Prometheus Radio Project v. FCC

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_________________
Nos. 17-1107, 17-1109, 17-1110, 17-1111
_________________
PROMETHEUS RADIO PROJECT
*National Association of Broadcasters
**Cox Media Group LLC,
Intervenors
v.
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)
_________________
Nos. 18-1092, 18-1669, 18-1670, 18-1671,
18-2943 & 18-3335
_________________
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)
2
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)
v.
FEDERAL COMMUNICATIONS COMMISSION;
UNITED STATES OF AMERICA
_________________
On Petition for Review of An Order of
the Federal Communications Commission
(FCC Nos. FCC-1: FCC-16-107; FCC-17-156; FCC-18-114)
_________________
Argued June 11, 2019
Before: AMBRO, SCIRICA, and FUENTES, Circuit Judges
(Opinion filed September 23, 2019)
Angela J. Campbell
Andrew J. Schwartzman
James T. Graves
Institute for Public Representation
Georgetown Law
600 New Jersey Avenue, N.W., Suite 312
Washington, DC 20001
3
Counsel for Petitioners
Prometheus Radio Project,
Media Mobilizing Project
Counsel for Intervenor Respondents
Benton 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
2000 Pennsylvania Avenue, Suite 5300
Washington, DC 20006
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
Stinson Leonard Street
1775 Pennsylvania Avenue, N.W., Suite 800
Washington, DC 20006
Counsel for Petitioner
Multicultural Media Telecom and Internet Council
4
National Association of Black Owned
Broadcasters, Inc.
Craig E. Gilmore
Kenneth E. Satten
Wilkinson Barker Knauer
1800 M Street, N.W., Suite 800N
Washington, DC 20036
Counsel for Petitioners
Scranton Times LP,
Bonneville International Corp.
Jack N. Goodman (Argued)
Law Offices of Jack N. Goodman
1200 New Hampshire Avenue, N.W.
Suite 600
Washington, DC 20036
Counsel for Petitioner
Independent Television Group
Jessica J. Gonzalez
Free Press
1025 Connecticut Avenue, N.W., Suite 1110
Washington, DC 20036
Counsel for Petitioner
Free Press
5
Thomas 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
445 12th Street, S.W.
Washington, DC 20554
Counsel for Respondent
Federal Communications Commission
Makan 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
950 Pennsylvania Avenue, N.W.
Washington, DC 20004
Counsel for Respondent
United States of America
6
Helgi C. Walker (Argued)
Andrew G. I. Kilberg
Gibson Dunn & Crutcher
1050 Connecticut Avenue, N.W.
Washington, DC 20036
Counsel for Intervenor Petitioner/Respondent
National Association of Broadcasters
Yosef Getachew
Common Cause
805 15th Street, N.W., Suite 800
Washington, DC 20005
Counsel for Intervenor Respondent/Petitioner
Common Cause
David E. Mills
Cooley
1299 Pennsylvania Avenue, N.W., Suite 700
Washington, DC 20004
Counsel for Intervenor Petitioner
Cox Media Group LLC
Kevin F. King
Rafael Reyneri
Andrew Soukup
Covington & Burling
850 10th Street, N.W.
One City Center
Washington, DC 20001
7
Counsel for Intervenor Respondent
Fox Corp.
David D. Oxenford
Wilkinson Barker Knauer
1800 M Street, N.W., Suite 800N
Washington, DC 20036
Counsel for Intervenor Respondent
Connoisseur Media LLC
Paul A. Cicelski
S. Jenell Trigg
Lerman Senter
2001 L Street, N.W., Suite 400
Washington, DC 20036
Counsel for Intervenor Respondent
New Corp.
Eve Klindera Reed
Jeremy J. Broggi
Wiley Rein
1776 K Street, N.W.
Washington, DC 20006
Counsel for Intervenor Respondent
Nextar Broadcasting Inc.
8
Jeetander T. Dulani
Pillsbury Winthrop Shaw Pittman
1200 17th Street, N.W.
Washington, DC 20036
Counsel for Intervenor Respondent
Sinclair Broadcast Group Inc.
_________________
OPINION OF THE COURT
_________________
AMBRO, Circuit Judge
Here we 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.
One of these petitioners argues that the FCC did not go
9
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.
Another 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.
We do, 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.
10
I. Background
To 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 III”).
Under the Communications Act of 1934, 47 U.S.C. § 151et 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.” Id.
11
Thrice 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 racial minorities.
After 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.
We also 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
12
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 469–71.
But the 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.
We held 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 50–51.
13
Three 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 further
comment.
A 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
14
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.
In 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. ¶ 21.
As an incentive for established broadcasters to participate
15
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.
Before 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 rehearing.
After 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
16
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
existing petitions.
In 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
cases consolidated.
For 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).
17
The 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.
II. Jurisdiction and Standard of Review
We have 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.
Per § 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[,] including a rational connection
between the facts found and the choice made.” Id. (internal
quotation marks omitted).
When the FCC conducts a Quadrennial Review under
§ 202(h), that provision also affects our standard of review, as it
requires that “no matter what the Commission decides to do to
any particular rule—retain, repeal, or modify (whether to make
more or less stringent)—it must do so in the public interest and
support its decision with a reasoned analysis.” Prometheus I,
18
373 F.3d at 395. When § 202(h) refers to rules being
“necessary,” that term means “useful,” “convenient,” or
“helpful.” Id. at 394.
This case also involves challenges to agency inaction.
Section 706(1) of the APA allows us to “compel agency action
unlawfully withheld or unreasonably delayed.” 5 U.S.C.
§ 706(1). Under this provision, our “polestar is
reasonableness.” Public Citizen Health Research Grp. v. Chao,
314 F.3d 143, 151 (3d Cir. 2002). We must “balance the
importance of the subject matter being regulated with the
regulating agency’s need to discharge all of its statutory
responsibilities under a reasonable timetable.” Oil, Chem. &
Atomic Workers Union v. Occupational Safety & Health Admin.,
145 F.3d 120, 123 (3d Cir. 1998).
With this balance in mind, unreasonable delay
should be measured by the following factors:
First, the court should ascertain the length of time
that has elapsed since the agency came under a
duty to act. Second, the reasonableness of the
delay should be judged in the context of the
statute authorizing the agency’s action. Third, the
court should assess the consequences of the
agency’s delay. Fourth, [it] should consider any
plea of administrative error, administrative
inconvenience, practical difficulty in carrying out
a legislative mandate, or need to prioritize in the
face of limited resources.
Id. (internal quotation marks omitted).
19
III. Analysis
A. Standing
As a threshold matter, Intervenors argue that Citizen and
Diversity Petitioners (called “Regulatory Petitioners” for ease of
reference in this section) lack standing, and the FCC concurs in
that argument. To have standing to sue in federal court under
Article III of the Constitution, a plaintiff must have (1) an
“injury in fact,” meaning “an invasion of a legally protected
interest which is (a) concrete and particularized[,] and (b) actual
or imminent, not conjectural or hypothetical,” that is (2) “fairly
traceable to the challenged action of the defendant,” and it must
(3) be “likely, as opposed to merely speculative, that the injury
will be redressed by a favorable decision.” Lujan v. Defenders
of Wildlife, 504 U.S. 555, 560–61 (1992) (internal citations and
quotation marks omitted).
There are two separate disputes regarding Regulatory
Petitioners’ standing. First is a procedural question. After
Intervenors raised the issue in their merits brief, Regulatory
Petitioners submitted declarations to establish standing along
with their reply briefs. Intervenors now argue that we should
not consider those declarations or the facts asserted within them
because materials to establish standing must be submitted
instead with Regulatory Petitioners’ opening briefs. Even
accepting the declarations, Intervenors still dispute standing.
We disagree on both counts. It is well established that
petitioners challenging agency action may supplement the
administrative record for the purpose of establishing Article III
standing, even though judicial review of agency action is usually
limited to the administrative record. As the Tenth Circuit
20
observed in US Magnesium, LLC v. EPA, 690 F.3d 1157, 1164
(10th Cir. 2012), the Article III standing requirements do not
apply to agency proceedings, and thus there is no reason for the
facts supporting standing to be a part of the administrative
record. It is, moreover, the practice in most of the Circuits that
have considered the matter to accept these materials at any stage
of the litigation. In US Magnesium itself, for example, the
Tenth Circuit accepted supplemental materials that were
attached to a petitioner’s reply brief. Id. (Its discussion did not
squarely address the timing issue, only whether a court could
properly go beyond the administrative record to ascertain
standing at all.) The Seventh Circuit has accepted supplemental
submissions filed after oral argument. Texas Indep. Producers
and Royalty Owners Ass’n v. EPA, 410 F.3d 964, 971 (7th Cir.
