United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued January 14, 2002 Decided April 2, 2002
No. 01-1079
Sinclair Broadcast Group, Inc.
Petitioner
v.
Federal Communications Commission and
United States of America,
Respondents
United Church of Christ, et al.,
Intervenors
On Petition for Review of an Order of the
Federal Communications Commission
Barry H. Gottfried argued the cause for petitioner. With
him on the briefs were Martin R. Leader and Kathryn R.
Schmeltzer.
John R. Feore Jr. and Scott Dailard were on the brief for
amicus curiae Paxson Communications Corporation, urging
reversal. Nina Shafran entered an appearance.
Joel Marcus, Counsel, Federal Communications Commis-
sion, argued the cause for respondents. With him on the
brief were Jane E. Mago, General Counsel, Daniel M. Arm-
strong, Associate General Counsel, FCC, and Jacob A. Lewis,
Attorney, U.S. Department of Justice.
Angela J. Campbell, Amy R. Wolverton, Andrew Jay
Schwartzman and Harold Feld were on the brief for interve-
nors.
Before: Sentelle and Rogers, Circuit Judges, and
Williams, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge Rogers.
Opinion concurring and dissenting in part filed by Circuit
Judge Sentelle.
Rogers, Circuit Judge: Recently, in Fox TV Stations v.
FCC, 280 F.3d 1027 (D.C. Cir. 2002), the court addressed the
national television ownership caps, remanding the national
caps for justification by the Federal Communications Com-
mission and vacating the cable-broadcast cross-ownership
rule. Id., at 1033. In so doing, the court construed s 202(h)
of the Telecommunications Act of 1996, Pub. L. No. 104-104,
110 Stat. 56 ("1996 Act"), to "carr[y] with it a presumption in
favor of repealing or modifying the ownership rules." Id., at
1048. The local television ownership rule now on review
allows common ownership of two television stations in the
same local market if one of the stations is not among the four
highest ranked stations in the market and eight independent-
ly owned, full-power, operational television stations remain in
that market after the merger. See Review of the Commis-
sion's Regulations Governing Television Broadcasting, Re-
port and Order, FCC 99-209 (rel. Aug. 6, 1999), 64 Fed. Reg.
50,651 (Sept. 17, 1999) ("Local Ownership Order"), on recons.,
FCC 00-431 (rel. Jan. 19, 2001), 66 Fed. Reg. 9039 (Feb. 6,
2001) ("Reconsideration Order") (codified at 47 C.F.R.
73.3555(b) (2002)). Sinclair Broadcasting Group, Inc. ("Sin-
clair") challenges the local ownership rule on three principal
grounds: it contends that (1) limiting common ownership of
television stations in a local market to those with eight
independent voices is arbitrary and capricious, (2) failing to
fully grandfather existing local marketing agreements vio-
lates s 202(g) of the 1996 Act, is impermissibly retroactive,
and constitutes an unlawful taking of property in violation of
the Fifth Amendment; and (3) the restrictions violate the
First Amendment. We hold that the Commission has failed
to demonstrate that its exclusion of non-broadcast media in
the eight voices exception is not arbitrary and capricious.
Accordingly, we remand the local ownership rule to the
Commission for further consideration.
I.
The duopoly rule prohibited common ownership or control
of television stations with overlapping "Grade B" signal con-
tours. See 47 C.F.R. s 73.3555(b) (1998). When the rule was
promulgated in 1964, the television marketplace consisted
only of 649 television stations and a small number of cable
systems whose primary purpose was to retransmit the signals
of over-the-air broadcast stations. In 1991, the Commission
issued a Notice of Inquiry ("NOI"), launching an investigation
into whether to relax restrictions on the television industry in
view of changes in the video marketplace in the past 15 years,
as reflected in a staff working paper. See Review of the
Policy Implications of the Changing Video Marketplace,
Notice of Inquiry, FCC 91-215 (rel. Aug. 7, 1991), 56 Fed.
Reg. 40,847 (Aug. 16, 1991). We summarize the rulemaking
background relevant to Sinclair's contention that the eight
voices exception is arbitrary and capricious.
A year after issuing its NOI, the Commission issued a
Notice of Proposed Rulemaking to consider changes to sever-
al of the structural rules that governed the television indus-
try. See Review of the Commission's Regulations Governing
Television Broadcasting, Notice of Proposed Rulemaking,
FCC 92-209 (rel. June 12, 1992), 57 Fed. Reg. 28,163 (June
24, 1992) ("1992 Notice"). The Commission sought com-
ments, with specific "facts, data, and studies," on "whether
and how we might modify the contour overlap rule to afford
broadcasters greater flexibility, yet avoid undue harm to our
underlying competition and diversity concerns," and "whether
we should further modify our local ownership rules to permit
common ownership of television stations with overlapping
contours under certain limited circumstances." In regard to
the latter, the Commission sought comment on whether it
should require that "a minimum number of separately-owned
television stations remain in the market" after mergers of
existing stations. The Commission observed that a minimum
of six independently owned stations would provide outlet
capacity for ABC, NBC, CBS, Fox, and two independents and
permit mergers in 38 of the top 50 markets.
In 1995, the Commission issued a Further Notice of Pro-
posed Rulemaking, proposing a new analytical framework for
evaluating economic and diversity issues in view of develop-
ments that had altered the telecommunications landscape and
changes in the local marketing agreements ("LMAs") rules
for radio. See Review of the Commission's Regulations
Governing Television Broadcasting, Further Notice of Pro-
posed Rule Making, FCC 94-322 (rel. Jan. 17, 1995), 60 Fed.
Reg. 6,490 (Feb. 2, 1995) ("Further Notice"). Among other
things, the Commission sought guidance on the threshold
number, "if any," as would be necessary to ensure a minimum
number of independent voices in a community. The Commis-
sion observed that a merger-based standard, looking to the
merger guidelines of the Justice Department and Federal
Trade Commission, might be too low as their purpose lay in
defining the point at which heightened antitrust scrutiny is
required, and not in encouraging a wide array of voices and
viewpoints. The Commission also sought comment on the
extent to which television ownership rules should take into
account the existence of other competing media. The Com-
mission noted the prospect of increased penetration in the
video marketplace by cable, direct broadcast satellite
("DBS"), and wireless cable, as well as the emergence of
telephone video dialtone service, and the roles of radio and
newspapers as sources of information and news. However, in
view of evidence that several of these alternatives are "sub-
scription services" and lack the public interest obligations of
broadcast stations, the Commission requested evidence on the
extent to which non-broadcast sources "can be considered for
diversity purposes as substitutes for broadcast television."
The Commission stated its "tentative beliefs" that, although it
saw no reason to include other electronic media, cable ought
to be included as a substitute for television stations for
diversity purposes if information was provided that would
enable the Commission to determine the extent to which cable
should be counted. While acknowledging that the question
was closer, the Commission further explained it could not
consider "each radio station" and "each newspaper" as being
the equivalent of a broadcast television station because televi-
sion is more immediate than newspapers, has public interest
obligations not shared by newspapers, has more visual impact
than either newspapers or radio, and is used by more people
as their primary news source than are either radio or newspa-
pers. The Commission further stated, in regard to ownership
caps, that guidelines may be necessary for counting LMAs
capturing more than 15% of a station's airtime, similar to the
radio LMAs rule, and sought information about the preva-
lence, purpose, and private and public benefits of LMAs in
the television market. The Commission also sought comment
on whether further relaxation of the "one-to-a-market" radio-
television cross ownership rule was needed.
