Mary v. Harris Foundation v. Federal Communications Commission ( 2015 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 27, 2014 Decided January 20, 2015
No. 13-1304
MARY V. HARRIS FOUNDATION,
APPELLANT
v.
FEDERAL COMMUNICATIONS COMMISSION,
APPELLEE
HOLY FAMILY COMMUNICATIONS, INC.,
INTERVENOR
On Appeal of an Order of the
Federal Communications Commission
Donald E. Martin argued the cause and filed the briefs
for appellant.
Matthew J. Dunne, Counsel, Federal Communications
Commission, argued the cause for appellee. With him on the
brief were Jonathan B. Sallet, Acting General Counsel, David
M. Gossett, Acting Deputy General Counsel, and Richard K.
Welch, Deputy Associate General Counsel. Jacob M. Lewis,
Associate General Counsel, entered an appearance.
Denise B. Moline was on the brief for intervenor Holy
Family Communications, Inc. in support of appellee.
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Before: HENDERSON, Circuit Judge, and GINSBURG and
SENTELLE, Senior Circuit Judges.
Opinion for the Court filed by Senior Circuit Judge
GINSBURG.
GINSBURG, Senior Circuit Judge: The Mary V. Harris
Foundation (MVH) and Holy Family Communications, Inc.
each applied to the Federal Communications Commission for
a license to operate a noncommercial educational radio station
in the vicinity of Buffalo, New York, requiring the
Commission to decide between the two. To do so, the agency
used its comparative selection criteria, which it had
promulgated through a notice-and-comment rulemaking. By
a faithful application of those criteria, the Commission found
Holy Family had the superior application and awarded it the
license. MVH appeals that decision, arguing that the criterion
upon which the outcome turned, viz., the weight given to an
applicant’s plan to broadcast to underserved populations,
either violates the Communications Act of 1934, which
requires the Commission to distribute licenses fairly, or is
arbitrary and capricious, in violation of the Administrative
Procedure Act. MVH also appeals the agency’s refusal to
waive application of the selection criteria.
Because the disputed criterion is part of a reasonable
framework for achieving goals consistent with the
Commission’s statutory mandate, and because MVH offers no
support for a waiver except that it came close to the threshold
it needed to get the license, we affirm the decision of the
Commission.
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I. Background
When multiple applicants seek mutually exclusive
licenses to operate a noncommercial educational (NCE) radio
station, the Commission’s choice between them turns first
upon the extent to which their proposals would increase the
access of underserved populations to NCE broadcasting
service. 47 C.F.R. § 73.7002. It does so pursuant to the “fair
distribution” mandate in section 307(b) of the
Communications Act of 1934, as amended, 47 U.S.C.
§ 307(b), which instructs “the Commission [to] make such
distribution of licenses ... among the several States and
communities as to provide a fair, efficient, and equitable
distribution of radio service to each of the same.”
Prior to 1995, when faced with mutually exclusive
applications for an NCE license, the Commission
implemented this mandate through a comprehensive review of
the applicants’ proposals in extended “comparative hearings.”
Because this method proved inefficient and impermissibly
subjective, the Commission conducted a rulemaking
proceeding to revise the NCE comparative selection process.
In re Reexamination of the Comparative Standards for
Noncommercial Educational Applicants, Report & Order, 15
FCC Rcd. 7386 (2000) [hereinafter NCE Order]. Under the
newly promulgated selection process, the Commission first
applies the objective Fair Distribution Rule:
1) An applicant will receive the license if at least 10%
of all the people it proposes to reach will receive
their first or second reserved channel NCE service,
as long as the absolute number of people newly to
receive first or second service is at least 2,000.
2) If more than one applicant meets the 10% threshold,
then the applicant proposing to provide first or
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second service to more people will receive the
license, as long as the difference amounts to at least
5,000 people.
3) If the difference does not amount to 5,000 people,
then all the applicants meeting the 10% threshold
will be compared according to other criteria. If no
applicant meets the threshold, then no preference
will be awarded and all applicants will be compared
according to other criteria.
See 47 C.F.R. § 73.7002. If the Fair Distribution Rule is not
dispositive, then the Commission compares NCE applicants
by awarding points for (1) continuity of local ownership, (2)
having diverse ownership, (3) operating a statewide network
that provides programming to accredited schools, and (4)
proposing to broadcast to a larger area and population than
other applicants. See 47 C.F.R. § 73.7003.