2005). And the Ninth Circuit has expressly held that standing
need not be established in an opening brief in cases like this.
Nw. Envtl. Def. Ctr. v. Bonneville Power Admin., 117 F.3d 1520,
1528 (9th Cir. 1997).
Against this, Intervenors marshal two sources of
contradictory authority. First is the Supreme Court’s statement,
in a footnote in Lujan itself, that “standing is to be determined at
the commencement of suit.” 504 U.S. at 570 n.5 (emphasis
added). This is not on point. That footnote sought only to rebut
an argument from Justice Stevens’s dissenting opinion that,
although the agencies whose actions would harm the petitioners
there were not technically parties to the lawsuit, those agencies
would not ignore a decision from the Supreme Court
interpreting the relevant legal provisions, and thus such a
decision would actually redress the petitioners’ injuries. The
majority rejected this argument because it depended entirely on
the contingent fact that the Supreme Court ended up taking the
case, which could not have been known at the start of suit.
Hence “commencement of suit” indicates only that standing
must exist at the beginning of litigation, not that the materials
21
establishing standing must be submitted at that time.
The other authorities cited by Intervenors are cases from
the D.C. Circuit. See, e.g., Sierra Club v. EPA, 292 F.3d 895,
900 (D.C. Cir. 2002). But that Circuit has a provision of its
local rules expressly requiring the petitioners in any “cases
involving direct review . . . of administrative actions” to file
materials establishing standing along with their opening brief.
See D.C. Cir. Rule 28(a)(7). The cases cited by Intervenors all
simply applied this rule, which does not apply to proceedings in
our court.
It appears that this is a question of first impression in our
Circuit. To resolve it, we adopt the view held overtly by the
Ninth Circuit and implicitly by the Tenth and Seventh: parties
may submit materials to establish standing at any time in the
litigation.1 This is especially so here, where the same parties
have been litigating before us for a decade and a half. It was not
unreasonable for Regulatory Petitioners to assume that their
qualification to continue in the case was readily apparent. Cf.
Del. Dep’t. of Nat’l Res. & Envtl. Control v. EPA, 785 F.3d 1,
8–9 (D.C. Cir. 2015) (permitting petitioners to submit standing
materials with their reply brief despite the contrary requirement
of the D.C. Circuit’s local rules when they reasonably believed
1
As noted, other courts have gone so far as to accept standing
materials submitted after oral argument. See Texas Indep.
Producers and Royalty Owners Ass’n, 410 F.3d at 971. This
could be appropriate where the issue of standing is not raised
until oral argument. Although we do not set out a
comprehensive rule for all cases, in general materials to
establish standing should be submitted promptly once standing
is called into question.
22
that standing was self-evident).
Turning to the substance of standing, Intervenors argue
that Regulatory Petitioners’ alleged harm is not sufficiently
imminent to establish standing because any mergers under the
new rules would require FCC approval and would be subject to
judicial review; in effect, Regulatory Petitioners have not
produced evidence that the rule changes will lead to additional
consolidation. In addition, Intervenors continue, Regulatory
Petitioners lack standing because their objections to the rule
changes pertain to ownership diversity and not to the § 202(h)
purpose of promoting competition. We find none of these
arguments persuasive.
The first two arguments share a common theme: although
Regulatory Petitioners will be harmed by consolidation within
the industry (a fact Intervenors do not appear to contest), it is
speculative that the new rules will actually lead to consolidation.
The problem is that encouraging consolidation is a primary
purpose of the new rules. This is made clear throughout the
Reconsideration Order, see, e.g., 32 F.C.C.R. at 9811, 9836.
The Government cannot adopt a policy expressly designed to
have a certain effect and then, when the policy is challenged in
court by those who would be harmed by that effect, respond that
the policy’s consequences are entirely speculative. Intervenors
cite Rainbow/PUSH Coalition v. FCC, 330 F.3d 539, 542–44
(D.C. Cir. 2003), but that case only held that petitioners there,
who sought to assert standing simply as audience-members, had
to demonstrate that a proposed merger would have some specific
baleful effect(s) on the viewing audience, i.e., some degradation
of the programming available to that audience. Here Intervenors
do not contest that consolidation, if it occurs, will harm the
Regulatory Petitioners.
23
Nor is it material that any future mergers would require
FCC approval. The point is that, under the new rules, it will
approve mergers that it would have rejected previously, with the
rule changes in the Reconsideration Order the key factor causing
those grants of approval. See Sara Fischer, The local TV
consolidation race is here, Axios (Aug. 10, 2018), available at
https://www.axios.com/the-local-tv-consolidation-war-is-here-
7c65f3fb-eaab-43c4-9a00-81303867dbee.html (“Many local
broadcasters cite one key reason for their consolidation—
[t]he FCC's landmark decision last year to roll back old
regulations that limited the ability of TV companies to own
properties in the same market.”). Intervenors’ citation to
Clapper v. Amnesty International, USA, 568 U.S. 398, 410–11
(2013), is not to the contrary. It involved a “highly attenuated
chain of possibilities” that, among other things, would make it
difficult to discern whether the challenged law was even the
cause-in-fact of the plaintiffs’ alleged injuries.2 The causal
2
Clapper involved a challenge to Section 702 of the Foreign
Intelligence Surveillance Act, 50 U.S.C. § 1881a, part of the
2008 FISA Amendments. Pub. L. No. 110-261, 122 Stat. 2436(2008). The chain of possibilities the Court identified ran as
follows: “(1) the Government will decide to target the
communications of non-U.S. persons with whom they
communicate; (2) in doing so, the Government will choose to
invoke its authority under [§ 702] rather than utilizing another
method of surveillance; (3) the Article III judges who serve on
the Foreign Intelligence Surveillance Court will conclude that
the Government's proposed surveillance procedures
satisfy [§ 702]’s many safeguards and are consistent with the
Fourth Amendment; (4) the Government will succeed in
intercepting the communications of respondents’ contacts; and
24
chain here is anything but attenuated.
Intervenors’ third argument fails for multiple reasons.
First, they identify incorrectly the goals of § 202(h) as limited to
promoting competition. Instead, as its text makes plain, review
under that provision is intended to determine whether each of
the ownership rules serves the public interest, broadly
conceived, in light of ongoing competitive developments within
the industry. See Prometheus I, 373 F.3d at 390–95.
In addition, there is no requirement that the harm alleged
be closely tied to a challenger’s legal argument in order to have
Article III standing. Intervenors invoke a second
Rainbow/PUSH Coalition v. FCC case, 396 F.3d 1235, 1242–43
(D.C. Cir. 2005), there involving an objection to renewal of a
radio station’s license because it had allegedly engaged in
employment discrimination. Audience members, the D.C.
Circuit held, lacked standing to object because the alleged
violative conduct at issue had not harmed them at all. This does
not support the notion that a party may lack standing, even
though it will suffer a concrete and particularized injury, simply
because it is the wrong “kind” of injury. That argument sounds
not in the requirements of Article III but of “prudential
standing,” a now-discredited doctrine under which courts would
decline to hear cases within their jurisdiction if the plaintiffs’
complaint did not fall within the “zone of interests” protected by
the law they invoked. In Lexmark Int’l, Inc. v. Static Control
Components, Inc., 572 U.S. 118 (2014), the Supreme Court held
that this should be understood solely as a matter of statutory
construction, i.e., of determining whether a given statutory cause
of action extended to a particular plaintiff. Intervenors do not
(5) respondents will be parties to the particular communications
that the Government intercepts.”
25
argue, and could not seriously contend, that Regulatory
Petitioners do not qualify as “aggrieved parties” for purposes of
the APA’s general cause of action. See 5 U.S.C. § 702.
We emerge from the bramble to hold that Regulatory
Petitioners have standing. Thus we proceed to the merits issues
before us.
B. Retention of the Top-Four Rule
Deregulatory Petitioner ITG argues that the FCC’s
decision to retain its “top-four” local television rule, prohibiting
the merger of any two of the top four stations in a given market,
while rescinding the “eight voices” rule, was arbitrary and
capricious. This is an issue we dealt with before, in Prometheus
I, when we upheld the top-four restriction against deregulatory
challenges. We noted that “we must uphold an agency’s line-
drawing decision when it is supported by the evidence in the
record.” Prometheus I, 373 F.3d at 417 (citing Sinclair
Broadcast Group, Inc. v. FCC, 284 F.3d 148, 162 (D.C. Cir.