Then, on February 8, 1996, Congress enacted the Telecom-
munications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56
("1996 Act"). Focusing on the need to "promote the policies
and purposes of this Act favoring diversity of media voices,
vigorous economic competition, technological advancement,
and promotion of the public interest, convenience, and neces-
sity," 1996 Act s 257(b), Congress itself revamped the land-
scape for radio ownership and the national rules for television
ownership while leaving the local rules for television to the
Commission. Specifically, as to radio, the 1996 Act eliminat-
ed the numerical limit on national ownership and relaxed
common ownership restrictions in local radio markets, provid-
ed a specific minimum number of radio station voices re-
mained, depending on the size of the market and provided no
party owned, operated, or controlled more than 50% of the
stations in any market. See 1996 Act ss 202(a) & (b); see
also Implementation of Sections 202(a) and 202(b)(1) of the
Telecommunications Act of 1996 (Broadcast Radio Owner-
ship), Order, 61 Fed. Reg. 10,689 (March 15, 1996). As to
television, the 1996 Act eliminated the nationwide cap on
common ownership and increased the national audience reach
limit from 25% to 35%, allowing common ownership of televi-
sion stations provided no single entity dominated more than
35 percent of the national viewing audience. See 1996 Act
s 202(c)(1); Fox TV Stations, 280 F.3d at 1033. Regarding
local television ownership rules, Congress directed the Com-
mission to "conduct a rulemaking proceeding to determine
whether to retain, modify, or eliminate its limitations on the
number of television stations that a person or entity may own,
operate, or control, or have a cognizable interest in, within
the same television market." 1996 Act s 202(c)(2). As to the
Commission's "waiver" policy of allowing a single entity to
own a radio-television combination in the largest 25 markets
if 30 independent voices remained post-merger, Congress
directed the Commission to extend this policy to the largest
50 markets. Id. s 202(d). Congress further directed the
Commission to conduct a biennial review of all ownership
rules to "determine whether any of such rules are necessary
in the public interest as a result of competition." Id.
s 202(h). The 1996 Act also addressed LMAs, see id.
s 202(g), which we discuss in Part IV.
In October 1996, the Commission issued a Second Further
Notice of Proposed Rulemaking addressing the duopoly rule,
the "one-to-a-market" rule, and LMAs. See Review of the
Commission's Regulations Governing Television Broadcast-
ing, Second Further Notice of Proposed Rule Making, FCC
96-438 (adopted Nov. 5, 1996; rel. Nov. 7, 1996), 61 Fed. Reg.
66,978 (Dec. 19, 1996) ("Second Further Notice"). The Com-
mission sought comment on its "tentative conclusion" that
common ownership of television stations within a single mar-
ket (defined as Nielsen designated market areas, or "DMAs")
should be permitted so long as their "Grade A" signal con-
tours (narrower than Grade B) did not overlap. The Com-
mission reported that, in response to its proposal in the 1992
Notice to permit common ownership within the same geo-
graphic community so long as six independently owned broad-
cast stations remained, the submitted comments suggested
floors from seven to ten (with NBC suggesting seven). On
the question of "substitutability" of non-broadcast sources for
broadcast, there was lack of unanimity among the parties as
well as a lack of evidence, and the Commission renewed its
request for evidence on substitutability. At this point, the
Commission proposed to exclude other media from the count
of minimum independent voices in a local market "until we
observe further marketplace developments," suggesting the
possibility of further deregulation as part of its future bienni-
al review. The Commission also sought comment on whether
existing LMAs should be grandfathered if LMAs were count-
ed towards ownership caps.
In the local ownership order, the Commission relaxed the
duopoly rule by narrowing the geographic scope from a Grade
B contour approach to a DMA test. See Local Ownership
Order p 8, 47. Thus, common ownership of television stations
is permitted without regard to contour overlap if the stations
are in separate Nielsen DMAs. Common ownership of sta-
tions in the same DMA is permitted, provided their Grade B
contours do not overlap (continuing the previous rule) or,
where there is Grade B overlap, one of the stations is not
among the four highest-ranked stations in the market ("based
on audience share as measured by Nielsen or any comparable
professional, accepted rating service, at the time the applica-
tion is filed") and "eight independently owned, full-power and
operational television stations (commercial and noncommer-
cial) will remain post-merger" ("the eight-voices exception").
Based on its finding that "[b]roadcast stations, particularly
television stations, reach large audiences and are the primary
source of news and entertainment programming for Ameri-
cans," and also because "there remain unresolved questions
about the extent to which [non-broadcast television] alterna-
tives are widely accessible and provide meaningful substitutes
to broad stations," the Commission determined that the only
medium to be counted for purposes of the "eight-voices
exception" is broadcast television, unlike the minimum voices
exception in the radio-television cross-ownership rule, where
certain local newspapers and cable television stations are
counted. Mergers will be presumed to be in the public
interest if one of the stations in a proposed combination is a
failed or failing station, or is not yet constructed. As to
LMAs, as proposed in the Second Further Notice, LMAs
entered prior to November 5, 1996, will be grandfathered,
conditioned on the outcome of the 2004 biennial review;
LMAs entered on or after that date have two years to
conform to the local ownership rule. In a separate order
issued simultaneously with the Local Ownership Order, the
Commission stated that television LMAs will count towards
the television ownership caps if the LMA involves more than
15% of a station's air time. See Review of the Commission's
Regulations Governing Attribution of Broadcast and Ca-
ble/MDS Interests, Report and Order, FCC 99-207 (rel. Aug.
6, 1999), 64 Fed. Reg. 50,622 (Sept. 17, 1999) ("Attribution
Order"), on recons., FCC 00-438 (rel. Jan. 19, 2001), 66 Fed.
Reg. 9,962 (Feb. 13, 2001).
Taking into account geographically large DMAs where
viewers on the outskirts of a DMA may not receive the signal
of some broadcasters in the DMA, the Commission, in a
reconsideration order of January 19, 2001, determined to
count towards the eight voices only those stations whose
Grade B signal contour overlaps with the Grade B contour of
one of the stations in the proposed merger. Reconsideration
Order pp 16-17. The Commission otherwise generally af-
firmed the local ownership rule on reconsideration, rejecting
the First Amendment challenges to ownership restrictions
presented in the initial rulemaking. Id. pp 56-58.
We address in Part II a threshold jurisdictional issue
raised by the Commission. Concluding that we have jurisdic-
tion to consider Sinclair's challenges to the Local Ownership
Order as well as the Reconsideration Order, we address in
Part III Sinclair's contention that the Commission acted
arbitrarily and capriciously in promulgating the local owner-
ship rule; in Part IV Sinclair's challenge to the Commission's
regulation of television LMAs; and in Part V Sinclair's First
Amendment contentions.
II.
Sinclair's petition for review stated that it sought review of
the report and order issued January 19, 2001, and attached a
copy of the Reconsideration Order of that date, which Sin-
clair denominated as the "TV Ownership Order"; the petition
did not mention the underlying Local Ownership Order of
August 6, 1999. In Interstate Commerce Commission v.
Brotherhood of Locomotive Engineers, the Supreme Court
held an agency's reconsideration order is not a final order for
purposes of judicial review. See 482 U.S. 270, 278-280 (1987).
Absent new evidence or changed circumstances presented to
the agency upon reconsideration, the court lacks jurisdiction
to hear a challenge to an agency's order denying reconsidera-
tion of its earlier administrative ruling. See, e.g., Southwest-
ern Bell Telephone v. FCC, 180 F.3d 307, 310-11 (D.C. Cir.
1999); Beehive Telephone Company, Inc. v. FCC, 180 F.3d
314, 318-19 (D.C. Cir. 1999); Entravision Holdings, LLC v.
FCC, 202 F.3d 311, 312 (D.C. Cir. 2000). Sinclair maintains,
however, that its intent to seek review of the Local Owner-
ship Order could be inferred from the statement of issues
that it filed with its docketing statement as well as from its
emergency motion for a stay. The Commission disagrees.
The law in this circuit on when a petitioner's failure to
designate the correct order is fatal has evolved. On the one
hand, the court has held, citing Federal Rule of Appellate
Procedure 15(a)(2)(C), that unless an agency order is speci-
fied in the petition for review, the court lacks jurisdiction to
review the order. Thus, in City of Benton v. Nuclear Regula-
tory Comm'n, 136 F.3d 824 (D.C. Cir. 1998), it was irrelevant
that a docketing statement named one of the correct agency
orders and attached a copy of the unnamed order because the
named order was merely a nonfinal interlocutory order and
was issued while the final order was still pending. Id. at 825.
Similarly, in John D. Copanos and Sons, Inc. v. FDA, 854
F.2d 510, 527 (D.C. Cir. 1988), the court declined to infer an
intent to appeal unnamed agency orders from the petitioner's
reference to a prior order even though they were part of the
same administrative record. In Small Business in Telecom-
munications v. FCC, 251 F.3d 1015, 1021-22 (D.C. Cir. 2001),
the court likewise declined to infer an intent to appeal an
order issued two years earlier that was not part of the same
proceeding, stating that petitioner's motion to amend the
rulings under review, filed four months after the petition,
implied that the unnamed ruling was merely an "afterthought
occurring several months down the road." Id. at 1022. The
petitioner also had not argued that its intent to appeal the
unnamed order could be fairly inferred from a reference in
the statement of issues. See id. at 1021, n.8.
