolidated in January 2017; they were then held in
abeyance while the Commission considered the petitions for
the Reconsideration Order issued in November 2017, four
additional petitions for review were filed: one by Prometheus
and MMP in our Court as well as three in the D.C. Circuit
from (1) Independent Television Group ("ITG"), (2)
MMTC and NABOB, and (3) a coalition of groups including Free
Press, the Office of Communication, Inc. of the United Church
of Christ ("UCC"), the National Association of
Broadcast Employees and Technicians-Communications Workers of
America ("NABET-CWA"), and Common Cause. Once again
the D.C. Circuit transferred the petitions before it to our
Court, and we consolidated the new wave of cases with the
February 2018 we stayed all proceedings pending the close of
notice and comment on the Incubator Order. Once the final
Order issued in August 2018, Prometheus and MMP filed a
petition for review in our Court, and MMTC and NABOB filed
another in the D.C. Circuit that was transferred here and the
purposes of briefing and oral argument, the various
petitioners divided into three groups. The first included
Prometheus, MMP, Free Press, UCC, NABET-CWA, and Common
Cause, who argue that the Commission has not adequately
considered how its changes to the broadcast ownership rules
will affect ownership by women and racial minorities. We
refer to this group as "Citizen Petitioners, "
consistent with our past practice. See Prometheus
III, 824 F.3d at 39. A second group, consisting of MMTC
and NABOB, argues that the Incubator Order's definition
of "comparable markets" is unlawful and that the
Commission has unreasonably withheld action on a proposal to
extend cable procurement rules to broadcast media. To
distinguish this group, we refer to its members as
"Diversity Petitioners." Finally, ITG-standing
alone now as the only "Deregulatory
Petitioner"-challenges the retention of the
"top-four" component of the local television rule
(which, to repeat, bans mergers between two or more of the
four largest stations in a given market).
Commission defends its orders in their entirety.
Additionally, a group of Intervenors-including both Scranton
and Bonneville as well as many of the Deregulatory
Petitioners from prior rounds of this litigation-defends the
FCC's actions and argues further that Citizen and
Diversity Petitioners lack standing.
Jurisdiction and Standard of Review
jurisdiction to hear these petitions for review of agency
action under 47 U.S.C. § 402(a) and 28 U.S.C. §
2342(1). As noted above and covered in § III.A below,
Intervenors argue, with the support of the Commission, that
Citizen and Diversity Petitioners lack standing.
§ 706(2) of the Administrative Procedure Act
("APA"), we can set aside agency action that is
arbitrary or capricious. 5 U.S.C. § 706(2). "The
scope of review under the 'arbitrary and capricious'
standard is narrow and a court is not to substitute its
judgment for that of the agency." Motor Vehicle
Mfrs. Ass'n of U.S. v. State Farm Mut. Auto. Ins.
Co., 463 U.S. 29, 43 (1983). Despite this deference, we
require the agency to "examine the relevant data and
articulate a satisfactory explanation for its action[, ]