2002); AT&T Corp. v. FCC, 220 F.3d 607, 627 (D.C. Cir.
2000)). And the Commission had ample record evidence
supporting its decision to draw the line at four: it saw a
“cushion” of audience share between the fourth- and fifth-
ranked stations, reflecting that the top four would be the
affiliates of the four major national networks (ABC, CBS, NBC,
and Fox); the same cushion was apparent in national viewership
figures for the networks themselves; mergers between the third-
and fourth-largest stations in each of the ten largest markets
would produce a new largest station; and mergers among top-
four stations would generally increase the statistical
consolidation of the local market by a substantial amount. Id. at
418.
26
Now ITG argues that the FCC “failed to recognize that
the same reasons it found supported repeal of the Eight-Voice
test also required it to repeal or modify the Top-Four
Prohibition.” ITG Br. at 20. It first takes issue with the notion
of a ratings “cushion” between the top-four and other stations, in
part questioning whether the cushion exists and in part asking
why it should matter. Id. at 28–29. It further contests the FCC’s
reliance on its conclusion, from the 2002 review cycle, that
mergers among top-four stations would generally result in a new
largest station, noting that the evidence shows that mergers
between the third- and fourth-largest stations would not result in
a new largest entity in roughly half of the markets with at least
four stations. Id. at 29–30. Finally, it argues that the new
waiver provision cannot excuse that, as it sees things, the rule as
a whole is not rationally related to the facts. Id. at 31–32.
We disagree. None of ITG’s arguments meaningfully
distinguish our holding in Prometheus I. Just as in that case,
ITG simply takes issue with the way in which the Commission
chose to draw the lines. The basic logic of the top-four rule, as
we recognized in 2004, is that while consolidation may offer
efficiency gains in general, mergers between the largest stations
in a market pose a unique threat to competition. See
Prometheus I, 373 F.3d at 416. Although there might be other
more tailored, and more complex, ways to identify those
problematic mergers, the simplest is to declare, as the
Commission has done, that mergers between two or more of the
largest X stations in a market are not permitted. The choice of
X must be somewhat arbitrary: each market’s contours will be
slightly different, and no single bright-line rule can capture all
this complexity. But the television industry does generally
feature a distinct top-four, corresponding to the four major
national networks, and four is therefore a sensible number to
pick. And this is exactly the kind of line-drawing, where any
line drawn may not be perfect, to which courts are the most
27
deferential. See id. at 417. ITG has much to say about
everything this simple rule misses, but that is beside the point.
The Commission has the discretion to adopt a blunt instrument
such as the top-four rule if it chooses. Indeed we confronted,
and rejected, this exact argument—that treating all top-four
stations the same wrongly ignored the variation in market
structures—in Prometheus I. Id. at 417–18.
Nor is it improper that the FCC’s justification for this
rule is the same as it was in the 2002 review cycle.
Section 202(h) requires only that the Commission think about
whether its rules remain necessary every four years. It does not
imply that the policy justifications for each regulation have a
shelf-life of only four years, after which they expire and must be
replaced. Nor does § 202(h), or any other authority cited by
ITG, require that the Commission always base its decisions on
perfectly up-to-date data. In any event, ITG itself cites more
recent data presented to the Commission through the
administrative process, and this information paints a picture
materially identical to what the Commission saw in 2002.
In this context, we reaffirm our conclusion from
Prometheus I that retention of the top-four rule is amply
supported by record evidence and thus is not arbitrary or
capricious.3
3
Accordingly, we need not address ITG’s argument that the
newly added waiver provision, which allows the Commission to
permit a merger that would otherwise be barred by the top-four
rule if “the reduction in competition is minimal and is
outweighed by public interest benefits,” Reconsideration Order
¶ 82, cannot save an otherwise irrational rule.
28
C. “Comparable Markets” Definition
Diversity Petitioners challenge the Incubator Order’s
definition of comparable markets for radio stations, arguing that
it was not properly noticed and in any event was arbitrary and
capricious.
Their argument devolves to this. The basic concept of
the incubator program uses a waiver of the rules governing local
radio ownership as a reward to induce participation by
established broadcasters. The Notice of Proposed Rulemaking
(“NPRM”) sought comment on the following questions about
these reward waivers: “How should the Commission structure
the waiver program? For example, should the waiver be limited
to the market in which the incubating activity is occurring?
Alternatively, should waiver be permissible in any similarly
sized market? How would the Commission determine which
markets are similar in size?” Reconsideration Order ¶ 137.
Diversity Petitioners take this to indicate only that the
Commission was considering two possibilities: either that the
waiver could only be used in the same market where the
incubating activity occurred or that it could be used in other
markets of similar population. They contend that “size” in this
context is most naturally read as referring to population, or some
other indicator of market size (such as audience or listenership
numbers), as opposed to the number of radio stations in the
market. The two responsive comments on this issue, they
contend, seem to have reflected this assumption. See Diversity
Petitioners’ Br. at 16–17.
Instead, as noted, the Incubator Order adopted a system
of reward waivers that can be used in any “comparable” market,
meaning not a market of similar population but one with a
29
similar number of radio stations. This proposal was first
described in detail in the draft of the Incubator Order made
available before the final order was promulgated. In response,
Diversity Petitioners made several ex parte communications
with the Commission expressing their concern over this
definition of “comparable” markets. Id. at 21–22. Their letters
expressed concern that the proposed rule would allow a
broadcaster to incubate in a small rural market and then use its
reward waiver in a much larger market, such as New York City,
thus getting an outsized return for its investment. Thus
Diversity Petitioners suggested that the rule should disallow
using a waiver in another top-tier “comparable” market that is
not within five spots of the incubating market in the Nielsen
population-based rankings, but the Commission declined to
adopt this proposal. See Incubator Order ¶ 68.
Diversity Petitioners argue that this was not adequate
notice. We have addressed similar claims in both Prometheus I,
373 F.3d at 411–412, and Prometheus II, 652 F.3d at 449–50.
Essentially, “the adequacy of the notice must be tested by
determining whether it would fairly apprise interested persons of
the ‘subjects and issues’ before the agency.” Prometheus I, 373
F.3d at 411 (quoting Am. Iron & Steel Inst. v. EPA, 568 F.3d
284, 293 (3d Cir. 1977)). The strongest fact supporting
Diversity Petitioners’ claim is the swift response by
commenters expressing surprise once the eventual definition of
comparable markets was made public. Courts will consider the
behavior of commenters in assessing whether notice was
adequate. See, e.g., Sprint Corp. v. FCC, 315 F.3d 369, 376
(D.C. Cir. 2003).
But parsing the language of the Notice of
Proposed Rulemaking itself suffices to show that it did provide
adequate notice. Specifically, after asking whether the waiver
30
should be applicable in any similarly sized market, the NPRM
asked how the Commission would determine which markets are
similarly sized. This strongly suggests that the Commission was
considering a range of different ways to measure market size,
and it undercuts Diversity Petitioners’ assertion that the word
“size” could only be read to mean population. See Diversity
Petitioners’ Br. at 16 (“The reference to ‘size’ in the NPRM is
generally understood in the broadcast industry to mean markets
that have similar populations.”).
Turning to the substance of the comparable markets
definition, Diversity Petitioners assert that the FCC’s definition
will create a perverse incentive for established broadcasters to
incubate in markets with low populations but many radio
stations (using the example of Wilkes-Barre, Pennsylvania) and
then use their waivers in “comparable” markets with much
greater populations (e.g., New York City). The Incubator Order
responded to this concern by noting that some markets with
similar populations have vastly different numbers of stations,
and stated that “[i]n crafting our standard, we focused primarily
on preventing the potential for ownership consolidation in a
market with fewer stations and independent owners than the
market in which the incubation relationship added a new
entrant.” Incubator Order ¶ 68. It expected that incubating
entities will not necessarily use their waivers only in the largest
markets, but rather wherever they face ownership restrictions
under the FCC’s rules. Id. And it noted that some incubating
entities might not have relevant ownership interests in other
markets of similar population size, such that they would have no
flexibility under Diversity Petitioners’ proposed rules. Id.Diversity Petitioners posit this as an inadequate response,
but we disagree. They are correct that the Commission did not
rebut the suggestion that waivers might be used in markets with
31
much higher populations than the ones where incubation is
occurring. It explained instead why it did not think this prospect
overly frightening. Diversity Petitioners suggest that this
dynamic could reduce the positive influence of the incubator
program on ownership diversity, as (they claim) smaller markets
like Wilkes-Barre are less diverse. This is not supported by the
record: as Intervenors note, many smaller markets are quite
racially diverse, see Intervenors’ Br. at 50, and Diversity
Petitioners’ rejoinder that these markets contain fewer total
people of color than big cities like New York or Los Angeles,
Diversity Petitioners’ Reply Br. at 17 n.7, is essentially
tautological. And we cannot say that the Commission’s focus
on the potential anti-competitive effects of the waiver program
is unreasonable, for the waivers relate specifically to rules
designed to promote competition.