In non-agency cases, on the other hand, looking to Federal
Rule of Appellate Procedure 3(c)(1)(B), the court held in
Brookens v. White, 795 F.2d 178 (D.C. Cir. 1986) (per cu-
riam), that "a mistake in designating the judgment ... should
not result in loss of the appeal as long as the intent to appeal
from a specific judgment can be fairly inferred from the
notice and the appellee is not misled by the mistake." Id. at
180 (quoting 9 J. Moore & B. Ward, Moore's Federal Prac-
tice, s 203.18 (2d ed. 1985)). This approach was confirmed
by the Supreme Court, which instructed in Smith v. Barry,
502 U.S. 244, 248 (1992), that Rule 3's requirements are to be
"liberally construe[d]" such that "when papers are 'technically
at variance with the letter of [Rule 3], a court may nonethe-
less find that the litigant has complied with the rule if the
litigant's action is the functional equivalent of what the rule
requires.' " Rule 3 was amended in 1993 to provide that "[a]n
appeal must not be dismissed for informality of form or title
of the notice of appeal, or for failure to name a party whose
intent to appeal is otherwise clear from the notice." Fed. R.
App. P. 3(c)(4) (2001).
For purposes of the instant appeal, the distinction between
administrative appeals under Rule 15(a)(2)(C) and civil ap-
peals under Rule 3(c)(1)(B) all but evaporated when the court
deemed a petition for review under Rule 15 to be analogous
to a notice of appeal under Rule 3. In Southwestern Bell, the
court, upon noting that no party had suggested that a Rule 15
petition is not analogous to a notice of appeal under Rule 3,
proceeded to apply the Brookens test in looking at contempo-
raneously filed documents to determine whether the intent to
appeal an order unnamed in the petition for review could be
fairly inferred. 180 F.3d at 313 & n*. Other circuits had
taken a similar approach in construing Rule 15(a). See
Gottesman v. INS, 33 F.3d 383, 388 (4th Cir. 1994); Castillo-
Rodriguez v. INS, 929 F.2d 181, 183-84 (5th Cir. 1991); see
also Shell Oil Co. v. Fed. Power Comm'n, 509 F.2d 176, 178
(5th Cir. 1975). The court in Southwestern Bell found no
mention of the unnamed order in either the docketing state-
ment or the preliminary statement of issues. 180 F.3d at 313.
Observing that "the lack of prejudice is a necessary, not
sufficient, condition for excusing a petitioner's mistake in
naming the order of which review is sought," the court denied
the petition for review of an unreviewable order. Id. at 314.
If the unnamed agency order is not mentioned in any contem-
poraneously filed documents, the defect cannot be cured
because the agency has not received adequate notice. See id.
at 313. Similarly, in Entravision Holdings, 202 F.3d at 314,
the court held it lacked jurisdiction to review an agency order
that was mentioned only in describing the reconsideration
order, concluding that "the clear import is that only the
[reconsideration] order is under review." Id. In contrast,
where the unnamed underlying order was mentioned in a
contemporaneously filed document, such as the docketing
statement or certificate of rulings on review, or discussed in a
timely stay motion, the court held that it had jurisdiction
because the petitioner's intent was fairly inferrable and thus
the agency received adequate notice. See Martin v. FERC,
199 F.3d 1370, 1372-73 (D.C. Cir. 2000). Likewise, where the
certificate of rulings being appealed identified an order not
named in the petition for review, but the order was described
in the petition for review in terms indicating that an appeal of
the unnamed underlying order was intended, the court held it
had jurisdiction to review the underlying order because the
petitioner's intent could be fairly inferred. See City of Ocon-
to Falls v. FERC, 204 F.3d 1154, 1160 (D.C. Cir. 2000).
The Commission, relying on Entravision, Small Business
in Telecommunications, and Southwestern Bell, maintains
that because Sinclair's contemporaneously filed documents,
including its certificate of counsel, refer only to, and attach a
copy of, the Reconsideration Order, Sinclair's "boilerplate"
arbitrary and capricious issue in its statement of issues was
insufficient to give fair notice of its intent to appeal more than
the Reconsideration Order. There is some merit to the
Commission's position. Sinclair is a large, sophisticated com-
pany represented by experienced counsel who could be ex-
pected to name in the petition for review the order or orders
Sinclair seeks to appeal, in accordance with the appellate
rules of procedure. Nevertheless, consistent with instruction
from the Supreme Court with regard to Rule 3 and this
court's gloss onto Rule 15(a)(2)(C) of Rule 3(c)(4)'s harmless
error standard, the court is required to look beyond the
petition for review. Thus, for example, in Schoenbohm v.
FCC, 204 F.3d 243 (D.C. Cir. 2000), the court concluded that
the petitioner's statement of reasons "expressly list[ing] each
of his challenges to the underlying order" sufficed to raise the
"substantive merits" of the underlying agency order. Id. at
246. Similarly, in Independent Petroleum Ass'n of America
v. Babbitt, 235 F.3d 588 (D.C. Cir. 2001), and Damsky v. FCC,
199 F.3d 527, 533 (D.C. Cir. 2000), the court concluded that
the petitioners' statements of issues provided clear indication
to the agency of petitioners' intent to appeal the underlying
agency order that was not named in the petition for review.
Babbitt, 235 F.3d at 593-94; Damsky, 199 F.3d at 533.
Sinclair's "non-binding statement of the issues" cannot be
cast aside as readily as the Commission suggests. As the
Commission would have it, Sinclair's arbitrary and capricious
issue is simply "a boilerplate claim raised in every agency
case" and is unlike both the statement of issues in Schoen-
bohm that could have referred only to the underlying order
and not the reconsideration order, and the notice of appeal in
Damsky that referred to the underlying order. The distinc-
tions are not so fine as the Commission suggests. Sinclair's
statement of issues named the "new local television ownership
regulations" as the source of each of its issues, three involving
challenges under the Constitution and a fourth issue stating
that the Commission "acted arbitrarily, capriciously, and oth-
erwise contrary to law in imposing the new local television
ownership regulations on broadcasters." Boilerplate or not,
the fourth issue, fairly read, can only refer to the Local
Ownership Order of August 6, 1999, and thus gave notice to a
reasonably intelligent person that Sinclair intended to make a
substantive challenge to the underlying Local Ownership
Order and not only to the Reconsideration Order. Sinclair's
statement of issues, which was filed with its docketing state-
ment, was filed thirty-four days after the petition for review,
in accordance with the order of the clerk of this court. By
contrast, Sinclair's reliance on its motion for a stay, which
was filed ninety-one days after the petition for review, can
hardly be considered a "contemporaneous" filing. See Small
Business in Telecommunications, 251 F.3d at 1022. More-
over, as in Schoenbolm and Damsky, the Commission does
not claim it was prejudiced or misled, see Schoenbohm, 204
F.3d at 246; Damsky, 199 F.3d at 533, and we find neither
for the Commission addressed both Orders in its brief. Cf.
Oconto Falls, 204 F.3d at 1160; Martin, 199 F.3d at 1373.
Accordingly, because Sinclair's intent to appeal the Local
Ownership Order can be fairly inferred from its contempora-
neously filed statement of issues, the court has jurisdiction to
consider Sinclair's challenges to both Orders.
III.
Sinclair's challenge to the local ownership rule as arbitrary
and capricious focuses primarily on the eight-voices exception,
contending that it lacks any rational foundation or "connec-
tion to the amorphous goal of 'diversity.' " In its view, the
Commission "plucked the number eight out of thin air" and
arbitrarily defined "voices" to exclude media that were includ-
ed in the radio-television cross-ownership rule. Sinclair con-
tends that there is no longer any threat that diversity of
programming sources, much less diversity of viewpoints, will
be diminished if the Commission does not limit ownership of
television stations in local markets, and, consequently, the
Commission has failed to show the local ownership rule is
necessary in the public interest. Sinclair observes that the
Commission acknowledged both that the video marketplace
has changed substantially since 1964 when it first promulgat-
ed the duopoly rule, and that a theory exists that common
ownership can lead to better and more varied programming.
In reviewing a contention that an agency rule is arbitrary
and capricious, the court generally examines whether the
Commission has considered the relevant factors and has
provided a reasoned explanation for its action that does not
"run[ ] counter to the evidence before [it]." Motor Vehicle
Mfrs. Ass'n v. State Farm Mut. Auto Ins. Co., 463 U.S. 29, 43
(1983); see also AT&T Corp. v. FCC, 113 F.3d 225, 229 (D.C.