Holy Family and MVH each applied to the Commission
to broadcast NCE programming to the greater Buffalo, New
York area. Holy Family would reach 88,434 people, 5.53%
(or 4,886) of whom were receiving only one NCE service, and
MVH would reach 300,673 people, 9.46% (or 28,453) of
whom were receiving only one NCE service. Accordingly,
neither applicant received a dispositive preference under the
Fair Distribution Rule because neither reached the 10%
threshold, even though MVH proposed to serve
approximately 23,500 more underserved people than did Holy
Family. When it went on to compare the two applicants under
the point system, the Commission tentatively selected Holy
Family. That decision was announced in a 2007 order that
also resolved a number of other application contests. See In
re Comparative Consideration of 76 Groups of Mutually
Exclusive Applications for Permits to Construct New or
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Modified Noncommercial Educational FM Stations, 22 FCC
Rcd. 6101, 6167, ¶ 230 (2007) [hereinafter Omnibus Order].
MVH petitioned the Media Bureau of the Commission to
deny Holy Family’s application because, in addition to
reasons not relevant to this appeal, Holy Family’s proposal
was “far inferior to MVH’s proposal in terms of the fair
distribution of service.” MVH therefore asked the Bureau to
grant it a fair distribution preference despite falling short of
the 10% threshold because “[s]lavish adherence” to the Fair
Distribution Rule yielded an unintended consequence in this
case. The Bureau denied that aspect of the petition,
explaining in its Letter Decision that the threshold is
necessary “to ensure that only the most significant differences
would be decisional” and that comparative differences not
reaching this level of significance are taken into account in
the points awarded for an applicant reaching a larger area and
population. 22 FCC Rcd. 18931, 18935 (2007) [hereinafter
Letter Decision]. It also cited a recent decision of the
Commission denying a waiver to an applicant that would have
brought first or second service to 9.33% of its population,
approximately 25,000 people. Id. at 18934. The Bureau later
denied MVH’s request for reconsideration because MVH did
no more than “reassert[] points that it made previously.” In re
Application of Holy Family Commc’ns, Inc., Mem. Op. &
Order, 26 FCC Rcd. 12791, 12792, ¶ 4 (2011). MVH then
applied to the Commission for review, arguing the 10%
threshold is arbitrary and the Commission should waive it in
recognition of the superiority of MVH’s proposal in achieving
a fair distribution of NCE service. The Commission denied
review, stating only that it agreed with the reasoning of the
Media Bureau. In re Holy Family Commc’ns, Inc., Mem. Op.
& Order, 28 FCC Rcd. 4854, 4854, ¶ 2 (2013) [hereinafter
Final Order].
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MVH now appeals the Commission’s decision under 47
U.S.C. § 402(b)(1), which statute allows an applicant for a
station license to appeal the denial of its application directly
to this court. Holy Family has intervened in support of both
the Fair Distribution Rule and the Commission’s denial of a
waiver.
II. Analysis
MVH argues the Fair Distribution Rule is an
impermissible basis for the Commission’s decision because
the 10% threshold fails to implement the statutory
requirement for “fair, efficient, and equitable distribution of
radio service” and because it is arbitrary and capricious.
MVH also argues that, even if the Rule survives scrutiny, as
applied in this case the result is inconsistent with achieving a
fair distribution, wherefore the Commission abused its
discretion by denying MVH’s waiver request.
A. The 10% Threshold Is Permissible Under the Statute
MVH first argues the 10% threshold is inconsistent with
the Commission’s statutory obligation to “provide a fair,
efficient, and equitable distribution of radio service.” It
points out that the Commission’s historical approach to
achieving a fair distribution was to compare the absolute
numbers of underserved people, not the percentages of the
total populations, that the applicants would serve. What the
Commission did in the past is of no moment, however, if its
current approach reflects a permissible interpretation of the
statute. See Chevron, U.S.A., Inc. v. Natural Res. Def.