We therefore hold that the definition of “comparable
markets” in the Incubator Order was adequately noticed and is
not arbitrary and capricious.
D. Effect of Rule Changes on Ownership Diversity
Citizen Petitioners argue that the Commission did not
adequately consider the effect its new rules would have on
ownership of broadcast media by women and racial minorities.
We agree. In Prometheus III we stated that the ongoing attempt
to bring the 2010 and 2014 review cycles to a close must
“include a determination about the effect of the rules on
minority and female ownership.” 824 F.3d at 54 n.13 (internal
quotation marks omitted). Both the 2016 Report & Order and
the Reconsideration Order ostensibly included such a
determination, and each concluded that the broadcast ownership
rules have minimal effect on female and minority ownership.
32
But these conclusions were not adequately supported by the
record, and thus they were arbitrary and capricious.
The 2016 Report & Order retained all of the existing
ownership rules, but it also addressed a proposal to tighten the
local television and radio ownership rules as a means of
promoting ownership diversity. The Commission rejected this
proposal because it found no evidence that reducing
consolidation would have that effect based on the following
evidence. The National Telecommunications and Information
Administration (“NTIA”) had collected data regarding the
number of minority-owned stations in the late 1990s. About a
decade later, the FCC itself began collecting this data through a
survey using what is called “Form 323.” See Prometheus III,
824 F.3d at 44 (discussing the use of Form 323 to gather data
about minority ownership). It did so with the express purpose of
generating better data about ways to increase ownership by
women and minorities. Id.
What the 2016 Report & Order did was to compare the
NTIA data from the late 1990s, around the time that the local
ownership rules were first relaxed, with the subsequent Form
323 data. It saw the same pattern for television and for radio: an
initial decrease in minority-owned stations after the rules
became more flexible to permit more consolidation, followed by
a long-term increase. The NTIA showed 312 minority-owned
radio stations in 1995, just before the local radio rule was
relaxed, followed by 284 in 1996–97, 305 in 1998, and 426 in
1999–2000. Form 323 data, meanwhile, showed 644 such
stations in 2009, 756 in 2011, and 768 in 2013. See 2016 Report
& Order ¶ 126–28. Turning to television, NTIA data showed 32
minority-owned stations in 1998—just before the local
television rule was relaxed—and 23 stations in 1999–2000,
while Form 323 data showed 60 stations in 2009, 70 in 2011,
33
and 83 in 2013. Id. ¶ 77.
Because the trendlines did not show that relaxing these
rules had played a major role in restricting ownership diversity,
the Commission thought that reversing the process (that is,
tightening local radio and television ownership rules) would also
be unlikely to have a major effect. Id. ¶ 126. At the same time
it did not think that further loosening the rules would be an
effective means of promoting diversity, as the data did not
suggest that the increase from the late 1990s through the 2009–
13 period had been caused by the relaxed rules. See id. ¶ 78,
128. The Order stated that the Commission remained “mindful
of the potential impact of consolidation . . . on ownership
opportunities for . . . minority- and women-owned businesses,
and we will continue to consider the implications in the context
of future quadrennial reviews.” Id. ¶ 128. The 2016 Report &
Order also cited this same data to suggest that its modest
revisions to the cross-ownership rules would not be likely to
have a major influence on ownership diversity. Id. ¶ 196 n.586.
The Reconsideration Order, by contrast, did make major
changes to the ownership rules, and it invoked the same
evidence as the 2016 Report & Order to conclude that this
would not meaningfully affect ownership diversity. Thus it
stated, as to the cross-ownership rules, that “record evidence
demonstrates that previous relaxations of other ownership rules
have not resulted in an overall decline in minority and female
ownership of broadcast stations, and we see no evidence to
suggest that eliminating the [Newspaper/Broadcast Cross-
Ownership] Rule will produce a different result and precipitate
such a decline.” Reconsideration Order, ¶ 46. As to the local
television rule, the Order concluded that “the record does not
support a causal connection between modifications to the Local
Television Ownership Rule and minority and female ownership
34
levels;” thus the modifications “are not likely to harm minority
and female ownership.” Id. ¶ 83.
Problems abound with the FCC’s analysis. Most glaring
is that, although we instructed it to consider the effect of any
rule changes on female as well as minority ownership, the
Commission cited no evidence whatsoever regarding gender
diversity. It does not contest this. See Respondent’s Br. at 40
n.14. Instead it notes that “no data on female ownership was
available” and argues that it “reasonably relied on the data that
was available and was not required to fund new studies.” Id.
Elsewhere, however, the Commission purports to have complied
with our instructions to consider both racial and gender
diversity, repeatedly framing its conclusion in terms that
encompass both areas. See, e.g., id. at 33–36. The trouble is
that any ostensible conclusion as to female ownership was not
based on any record evidence we can discern. Courts will find
agency action arbitrary and capricious where the agency
“entirely fail[s] to consider an important aspect of the problem,”
State Farm, 463 U.S. at 43, and that is effectively what
happened here. The only “consideration” the FCC gave to the
question of how its rules would affect female ownership was the
conclusion there would be no effect. That was not sufficient,
and this alone is enough to justify remand.
Even just focusing on the evidence with regard to
ownership by racial minorities, however, the FCC’s analysis is
so insubstantial that it would receive a failing grade in any
introductory statistics class. One basic problem is the way the
Commission treats the NTIA and Form 323 data as comparable,
even though these two data sets were created using entirely
different methodologies. For example, we do not know how
many minority-owned stations the Form 323 survey would have
found in 1999, or how many the NTIA’s methods would have
35
found in 2009. Indeed the NTIA data is known to be
substantially incomplete, and the large increase in minority-
owned radio stations it showed between 1998 and 1999–2000 is
thought to have been caused by largely improved methodology
rather than an actual increase in the number of minority-owned
stations. 2016 Report & Order ¶ 126. 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.
Even if we could treat the use of these two data sets as
reliable, the FCC’s statistical conclusions are woefully
simplistic. They compare only the absolute number of minority-
owned stations at different times, and make no effort to control
for possible confounding variables. The simplest of these would
be the total number of stations in existence. We do not know,
for example, whether the percentage of stations that are
minority-owned went up or down from 1999 to 2009.
And even if we only look at the total number of minority-
owned stations, the FCC did not actually make any estimate of
the effect of deregulation in the 1990s. Instead it noted only
that, whatever this effect was, deregulation was not enough to
prevent an overall increase during the following decade. The
Commission made no attempt to assess the counterfactual
scenario: how many minority-owned stations there would have
been in 2009 had there been no deregulation.
An analogy helps illustrate this point: if an economy that
has been growing at an annual 2% rate suffers a serious
depression in which it shrinks by 10%, and then resumes
growing at the same 2% rate, a decade later it will likely be
36
bigger than it was on the eve of the depression. But this does
not mean that the depression had no effect on the size of the
economy. Nothing in the FCC’s analysis rules out, or even
addresses, the possibility that the 1990s deregulation caused
such a one-time “depression” of minority ownership even if it
did not reverse the long-term increase in minority-owned
stations.
The Commission does not really contest any of these
deficiencies in its data or its analysis. Instead it argues that they
are irrelevant. It notes, first of all, that ownership diversity is
just one of many competing policy goals it must balance when
adjusting its regulations. Respondent’s Br. at 32–33. Thus, the
Reconsideration Order noted that the Commission should not
retain a rule that unduly burdened the competitive practices of
all broadcasters “based on the unsubstantiated hope that these
restrictions will promote minority and female ownership.”
Reconsideration Order ¶ 65. It cites to broad support for
eliminating the newspaper/broadcast cross-ownership rules,
including from minority media owners, as evidence that doing
so would not have an adverse effect on minority ownership.
Respondent’s Br. at 34. And it asserts that, while the data used
was not perfect, it was the only evidence available as to the
effects of earlier rounds of deregulation on ownership diversity.