Cir. 1997). Where issues involve "elusive" and "not easily
defined" areas such as programming diversity in broadcast-
ing, FCC v. National Citizens Committee for Broadcasting,
436 U.S. 775, 796-97 (1978) ("NCCB"), our review is consider-
ably more deferential, according broad leeway to the Commis-
sion's line-drawing determinations. See AT&T Corp. v. FCC,
220 F.3d 607, 637 (D.C. Cir. 2000). Our review here is
necessarily informed, however, by Congress' instruction in
s 202(h) of the 1996 Act that, in addition to reviewing its
ownership rule biennially to "determine whether any of such
rules are necessary in the public interest as a result of
competition[,] [t]he Commission shall repeal or modify any
regulation it determines to be no longer in the public inter-
est." 1996 Act s 202(h). This sentence appears as the last
sentence of Congress's instruction that the Commission re-
view each of its ownership rules every two years "which the
court characterized as designed to continue the process of
deregulation." Fox TV Stations, 280 F.3d at 1033. The
court in Fox TV Stations concluded that "[s]ection 202(h)
carries with it a presumption in favor of repealing or modify-
ing the ownership rules," id. at 1048, thus limiting the Com-
mission's authority only to retain a rule "necessary in the
public interest." 1996 Act s 202(h). So understood, we first
look to the Commission's explanation of the local ownership
rule in the Local Ownership Order and Reconsideration
Order and then turn to Sinclair's challenges to the eight-
voices exception.
A.
In the Local Ownership Order, the Commission focused on
"ensuring a sufficient number of independently owned outlets
... [to] maximize the available independent viewpoints in a
given local market." It took as a basic tenet of national
communications policy that "the widest possible dissemination
of information from diverse and antagonistic sources is essen-
tial to the welfare of the public" in diversity (quoting Turner
Broad. Sys., Inc. v. FCC, 512 U.S. 622, 663 (1994)). That
outcome, the Commission explained, is, in its judgment, sig-
nificantly less likely with greater concentration of media
ownership. In concluding that continued local ownership
restrictions were required in the public interest, the Commis-
sion noted that in Metro Broadcasting, Inc. v. FCC, 497 U.S.
547, 571 n.16 (1990), overruled on other grounds Adarand
Constructors, Inc. v. Pena, 515 U.S. 200 (1995), the Supreme
Court upheld the Commission's judgment that there is a
positive correlation between a station's ownership and its
editorial viewpoint. The Commission noted further that in
NCCB, 436 U.S. at 796-97, the Court held that the Commis-
sion had acted rationally, despite the inconclusiveness of the
rulemaking record, in finding that diversification of ownership
would enhance the possibility of achieving greater diversity of
viewpoint. Observing also that "ownership carries with it the
power to select, to edit, and to choose the methods, manner
and emphasis of presentation," Local Ownership Order p 22
(quoting Metro Broadcasting, 497 U.S. at 571 n.16), the
Commission found that broadcast television station owners
provide essential services, including "local and national news,
election results, weather advisories, access for candidates,
children's educational programming, and other public interest
programming." Both independent stations and the networks'
local affiliates, the Commission found, "air locally-originated
programming, primarily local news and sports." Therefore,
the Commission concluded, reiterating its goal from 1964,
"the greater the diversity of ownership in a particular area,
the less chance there is that a single person or group can
have 'an inordinate effect, in political, editorial, or similar
programming sense, on public opinion at the regional level.' "
As to the need to ensure economic competition, the Commis-
sion reasoned that "[c]ompetition is likely to be greater in
markets where many separate firms vie to serve the customer
than in markets where few firms serve the market." But for
our conclusion in Part III C, infra, the Commission adequate-
ly explained how the local ownership rule furthers diversity at
the local level and is necessary in the "public interest" under
s 202(h) of the 1996 Act.
The Commission determined, in view of changes in the
video marketplace since 1964, that because "there may be
some intermedia substitutability in the markets served by
broadcasters," this "justifies some relaxation of our local
television ownership rules, as it suggests that consumers and
advertisers may have more viable alternatives to broadcast
stations than they once had." Because of the high degree of
consolidation in the broadcast industry since the passage of
the 1996 Act, with a resultant downward trend in the number
of station owners in each market, and in recognition of the
economic benefits of common ownership, the Commission
confronted what it described as an "exercise in line drawing"
between allowing broadcasters to realize economic efficiencies
and service benefits, and ensuring diversity and competition.
The Commission found that "broadcast television [is] the
primary source of news and information for most Americans,"
Local Ownership Order p 40, and concluded that only a
limited degree of relaxation of local ownership restrictions
was warranted in view of unresolved issues about the extent
to which alternatives provide meaningful substitutes to broad-
cast stations and are widely accessible. First, the Commis-
sion found that the total number of television and radio
stations had increased by more than 85% since 1970, while
consumer choice had been increased by the introduction of
DBS, cable, home satellite dishes, open video systems, the
internet, and the less well known sources, wireless cable
(MMDS) and single building cable (SMATV) systems. But,
second, the Commission observed that many non-broadcast
sources "are still establishing themselves in the marketplace
and generally do not provide an independent source of local
news and informational programming." Third, the Commis-
sion reported that, despite repeated requests for evidence
regarding the degree to which cable, DBS, home satellite
dishes, open video systems, the internet and other alternative
media serve as economic substitutes for broadcast television,
it had "received no evidence quantifying intermedia substitut-
ability.... [and was] aware of no definitive empirical stud-
ies."
Sinclair does not contest that, in fact, this was the state of
the record before the Commission. Rather, as the Commis-
sion suggests in its brief, Sinclair is focusing on a changed
television market, with highly diverse programming, that in
its view ownership restrictions cannot help achieve, while the
Commission has focused largely on viewpoint diversity. See,
e.g., Local Ownership Order pp 22-23; Br. of Respondent at
24-27. The latter addresses station owners bringing unique
points of view to the selection of material they air; the former
addresses the number of different types of programs on the
air, regardless of whether they reflect differing editorial
viewpoints. The Commission concludes in its brief on appeal
that, consequently, Sinclair's contention that the Commission
failed to present substantial evidence that ownership diversity
will lead to programming diversity is beside the point. In
any event, Sinclair overstates the burden on the Commission.
In NCCB, the Supreme Court stated that:
As the Court of Appeals observed, "[d]iversity and its
effects are ... elusive concepts, not easily defined let
alone measured without making qualitative judgments
objectionable on both policy and First Amendment
grounds." 181 U.S. App. D.C., at 24, 555 F.2d, at 961.
Moreover, evidence of specific abuses by common owners
is difficult to compile; "the possible benefits of competi-
tion do not lend themselves to detailed forecast." FCC v.
RCA Communications, Inc., 346 U.S. 86, 96 (1953). In
these circumstances, the Commission was entitled to rely
on its judgment, based on experience, that "it is unrealis-
tic to expect true diversity from a commonly owned
station-newspaper combination." NCCB, 436 U.S. at 796-
97.
Sinclair's reliance on Lamprecht v. FCC, 958 F.2d 382 (D.C.
Cir. 1992), is misplaced, for the expectation that a particular
type of person, e.g., women, will select particular types of
programming is not the same as the expectation that a
variety of owners will present a variety of editorial view-
points. To the extent Sinclair maintains that consideration of
competition is beyond the proper purview of the Commission,
it is simply wrong. See NCCB, 436 U.S. at 795. Insofar as
Sinclair relies on the Commission's findings that the media
market has changed since 1964 and that consolidated owner-
ship may result in diversity of programming, Sinclair fails to
acknowledge that the scarcity rationale adopted by the Su-
preme Court in National Broadcasting Co. v. FCC, 319 U.S.
190, 226-227 (1943) ("Nat'l. Broad."); Red Lion Broadcasting
Co. v. FCC, 395 U.S. 367, 388 (1969), is both at issue in
television broadcasting and binding on this court. See Fox
TV Stations, 280 F.3d at 1046. In FCC v. League of Women
Voters, 468 U.S. 364, 376 n.11 (1984), the Supreme Court
stated: "We are not prepared ... to reconsider our long-
standing [scarcity rationale] without some signal from Con-
gress or the [Commission] that technological developments
have advanced so far that some revision of the system of
broadcast regulation may be required." Absent such signals,
the Court has refused to abandon the scarcity rationale. See
Turner Broad., 512 U.S. at 638.
B.