Council, Inc., 467 U.S. 837, 863-64 (1984) (“An initial
agency interpretation is not instantly carved in stone. On the
contrary, the agency, to engage in informed rulemaking, must
consider varying interpretations and the wisdom of its policy
7
on a continuing basis.”); Motor Vehicle Mfrs. Ass'n of U.S.,
Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42 (1983)
(“[W]e fully recognize that regulatory agencies do not
establish rules of conduct to last forever and that an agency
must be given ample latitude to adapt their rules and policies
to the demands of changing circumstances.” (citations and
internal quotation marks omitted)). An agency must
nevertheless “display awareness that it is changing position”;
it cannot “depart from a prior policy sub silentio or simply
disregard rules that are still on the books.” FCC v. Fox
Television Stations, Inc., 556 U.S. 502, 515 (2009). This does
not, however, equate to a “heightened standard” for
reasonableness. Id. at 514. The agency need only show “that
the new policy is permissible under the statute, that there are
good reasons for it, and that the agency believes it to be
better.” Id. at 515.
At oral argument, MVH clarified its position; it
contended the only acceptable rule under the statute would be
one that granted the license to whichever applicant would
provide first or second service to more people. Nothing in the
text or history of the statute could possibly be read to require
that specific approach.
Applying the familiar two-step framework of Chevron,
we ask first whether in § 307(b) the Congress addressed and
hence foreclosed the question here in dispute. See 467 U.S. at
843 (agency “must give effect to the unambiguously
expressed intent of Congress”). Section 307(b) was enacted
to redress the “[c]oncentration of radio service in the big city”
at the expense of service to “sparsely populated areas.”
Pasadena Broad. Co. v. FCC, 555 F.2d 1046, 1050 (D.C. Cir.
1977) (internal quotation marks omitted). There can be no
doubt, however, that the Congress left it to the agency to
decide how best to pursue this goal: The litany “fair,
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efficient, and equitable” indicates the Congress delegated to
the Commission the task of balancing myriad considerations
that neither body could fully anticipate. See Alvin Lou Media,
Inc. v. FCC, 571 F.3d 1, 11 (D.C. Cir. 2009) (“The text of
§ 307 is silent regarding ... what the Commission should
consider in making § 307(b) determinations). Indeed,
§ 307(b) was given its present form in 1936 precisely in order
to replace the rigid head counting scheme the Congress had
imposed upon the agency in a 1935 amendment, and to
restore the discretionary approach of the original
Communications Act of 1934. See Pasadena Broad., 555
F.2d at 1050 (“The purpose of this reversion was [in part] to
loose the Commission from the fetters imposed by the quota
system”). By eschewing a more prescriptive test, the
Congress clearly authorized the Commission to decide what
factors would be dispositive in expanding access to radio
service. See Alvin Lou Media, 571 F.3d at 11 (“The absence
of statutory procedural mandates supports the conclusion that
the Commission’s ... procedures ... do not conflict with
§ 307(b)”).
Turning to step two of the Chevron framework, we ask
whether the agency’s interpretation of § 307(b) in this case is
a “permissible” one. 467 U.S. at 843. MVH contends that
whatever “fair, efficient, and equitable distribution” means, it
must include selecting an applicant that will bring second
service to 23,500 more people than would another applicant.
Sensible as that proposition may seem at first blush, its appeal
fades when one recalls that the statute requires the
Commission to ensure access to radio service not only for
underserved people but in particular for underserved people in
sparsely populated areas. The percentage of the total
broadcast population receiving first or second NCE service is
a reasonable proxy for whether the station targets a sparsely
populated area. The 10% threshold ensures that stations
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targeted at big cities do not win a decisive preference by
virtue of incidentally covering pockets of underserved people
who reside in a generally well-served community, as
illustrated below.
Moreover, there is nothing in § 307(b) that suggests
people already receiving one NCE broadcast must be
considered underserved or given a preference at all. Should
people receiving two NCE broadcasts be designated
underserved? What about a community receiving several
commercial broadcasts but no NCE broadcasts? These are
judgments the Congress delegated to the Commission, not to
the courts. It is therefore well within the Commission’s
discretion to award preferences for fair distribution in a
manner that provides an incentive for applicants to expand
service to sparsely populated areas even though it will
occasionally result in the Commission awarding an NCE
license to an applicant that will provide second NCE service
to fewer people than would a competing applicant.
