CITIZENS COMMUNICATIONS CENTER v. F. C. C.

J. SKELLY WRIGHT, Circuit Judge:

Appellants and petitioners1 in these consolidated cases2 challenge the legality of the "Policy Statement on Comparative Hearings Involving Regular Renewal Applicants," 22 F.C.C.2d 424, released by the Federal Communications Commission on January 15, 1970, and by its terms made applicable to pending proceedings. Briefly stated, the disputed Commission policy is that, in a hearing between an incumbent applying for renewal of his radio or television license and a mutually exclusive applicant, the incumbent shall obtain a controlling preference by demonstrating substantial past performance without serious deficiencies.3 Thus if the incumbent prevails on the threshold issue of the substantiality of his past record, all other applications are to be dismissed without a hearing on their own merits.

Petitioners contend that this policy is unlawful under Section 309(e) of the Communications Act of 19344 and the doctrine of Ashbacker Radio Corp. v. F. C.C., 326 U.S. 327, 66 S.Ct. 148, 90 L.Ed. 108 (1945). The 1970 Policy Statement is also attacked by petitioners on grounds that it was adopted in disregard of the Administrative Procedure Act and that it restricts and chills the exercise of rights protected by the First Amendment.

Respondents urge the court to refrain from considering these arguments at this time because the 1970 Policy Statement is neither a final order nor yet ripe for review. In the alternative, respondents take the position that the Policy Statement is a lawful exercise of the Commission's authority.

We find that the judicial review sought by petitioners is appropriate at this time. Without reaching petitioners' other grounds for complaint,5 we hold that the 1970 Policy Statement violates the Federal Communications Act of 1934, as interpreted by both the Supreme Court and this court.

I

Petitioners argue that the 1970 Policy Statement is "final" in the primary sense of the term because no further proceedings concerning the Policy Statement are contemplated by the Commission or provided for by the Commission's rules. Respondents' position is that neither the Policy Statement nor the order denying the petitions for reconsideration are final orders within the statutory meaning of 28 U.S.C. § 2342(1) and 47 U.S.C. § 402(a). They argue that the Policy Statement sets only general guidelines to be applied in future adjudicatory proceedings where applicable. We find it unnecessary to resolve this particular disagreement because, even if the Policy Statement is characterized as interlocutory, it is still reviewable at this time. Since the Policy Statement is alleged to deprive petitioners in No. 24,491 of their statutory right to a full comparative hearing under the Ashbacker doctrine, the Commission's action in issuing the Policy Statement is reviewable now. Chicago & Southern Air Lines, Inc. v. Waterman Steamship Corp., 333 U.S. 103, 113, 68 S.Ct. 431, 92 L.Ed. 568 (1948); Delta Air Lines v. C.A.B., 97 U.S.App.D.C. 46, 228 F.2d 17 (1955). As this court stated in summarizing the holding of Delta Air Lines in a subsequent case, "when the Commission adopts a procedure which precludes a true comparative hearing of conflicting applications, review may be sought here without awaiting a grant of one of the applications." Midwestern Gas Transmission Co. v. F. P.C., 103 U.S.App.D.C. 360, 366, 258 F.2d 660, 666 (1958).

Petitioners contend that the same line of cases holding an interlocutory order denying a party an Ashbacker hearing to be final for purposes of review necessarily supports the proposition that such an order is also ripe for review before completion of the contemplated hearing. Without deciding whether this proposition holds in every case, we agree that the Policy Statement is ripe for review under the test laid out in Abbott Laboratories v. Gardner, 387 U.S. 136, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967). According to the Supreme Court in Abbott Laboratories, the ripeness of a controversy depends upon both "the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration." Id. at 149, 87 S.Ct. at 1515. The Policy Statement controversy is ripe under both halves of this test. Here the Policy Statement has been administratively considered and reconsidered by the Commission. The issues before us are "purely legal."6 Ibid. Whether the Policy Statement denies a competing applicant the full comparative hearing to which he is entitled is strictly a matter of statutory interpretation involving a comparison of the hearing procedures spelled out in the Policy Statement with the requirements of 47 U.S.C. § 309(e) and Ashbacker. Likewise, the other issues raised by petitioners and enumerated in the introduction of this opinion are also purely legal and will not be focused or clarified by further proceedings in particular cases before the Commission.