Our review of Sinclair's challenges to the "eight-voices
exception" proceeds in recognition that the Commission "has
wide discretion to determine where to draw administrative
lines," and, therefore, the court will reverse that choice only
for abuse of discretion. See AT&T Corp. 220 F.3d at 627.
Thus, the court is "generally 'unwilling to review line-drawing
performed by the Commission unless a petitioner can demon-
strate that the lines drawn ... are patently unreasonable,
having no relationship to the underlying regulatory prob-
lem.' " Cassell v. FCC, 154 F.3d 478, 485 (D.C. Cir. 1998)
(quoting Home Box Office, Inc. v. FCC, 567 F.2d 9, 60 (D.C.
Cir. 1977)). Choosing the number eight and defining "voices"
are quintessentially matters of line drawing invoking the
Commission's expertise in projecting market results. The
Commission, observing that it has historically used voice-
count tests as a means of promoting diversity, concluded,
upon taking into account current marketplace conditions, that
the eight-voices standard "strikes what we believe to be an
appropriate balance between permitting stations to take ad-
vantage of the efficiencies of television duopolies while at the
same time ensuring a robust level of diversity."
We leave for another day any conclusion regarding the
Commission's choice of eight. There is an obvious interrelat-
edness between the Commission's choice of eight and its
definition of "voices." Succinctly put, Sinclair contends that
the Commission has not provided any justification for count-
ing fewer types of "voices" in the local ownership rule than it
counted in its rule on cross-ownership of radio and television
stations. We agree, for notwithstanding the substantial def-
erence to be accorded to the Commission's line drawing, the
Commission cannot escape the requirements that its action
not "run[ ] counter to the evidence before it" and that it
provide a reasoned explanation for its action. Motor Vehi-
cles, 463 U.S. at 43. Thus, even were we to reject Sinclair's
assertion that the number eight was "plucked out of thin air,"
in view of the rulemaking record, our resolution of Sinclair's
challenge to the Commission's definition of "voices" requires
that the rule be remanded to the Commission. On remand
the Commission conceivably may determine to adjust not only
the definition of "voices" but also the numerical limit.
The Commission included a voice-count provision in both
the radio-television cross-ownership rule and the local televi-
sion ownership rule. For the cross-ownership rule, the Com-
mission included as "voices" not only broadcast television and
radio stations but also independently owned daily newspapers
with circulation exceeding five percent of households in the
DMA, and cable systems providing generally available service
to television households in the DMA, provided all cable
systems, within the DMA are counted as one single voice.
Local Ownership Order p 111. The Commission found that
"[t]he public continues to rely on both radio and television for
news and information, suggesting the two media both contrib-
ute to the 'marketplace of ideas' and compete in the same
diversity market." The Commission also found, in addressing
market shares, that radio and televison "serve as substitutes
at least to some degree for diversity purposes." Further, the
Commission concluded that newspapers and cable systems
"are an important source of news and information on issues of
local concern and compete with radio and television, at least
to some extent, as advertising outlets." Id. p 113. Regarding
cable systems, the Commission acknowledged that public,
educational, and governmental channels "present local infor-
mational and public affairs programming to the public," such
as city council meetings.
By contrast, in the local ownership rule the Commission
excluded all media sources except broadcast television in
defining "voices." It gave two reasons for doing so. First,
the Commission stated that its decision to exclude non-
broadcast media from its definition of "voices" was based on
its finding that "broadcast television remains the primary
source of news and information for most Americans." Id.
p 40 & n.73. To support its finding, the Commission pointed
to a study, "America's Watching, Public Attitudes Toward
Television," by Roper Starch Worldwide, Inc., based on 2000
in-person interviews conducted in-home in March 1997. That
study compared television generally to newspapers and radio,
and then addressed broadcast television programming other
than news. The Roper study also compared broadcast and
cable television as sources of entertainment, finding that 93%
of Americans watched a program on a broadcast network or
local station during a seven-day period, and that the "four
major networks" were the "type of television" that 55% of
families with children under age 18 watched, compared to
cable (22%) and premium cable (9%) and the type of television
Americans "make a special effort to watch" 67% of the time,
compared to 25% for basic cable and 5% for premium cable.
At no point, however, did the Roper study compare broadcast
to non-broadcast television as sources of news, much less as
sources of local news. Rather, the Roper study simply
indicated that nearly 70% of adults get most of their news
from television--almost twice the number that list newspa-
pers as their main source of news and five times the number
that list radio.
Although the Roper study did not differentiate between
broadcast and cable television as sources of news, the Com-
mission repeatedly points to the study as support for its
finding on the primacy of broadcast television in news. This
is true when the Commission states that the "viewpoint a
station uses in presenting the news can have a substantial
impact on a local election" and when it states that "broadcast
television, more so than any other media, continues to have a
special, pervasive impact in our society given its role as the
preeminent source of news and entertainment." Local Own-
ership Order pp 18, 68. Likewise on reconsideration, in reaf-
firming that "only broadcast TV stations ... are the primary
source of news and other information," the Commission points
to its original order, which in turn relies on the Roper study.
See Reconsideration Order p 22.
The rulemaking record does not fill the evidentiary gap.
Comments submitted to the Commission suggested that the
1994 Commission Report reprinted in the Federal Communi-
cations Law Journal stated that "more than 70% of the
public say they depend upon broadcast television for most of
their local news," when, in fact, the Journal article statement
includes neither the word "broadcast" nor the word "local."
See D. Bartlett, The Soul of a News Machine: Electronic
Journalism in the Twenty-First Century, 47 Fed. Comm. L. J.
1, 17 (Oct. 1994). The Commission's conclusion that "the top
four-ranked stations in each market generally have a local
newscast, whereas lower ranked stations often do not have
significant local news programming, given the costs involved,"
offers no further insight on the critical question. Indeed, the
Commission's 1994 Cable Competition Report, stating that
more than half of all viewing hours in cable households during
the 1992-93 season were of re-transmitted broadcast signals
leaves open the possibility of considerable non-retransmitted
programming.
The second reason the Commission gave for limiting
"voices" to broadcast television involved the "unresolved
questions about the extent to which [non-broadcast] alterna-
tives are widely accessible and provide meaningful substitutes
to broadcast stations." Local Ownership Order p 33. In the
1995 Further Notice, the Commission proposed to include
cable systems as well as broadcast, acknowledging that their
low market penetration at the time may rapidly change, and
sought comments on which suppliers should be included. See
Further Notice p 29. The Commission concluded that, in the
absence of "definitive empirical studies quantif[ying] the ex-
tent to which the various media are substitutable in local
markets," the "unresolved questions" on substitutability pre-
cluded further relaxation of local ownership restrictions. The
Commission explained that "[t]his is a critical issue, for many
of the arguments for greater relaxation or elimination of our
ownership rules are premised on the assumption that consum-
ers and advertisers have the option of turning to a large
number of non-broadcast media." This "wait-and-see ap-
proach, however, cannot be squared with its statutory man-
date ... to 'repeal or modify' any rule that is not 'necessary
in the public interest.' " Fox TV Stations, 280 F.3d at 1042.
The deficiency of the Commission's explanation is under-
scored by the explanation it failed to give for defining
"voices" differently in the cross-ownership and local owner-
ship rules. Both rules address monopolization of an industry
in view of the limited number of broadcast licenses available
in spectrum. The cross-ownership rule addresses the prob-
lem of saturation of a community by a single editorial voice
through numerous media outlets, allowing ownership of two
television stations and a varying number of radio stations
depending on the remaining number of independently owned
media voices in the market. The Commission based its
decision to relax the cross ownership restrictions in recogni-
tion of "the growth in the number and types of media outlets,
the clustering of cable systems in major population centers,
the efficiencies inherent in joint ownership and operation of
both television and radio stations in the same market, as well
as the public service benefits that can be obtained from joint
operation." Local Ownership Order p 102. It viewed "the
voice test components of the revised rule [to] ensure that the
local market remains sufficiently diverse and competitive."
Id. Having found for purposes of cross-ownership that
counting other media voices "more accurately reflects the
actual level of diversity and competition in the market," id.
p 107, the Commission never explains why such diversity and
competition should not also be reflected in its definition of
"voices" for the local ownership rule. On reconsideration the
Commission reiterated its earlier reasons for excluding other
media from "voices" in the local ownership rule. See Recon-
sideration Order p 22. To the extent the Commission stated
that "[o]ther video programming distributors, such as cable
and DBS, typically do not serve as independent sources of
local information [as] most of any local programming they
provide is originated by a broadcast station," id., it ignores
the implications of its findings about cable systems in the
cross-ownership rule.