MVH also contends the 10% threshold violates the fair
distribution mandate of § 307(b) because it might cause an
applicant to reduce its total population served – an otherwise
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undesirable goal – in order to increase the percentage of
people in its proposal receiving first or second service. The
selection criteria that are applied if the Fair Distribution Rule
is not dispositive prevent that unintended consequence,
however, by providing comparative points for applicants
covering larger areas and populations. 47 C.F.R.
§ 73.7003(b)(4). MVH also suggests an applicant might
understate its intended area of service when applying to the
Commission “and later enlarge the service area after the
construction permit is issued.” Again, however, the points
gained for proposing a larger and more populous service area
– and hence lost to an applicant proposing a smaller and less
populous area – make this gamesmanship unlikely. In any
event, a provision in the Fair Distribution Rule itself probably
prohibits this result: “For a period of four years of on-air
operations, an applicant receiving a decisive preference
pursuant to this section is required to construct and operate
technical facilities substantially as proposed ....” 47 C.F.R.
§ 73.7002(c).
Accordingly, MVH cannot escape the Rule on the ground
that it conflicts with the § 307(b) mandate for a “fair,
efficient, and equitable distribution of radio service.”
B. The 10% Threshold Is Not Arbitrary and Capricious
MVH next argues the Fair Distribution Rule is arbitrary
and capricious because the Commission did not provide a
reasoned explanation for the 10% threshold either during the
notice-and-comment process or in the Omnibus Order
applying the selection criteria to particular cases, including
this one. Indeed, MVH characterizes the Fair Distribution
Rule as a departure from the “long-standing policy” of case-
by-case analysis with no qualifying threshold. As evidence of
the Commission’s failure of reasoned decision making, MVH
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points out that the agency, in proposing to adopt a rule, never
said it was considering a minimum percentage of people
receiving first or second service as a prerequisite for receiving
a preference for fair distribution and therefore did not benefit
from the comments that applicants would have offered in
response. Presumably because the time has passed for a
procedural challenge to the rule, MVH couches this argument
as an objection to the reasoning underlying the substance of
the Rule and not to the notice-and-comment process by which
the Rule was promulgated. MVH further claims the decision
to impose a threshold for eligibility to receive a fair
distribution preference “lacked any support in the rulemaking
record” because the only commenter that mentioned such a
threshold suggested a 5% level.
Although the Commission must “articulate a satisfactory
explanation for its action” when it changes course, State
Farm, 463 U.S. at 43, there is no requirement that the
explanation derive from the comments it receives. In
adopting the Fair Distribution Rule and applying it to MVH,
the agency fully explained its reason for departing from its
long-standing case-by-case approach.
More specifically, the Commission explained the new
Rule would “eliminate the vagueness and unpredictability of
the [previous] system,” NCE Order, 15 FCC Rcd. at 7394,
¶ 18, and with reference to the goal of fair distribution in
particular, it explained that it sought “to evaluate applications
quickly, with minimal burden on applicants and on the staff,”
id. at 7395, ¶ 21. Moreover, contrary to MVH’s description,
the Commission did draw support for an objective approach
from the comments of interested parties. It specifically
mentioned commenters’ “concern[s] that the population
receiving a first or second service be of a sufficient size to be
meaningful,” that the Commission “define what constitutes a
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significant population receiving first or second service,” and
that its “calculations ... be consistent.” Id. at 7396, ¶ 23.
Next, in response to another applicant’s argument that it
should receive a fair distribution preference despite falling
only slightly short of the 10% threshold, the Commission
explained in the Omnibus Order how the threshold
encourages the fair distribution of NCE licenses: “In well-
populated service areas such as [the applicant’s], the ten
percent component ensures that Section 307(b) eligibility is
limited to NCE applicants offering new service to a
significant portion of the relatively large population.” 22
FCC Rcd. at 6114, ¶ 30. This explanation echoed the reason
the Commission gave in the NCE Order for choosing a 10%
threshold rather than the 5% threshold one commenter had
suggested: “We generally concur with this suggestion ... but
believe that the percentage difference in population coverage
must be greater if it is to distinguish between applicants in
well populated areas, as a threshold matter.” 15 FCC Rcd. at
7397, ¶ 25.