Id. at 40. The Commission solicited evidence on this issue
during the notice-and-comment period, and it did not receive
any information of higher quality than the NTIA/Form 323 data.
Thus it argues it had no affirmative burden to produce additional
evidence or to fund new studies itself. Id. at 47 (citing Stilwell
v. Office of Thrift Supervision, 569 F.3d 514, 519 (D.C. Cir.
2009)).
We are not persuaded. It is true that “[t]he APA imposes
no general obligation on agencies to produce empirical
37
evidence,” only to “justify its rule with a reasoned explanation.”
Stilwell, 569 F.3d at 519. But in this case the reasoned
explanation given by the Commission rested on faulty and
insubstantial data. In Stilwell the agency had proceeded based
on its “long experience” supervising the regulated industry and
had support from the commenters. Id. Here, the Commission
has not relied on its general expertise, and, outside of the
modifications to the newspaper/broadcast cross-ownership rule,
it does not rely on support from commenters. It has not offered
any theoretical models or analysis of what the likely effect of
consolidation on ownership diversity would be. Instead it has
confined its reasoning to an insubstantial statistical analysis of
unreliable data—and, again, has not offered even that much as
to the effect of its rules on female ownership.
Finally, it is true that promoting ownership diversity is
but one of the policy goals the FCC must consider. But this only
highlights that it is something the Commission must consider. It
is, as State Farm says, “an important aspect of the problem.”
463 U.S. at 43. The Commission might well be within its rights
to adopt a new deregulatory framework (even if the rule changes
would have some adverse effect on ownership diversity) if it
gave a meaningful evaluation of that effect and then explained
why it believed the trade-off was justified for other policy
reasons. But it has not done so. Instead it has proceeded on the
basis that consolidation will not harm ownership diversity. This
may be so; perhaps a more sophisticated analysis would
strengthen, not weaken, the FCC’s position. But based on the
evidence and reasoning the Commission has given us, we simply
cannot say one way or the other. This violated the
Commission’s obligations under the APA and our remand
instructions, and we “may not supply a reasoned basis for the
agency’s action that the agency itself has not given.” Id. (citing
SEC v. Chenery Corp., 332 U.S. 194, 196 (1947).
38
Accordingly, we vacate the Reconsideration Order and
the Incubator Order in their entirety, as well as the “eligible
entity” definition from the 2016 Report & Order. On remand
the Commission must ascertain on record evidence the likely
effect of any rule changes it proposes and whatever “eligible
entity” definition it adopts on ownership by women and
minorities, whether through new empirical research or an in-
depth theoretical analysis. If it finds that a proposed rule change
would likely have an adverse effect on ownership diversity but
nonetheless believes that rule in the public interest all things
considered, it must say so and explain its reasoning. If it finds
that its proposed definition for eligible entities will not
meaningfully advance ownership diversity, it must explain why
it could not adopt an alternate definition that would do so. Once
again we do not prejudge the outcome of any of this, but the
Commission must provide a substantial basis and justification
for its actions whatever it ultimately decides.
E. Delay in Adopting Procurement Rules
Finally, Diversity Petitioners argue that the Commission
has unreasonably delayed action on their proposal to extend the
cable procurement rules to broadcast media. These rules require
cable companies to encourage minority- and female-owned
businesses to do business with them. See 47 C.F.R. § 76.75(e).
A proposal to apply similar rules to broadcast media companies
was one of the proposals we instructed the Commission to
consider on remand all the way back in Prometheus I. See 373
F.3d at 421 n.59. In Prometheus III, the same Diversity
Petitioners argued the FCC had unlawfully refused to address
these proposals. We declined to pass on this challenge, noting
that the Chairman of the FCC had committed to addressing these
proposals in what eventually became the 2016 Report & Order,
and thus the challenge was premature. See 824 F.3d at 50 n.11.
39
At the same time we “note[d] our expectation that the
Commission will meet its proffered deadline.” The 2016 Report
& Order ultimately found that there was “merit in exploring”
whether to adopt this proposal, and stated that it would “evaluate
the feasibility” of doing so. 2016 Report & Order ¶ 330. [J.A.
at 169] The Notice of Proposed Rulemaking for the 2018 cycle
sought comment on a number of aspects of this proposal,
including its constitutionality. See 2018 Quadrennial
Regulatory Review—Review of the Commission’s Broadcast
Ownership Rules and Other Rules Adopted Pursuant to Section
202 of the Telecommunications Act of 1996, Notice of Proposed
Rulemaking, 84 F.R. 6741, 6752 (Feb. 28, 2019)
As set out at length in Prometheus III, when reviewing a
claim of unreasonable agency delay we evaluate four factors:
first, the length of time since the agency came under a duty to
act; second, the context of the statute authorizing the agency’s
action; third, the consequences of the agency’s delay; and,
finally, any claim of administrative error, inconvenience, or
practical difficulty carrying out the obligation, especially in light
of limited resources. See 824 F.3d at 39–40 (quoting Oil, Chem.
& Atomic Workers Union, 145 F.3d at 123).
The Commission argues it has not unreasonably delayed
action because the record as of the 2016 Report & Order did not
support adopting the proposal—largely because the commenters
did not offer any substantial supporting materials for it. See
Respondent’s Br. at 89. We agree. This is not like the eligible
entity issue in Prometheus III, where the FCC had failed to act
for well over a decade. At most, the agency’s failure to act
began with the 2016 Report & Order three years ago. And the
consequence of the Commission’s failure to act at that time was
evidently to keep the proposal alive, rather than rejecting it
outright for lack of support. Given all of this, not to mention
40
that the NPRM for the 2018 cycle has sought further comment
on this proposal, we do not at this time find unreasonable delay
by the Commission.
That being said, we do anticipate that the Commission
will take final action on this proposal one way or another when
it resolves the 2018 review cycle, at which time its decision will
be subject to judicial review. If it does not do so, we may reach
a different conclusion as to the reasonableness of that additional
delay.
F. Conclusion
Citizens and Diversity Petitioners have standing to press
their claims. On the merits, we hold that the FCC’s retention of
the “top-four” prong of its local television ownership rule was
not arbitrary and capricious. We also hold that the Incubator
Order’s definition of “comparable markets” was adequately
noticed and was not arbitrary and capricious. And we decline to
hold that the FCC has unreasonably delayed action on the
proposal to adopt procurement rules for the broadcasting
industry. We do conclude, however, that the Commission has
not shown yet that it adequately considered the effect its actions
since Prometheus III will have on diversity in broadcast media
ownership. We therefore vacate and remand the
Reconsideration and Incubator Orders in their entirety, as well
as the “eligible entity” definition from the 2016 Report & Order.
Citizen Petitioners ask us to appoint a mediator or master
to “ensure timely compliance” with our decision. Citizen
Petitioners’ Br. at 43. Courts will sometimes appoint a special
master to oversee compliance with remedial decrees, but these
41
cases typically involve institutions such as prisons where the
Court could not otherwise easily ascertain whether the defendant
is complying, and the master’s job is limited only to observing
and reporting. See, e.g., Ruiz v. Estelle, 679 F.2d 1115 (5th Cir.
1982), amended in part and vacated in part on other grounds,
688 F.2d 266 (5th Cir. 1982) (per curiam). There is no need for
such an observational special master here, where the
Commission’s actions on remand will be published in the
Federal Register and readily available for subsequent judicial
review. Moreover, we would decline in any event to appoint a
special master with any powers beyond the simply
observational, as doing so would raise grave constitutional
concerns, see e.g. Cobell v. Norton, 334 F.3d 1128, 1141–42
(D.C. Cir. 2003), and we do not doubt the Commission’s good
faith in its efforts to comply with our requests.
Because yet further litigation is, at this point, sadly
foreseeable, this panel again retains jurisdiction over the
remanded issues.
42
Prometheus Radio Project et al. v. Federal Communications
Commission, Nos. 17-1107, 17-1109, 17-1110, 17-1111, 18-
1092, 18-1669, 18-1670, 18-1671, 18-2943 & 18-3335,
SCIRICA, Circuit Judge, concurring in part and dissenting in
part
The Telecommunications Act of 1996 mandates that the
Federal Communications Commission (FCC) regularly review
its broadcast media ownership rules to ensure they remain in
step with the demands of a rapidly evolving marketplace. Yet
some of these rules date back to the 1990s and early 2000s, and
one all the way to 1975, before the Internet revolutionized
American media consumption. Americans today increasingly
rely on online sources for local news and information. Studies
in the record reinforce what most people old enough to recall
the days before WiFi and iPads understand instinctively: the
explosion of Internet sources has accompanied the decline of
reliance on traditional media. The realities of operating a viable
broadcasting enterprise today look little like they did when the
FCC enacted the current ownership rules. Despite all of this,
the FCC’s broadcast ownership rules remained largely static
for fifteen years.
