Petitioners seek review of a Federal Communications Commission's frequency allocation rulemaking proceeding in which the Commission departed from its minority preference policy in apportionment of new broadcast licenses for fourteen AM channels known as foreign clear channels. Petition granted and proceeding remanded.
Before: OAKES, KEARSE and PIERCE, Circuit Judges.
This is a petition to review a report and order of the Federal Communications Commission ("FCC" or "Commission"), released May 7, 1985, concerning frequency allocations on fourteen AM broadcast channels known as AM foreign clear channels. Petitioners National Black Media Coalition and its New York affiliate ("National Black Media") challenge the FCC's departure from its minority preference policy in new rules governing applications for broadcast licenses on these channels. Petitioners claim that the FCC failed to observe proper procedure and that its decision to abandon this non-technical criterion does not rest on a rational basis.
We agree with petitioners that FCC did not give proper notice to interested parties in its Notice of Proposed Rulemaking ("Notice") and, in addition, that it relied on inadequately disclosed data to reach its conclusions. The FCC published a notice in which it announced that it proposed to adopt the minority preference policy, but then it declined to do so in its final report and order without providing a meaningful opportunity for comment as required by Section 4 of the Administrative Procedure Act, 5 U.S.C. §§ 553(b), (c) (1982). Furthermore, studies and maps relied upon by the FCC in its report and order were not exposed to public comment, so that the Commission cannot be said to have considered all the relevant factors in making its decision. Its order must therefore be overturned as arbitrary and capricious. See United States v. Nova Scotia Food Prods. Corp., 568 F.2d 240, 251-52 (2d Cir. 1977).
In order to apply for an AM broadcast license, an applicant must demonstrate that its station will operate in compliance with "technical acceptance criteria" designed to prevent interference with other AM stations. See 47 C.F.R. § 73.37(a) (1985). In addition, FCC rules have included five threshold requirements that applications for new AM stations must satisfy. Beginning in 1973, these "non-technical criteria" initially required that an applicant locate its station in an unserved or underserved location. In 1980, the FCC added further non-technical eligibility criteria for the twenty-five AM channels known as the U.S. Class I-A clear channels. As an alternative to establishing a station in an unserved or underserved area, a new applicant could also meet the non-technical criteria for a license if it were a minority-owned enterprise or a non-commercial entity. See Clear Channel Broadcasting in the AM Broadcast Band, 78 F.C.C. 2d 1345, 1368-70, reconsider. denied, 83 F.C.C. 2d 216 (1980), aff'd sub nom. Loyola University v. FCC, 216 U.S. App. D.C. 403, 670 F.2d 1222 (D.C. Cir. 1982); 47 C.F.R. § 73.37(e)(2).*fn1 These "non-technical criteria" are the subject of the present appeal.
In the past, international agreements prohibited broadcast stations in the United States from establishing any new nighttime operations on AM foreign clear channels. As a result of an agreement between the United States and Canada and negotiations which are expected to lead to agreements between the United States, Mexico and the Bahamas, restrictions on the number of stations which may operate full-time on the subject fourteen AM stations will be relaxed.
In March 1984, the FCC proposed both technical and non-technical rules to govern applications for new full-time service on these channels. See notice of Proposed Rulemaking, Nighttime Operations on Canadian, Mexican, and Bahamian AM Clear Channels, 49 Fed. Reg. 18567, published May 1, 1984 ("Notice"). In its proposal the FCC stated that, as a result of the short period of time which had elapsed between the 1980 proceeding regarding the twenty-five U.S. Class I-A clear channels and the current proceeding, the resolution of the pertinent issues had remained unchanged. Thus, the Commission proposed to apply the same technical and non-technical eligibility criteria to licensing applications for the foreign clear channels as had been adopted for the twenty-five U.S. Class I-A clear channels. The public interest, the FCC stressed, was best served by continuing to promote the three goals of the 1980 proceeding: "(1) first or second local nighttime radio outlets to unserved or underserved communities; (2) more minority-owned stations; (3) additional noncommercial stations." Noting that the 1980 clear channels proceeding had predicted that only 100 to 125 new stations would result from that proceeding, the Commission concluded that "opportunities to meet these needs still remain inadequate today." The FCC thus proposed to extend the five threshold non-technical eligibility requirements as set forth in 47 C.F.R. § 73.37(e)(2)(i)-(v) to the fourteen AM foreign clear channels. However, the Commission "invite[d] any other proposals that would likely result in the greatest overall benefit to the public," and in its formal invitation to comment, noted that it proposed to adopt in this Notice of Proposed Rule Making or in accordance with such variants, modifications, or alternatives within the scope of the issues of this proceeding, as we may find preferable after considering the entire record."