Moreover, it would work a severe hardship on petitioners for the court to withhold consideration of their appeal. The substantial financial expense7 to which Hampton Roads and Community Broadcasting will have been put if review of their alleged denial of procedural rights is delayed is a hardship which the court may properly take into account in finding this case ripe for review. Abbott Laboratories, supra, 387 U.S. at 153-154, 87 S.Ct. 1507; City of Chicago v. Atchison, Topeka & Santa Fe R. Co., 357 U.S. 77, 84, 78 S.Ct. 1063, 2 L.Ed.2d 1174 (1958). Even more important perhaps is the deadening effect the Policy Statement has had since its institution upon renewal challenges generally. By depriving competing applicants of their right to a full comparative hearing on the merits of their own applications, and by severely limiting the importance of other comparative criteria, the Commission has made the cost of processing a competing application prohibitive when measured by the challengers' very minimal chances of success. That the Policy Statement is in this sense self-executing8 and that it has in fact served to deter the filing of a single competing application for a television renewal in over a year9 is perhaps the most compelling factor in the court's decision to review this dispute at this time.

II

In order to clarify not only the legal issues but also the related substantive policy considerations involved in these consolidated cases, the court will first attempt to put the present controversy in its historical context. The national effort at comprehensive regulation of broadcasting began in 1927 with the Federal Radio Act.10 This Act was intended to insure that "the broadcasting privilege will not be a right of selfishness" but would rather "rest upon an assurance of public interest to be served."11 To achieve this purpose the Act provided for expiration of licenses, and consequent renewal hearings, every three years.12 At both initial and renewal licensing, applicants were to be tested by the basic standard of "public interest, convenience, or necessity,"13 which was defined by the Federal Radio Commission in 1928 as

Although the Federal Communications Act does not itself establish any specific licensing criteria, the Supreme Court has noted that "[s]ince the very inception of federal regulation [of] radio, comparative considerations as to the services to be rendered have governed the application of the standard of `public interest, convenience, or necessity.'" National Broadcasting Co. v. United States, 319 U.S. 190, 217, 63 S.Ct. 997, 1009, 87 L.Ed. 1344 (1943). With the great expansion of the broadcast media after World War II, the Commission was under heavy pressure to develop specific criteria for choosing among competitors seeking licenses for the quickly diminishing number of unallocated frequencies. The criteria were developed through a series of comparative hearing decisions and were reviewed and given final statement in the Commission's 1965 Policy Statement on Comparative Broadcast Hearings, 1 F.C.C.2d 393. The 1965 Policy Statement defines the purpose of the comparative hearing as choosing the applicant who will provide the "best practicable service to the public" and who will insure the "maximum diffusion of control of the media of mass communications." The basic criteria relating to the determination of which applicant will provide the best service to the public are listed as full-time participation in station operation by owners, proposed program service, past broadcast record, efficient use of frequency, and character. Diversification of control of the media of mass communication is elevated in the 1965 Policy Statement to a factor of primary significance; and in an effort to resolve the inherent contradiction between the goal of diversification and its tradition of according an advantage to initial applicants with past broadcasting experience, the Commission states that it will not consider a past broadcast record which is "within the bounds of average performance." Only records which demonstrate "unusual attention to the public's needs and interests" are to be given favorable consideration, since average performance is expected of all licensees.

Although the 1965 Policy Statement explicitly refrains from reaching the "somewhat different problems raised where an applicant is contesting with a licensee seeking renewal,"15 the Communications Act itself places the incumbent in the same position as an initial applicant. Under the 1952 amendment to the Act, both initial and renewal applicants must demonstrate that the grant or continuation of a license will serve the "public interest, convenience, and necessity." The Communications Act itself says nothing about a presumption in favor of incumbent licensees at renewal hearings; nor is an inability to displace operating broadcasters inherent in government management, as is established by the fact that in its early years of regulation the Federal Radio Commission often refused to renew licenses.16

Nonetheless, the history of Commission decision and of the decisions of this court reflected until recently an operational bias in favor of incumbent licensees;17 despite Commissioner Hyde's observation in his dissent to the 1965 Policy Statement that there was no rational or legal basis for its purported nonapplicability to comparative hearings involving renewals,18 it was commonly assumed that renewal decisions would continue to be governed by policy established in the well known Hearst19 and Wabash Valley20 cases. These two cases, which began with the unassailable premise that the past performance of a broadcaster is the most reliable indicator of his future performance, were typical of the Commission's past renewal rulings in that their actual effect was to give the incumbent a virtually insuperable advantage on the basis of his past broadcast record per se. In Hearst the Commission ruled that the incumbent's unexceptional record of past programming performance, coupled with the unavoidable uncertainty whether the challenger would be able to carry out its program proposals, was sufficient to overcome the incumbent's demerits on other comparative criteria. And in Wabash Valley the Commission held that a newcomer seeking to oust an incumbent must make a showing of superior service and must have some preference on other comparative criteria.

