Mary v. Harris Foundation v. Federal Communications Commission

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 27, 2014 Decided January 20, 2015

No. 13-1304

MARY V. HARRIS FOUNDATION,

APPELLANT

v.

FEDERAL COMMUNICATIONS COMMISSION,

APPELLEE

HOLY FAMILY COMMUNICATIONS, INC.,

INTERVENOR

On Appeal of an Order of the

Federal Communications Commission

Donald E. Martin argued the cause and filed the briefs

for appellant.

Matthew J. Dunne, Counsel, Federal Communications

Commission, argued the cause for appellee. With him on the

brief were Jonathan B. Sallet, Acting General Counsel, David

M. Gossett, Acting Deputy General Counsel, and Richard K.

Welch, Deputy Associate General Counsel. Jacob M. Lewis,

Associate General Counsel, entered an appearance.

Denise B. Moline was on the brief for intervenor Holy

Family Communications, Inc. in support of appellee.

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Before: HENDERSON, Circuit Judge, and GINSBURG and

SENTELLE, Senior Circuit Judges.

Opinion for the Court filed by Senior Circuit Judge

GINSBURG.

GINSBURG, Senior Circuit Judge: The Mary V. Harris

Foundation (MVH) and Holy Family Communications, Inc.

each applied to the Federal Communications Commission for

a license to operate a noncommercial educational radio station

in the vicinity of Buffalo, New York, requiring the

Commission to decide between the two. To do so, the agency

used its comparative selection criteria, which it had

promulgated through a notice-and-comment rulemaking. By

a faithful application of those criteria, the Commission found

Holy Family had the superior application and awarded it the

license. MVH appeals that decision, arguing that the criterion

upon which the outcome turned, viz., the weight given to an

applicant’s plan to broadcast to underserved populations,

either violates the Communications Act of 1934, which

requires the Commission to distribute licenses fairly, or is

arbitrary and capricious, in violation of the Administrative

Procedure Act. MVH also appeals the agency’s refusal to

waive application of the selection criteria.

Because the disputed criterion is part of a reasonable

framework for achieving goals consistent with the

Commission’s statutory mandate, and because MVH offers no

support for a waiver except that it came close to the threshold

it needed to get the license, we affirm the decision of the

Commission.

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I. Background

When multiple applicants seek mutually exclusive

licenses to operate a noncommercial educational (NCE) radio

station, the Commission’s choice between them turns first

upon the extent to which their proposals would increase the

access of underserved populations to NCE broadcasting

service. 47 C.F.R. § 73.7002. It does so pursuant to the “fair

distribution” mandate in section 307(b) of the

Communications Act of 1934, as amended, 47 U.S.C.

§ 307(b), which instructs “the Commission [to] make such

distribution of licenses ... among the several States and

communities as to provide a fair, efficient, and equitable

distribution of radio service to each of the same.”

Prior to 1995, when faced with mutually exclusive

applications for an NCE license, the Commission

implemented this mandate through a comprehensive review of

the applicants’ proposals in extended “comparative hearings.”

Because this method proved inefficient and impermissibly

subjective, the Commission conducted a rulemaking

proceeding to revise the NCE comparative selection process.

In re Reexamination of the Comparative Standards for

Noncommercial Educational Applicants, Report & Order, 15

FCC Rcd. 7386 (2000) [hereinafter NCE Order]. Under the

newly promulgated selection process, the Commission first

applies the objective Fair Distribution Rule:

1) An applicant will receive the license if at least 10%

of all the people it proposes to reach will receive

their first or second reserved channel NCE service,

as long as the absolute number of people newly to

receive first or second service is at least 2,000.

2) If more than one applicant meets the 10% threshold,

then the applicant proposing to provide first or

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second service to more people will receive the

license, as long as the difference amounts to at least

5,000 people.

3) If the difference does not amount to 5,000 people,

then all the applicants meeting the 10% threshold

will be compared according to other criteria. If no

applicant meets the threshold, then no preference

will be awarded and all applicants will be compared

according to other criteria.

See 47 C.F.R. § 73.7002. If the Fair Distribution Rule is not

dispositive, then the Commission compares NCE applicants

by awarding points for (1) continuity of local ownership, (2)

having diverse ownership, (3) operating a statewide network

that provides programming to accredited schools, and (4)

proposing to broadcast to a larger area and population than

other applicants. See 47 C.F.R. § 73.7003.