At oral argument, the Commission suggested that even
assuming complete substitutability of cable news for broad-
cast news still would leave the 20% of the viewing public that
lacks cable dependent on television broadcast news alone, and
their sources of diversity would be diminished if non-
broadcast media were counted towards the eight voices test.
As indicated in the Commission's Third Annual Report to
Congress on Cable Competition, No. CS 97-1 (Released
January 2, 1997) and the 1994 Cable Competition Report,
cable, satellite, and other media sources generally are not as
widely available as free television broadcasting to viewers.
Other data pointed to the "digital divide," wherein low income
persons and minorities do not have access to the newer
technologies. In addition, only broadcast stations have public
interest obligations. Yet these considerations did not deter
the Commission from including other media in defining
"voices" for the purpose of cross-ownership, and it is not
readily apparent why they would do so in defining "voices"
for the purpose of local ownership.
Accordingly, we hold that the Commission has failed to
demonstrate that its exclusion of non-broadcast media from
the eight voices exception is "necessary in the public interest"
under s 202(h) of the 1996 Act.
IV.
Challenging the LMA grandfathering provisions of the local
ownership rule, see Local Ownership Order p 133, Sinclair
contends that the Commission's decision to allow only limited
grandfathering for LMAs is contrary to s 202(g) of the 1996
Act, constitutes retroactive rulemaking, and is an unconstitu-
tional taking of property. None of these contentions has
merit.
A.
The question of whether the Commission had ignored the
plain directive of Congress, as Sinclair contends, is ripe for
review. Contrary to the position of the Commission, Sinclair
presents a purely legal question that will not benefit from
consideration in a more concrete form. See Abbott Laborato-
ries v. Gardner, 387 U.S. 136, 149 (1967), overruled on other
grounds by Califano v. Sanders, 430 U.S. 99, 105 (1977); Fox
TV Stations, 280 F.3d at 1048-49; see also Chevron U.S.A.,
Inc. v. Natural Res. Def. Council, 467 U.S. 837 (1984).
The local ownership rule provides that LMAs in effect prior
to November 5, 1996, will be grandfathered until the 2004
biennial review, a period of approximately five years, when
their status will be reviewed on a case-by-case basis to assess
the appropriateness of extending the LMA, based on public
interest factors, digital TV conversion, marketplace condi-
tions, and equities. See Local Ownership Order pp 133, 142,
146-48. Sinclair contends that this is a "blatant violation of
Section 202(g)." We disagree.
Section 202(g) of the 1996 Act provides that:
Nothing in this section shall be construed to prohibit
the origination, continuation, or renewal of any television
local marketing agreement that is in compliance with the
regulations of the Commission.
The statute says nothing about grandfathering. Hence, the
only question is whether the Commission's interpretation of
the statute is reasonable. See Chevron, 467 U.S. at 842-43.
Sinclair's reliance on legislative history is to no avail. The
Senate and House Conference Reports state that grandfa-
thering was to cover "LMAs currently in existence upon
enactment of this legislation," i.e., February 8, 1996. See S.
Conf. Rep. No. 104-230 at 163 (1996); H.R. Conf. Rep. No.
104-458 at 163 (1996). In view of the express acknowledg-
ment in s 202(g) that LMAs were subject to the Commis-
sion's continuing regulatory authority, the Commission could
reasonably conclude that Congress did not intend permanent-
ly to bar the Commission from regulating existing LMAs.
B.
Sinclair's contention that the LMA grandfathering provi-
sion constitutes impermissibly retroactive rulemaking also
fails. The Local Ownership Order alters the future effect,
not the past legal consequences of LMAs. See Celtronix
Telemetry, Inc. v. FCC, 272 F.3d 585, 588 (D.C. Cir. 2001).
The Rule does not either alter the past legality of LMAs or
impose any liability for having engaged in LMAs that now
constitute an impermissible duopoly or introduce any retro-
spective duties for past conduct. See DirecTV, Inc. v. FCC,
110 F.3d 816, 825-26 (D.C. Cir. 1997); Buckeye Cablevision,
Inc., v. FCC, 387 F.2d 220, 227-28 (D.C. Cir. 1967). At most
the Local Ownership Order is secondarily retroactive in
upsetting expectations at the time the LMAs were entered
into. See Bowen v. Georgetown University Hospital, 488
U.S. 204, 219 (1988) (Scalia, J., concurring). In this regard,
the only question is whether the Commission's action was
reasonable. See Bergerco Canada v. U.S., 129 F.3d 189, 192-
93 (D.C. Cir. 1997). Because the Commission's grandfather-
ing decision was consistent with the 1996 Act and fulfills the
public interest in diversity, Sinclair fails to demonstrate that
the Commission's decision is unreasonable and not a permissi-
ble change of policy notwithstanding that it may upset some
expectations. Moreover, the Commission left open the possi-
bility of further extensions on a case by case basis as part of
its biennial review of the Local Ownership Order in 2004.
As to post November 1996 LMAs, the Local Ownership
Order is consistent with the 1996 Act, and the Commission
gave notice in the Second Further Notice, that "television
LMAs entered into on or after the adoption date of this
Notice would be entered into at the risk of the contracting
parties...." Hence, Sinclair could have no reasonable expec-
tation that post November 1996 LMAs would remain unaf-
fected. Sinclair does not suggest that the LMA provisions in
the Local Ownership Order were not a logical outgrowth of
the Commission's proposal. See, e.g., Arizona Pub. Prot. Co.
v. EPA, 211 F.3d 1280, 1299 (D.C. Cir. 2000); see also Nat'l
Black Media Coalition v. FCC, 822 F.2d 277, 283 (2d. Cir.
1987); Spartan Radiocasting Co. v. FCC, 619 F.2d 314, 322
(4th Cir. 1980).
C.
Sinclair's Fifth Amendment takings contention fails too.
Although the Commission half-heartedly contends that this
contention is not properly before the court because it was
first raised in the petition for reconsideration, its reliance on
U.S. Cellular Corp. v. FCC, 254 F.3d 78, 89 (D.C. Cir. 2001),
is misplaced. Sinclair did not seek in its petition for reconsid-
eration to submit new evidence to the Commission that the
Commission declined to receive, as occurred in U.S. Cellular.
Rather, Sinclair raised a legal argument in its petition that
the Commission had an opportunity to address on reconsider-
ation. Likewise, the Commission's contention that Sinclair's
claim is not ripe with respect to LMAs entered before No-
vember 1996 is unpersuasive for the same reasons we noted
in rejecting the Commission's contention that Sinclair's statu-
tory challenge was unripe. See supra Part III A.
On the merits, however, the Commission's brief is persua-
sive. First, Sinclair's takings contention appears, the Com-
mission suggests, to be challenging the Commission's decision
to consider LMAs attributable ownership interests and there-
by subject them to the Local Ownership Order. The attribu-
tion decision was reached in the Attribution Order, which is
not before the court. See Attribution Order p 83. Second,
Sinclair fails to show that the grandfathering provision of the
Local Ownership Order "reaches a certain magnitude" as to
deprive an owner of the use of property. See Pa. Coal Co. v.
Mahon, 260 U.S. 393, 413 (1922). Sinclair has neither provid-
ed information about the economic impact on its business of
LMA termination, nor provided a basis on which to determine
that there will be significant interference with its expecta-
tions. See Penn Cent. Transp. Co. v. City of New York, 438
U.S. 104, 124 (1978). Sinclair's consolidated comments to the
Commission simply recount Sinclair's growth and anticipated
growth, showing its use of LMAs in some instances, only to
conclude summarily that full grandfathering (to encompass
the full length of the LMAs including contract term, renewals
and assignments permitted by the contract) is necessary to
avoid "considerable economic harm to the broadcast television
industry." Somewhat more helpfully, Sinclair states in its
brief that each LMA (without stating how many there are)
has a contract term of five years with a potential five year
renewal. Without discounting Sinclair's concern about inves-
tors' and banks' financial commitments to the television in-
dustry, the information Sinclair has provided still fails under
the Penn Central analysis.
As to LMAs entered prior to November 5, 1996, the Local
Ownership Order imposed an additional obligation about
which the Commission had forewarned in the 1992 Notice.