Then, in the very controversial WHDH21 case, the Commission for the first time in its history, in applying comparative criteria in a renewal proceeding, deposed the incumbent and awarded the frequency to a challenger. Indicating a swing away from Hearst and Wabash Valley, in practical if not theoretical terms, the Commission stated its intention to insure that "the foundations for determining the best practicable service, as between a renewal and a new applicant, are more nearly equal at their outset."22 Finding that because the incumbent's programming service had been "within the bounds of the average" it was entitled to no preference, and that the incumbent was inferior on the comparative criteria of diversification and integration, the Commission awarded the license to one of the challengers.

The WHDH decision became the immediate subject of fierce attack, provoking criticism from those who feared that it represented a radical departure from previous law23 and that it threatened the stability of the broadcast industry by undermining large financial investments made by prominent broadcasters in reliance upon the assumption that licenses once granted would be routinely renewed.24 While the Commission's decision was still on appeal to this court, ultimately to be affirmed, the broadcast industry sought to obtain from Congress the elimination or drastic revision of the renewal hearing procedure. A bill introduced by Senator Pastore, Chairman of the Communications Subcommittee of the Senate Commerce Committee,25 proposed to require a two-stage hearing wherein the renewal issue would be determined prior to and exclusive of any evaluation of challengers' applications. The bill provided that if the Commission finds the past record of the licensee to be in the public interest, it shall grant renewal. Competing applications would be permitted to be filed only if the incumbent's license is not renewed. Although more than 100 congressmen and 23 senators quickly announced their support, the bill was bitterly attacked in the Senate hearings by a number of citizens groups testifying, inter alia, that the bill was racist, that it would exclude minorities from access to media ownership in most large communities, and that it was inimical to community efforts at improving television programming.26

The impact of such citizen opposition measurably slowed the progress of S. 2004. Then, without any formal rule making proceedings,27 the Commission suddenly issued its own January 15, 1970 Policy Statement, and the Senate bill was thereafter deferred in favor of the Commission's "compromise." The 1970 Policy Statement retains the single hearing approach but provides that the renewal issue must be determined first in a proceeding in which challengers are permitted to appear only for the limited purpose of calling attention to the incumbent's failings.28 The Policy Statements sets forth that a licensee with a record of "substantial" service to the community, without serious deficiencies, will be entitled to renewal notwithstanding promise of superior performance by a challenger. Only upon a refusal to renew because of the incumbent's past failure to provide substantial service would full comparative hearings be held. Thus, in effect, the Policy Statement administratively "enacts" what the Pastore bill sought to do. The Statement's test for renewal, "substantial service," seems little more than a semantic substitute for the bill's test, "public interest," and the bill's two-stage hearing, the second stage being dependent on the incumbent's failing the test, is not significantly different from the Statement's summary judgment approach. The "summary judgment" concept of the 1970 Policy Statement, however, runs smack against both statute and case law, as the next section of this opinion will show.

III

Superimposed full length over the preceding historical analysis of the "full hearing" requirement of Section 309(e) of the Communications Act29 is the towering shadow of Ashbacker, supra, and its progeny, perhaps the most important series of cases in American administrative law. Ashbacker holds that under Section 309(e), where two or more applications for permits or licenses are mutually exclusive, the Commission must conduct one full comparative hearing of the applications.30 Although Ashbacker involved two original applications, no one has seriously suggested that its principle does not apply to renewal proceedings as well. This court's opinions have uniformly so held, as have decisions of the Commission itself.31

It is not surprising, therefore, that the Commission's 1970 Policy Statement implicitly accepts Ashbacker as applicable to renewal proceedings. To circumvent the Ashbacker strictures, however, it adds a twist: the Policy Statement would limit the "comparative" hearing to a single issue — whether the incumbent licensee had rendered "substantial" past performance without serious deficiencies. If the examiner finds that the licensee has rendered such service, the "comparative" hearing is at an end and, barring successful appeal, the renewal application must be granted. Challenging applicants would thus receive no hearing at all on their own applications, contrary to the express provision of Section 309(e) which requires a "full hearing."

In Ashbacker the Commission had promised the challenging applicant a hearing on his application after the rival application was granted. The Supreme court in Ashbacker said that such a promise was "an empty thing." At least the Commission here must be given credit for honesty. It does not make any empty promises. It simply denies the competing applicants the "full hearing" promised them by Section 309(e) of the Act. Unless the renewal applicant's past performance is found to be insubstantial or marred by serious deficiencies,32 the competing applications get no hearing at all. The proposition that the 1970 Policy Statement violates Section 309(e), as interpreted in Ashbacker, is so obvious it need not be labored.33

In support of its 1970 Policy Statement the Commission is reduced to reciting the usual litany that "[t]he task of choosing between various claimants for the privilege of using the air waves is essentially an administrative one" consigned by Congress to the Commission. Brief for the Commission at 30. But Congress did not give the Commission carte blanche. To protect the public it limited its mandate with the Section 309(e) "full hearing" requirement. Unless the limitation is observed, any putative exercise of the mandate is a nullity.