Holy Family and MVH each applied to the Commission

to broadcast NCE programming to the greater Buffalo, New

York area. Holy Family would reach 88,434 people, 5.53%

(or 4,886) of whom were receiving only one NCE service, and

MVH would reach 300,673 people, 9.46% (or 28,453) of

whom were receiving only one NCE service. Accordingly,

neither applicant received a dispositive preference under the

Fair Distribution Rule because neither reached the 10%

threshold, even though MVH proposed to serve

approximately 23,500 more underserved people than did Holy

Family. When it went on to compare the two applicants under

the point system, the Commission tentatively selected Holy

Family. That decision was announced in a 2007 order that

also resolved a number of other application contests. See In

re Comparative Consideration of 76 Groups of Mutually

Exclusive Applications for Permits to Construct New or

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Modified Noncommercial Educational FM Stations, 22 FCC

Rcd. 6101, 6167, ¶ 230 (2007) [hereinafter Omnibus Order].

MVH petitioned the Media Bureau of the Commission to

deny Holy Family’s application because, in addition to

reasons not relevant to this appeal, Holy Family’s proposal

was “far inferior to MVH’s proposal in terms of the fair

distribution of service.” MVH therefore asked the Bureau to

grant it a fair distribution preference despite falling short of

the 10% threshold because “[s]lavish adherence” to the Fair

Distribution Rule yielded an unintended consequence in this

case. The Bureau denied that aspect of the petition,

explaining in its Letter Decision that the threshold is

necessary “to ensure that only the most significant differences

would be decisional” and that comparative differences not

reaching this level of significance are taken into account in

the points awarded for an applicant reaching a larger area and

population. 22 FCC Rcd. 18931, 18935 (2007) [hereinafter

Letter Decision]. It also cited a recent decision of the

Commission denying a waiver to an applicant that would have

brought first or second service to 9.33% of its population,

approximately 25,000 people. Id. at 18934. The Bureau later

denied MVH’s request for reconsideration because MVH did

no more than “reassert[] points that it made previously.” In re

Application of Holy Family Commc’ns, Inc., Mem. Op. &

Order, 26 FCC Rcd. 12791, 12792, ¶ 4 (2011). MVH then

applied to the Commission for review, arguing the 10%

threshold is arbitrary and the Commission should waive it in

recognition of the superiority of MVH’s proposal in achieving

a fair distribution of NCE service. The Commission denied

review, stating only that it agreed with the reasoning of the

Media Bureau. In re Holy Family Commc’ns, Inc., Mem. Op.

& Order, 28 FCC Rcd. 4854, 4854, ¶ 2 (2013) [hereinafter

Final Order].

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MVH now appeals the Commission’s decision under 47

U.S.C. § 402(b)(1), which statute allows an applicant for a

station license to appeal the denial of its application directly

to this court. Holy Family has intervened in support of both

the Fair Distribution Rule and the Commission’s denial of a

waiver.

II. Analysis

MVH argues the Fair Distribution Rule is an

impermissible basis for the Commission’s decision because

the 10% threshold fails to implement the statutory

requirement for “fair, efficient, and equitable distribution of

radio service” and because it is arbitrary and capricious.

MVH also argues that, even if the Rule survives scrutiny, as

applied in this case the result is inconsistent with achieving a

fair distribution, wherefore the Commission abused its

discretion by denying MVH’s waiver request.

A. The 10% Threshold Is Permissible Under the Statute

MVH first argues the 10% threshold is inconsistent with

the Commission’s statutory obligation to “provide a fair,

efficient, and equitable distribution of radio service.” It

points out that the Commission’s historical approach to

achieving a fair distribution was to compare the absolute

numbers of underserved people, not the percentages of the

total populations, that the applicants would serve. What the

Commission did in the past is of no moment, however, if its

current approach reflects a permissible interpretation of the

statute. See Chevron, U.S.A., Inc. v. Natural Res. Def.