The Local Ownership Order grandfathers LMAs for a mini-
mum of five years, with the possibility of extension as part of
the Commission's 2004 biennial review. Regarding LMAs
entered thereafter, the Commission warned in the Second
Further Notice that LMAs entered into on or after November
5, 1996, "would be entered into at the risk of the contracting
parties." Hence, regardless of the contract date, Sinclair fails
to show that it had a reasonable expectation of a ten-year
contract period commencing after November 4, 1996. See
Ruckleshaus v. Monsanto Co., 467 U.S. 986, 1005-06 (1984);
FHA v. The Darlington, Inc., 358 U.S. 84, 91 (1958). Sinclair
makes no attempt to show that the character of the govern-
mental action at issue, where the Commission balanced inter-
ests to determine what was in the public interest, is not of the
kind that the Supreme court has declined to hold constitute a
taking. Cf. Connolly v. Pension Benefit Guaranty Corp., 475
U.S. 211, 225-27 (1986) (citations omitted).
V.
Finally, Sinclair's First Amendment challenge to the Local
Ownership Order is foreclosed by Supreme Court precedent
as well as this circuit's precedent. First, contrary to the
Commission's view, Sinclair's First Amendment challenges
are properly before the court because these claims were
raised early in the rulemaking, although not by Sinclair and
not expressly addressed by the Commission until its Recon-
sideration Order. See Washington Ass'n for Television and
Children v. FCC, 712 F.2d 677, 682 & n.10 (D.C. Cir. 1983).
Second, the court applies a rational basis standard of
review. See NCCB, 436 U.S. at 796, 801; Time Warner
Entm't Co. v. U.S., 211 F.3d 1313, 1320, 1321 (D.C. Cir. 2000),
cert. denied, 121 S. Ct. 1167 (2001); Fox TV Stations, 280
F.3d at 1046. Sinclair's contention that the Local Ownership
Order regulates the content of speech and thus is subject to
strict scrutiny review, fails under NCCB, where the Supreme
Court reviewed analogous restrictions on common ownership
in a local market and held that such restrictions are "not
content related." 436 U.S. at 801; see also Fox TV Stations,
280 F.3d at 1046; Time Warner, 211 F.3d at 1320, 1321.
Sinclair's alternative contention that the Local Ownership
Order is subject to intermediate scrutiny is contrary to
Turner Broad., 512 U.S. at 637, where the Court refused to
abandon the scarcity rationale as a reason for minimal scruti-
ny in the broadcast context. Id.; see Fox TV Stations, 280
F.3d at 1046. Although more than minimal scrutiny may be
required when a class of broadcasters is singled out, see
League of Women Voters, 468 U.S. at 384; Ruggiero v. FCC,
278 F.3d 1323, 1324-25, 1330-31 (D.C. Cir. 2002) (citing News
America Publ'g, Inc. v. FCC, 844 F.2d 800, 812 (D.C. Cir.
1988)), the Local Ownership Order makes no such distinction.
Sinclair's suggestion, based on its attorney's letter stating
that "some at the Commission have a clear and distinct bias
toward Sinclair," fails to show that the choice of the number
eight was picked with intent to harm Sinclair; at best, the
letter's reliance on hearsay reported in trade press is specula-
tion about administrative motivations, PLMRS Narrowband
Corp. v. FCC, 182 F.3d 995, 1002 (D.C. Cir. 1999), and thus
insufficient to invoke more than minimal review. Therefore,
the only question is whether the Local Ownership Order is
rationally connected to its goals of ensuring a diversity of
voices and adequate competition in television broadcasting.
See NCCB, 436 U.S. at 795-96; Turner Broad., 512 U.S. at
663.
Third, because "there is no unabridgeable First Amend-
ment right comparable to the right of every individual to
speak, write, or publish" to hold a broadcast license, NCCB,
436 U.S. at 799 (quoting Red Lion, 395 U.S. at 388); Nat'l
Broad., 319 U.S. at 227, Sinclair does not have a First
Amendment right to hold a broadcast license where it would
not, under the Local Ownership Order, satisfy the public
interest. NCCB, 436 U.S. at 800. In NCCB, the Supreme
Court upheld an ownership restriction analogous to the Local
Ownership Order, based on the same reasons of diversity and
competition, id. at 794-95, 800, 802, in recognition that such
an ownership limitation significantly furthers the First
Amendment interest in a robust exchange of viewpoints. Id.
at 795, 796-97; see also League of Women Voters, 468 U.S. at
380. The Court stated in NCCB that it saw "nothing in the
First Amendment to prevent the Commission from allocating
licenses so as to promote the 'public interest' in diversification
of the mass communications media." NCCB, 436 U.S. at 795
(quoting Associated Press v. United States, 326 U.S. 1, 20
(1945)). Sinclair's protest that NCCB is no longer controlling
because it is undermined by the advent of cable television,
DBS, and the internet, is to no avail. The rationale in NCCB,
based on the necessity that the Commission choose between
competing applicants for the same channel and the idea that
government allocation of broadcast frequencies is essential,
436 U.S. at 799, applies here. See League of Women Voters,
468 U.S. at 376 n.1; Ruggerio v. FCC, 278 F.3d at 1329;
News America, 844 F.2d at 811. As this court recognized in
Tribune Co. v. FCC, 133 F.3d 61 (D.C. Cir. 1998), "nothing in
the subsequent decisions of the [Supreme] Court has called
the constitutional validity of the [NCCB] doctrine into ques-
tion." Id. at 69. That said, allocation remains the Commis-
sion's task in addressing its duopoly rule, and for reasons we
elaborate in Part III supra, we hold that as a structural rule
the Local Ownership Order is consistent with the First
Amendment.
To the extent that Sinclair frames its First Amendment
challenge as one against the eight-voices exception rather
than the Rule itself, its challenge is meritless. Sinclair
contends that by comparison with the more inclusive standard
for radio and television cross-ownership, the definition of
"voices" here creates an overly broad restriction on television
broadcasters' right to speak. As an exception to the local
ownership restrictions in the Local Ownership Order, the
eight-voices exception presents no separate constitutional im-
plications because it imposes no independent burden on
speech; if anything, as the Commission states in its brief, see
Respondent's Br. at 30, it decreases the minimal burden on
speech imposed by the Local Ownership Order.
Accordingly, we hold that, notwithstanding Sinclair's failure
to name the Local Ownership Order in its petition for review,
the court has jurisdiction to consider Sinclair's challenge to
that Order, in addition to the Reconsideration Order, in view
of its timely filed statement of issues, which gave fair notice
of its intention to appeal the underlying Local Ownership
Order. Although we reject Sinclair's statutory challenge to
the local ownership rule provision on television LMAs and its
constitutional challenges to the local ownership rule as a
whole, we hold that the definition of "voices" in the local
ownership rule is arbitrary and capricious, and we remand
the rule to the Commission for further consideration.
Sentelle, Circuit Judge, concurring and dissenting in
part: I agree with the majority that we have jurisdiction to
hear this case. I also agree that the limited grandfathering
of local marketing agreements ("LMAs") in the Review of the
Commission's Regulations Governing Television Broadcast-
ing, Report and Order, 14 FCC Rcd 12903 (1999) ("Local
Ownership Order"), is permissible. Therefore I concur in
Parts II and IV of the majority opinion. I agree that the
amended "television duopoly" rule, as revised to include the
"eight voices" exception (the "Local Ownership Rule"), is
arbitrary and capricious, therefore I concur in Part III.B.
However, I write separately and do not join Part III.A
because I would find the Local Ownership Rule arbitrary and
capricious for additional reasons. Further, because I believe
that section 202(h) of the Telecommunications Act of 1996
mandates that we vacate this arbitrary and capricious Rule
and not merely remand it, I dissent from the decision not to
vacate.
I.
The Federal Communications Commission ("FCC" or
"Commission") argues that the "eight voices" exception to the
duopoly rule is a "reasonable exercise of the Commission's
line-drawing authority." It claims that the "eight voices"
exception ensures the "appropriate level of broadcast diversi-
ty," but also insists that it is unnecessary for it to present
substantial evidence that the proposed rule will result in
"diversity." In the absence of evidence, the Commission then
ducks for cover under the Supreme Court's dicta in FCC v.
National Citizens Committee for Broadcasting, 436 U.S. 775
(1978) ("NCCB"). There the Court observed that diversity
and its effects were "elusive concepts, not easily defined."