Early after Ashbacker this court indicated what a "full hearing" entailed. In Johnston Broadcasting Co. v. F.C.C., 85 U.S.App.D.C. 40, 45-46, 175 F.2d 351, 356-357 (1949), we explained that the statutory right to a full hearing included a decision upon all relevant criteria:

We, as well as the Commission,34 have consistently applied the teaching of Johnston Broadcasting to renewal proceedings. See South Florida Television Corp. v. F.C.C., 121 U.S.App.D.C. 293, 349 F.2d 971 (1965); Community Broadcasting Corp. v. F.C.C., 124 U.S. App.D.C. 230, 363 F.2d 717 (1966). Particularly since the 1965 Policy Statement, in a comparative hearing involving a renewal application each applicant has been aware that its task is "to make the best case possible on the basis of program offering, integration, diversification, past performance and any other matters the parties asked the Commission to consider as pertaining to licensee fitness." WHDH, supra, 143 U.S.App. D.C. at 399, 444 F.2d at 857.

We do not dispute, of course, that incumbent licensees should be judged primarily on their records of past performance. Insubstantial past performance should preclude renewal of a license. The licensee, having been given the chance and having failed, should be through. CompareWHDH, supra. At the same time, superior performance should be a plus of major significance in renewal proceedings.35 Indeed, as Ashbacker recognizes, in a renewal proceeding, a new applicant is under a greater burden to "make the comparative showing necessary to displace an established licensee." 326 U.S. at 332, 66 S.Ct. at 151. But under Section 309(e) he must be given a chance. How can he ever show his application is comparatively better if he does not get a hearing on it? The Commission's 1970 Policy Statement's summary procedure would deny him that hearing.36

The suggestion that the possibility of nonrenewal, however remote, might chill uninhibited, robust and wide-open speech cannot be taken lightly. But the Commission, of course, may not penalize exercise of First Amendment rights. And the statute does provide for judicial review. Indeed, the failure to promote the full exercise of First Amendment freedoms through the broadcast medium may be a consideration against license renewal. Unlike totalitarian regimes, in a free country there can be no authorized voice of government. Though dependent on government for its license, independence is perhaps the most important asset of the renewal applicant.

The Policy Statement purports to strike a balance between the need for "predictability and stability"37 and the need for a competitive spur. It does so by providing that the qualifications of challengers, no matter how superior they may be, may not be considered unless the incumbent's past performance is found not to have been "substantially attuned" to the needs and interests of the community. Unfortunately, instead of stability the Policy Statement has produced rigor mortis.38 For over a year now, since the Policy Statement substantially limited a challenger's right to a full comparative hearing on the merits of his own application, not a single renewal challenge has been filed.

Petitioners have come to this court to protest a Commission policy which violates the clear intent of the Communications Act that the award of a broadcasting license should be a "public trust."39 As a unanimous Supreme Court recently put it, "It is the right of the viewers and listeners, not the right of the broadcasters, which is paramount."40 Our decision today restores healthy competition by repudiating a Commission policy which is unreasonably weighted in favor of the licensees it is meant to regulate, to the great detriment of the listening and viewing public.

Wherefore it is ORDERED: (1) that the Policy Statement, being contrary to law, shall not be applied by the Commission in any pending or future comparative renewal hearings; (2) that the Commission's order of July 21, 1970 denying petitioners' petition for reconsideration of the Policy Statement and refusing to institute rule making proceedings is reversed; and (3) that these proceedings are remanded to the Commission with directions to redesignate all comparative renewal hearings to which the Policy Statement was deemed applicable to reflect this court's judgment.

MacKINNON, Circuit Judge.

I concur in the foregoing opinion. While I recognize the desire and need for reasonable stability in obtaining renewal licenses, under the present statute as construed by Ashbacker Radio Corp. v. F.C.C., 326 U.S. 327, 66 S.Ct. 148, 90 L.Ed. 108 (1945), I do not consider it possible to provide administratively that operating licensees who furnish program service "substantially attuned to meeting the needs and interests of its area * * * [without] serious deficiencies * * * will be preferred over the newcomer and his application for renewal will be granted." Such policy would effectively prevent a newcomer applicant from being heard on the merits of his application, no matter how superlative his qualifications. It would also, in effect, substitute a standard of substantial service for the best possible service to the public and effectively negate the hearing requirements of the statute as interpreted by the Supreme Court. If such change is desired, in my opinion, it must be accomplished by amendment of the statute.