The Commission also explained that the selection criteria
take account of the absolute difference in the scale of
proposed service areas. See Omnibus Order, 22 FCC Rcd. at
6114, ¶ 29. That is, where, as here, there is not a dispositive
preference for an applicant providing first or second service to
more than 10% of its total population, an applicant that would
increase first or second service as a result of serving a larger
area with more people overall can receive a comparative
advantage as part of the point system for its superior scale.
The Commission’s NCE selection criteria therefore advance
the goal of expanding service even when an applicant covers a
large absolute number of underserved people but that number
is less than 10% of the total population to be served. This is
the same explanation that the Media Bureau provided when
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MVH petitioned to deny Holy Family’s tentative selection as
licensee. See Letter Decision, 22 FCC Rcd. at 18934-35.
In sum, the Commission adequately explained the
purpose of the 10% threshold and the NCE selection criteria
overall. Those criteria therefore provided a permissible
foundation for the Commission to decide between the
applications of MVH and Holy Family.
C. The Commission Did Not Abuse Its Discretion by
Denying MVH’s Waiver Request
Lastly, MVH argues the Commission should have made
an exception to the Fair Distribution Rule in its case. The
Commission may, in its discretion, grant a request to waive a
rule if:
(i) The underlying purpose of the rule(s) would not be
served or would be frustrated by application to the
instant case, and ... a grant ... would be in the public
interest; or
(ii) In view of unique or unusual factual circumstances
..., application of the rule(s) would be inequitable,
unduly burdensome or contrary to the public
interest, or the applicant has no reasonable
alternative.
47 C.F.R. § 1.925(b)(3). Our review of the Commission’s
denial of a waiver is “extremely limited,” Blanca Tel. Co. v.
FCC, 743 F.3d 860, 864 (D.C. Cir. 2014); see also id. (“We
will vacate the denial of a waiver only when the agency’s
reasons are so insubstantial as to render that denial an abuse
of discretion.” (internal quotation marks omitted)), because
the agency, as the author of the policy embodied in its rule, is
the appropriate body to determine whether a situation presents
14
unanticipated circumstances that make it more appropriate to
create an exception than to apply the rule. MVH argues the
Commission abused its discretion when it refused to waive
the Fair Distribution Rule because the fair distribution policy
underlying the Rule would be better served by MVH than by
Holy Family. It also claims the Commission did not explain
its decision to deny the waiver.
The Commission did explain its decision by explicitly
adopting the Media Bureau’s reason for denying the waiver.
Final Order, 28 FCC Rcd. at 4854, ¶ 2. The Bureau in turn
had explained it was following one of the Commission’s
decisions in the Omnibus Order. Letter Decision, 22 FCC
Rcd. at 18934. There an applicant to serve a population
9.33% of whom would receive first or second service had
argued the new 10% threshold should not be applied to it
because its underserved population, although less than 10% of
its total population, was much larger than the underserved
populations that the rival applicants proposed to serve.
Omnibus Order, 22 FCC Rcd. at 6113-14, ¶¶ 28-30. The
Commission denied that request for a waiver because, in its
view, adhering to the threshold was necessary in order to
encourage applicants to expand service to communities non-
contiguous to well-populated areas, as explained in Part II.B
above. See id at 6114, ¶ 30.
An agency does not abuse its discretion by applying a
bright-line rule consistently in order both to preserve
incentives for compliance and to realize the benefits of easy
administration that the rule was designed to achieve. See
Comcast Corp. v. FCC, 526 F.3d 763, 767 (D.C. Cir. 2008)
(affirming denial of waiver in part because consistent
application was necessary to preserve “providers’ incentive”
to comply with the policy); Turro v. FCC, 859 F.2d 1498,
1500 (D.C. Cir. 1988) (“[S]trict adherence to a general rule
15
may be justified by the gain in certainty and administrative
ease, even if it appears to result in some hardship in individual
cases”). The Commission’s decision not to waive the
threshold cutoff despite MVH just barely missing it was,
therefore, not an abuse of discretion.
III. Conclusion
In sum, the Commission’s selection of Holy Family’s
application over MVH’s pursuant to its Fair Distribution Rule
was not inconsistent with either § 307(b) of the
Communications Act or the prohibition of arbitrary and
capricious decision making in § 706 of the APA. When the
Commission declined to waive that rule, it neither failed to
explain that decision nor abused its discretion. Accordingly,
the decision of the Commission is
Affirmed.