NCCB, 436 U.S. at 796. But that does not mean that the
Commission may simply cry "diversity!" and thus avoid
meaningful appellate review. Purporting to promote "diversi-
ty" does not give the agency a free pass. While it is true that
the Commission has "wide discretion to determine where to
draw administrative lines," AT&T Corp. v. FCC, 220 F.3d 607,
627 (D.C. Cir. 2000), such discretion is not unfettered-and
here there are no meaningful limits to the diversity rationale
offered by the Commission. See Majority Op. Part III.A, at
15-18. There is no suggestion as to how much diversity is
enough, how much is too little, or how much is too much. As
Commissioner Furchtgott-Roth argued in dissent from the
Local Ownership Rule, the "amorphously-defined goal [of
diversity], and the assumptions upon which it rests, have not
been clearly articulated or supported by empirical facts."
Local Ownership Order, 14 FCC Rcd 12903, FCC 99-209, at
91 (Aug. 6, 1999). "[A]ll we have here, where the goal of
'diversity' in broadcasting is concerned, is an 'overwhelming
hunch.' " Id. at 91-92. The FCC offers us only truisms,
stating that it has struck the right balance, without explaining
why. See id. at 92. The Commission should define its
diversity goal, and in doing so explain the distinctions (and
interaction) between programming diversity and viewpoint
diversity, rather than simply quoting boilerplate on the "elu-
siveness" of diversity.
Even accepting for the moment that the FCC could regu-
late in the name of diversity without further elucidating that
goal, it must still, at a minimum, explain how its rule furthers
the goal of diversity. Here the FCC claims that the duopoly
rule, mitigated only by an eight voices exception, is necessary
in order to preserve a diversity of viewpoints in the local
market. According to the Commission, the greater the diver-
sity of ownership in a particular area, the less chance there is
that a single person or group can have an inordinate effect on
public opinion. Further, and critical to the Local Ownership
Rule, the Commission's "concern for ensuring diversity in
broadcasting is most pressing at the local level." Local
Ownership Order, p 19 (emphasis added). The Commission
concedes that its diversity goal is distinct from its goal of
ensuring competition. See id. at p 20. Were the goal merely
to preserve competition, then the FCC could readily apply the
Department of Justice/Federal Trade Commission Antitrust
Merger Guidelines. It declined to do so, apparently because
its "diversity requirements" are a different goal than competi-
tion per se. Review of the Commission's Regulations Gov-
erning Television Broadcasting, Further Notice of Proposed
Rule Making, 10 FCC Rcd 3524, p 123 (Jan. 17, 1995).
Therefore the FCC must at least make some effort at show-
ing how its Local Ownership Rule furthers diversity in the
local market--because it is purporting to regulate to protect
local diversity. I do not find that showing in the Commis-
sion's record. Therefore, I do not join Part III.A of the
majority opinion.
II.
I concur with the majority in Part III.B regarding the
inadequacy of the Commission's support for its restrictive
voice-count provision. I believe, however, that our determi-
nation compels vacature of the Local Ownership Rule. The
FCC argues that in adopting the eight voices exception and
the revised duopoly rule, it "decided to act cautiously and
alter the rule only slightly." The Commission also reminds
the Court that it will keep monitoring the situation, and "can
determine whether its cautionary stance remains warranted
or whether the rules can be relaxed further" in the next
biennial review. But this rulemaking was conducted, in part,
pursuant to section 202(h) of the Telecommunications Act of
1996. See Local Ownership Order, p 5 & n.13 ("Section 202
directs the Commission to conduct a biennial review of all of
its broadcast ownership rules and to repeal or modify any
regulation it determines is no longer in the public inter-
est.... We take such action today in amending our TV
duopoly and radio-television cross-ownership rules."); 1998
Biennial Review, 13 FCC Rcd 11276, 11280, p 10 (Mar. 13,
1998) ("We believe that our ongoing review of these rules
[including the duopoly rule] satisfies the requirements of
Section 202(h) of the Telecom Act.").
As the FCC itself noted in the Second Further Notice of
Proposed Rulemaking, the 1996 Act "directs the Commission
to undertake significant and far-reaching revisions to its
broadcast media ownership rules." 11 FCC Rcd 21655, p 2
(Nov. 7, 1996). Section 202(h) requires that the FCC "shall
determine whether any of such rules are necessary in the
public interest as the result of competition," and that the
FCC "shall repeal or modify any regulation it determines to
be no longer in the public interest." Pub. L. No. 104-104, 110
Stat. 56 (1996) (emphasis added). In applying that statute,
we have squarely considered and rejected the kind of caution-
ary approach employed by the FCC in adopting the Local
Ownership Rule: "The Commission's wait-and-see approach
cannot be squared with its statutory mandate promptly ... to
'repeal or modify' any rule that is not 'necessary in the public
interest.' " Fox Television Stations, Inc. v. FCC, 280 F.3d
1027, 1042 (D.C. Cir. 2002). Thus, the question before the
FCC was whether the duopoly rule was in the public interest-
and to keep the rule it had to determine that the answer was
yes. "Although a decision under s 202(h) to retain a rule is
similar to an agency's denial of a petition for rulemaking, the
underlying procedures differ in at least one important respect
that requires a different approach upon judicial review: Sec-
tion 202(h) carries with it a presumption in favor of repealing
or modifying the ownership rules." Fox, 280 F.3d at 1048.
The FCC, however, seems to have assumed the need for the
rule, and then attempted to justify it. But "[h]aving framed
the present rulemaking proceeding in terms of providing a
persuasive rationale for a rule that seemed unnecessary, and
having retained that framework, the FCC could not simply
assume ... a need for the rule and focus on rebutting specific
attacks levied against it. Such review is hardly 'especially
searching.' " Radio-Television News Dirs. Ass'n v. FCC, 184
F.3d 872, 886 (D.C. Cir. 1999) (internal footnote and citation
omitted).
Although the majority acknowledges the "statutory man-
date" of section 202(h), Majority Op. at 22, it fails to fully
appreciate it. This Court has held that "the mandate of
s 202(h) might better be likened to Farragut's order at the
battle of Mobile Bay ('Damn the torpedoes! Full speed
ahead.') than to the wait-and-see attitude of the Commission."
Fox, 280 F.3d at 1044. While section 202(h) "should not be
read to require the court always to vacate a rule improperly
retained by the Commission," id. at 1048, here the Commis-
sion "presumably made its best effort" to justify the Local
Ownership Rule, id. at 1053, and has come up short. Because
the Commission has failed to justify affirmatively the need for
any duopoly rule, with or without an eight voices exception, I
would vacate the Local Ownership Rule.
III.
As I would invalidate and vacate the duopoly rule on
statutory grounds, I would not reach the First Amendment
question raised by Sinclair. However, because the majority
have opted only to remand, I will briefly express my thoughts
on the constitutional questions.
At the outset, I freely concede (as I must) that this Court
"is not in a position to reject the scarcity rationale even if we
agree that it no longer makes sense." Fox, 280 F.3d at 1046.
The Supreme Court has already "declined to question its
continuing validity," Turner Broad., Inc. v. FCC, 512 U.S.
622, 638 (1994) ("Turner I"), and "it is not the province of this
court to determine when a prior decision of the Supreme
Court has outlived its usefulness." Fox, 280 F.3d at 1046
(citing Agostini v. Felton, 521 U.S. 203, 237 (1997)). While
there may be merit to petitioner's argument that the "diversi-
ty" rationale is essentially content-based, and that therefore
heightened scrutiny should be implicated, that argument has
been rejected. NCCB, 436 U.S. at 799-800; Red Lion Broad.
Co. v. FCC, 395 U.S. 367, 389-91 (1969); see Fox, 280 F.3d at
1045-46. Therefore, the FCC can effectively prescribe a limit
on the amount of speech a person may engage in through
broadcast media because a person is prohibited from engag-
ing in more speech (through a second station) if she owns (or
programs more than 15% of the content of) another station.
Perhaps with now-Chairman Powell's announcement that the
"time has come to reexamine First Amendment jurisprudence
as it has been applied to broadcast media and bring it into
line with the realities of today's communications market-
place," the Supreme Court will take notice. Commissioner
Powell, Willful Denial and First Amendment Jurisprudence,
Remarks before the Media Institute, Washington D.C. (Apr.
22, 1998), at http: //www.fcc.gov/Speeches/Pow-
ell/spmkp808.html. That being said, this Court is "stuck with
the scarcity doctrine until the day that the Supreme Court
tells us that the Red Lion no longer rules the broadcast
jungle." Tribune Co. v. FCC, 133 F.3d 61, 69 (D.C. Cir.
1998).
Conclusion
Because I would vacate the Local Ownership Rule, I re-
spectfully dissent from the majority's remedy.