The FCC’s most recent review of its ownership rules
culminated in an order that accounted for these changes. The
FCC evaluated the current market dynamics, concluded the
existing rules built for a pre-Internet marketplace no longer
serve the public interest, and repealed or modified the rules
accordingly. The FCC weighed the rules’ effects on
competition, localism, and diversity to determine what changes
would advance the public interest.
1
I join several parts of my colleagues’ decision,
including their rejection of the challenges to the incubator
program’s “comparable markets” definition and the
Reconsideration Order’s retention of a modified “top-four”
restriction in the Local TV Rule. But I do not share their
conclusion that the Reconsideration Order and Incubator
Order are arbitrary and capricious. In my view, the FCC
balanced competing policy goals and reasonably predicted the
regulatory changes dictated by the broadcast markets’
competitive dynamics will be unlikely to harm ownership
diversity. I would not delay the FCC’s actions. I would allow
the rules to take effect and direct the FCC to evaluate their
effects on women- and minority-broadcast ownership in its
2018 quadrennial review.
I.
The parties are intimately familiar with the FCC’s
quadrennial review of the broadcast ownership rules. See
Prometheus Radio Project v. FCC, 824 F.3d 33 (3d Cir. 2016)
(Prometheus III); Prometheus Radio Project v. FCC, 652 F.3d
431 (3d Cir. 2011) (Prometheus II); Prometheus Radio Project
v. FCC, 373 F.3d 372 (3d Cir. 2004) (Prometheus I). I
summarize the relevant history and principles that guide this
process before briefly reviewing the FCC’s most recent action.
A.
The orders at issue stem from the FCC’s review of its
broadcast ownership rules. Through these rules the FCC
advances its statutory mandate to regulate broadcast media as
“public convenience, interest, or necessity requires.” 47 U.S.C.
§ 303; see Nat’l Broad. Co. v. United States, 319 U.S. 190, 214
2
(1943). Early versions of the ownership rules cabined common
ownership within and across broadcast media to promote the
public interest. See FCC v. Nat’l Citizens Comm. for Broad.,
436 U.S. 775, 780 (1978) (NCCB). The FCC adopted broadcast
ownership rules with the objective to “promot[e] competition
among the mass media” and to “maximiz[e] diversification of
services sources and viewpoints.” Id. at 784 (internal quotation
marks and citation omitted). These in turn would benefit the
public through higher quality programming and broader
options. The FCC determines the appropriate amount of
common ownership by weighing the harms of excessive
concentration—diminished programming diversity, stifled
competition, and the like—against the competitive realities of
running viable broadcast enterprises.
A need for regulatory reform became palpable as the
Internet emerged, transforming how Americans receive news
and entertainment. Rapid technological change had left the
framework regulating media ownership ill-suited to the
marketplace’s needs. The public interest analysis at the heart
of the FCC’s ownership rules is as dynamic as the media
landscape. A static set of ownership regulations could not serve
the public interest for all time. See Prometheus I, 373 F.3d at
437 (Scirica, C.J., dissenting in part and concurring in part).
With continued change all but certain, Congress
retooled the approach to regulating affected markets. It enacted
the Telecommunications Act of 1996, Pub. L. No. 104-104,
110 Stat. 56, which directs the FCC to review the broadcast
ownership rules periodically. The relevant provision, Section
202(h), instructs:
The Commission shall review . . . all of its
3
ownership rules [quadrennially] as part of its
regulatory reform review . . . and shall determine
whether any of [its] 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.
Telecommunications Act of 1996, § 202(h), as amended by
Pub. L. No. 108-199, § 629, 118 Stat. 3, 99–100 (2004).
“[C]ompetition, localism, and diversity” are the values that
guide the FCC’s “public interest” analysis under Section
202(h). Prometheus I, 373 F.3d at 400; see also id. at 446(Scirica, C.J., dissenting in part and concurring in part). The
FCC considers five types of diversity: viewpoint, outlet,
program, source, and minority and women ownership. See id.
at 446 (Scirica, C.J. dissenting in part and concurring in part)
(summarizing the FCC’s analysis in its 2002 biennial review
order).
Embodied in Section 202(h) is the imperative that the
broadcast ownership rules stay in sync with the media
marketplace. See id. at 391. What is in the “public interest”
changes over time as the marketplace evolves, so the FCC must
reassess competitive conditions to set appropriate regulations.
The provision’s language and the accompanying legislative
history reveal a belief that “opening all telecommunications
markets to competition” will best suit a marketplace comprised
of diverse media platforms and shaped by technological
advancement. See H.R. Rep. No. 104-458, at 113 (1996) (Conf.
Rep.). Section 202(h) directs the FCC to assess the harms of
consolidation and abandon restrictions that deprive the public
of competitive benefits associated with some levels of common
4
ownership. 1
0F
B.
The FCC concluded its 2010/14 quadrennial review by
largely retaining the rules restricting common ownership. See
Second Report & Order, 2014 Quadrennial Regulatory
Review, 31 FCC Rcd. 9864 (2016) (2016 Report & Order). The
rules, according to the FCC, “promote[d] competition and a
diversity of viewpoints in local markets, thereby enriching
local communities through the promotion of distinct and
antagonistic voices.” Id. ¶ 3.
On petitions for reconsideration, the FCC repealed or
loosened most of these ownership rules. See Order on
Reconsideration and Notice of Proposed Rulemaking, 32 FCC
Rcd. 9802 (2017) (Reconsideration Order). The thrust of the
FCC’s analysis is that technological innovation and
fundamental changes to the media marketplace have eroded
many of the assumptions underlying the ownership rules. See,
e.g., id. ¶¶ 1, 19, 22, 43, 60, 71–73. The rules have thus ceased
serving the public interest. The Internet boom has ushered in
rivals that enjoy competitive advantages vis-à-vis broadcasters.
The ownership rules impede broadcasters’ ability to engage in
procompetitive transactions without offering compensating
benefits to the public.
The FCC’s repeal of the Newspaper/Broadcast Cross-
Ownership (NBCO) Rule illustrates the Reconsideration
Order’s public interest balancing. The NBCO Rule barred
1
Although framed in deregulatory terms, we have
understood the provision to allow modifications making the
rules “more or less stringent.” Prometheus I, 372 F.3d at 395.
5
combinations between broadcast stations and local newspapers
to preserve “strong local voices.” Id. ¶ 9. When the rule was
adopted in 1975, daily print newspapers constituted a
predominant voice in local news. The rule thus promoted
viewpoint diversity and localism by ensuring independent
sources of local content. But the FCC’s careful study and
informed judgment show this reasoning no longer holds.
Traditional media compete with “digital-only news outlets
with no print or broadcast affiliation.” Id. ¶ 19. The FCC
determined that the burst of Internet sources means local
newspapers’ independence from broadcast is no longer
essential to promote viewpoint diversity. See id. ¶¶ 18–22. The
flipside of this growth is the dwindling significance of print
newspapers. Repealing the NBCO Rule, the FCC determined,
lifts a barrier to combinations that may enhance localism. See
id. ¶ 26. Transactions between broadcasters and local
newspapers could enable “collaboration and cost-sharing” that
improve program quality. Id. ¶ 27. These efficiencies could
“attract new investment in order to preserve and expand” local
programming. Id. ¶ 42. The FCC predicted repeal of the NBCO
Rule “is unlikely to have a significant effect on minority and
female ownership in” broadcast markets in part because
broadcasters would be better positioned to acquire newspapers
than the reverse. Id. ¶ 46. So ownership diversity, like
competition and localism, did not justify keeping the rule. See
id. ¶ 48.