Council, Inc., 467 U.S. 837, 863-64 (1984) (“An initial

agency interpretation is not instantly carved in stone. On the

contrary, the agency, to engage in informed rulemaking, must

consider varying interpretations and the wisdom of its policy

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on a continuing basis.”); Motor Vehicle Mfrs. Ass'n of U.S.,

Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42 (1983)

(“[W]e fully recognize that regulatory agencies do not

establish rules of conduct to last forever and that an agency

must be given ample latitude to adapt their rules and policies

to the demands of changing circumstances.” (citations and

internal quotation marks omitted)). An agency must

nevertheless “display awareness that it is changing position”;

it cannot “depart from a prior policy sub silentio or simply

disregard rules that are still on the books.” FCC v. Fox

Television Stations, Inc., 556 U.S. 502, 515 (2009). This does

not, however, equate to a “heightened standard” for

reasonableness. Id. at 514. The agency need only show “that

the new policy is permissible under the statute, that there are

good reasons for it, and that the agency believes it to be

better.” Id. at 515.

At oral argument, MVH clarified its position; it

contended the only acceptable rule under the statute would be

one that granted the license to whichever applicant would

provide first or second service to more people. Nothing in the

text or history of the statute could possibly be read to require

that specific approach.

Applying the familiar two-step framework of Chevron,

we ask first whether in § 307(b) the Congress addressed and

hence foreclosed the question here in dispute. See 467 U.S. at

843 (agency “must give effect to the unambiguously

expressed intent of Congress”). Section 307(b) was enacted

to redress the “[c]oncentration of radio service in the big city”

at the expense of service to “sparsely populated areas.”

Pasadena Broad. Co. v. FCC, 555 F.2d 1046, 1050 (D.C. Cir.

1977) (internal quotation marks omitted). There can be no

doubt, however, that the Congress left it to the agency to

decide how best to pursue this goal: The litany “fair,

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efficient, and equitable” indicates the Congress delegated to

the Commission the task of balancing myriad considerations

that neither body could fully anticipate. See Alvin Lou Media,

Inc. v. FCC, 571 F.3d 1, 11 (D.C. Cir. 2009) (“The text of

§ 307 is silent regarding ... what the Commission should

consider in making § 307(b) determinations). Indeed,

§ 307(b) was given its present form in 1936 precisely in order

to replace the rigid head counting scheme the Congress had

imposed upon the agency in a 1935 amendment, and to

restore the discretionary approach of the original

Communications Act of 1934. See Pasadena Broad., 555

F.2d at 1050 (“The purpose of this reversion was [in part] to

loose the Commission from the fetters imposed by the quota

system”). By eschewing a more prescriptive test, the

Congress clearly authorized the Commission to decide what

factors would be dispositive in expanding access to radio

service. See Alvin Lou Media, 571 F.3d at 11 (“The absence

of statutory procedural mandates supports the conclusion that

the Commission’s ... procedures ... do not conflict with

§ 307(b)”).

Turning to step two of the Chevron framework, we ask

whether the agency’s interpretation of § 307(b) in this case is

a “permissible” one. 467 U.S. at 843. MVH contends that

whatever “fair, efficient, and equitable distribution” means, it

must include selecting an applicant that will bring second

service to 23,500 more people than would another applicant.

Sensible as that proposition may seem at first blush, its appeal

fades when one recalls that the statute requires the

Commission to ensure access to radio service not only for

underserved people but in particular for underserved people in

sparsely populated areas. The percentage of the total

broadcast population receiving first or second NCE service is

a reasonable proxy for whether the station targets a sparsely

populated area. The 10% threshold ensures that stations

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targeted at big cities do not win a decisive preference by

virtue of incidentally covering pockets of underserved people

who reside in a generally well-served community, as

illustrated below.

Moreover, there is nothing in § 307(b) that suggests

people already receiving one NCE broadcast must be

considered underserved or given a preference at all. Should

people receiving two NCE broadcasts be designated

underserved? What about a community receiving several

commercial broadcasts but no NCE broadcasts? These are

judgments the Congress delegated to the Commission, not to

the courts. It is therefore well within the Commission’s

discretion to award preferences for fair distribution in a

manner that provides an incentive for applicants to expand

service to sparsely populated areas even though it will

occasionally result in the Commission awarding an NCE

license to an applicant that will provide second NCE service

to fewer people than would a competing applicant.