Thirty-four parties filed comments in response to the Notice. Most of the comments were submitted by daytime-only stations which sought authorization to provide nighttime service on the fourteen AM foreign clear channels. These commentators either suggested adding another threshold standard to the non-technical criteria to permit daytime-only stations to apply for licenses, or waiving the criteria for daytime-only stations, or deleting the criteria altogether. National Black Media applauded the Commission's proposal to continue the non-technical eligibility criteria and noted that the demand for minority-owned stations remained largely unsatisfied.
The FCC in a report and order released May 7, 1985, decided not to adopt the non-technical eligibility requirements of Section 73.37(e)(2) after all. The Commission reviewed studies that it had conducted on sample foreign clear channels to determine whether new stations could be established on these frequencies in compliance with FCC interference standards. The studies, it is revealed, showed that "[i]n much of the country, particularly the populous areas, these frequencies could not be used to create new stations, full-time or otherwise, without causing destructive interference to the existing daytime-only and full-time stations on the channel." The agency pointed to maps appended to its report which purportedly showed the limited areas in which new AM stations could be established without causing interference. The commission concluded that rather than letting these frequencies "lie fallow in major portions of the country," they should be used to enable daytime-only stations to operate at night. Furthermore, it is noted that such a policy would enable daytime-only stations to compete more effectively by removing limits on their broadcasting time. While the FCC admitted that the foregoing does not apply to certain areas of the country, it concluded that because "the areas in which these new stations would be located are concentrated in the unserved or underserved portions of the country, acceptance criteria are not needed to funnel growth toward areas of greatest need. Moreover, these frequencies would continue to be available for minority or public radio applicants." FCC Commissioner Henry M. Rivera dissented, contending that the deletion of the non-technical acceptance criteria lacked a rational basis in the face of the underrepresentation of minorities in the broadcast industry.
Petitioners challenge the Commission's report and order on several grounds. They contend that the Commission failed to provide interested parties with sufficient notice of the decision to abandon the minority preference policy. Further, petitioners claim that the Commission did not take all relevant factors into account when formulating its new policies and thus its decision must be overturned as arbitrary and capricious. We agree with petitioners that the Commission did not provide the public with notice of its intention to delete the non-technical criteria which includes its minority preference policy; nor did it adequately disclose the studies and maps on which it based its decision.*fn2 Thus, its decision cannot be said to be grounded on all the relevant factors and it must be reversed as arbitrary and capricious.
In order to seek review by this court, petitioners must first survive a challenge brought by the Association for Broadcast Engineering Standards, Inc. and National Association of Broadcasters as intervenors. These intervenors claim that National Black Media lacks standing to maintain this petition because it is not aggrieved by the Commission's order as required by 28 U.S.C. § 2344 (1982). This argument can be disposed of with dispatch. The membership of National Black Media, a nonprofit organization which seeks to promote access by Blacks to the mass media, is certainly "aggrieved" by an order which departs from a minority preference policy. The Commission's rules regarding AM foreign clear channels are contained in a final agency order that affects the ability of petitioners' membership to obtain broadcast licenses and thus concretely operates "to control the business affairs" of that membership. United States v. Storer Broadcasting Co., 351 U.S. 192, ...