While the FCC’s public interest analysis balances
competition, localism, and diversity, the last consideration has
attracted most of the attention in this litigation. Neither the
2016 Report & Order nor Reconsideration Order found
evidence that showed keeping or changing the rules would
affect ownership diversity. “[E]mpirical study of the
6
relationship between cross-ownership restrictions” and
ownership diversity is complicated by “obstacles that make
such study impractical and unreliable,” the FCC observed, yet
it invited comment on both study design and the likely
connection. Quadrennial Regulatory Review—Review of The
Commission’s Broadcast Ownership Rules and Other Rules
Adopted Pursuant to Section 202 of the Telecommunications
Act of 1996, et al., Further Notice of Proposed Rulemaking and
Report and Order, 29 FCC Rcd. 4371 ¶ 198 n.595 (2014)
(2014 FNPRM). The 2016 Report & Order rejected arguments
that making the rules more restrictive “will promote increased
opportunities for minority and female ownership” because the
record lacked evidence supporting such a causal connection. ¶
77 (Local TV Rule); see id. ¶ 127 (Local Radio Rule). The
Reconsideration Order considered the consequences of
relaxing the rules on ownership diversity and determined the
record did not support arguments that minority and women
broadcasters would be harmed by the changes. See, e.g., ¶ 15
(NBCO Rule) (“[W]e find that eliminating the rule will have
no material effect on minority and female broadcast
ownership.”). No commenter introduced evidence that
contradicted the FCC’s prediction that changing the rules
would unlikely affect ownership diversity. The
Reconsideration Order announced the FCC’s intention to
pursue an incubator program, to facilitate entry and bolster
ownership diversity. See ¶¶ 121–25.
II.
Citizen Petitioners contend the FCC’s orders are
arbitrary and capricious because they do not adequately
analyze the new rules’ likely effects on minority and women
7
broadcast ownership. The APA’s “arbitrary and capricious”
standard together with Section 202(h) guide our review.
We must “hold unlawful and set aside agency action,
findings, and conclusions” that are “arbitrary [or] capricious.”
5 U.S.C. § 706(2)(A). Under this deferential review, we uphold
the FCC’s decision provided it “examine[d] the relevant data
and articulate[d] a satisfactory explanation for its action
including a ‘rational connection between the facts found and
the choice made.’” Motor Vehicles Mfrs. Ass’n v. State Farm
Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) (quoting
Burlington Truck Lines v. United States, 371 U.S. 156, 168
(1962)). Where, as here, the FCC makes predictions about the
likely consequences of its decisions, “complete factual support
in the record for [its] judgment or prediction is not possible or
required.” NCCB, 436 U.S. at 814; Rural Cellular Ass’n v.
FCC, 588 F.3d 1095, 1105 (D.C. Cir. 2009) (“Where . . . the
FCC must make predictive judgments about the effects of [its
regulations], certainty is impossible.”). These predictions are
“less amenable to rigid proof”; they “are more in the nature of
policy decisions entitled to substantial deference.” NAACP v.
FCC, 682 F.2d 993, 1001 (D.C. Cir. 1982), rev’d on other
grounds, FCC v. Fox Telev. Stations, Inc., 556 U.S. 502(2009).
As this Court has emphasized and notes again here,
Section 202(h) “also affects our standard of review.”
Prometheus III, 824 F.3d at 40; see Maj. Op. 18. To the extent
the meaning of Section 202(h) is disputed, the question would
ordinarily “implicat[e] an agency’s construction of the statute
which it administers,” thus triggering “the principles of
deference described in” Chevron U.S.A. Inc. v. Natural
Resources Defense Council, Inc., 467 U.S. 837, 842 (1984).
8
INS v. Aguirre-Aguirre, 526 U.S. 415, 424 (1999); see also
Sinclair Broad. Grp. v. FCC, 284 F.3d 148, 165 (D.C. Cir.
2004) (deferring to FCC’s reasonable interpretation of another
provision of the Telecommunications Act of 1996 under
Chevron).
III.
My colleagues find, “based on the evidence and
reasoning the Commission has given us,” it has not satisfied its
obligation to show changes in the ownership rules “will not
harm ownership diversity.” Maj. Op. 39. But the FCC enjoys a
measure of deference when it balances policy objectives based
on predictions of the consequences of its rules. This key
disagreement leads me to depart from my colleagues in three
respects. First, because the FCC’s consideration of the
interplay between its ownership rules and ownership diversity
satisfies the APA and Section 202(h), I would deny the
challenges to the Reconsideration Order and allow the new
rules to take effect. Second, I believe the substance of the
FCC’s eligible entity definition and the process by which it was
adopted accords with the APA. Third, I do not believe the FCC
acted arbitrarily or capriciously when it adopted the Incubator
Order. Accordingly, I would deny the petitions and allow the
FCC’s orders to take effect.
A.
Citizen Petitioners leave untouched the FCC’s core
determination that the ownership rules have ceased to serve the
“public interest.” The Reconsideration Order chronicles
significant changes throughout media markets and explains
why maintaining the rules no longer serves that public interest
9
goal. No party identifies any reason to question the FCC’s key
competitive findings and judgments. Citizen Petitioners argue
instead that all the rule changes that make up the
Reconsideration Order should be vacated because the FCC did
not adequately consider the new rules’ likely effects on
women- and minority-broadcast ownership. But neither
Section 202(h) nor the APA requires the FCC to quantify the
future effects of its new rules as a prerequisite to regulatory
action. Congress prescribed an iterative process; the FCC must
take a fresh look at its rules every four years. This process
assumes the FCC can gain experience with its policies so it
may assess how its rules function in the marketplace. The FCC
has sufficiently explained its decision and deserves an
opportunity to implement its policies.
Citizen Petitioners overlook “that the Commission’s
judgment regarding how the public interest is best served is
entitled to substantial judicial deference.” FCC v. WNCN
Listeners Guild, 450 U.S. 582, 596 (1981). The FCC’s Section
202(h) review typifies agency policymaking entitled to
deference, subject to the APA. Section 202(h) directs the FCC
to balance competing goals—competition, localism, and
diversity—to guarantee that its “regulatory framework [keeps]
pace with the competitive changes in the marketplace.”
Prometheus I, 373 F.3d at 391. The FCC enjoys a
“considerable amount of discretion” when it weighs objectives
to reach policy decisions. Rural Cellular, 588 F.3d 1095, 1103
(D.C. Cir. 2009) (internal quotation marks and citation
omitted). The record confirms the FCC analyzed the relevant
considerations and properly exercised its discretion. See, e.g.,
Reconsideration Order ¶ 63 (Radio/TV Cross-Ownership
Rule) (concluding the rule “no longer strikes an appropriate
balance between the protection of viewpoint diversity and the
10
potential public interest benefits that could result from the
efficiencies gained by common ownership of radio and
television stations in a local market”); see also id. ¶¶ 55–58
(rule no longer contributes substantially to viewpoint
diversity); id. ¶ 59 (rule is out of step with “realities of the
digital media marketplace”); id. ¶ 62 (“rule already permits
significant cross-ownership in local markets”); id. ¶ 64 (“no
evidence that any additional common ownership” resulting
from repeal “would disproportionately or negatively impact
minority- and female-owned stations”).
Traditional principles of deference are particularly apt
here. Not every decision the FCC makes is susceptible to
precise analysis; some “rest on judgment and prediction rather
than pure factual determinations.” WNCN Listeners Guild, 450
U.S. at 594. Predictions about the future effects of rules not yet
in being are “inherently speculative.” Council Tree Inv’rs, Inc.
v. FCC, 863 F.3d 237, 243 (3d Cir. 2017) (Council Tree IV)
(internal quotation marks omitted).
The FCC reasonably predicted on the record before it
that the new rules would not diminish or harm minority and
women ownership. The question whether the rules and
ownership diversity are interconnected was aired over the
course of the 2010/14 quadrennial review. The FCC invited
comment and data that might shed light on this connection.
See, e.g., 2014 FNPRM ¶ 222. It concluded—based on its
understanding of the broadcast markets, the evidence in the
record, and the only data submitted—that repeal of the rules
was unlikely to harm ownership diversity. See, e.g.,
Reconsideration Order ¶ 83 (Local TV Rule) (“In this lengthy
proceeding, no party has presented contrary evidence or a
compelling argument demonstrating why relaxing this rule
11
will” harm ownership diversity.); id. ¶ 69 (adopting revised
rule based on understanding of changed competitive
dynamics); id. ¶ 71 (observing changes in marketplace but
noting “broadcast television stations still play a unique and
important role in their local communities”); see also 2014
FNPRM ¶ 224 (Radio/TV Cross-Ownership Rule) (noting no
commenter has shown “low levels of [women and minority]
ownership are a result of existing radio/television cross-
ownership rule”). 2 The effect the new rules will have on
2F
women- and minority-broadcast ownership may remain
difficult to uncover until the FCC gains experience with the
new rules. See NCCB, 436 U.S. at 796–97; Council Tree Inv’rs,
Inc. v. FCC, 619 F.3d 235, 252–53 (3d Cir. 2010). Faced with
such a question, “complete factual support in the record for the
2
To the extent my colleagues require the FCC to conduct
empirical analysis on remand, they risk impermissibly adding
requirements beyond the APA. See Perez v. Mortgage Bankers
Ass’n, 135 S. Ct. 1199, 1207 (2015). They quote Stilwell v.