MVH also contends the 10% threshold violates the fair

distribution mandate of § 307(b) because it might cause an

applicant to reduce its total population served – an otherwise

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undesirable goal – in order to increase the percentage of

people in its proposal receiving first or second service. The

selection criteria that are applied if the Fair Distribution Rule

is not dispositive prevent that unintended consequence,

however, by providing comparative points for applicants

covering larger areas and populations. 47 C.F.R.

§ 73.7003(b)(4). MVH also suggests an applicant might

understate its intended area of service when applying to the

Commission “and later enlarge the service area after the

construction permit is issued.” Again, however, the points

gained for proposing a larger and more populous service area

– and hence lost to an applicant proposing a smaller and less

populous area – make this gamesmanship unlikely. In any

event, a provision in the Fair Distribution Rule itself probably

prohibits this result: “For a period of four years of on-air

operations, an applicant receiving a decisive preference

pursuant to this section is required to construct and operate

technical facilities substantially as proposed ....” 47 C.F.R.

§ 73.7002(c).

Accordingly, MVH cannot escape the Rule on the ground

that it conflicts with the § 307(b) mandate for a “fair,

efficient, and equitable distribution of radio service.”

B. The 10% Threshold Is Not Arbitrary and Capricious

MVH next argues the Fair Distribution Rule is arbitrary

and capricious because the Commission did not provide a

reasoned explanation for the 10% threshold either during the

notice-and-comment process or in the Omnibus Order

applying the selection criteria to particular cases, including

this one. Indeed, MVH characterizes the Fair Distribution

Rule as a departure from the “long-standing policy” of case-

by-case analysis with no qualifying threshold. As evidence of

the Commission’s failure of reasoned decision making, MVH

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points out that the agency, in proposing to adopt a rule, never

said it was considering a minimum percentage of people

receiving first or second service as a prerequisite for receiving

a preference for fair distribution and therefore did not benefit

from the comments that applicants would have offered in

response. Presumably because the time has passed for a

procedural challenge to the rule, MVH couches this argument

as an objection to the reasoning underlying the substance of

the Rule and not to the notice-and-comment process by which

the Rule was promulgated. MVH further claims the decision

to impose a threshold for eligibility to receive a fair

distribution preference “lacked any support in the rulemaking

record” because the only commenter that mentioned such a

threshold suggested a 5% level.

Although the Commission must “articulate a satisfactory

explanation for its action” when it changes course, State

Farm, 463 U.S. at 43, there is no requirement that the

explanation derive from the comments it receives. In

adopting the Fair Distribution Rule and applying it to MVH,

the agency fully explained its reason for departing from its

long-standing case-by-case approach.

More specifically, the Commission explained the new

Rule would “eliminate the vagueness and unpredictability of

the [previous] system,” NCE Order, 15 FCC Rcd. at 7394,

¶ 18, and with reference to the goal of fair distribution in

particular, it explained that it sought “to evaluate applications

quickly, with minimal burden on applicants and on the staff,”

id. at 7395, ¶ 21. Moreover, contrary to MVH’s description,

the Commission did draw support for an objective approach

from the comments of interested parties. It specifically

mentioned commenters’ “concern[s] that the population

receiving a first or second service be of a sufficient size to be

meaningful,” that the Commission “define what constitutes a

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significant population receiving first or second service,” and

that its “calculations ... be consistent.” Id. at 7396, ¶ 23.

Next, in response to another applicant’s argument that it

should receive a fair distribution preference despite falling

only slightly short of the 10% threshold, the Commission

explained in the Omnibus Order how the threshold

encourages the fair distribution of NCE licenses: “In well-

populated service areas such as [the applicant’s], the ten

percent component ensures that Section 307(b) eligibility is

limited to NCE applicants offering new service to a

significant portion of the relatively large population.” 22

FCC Rcd. at 6114, ¶ 30. This explanation echoed the reason

the Commission gave in the NCE Order for choosing a 10%

threshold rather than the 5% threshold one commenter had

suggested: “We generally concur with this suggestion ... but

believe that the percentage difference in population coverage

must be greater if it is to distinguish between applicants in

well populated areas, as a threshold matter.” 15 FCC Rcd. at

7397, ¶ 25.