Office of Thrift Supervision’s instruction that the “APA
imposes no general obligation on agencies to produce
empirical evidence.” Maj. Op. 38 (quoting 569 F.3d 514, 519
(D.C. Cir. 2009)). But they argue Stilwell is distinguishable
because there the agency relied on its “long experience”
supervising the industry and did not act on “faulty and
insubstantial data” like the FCC did here. Id. Setting aside the
FCC’s eight decades regulating broadcast media, the basic
principle that the APA “imposes no general obligation on
agencies to produce empirical evidence” applies regardless of
the quality of the data in the record. Stilwell, 569 F.3d at 519;
see Council Tree IV, 863 F.3d at 244 (“[W]e review only for
the use of relevant, not perfect, data.”). Were it otherwise, the
principle would be meaningless.
12
Commission’s judgment or prediction is not possible or
required.” NCCB, 436 U.S. at 814. Under these circumstances
settled principles of administrative law counsel deference to
the FCC’s prediction.3
Citizen Petitioners emphasize that the FCC acted on
faulty minority-ownership data and no women-ownership data.
See, e.g., Citizen Petitioners’ Br. 26–30. This data, which the
FCC acknowledged as imperfect, measured minority
ownership before and after two prior regulatory changes—in
1996 and 1999. Such data weaknesses are not fatal to the
FCC’s regulations—not only because, as noted, data gaps are
inherent to predictive regulation, but also because it is not
certain the data demanded would alter the FCC’s analysis.
First, Citizen Petitioners assume that the experience of these
earlier changes will speak directly to the effects of the
Reconsideration Order. Even if the FCC could obtain
improved data on these decades-old regulatory changes, that
information offers only modest predictive value for the
consequences of the FCC’s current rules regarding
modernization. Second, as noted the FCC considers five types
of diversity, not to mention competition and localism. The
FCC’s lack of some data relevant to one of these considerations
should not outweigh its reasonable predictive judgments,
3
This is true despite Citizen Petitioners’ criticism of the
FCC’s methodology and data. Not only does the FCC have
policymaking discretion, subject to the APA it also has
discretion “to proceed on the basis of imperfect scientific
information, rather than to invest the resources to conduct the
perfect study.” Cablevision Sys. Corp. v. FCC, 649 F.3d 695,
717 (D.C. Cir. 2011) (quoting Sierra Club v. EPA, 167 F.3d
658, 662 (D.C. Cir. 1999)).
13
particularly in the absence of any contrary information, such
that its entire policy update is held up.
The FCC must “repeal or modify” rules that cease to
serve the public interest even when it lacks optimal data.
Telecommunications Act of 1996, § 202(h). The FCC has
revised its Form 323 and conducted outreach programs to ease
compliance with its reporting requirements. 2016 Report &
Order ¶ 265. These are encouraging measures that could make
the FCC’s data more reliable, benefiting future quadrennial
reviews. The FCC intends to take up a variety of diversity-
related proposals in its 2018 quadrennial review. See 2018
Quadrennial Regulatory Review—Review of the Commission’s
Broadcast Ownership Rules and Other Rules Adopted
Pursuant to Section 202 of the Telecommunications Act of
1996, Notice of Proposed Rulemaking, 33 FCC Rcd. 12111 ¶¶
93–121 (2018). I would direct it to follow through on its
announcement as well as study the effects of the latest rules on
ownership diversity. I would not, however, delay the
Reconsideration Order based on the analytical shortcomings
Citizen Petitioners emphasize.
In short, I believe the FCC has explained its decision. I
would deny the petitions and allow the Reconsideration
Order’s rule changes to take effect.
B.
My colleagues remand the 2016 Report & Order’s
eligible entity definition for the FCC to ascertain what effect
the revenue-based definition will have on women and minority
ownership. But the FCC adopted the eligible entity definition
to “serve the public interest by promoting small business
14
participation in the broadcast industry and potential entry by
new entrepreneurs.” See 2016 Report & Order ¶ 279; see id. ¶¶
280–86. It thoroughly explained its policy choice. The record
indicated that the revenue-based eligible entity definition will
promote the FCC’s “traditional policy objectives . . . by
enhancing opportunities for small business[es].” Id. ¶ 281. The
FCC’s brief experience with this definition confirmed “a
significant number of broadcast licensees and permittees
availed themselves of policies based on the revenue-based
eligible entity standard.” Id. ¶ 283 (observing widespread use
of the policy allowing certain eligible entities generous
construction permits). No commenters argued the revenue-
based eligible entity definition does not serve the public
interest according to the FCC’s analysis. Id. ¶ 276.
This stands in contrast to the last time the FCC
employed this definition. During its 2006 quadrennial review
the FCC adopted a revenue-based eligibility entity definition
to promote ownership diversity. The approach failed because
the FCC provided no support for why its definition would “be
effective in creating new opportunities for broadcast ownership
by . . . women and minorities.” Prometheus II, 652 F.3d at 470(internal quotation marks and citation omitted). The key
distinction, of course, is the FCC’s policy decision to reorient
its eligible entity definition. As revised, it is intended to
“encourage innovation and enhance viewpoint diversity” by
“promoting small business participation in the broadcast
industry.” 2016 Report & Order ¶ 235. Because the FCC
pursued the revenue-based definition in past efforts to promote
ownership diversity, it evidently believed the definition would
not harm ownership diversity. Nothing in the present record
suggests otherwise. In my view the FCC properly complied
with its obligations under the APA.
15
C.
Under today’s outcome, I regret that the FCC’s
incubator program will not have an opportunity to stand or fall
on its own merit. See Rules and Policies to Promote New Entry
and Ownership Diversity in the Broadcasting Services, 33 FCC
Rcd. 7911 (2018) (Incubator Order). Citizen Petitioners take
issue with the program’s criteria for who is eligible to realize
its benefits. The FCC adopted a two-prong eligible entity
definition: participants must be both “new entrants” based on
the number of stations owned and “small businesses” based on
revenue. See id. ¶ 16. The FCC designed these criteria “to
encourage new entry into” an “extremely capital-intensive”
industry. Id. ¶ 18. The program’s benefits will not exclusively
accrue to minority and women broadcasters as the eligibility
criteria sweep in all emerging radio broadcasters. This breadth
is consistent with the incubator program’s stated goal. Yet
based on its review of data from incentive auctions, the FCC
predicts that the “new entrant” prong will likely benefit
prospective women and minority applicants. Id. ¶¶ 21–24.
The incubator program is a reasonable policy designed
to “support the entry of new and diverse voices into the
broadcast industry.” Id. ¶ 1. The FCC “has long contemplated
the potential for” a program that pairs emerging and
experienced broadcasters to ease entry into radio broadcasting.
Id. ¶ 2. The Incubator Order established the first program to
convert these ideas into a concrete policy. See ¶ 3. Before
adopting the program, the FCC considered alternative
eligibility criteria and invited “comment on how to determine
eligibility for participation in the incubator program.” Id ¶ 17;
see id. ¶¶ 28–30 (declining to adopt competing proposals that
might prove “administratively inefficient,” and committing to
16
“conduct outreach to help encourage participation in the
incubator program by mission-based entities and Native
American Nations” that are eligible). It then provided
comprehensive reasoning to justify the path it chose. See id. ¶
20 (“The record reflects that individuals seeking to purchase
their first or second broadcast station are the ones that often
face the most challenging financial hurdles.”); id. ¶ 21 (citing
incentive auction data showing definition could modestly
benefit women and minorities); id. ¶ 22 (citing comments
suggesting the same); id. ¶ 25 & n.53 (noting that revenue cap
narrows band of eligible entities); id. ¶ 27 (“Use of an objective
standard has the advantage of being straightforward and
transparent for potential applicants, as well as administrable for
the Commission without application of significant additional
processing resources.”). The FCC complied with the APA in
determining its “eligible entity” definition. Its choice, in my
view, is an aspect of program design largely left to the agency’s
policy discretion, subject to the APA, Telecommunications Act
of 1996, and other relevant statutes. The FCC’s order draws a
rational line between the record and decision made, and I
would allow the incubator program to take effect.
IV.
For the reasons provided, I would deny the petitions for
review and allow the FCC’s orders to take effect.
17