The Commission also explained that the selection criteria

take account of the absolute difference in the scale of

proposed service areas. See Omnibus Order, 22 FCC Rcd. at

6114, ¶ 29. That is, where, as here, there is not a dispositive

preference for an applicant providing first or second service to

more than 10% of its total population, an applicant that would

increase first or second service as a result of serving a larger

area with more people overall can receive a comparative

advantage as part of the point system for its superior scale.

The Commission’s NCE selection criteria therefore advance

the goal of expanding service even when an applicant covers a

large absolute number of underserved people but that number

is less than 10% of the total population to be served. This is

the same explanation that the Media Bureau provided when

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MVH petitioned to deny Holy Family’s tentative selection as

licensee. See Letter Decision, 22 FCC Rcd. at 18934-35.

In sum, the Commission adequately explained the

purpose of the 10% threshold and the NCE selection criteria

overall. Those criteria therefore provided a permissible

foundation for the Commission to decide between the

applications of MVH and Holy Family.

C. The Commission Did Not Abuse Its Discretion by

Denying MVH’s Waiver Request

Lastly, MVH argues the Commission should have made

an exception to the Fair Distribution Rule in its case. The

Commission may, in its discretion, grant a request to waive a

rule if:

(i) The underlying purpose of the rule(s) would not be

served or would be frustrated by application to the

instant case, and ... a grant ... would be in the public

interest; or

(ii) In view of unique or unusual factual circumstances

..., application of the rule(s) would be inequitable,

unduly burdensome or contrary to the public

interest, or the applicant has no reasonable

alternative.

47 C.F.R. § 1.925(b)(3). Our review of the Commission’s

denial of a waiver is “extremely limited,” Blanca Tel. Co. v.

FCC, 743 F.3d 860, 864 (D.C. Cir. 2014); see also id. (“We

will vacate the denial of a waiver only when the agency’s

reasons are so insubstantial as to render that denial an abuse

of discretion.” (internal quotation marks omitted)), because

the agency, as the author of the policy embodied in its rule, is

the appropriate body to determine whether a situation presents

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unanticipated circumstances that make it more appropriate to

create an exception than to apply the rule. MVH argues the

Commission abused its discretion when it refused to waive

the Fair Distribution Rule because the fair distribution policy

underlying the Rule would be better served by MVH than by

Holy Family. It also claims the Commission did not explain

its decision to deny the waiver.

The Commission did explain its decision by explicitly

adopting the Media Bureau’s reason for denying the waiver.

Final Order, 28 FCC Rcd. at 4854, ¶ 2. The Bureau in turn

had explained it was following one of the Commission’s

decisions in the Omnibus Order. Letter Decision, 22 FCC

Rcd. at 18934. There an applicant to serve a population

9.33% of whom would receive first or second service had

argued the new 10% threshold should not be applied to it

because its underserved population, although less than 10% of

its total population, was much larger than the underserved

populations that the rival applicants proposed to serve.

Omnibus Order, 22 FCC Rcd. at 6113-14, ¶¶ 28-30. The

Commission denied that request for a waiver because, in its

view, adhering to the threshold was necessary in order to

encourage applicants to expand service to communities non-

contiguous to well-populated areas, as explained in Part II.B

above. See id at 6114, ¶ 30.

An agency does not abuse its discretion by applying a

bright-line rule consistently in order both to preserve

incentives for compliance and to realize the benefits of easy

administration that the rule was designed to achieve. See

Comcast Corp. v. FCC, 526 F.3d 763, 767 (D.C. Cir. 2008)

(affirming denial of waiver in part because consistent

application was necessary to preserve “providers’ incentive”

to comply with the policy); Turro v. FCC, 859 F.2d 1498,

1500 (D.C. Cir. 1988) (“[S]trict adherence to a general rule

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may be justified by the gain in certainty and administrative

ease, even if it appears to result in some hardship in individual

cases”). The Commission’s decision not to waive the

threshold cutoff despite MVH just barely missing it was,

therefore, not an abuse of discretion.

III. Conclusion

In sum, the Commission’s selection of Holy Family’s

application over MVH’s pursuant to its Fair Distribution Rule

was not inconsistent with either § 307(b) of the

Communications Act or the prohibition of arbitrary and

capricious decision making in § 706 of the APA. When the

Commission declined to waive that rule, it neither failed to

explain that decision nor abused its discretion. Accordingly,

the decision of the Commission is

Affirmed.