# Prometheus Radio Project v. Federal Communications Commission > Court of Appeals for the Third Circuit · June 24, 2004 · 373 F.3d 372 URL: https://www.frixlaw.com/law-library/cases/3014050 ## Case - **Full name:** PROMETHEUS RADIO PROJECT v. FEDERAL COMMUNICATIONS COMMISSION; United States of America Prometheus Radio Project, Media General, Inc., National Association of Broadcasters, Network Affiliated Stations Alliance, ABC Television Affiliates Association, CBS Television Affiliates Association and NBC Television Affiliates, Fox Entertainment Group, Inc. and Fox Television Stations, Inc., Viacom Inc., National Broadcasting Company, Inc., and Telemundo Communications Group, Inc., Sinclair Broadcast Group, Inc., Media Alliance, Paxson Communications Corporation, National Council of the Churches of Christ in the United States, Tribune Company, Paxon Communications Corporation, Emmis Communications Corporation, Center for Digital Democracy and Fairness & Accuracy in Reporting, Clear Channel Communications, American Hispanic Owned Radio Association, Civil Rights Forum on Communications Policy, League of United Latin American Citizens, Minority Business Enterprise Legal Defense and Education Fund, Minority Media and Telecommunications Council, National Asian American Telecommunications Association, National Association of Latino Independent Producers, National Coalition of Hispanic Organizations, National Council of La Raza, National Hispanic Media Coalition, National Indian Telecommunications Institute, National Urban League, Native American Public Telecommunications, Inc., PRLDEF-Institute for Puerto Rican Policy, Unity: Journalists of Color, Inc. and Women’s Institute for Freedom of the Press - **Court:** Court of Appeals for the Third Circuit - **Decided:** June 24, 2004 - **Citations:** 373 F.3d 372 - **Precedential status:** Published - **Opinion:** Opinion - **Judges:** Ambro, Fuentes, Scirica - **Cited by:** 3 later opinions in the Frix Law Library ## Citator (automated) - No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases. - Full citator and citing cases: https://www.frixlaw.com/law-library/cases/3014050 ## Opinion text Opinions of the United 2004 Decisions States Court of Appeals for the Third Circuit 6-24-2004 Prometheus Radio v. FCC Precedential or Non-Precedential: Precedential Docket No. 03-3388 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2004 Recommended Citation "Prometheus Radio v. FCC" (2004). 2004 Decisions. Paper 537. http://digitalcommons.law.villanova.edu/thirdcircuit_2004/537 This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova University School of Law Digital Repository. It has been accepted for inclusion in 2004 Decisions by an authorized administrator of Villanova University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu. PRECEDENTIAL UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT Nos. 03-3388, 03-3577, 03-3578, 03-3579, 03-3580, 03-3581, 03-3582, 03-3651, 03-3665, 03-3675, 03-3708, 03-3894, 03-3950, 03-3951, 03-4072, 03-4073 & 04-1956 PROMETHEUS RADIO PROJECT vs. FEDERAL COMMUNICATIONS COMMISSION; UNITED STATES OF AMERICA Prometheus Radio Project, Petitioner in No. 03-3388 Media General, Inc., Petitioner in No. 03-3577 National Association of Broadcasters, Petitioner in No. 03-3578 Network Affiliated Stations Alliance, ABC Television Affiliates Association, CBS Television Affiliates Association and NBC Television Affiliates, Petitioners in No. 03-3579 Fox Entertainment Group, Inc. and Fox Television Stations, Inc., Petitioners in No. 03-3580 Viacom Inc., Petitioner in No. 03-3581 National Broadcasting Company, Inc., and Telemundo Communications Group, Inc., Petitioners in No. 03-3582 Sinclair Broadcast Group, Inc., Petitioner in No. 03-3651 Media Alliance, Petitioner in No. 03-3665 Paxson Communications Corporation, Petitioner in No. 03-3675 National Council of the Churches of Christ in the United States, Petitioner in No. 03-3708 Tribune Company, Petitioner in No. 03-3894 Paxson Communications Corporation, Petitioner in No. 03-3950 Emmis Communications Corporation, Petitioner in No. 03-3951 Center for Digital Democracy and Fairness & Accuracy in Reporting, Petitioners in No. 03-4072 Clear Channel Communications, Petitioner in No. 03-4073 American Hispanic Owned Radio Association, Civil Rights Forum on Communications Policy, League of United Latin American Citizens, Minority Business Enterprise Legal Defense and Education Fund, Minority Media and Telecommunications Council, National Asian American Telecommunications Association, National Association of Latino Independent Producers, National Coalition of Hispanic Organizations, National Council of La Raza, National Hispanic Media Coalition, National Indian Telecommunications Institute, National Urban League, Native American Public Telecommunications, Inc., PRLDEF-Institute for Puerto Rican Policy, UNITY: Journalists of Color, Inc. and W omen’s Institute for Freedom of the Press, Petitioners in No. 04-1956 On Petition for Review of An Order of the Federal Communications Commission (FCC No. 03-127) Argued February 11, 2004 Before: SCIRICA, Chief Judge, AM BRO and FUENTES, Circuit Judges (Filed June 24, 2004) Andrew Jay Schwartzman, Esquire (Argued) Cheryl A. Leanza, Esquire Media Access Project 1625 K Street, N.W., Suite 1118 Washington, DC 20006 Counsel for Prometheus Radio Project, Center for Digital Democracy and Fairness and Accuracy in Reporting Shelby D. Green, Esquire Pace University School of Law 78 North Broadway White Plains, NY 10603 Counsel for National Council of the Churches of Christ in the United States Samuel L. Spear, Esquire Spear Wilderman Borish Endy Spear & Runckel 230 South Broad Street, Suite 1400 Philadelphia, PA 19102 Counsel for Prometheus Radio Project Angela J. Campbell, Esquire (Argued) James A. Bachtell, Esquire Karen Henein, Esquire Institute for Public Representation 2 Georgetown University Law Center 600 New Jersey Avenue, N.W., Suite 312 Washington, DC 20001 Counsel for Media Alliance and Office of Communication of the United Church of Christ, Inc. Glen B. Manishin, Esquire (Argued) Stephanie A. Joyce, Esquire Kelley Drye & Warren LLP 8000 Towers Crescent Drive, Suite 1200 Vienna, VA 22182 Counsel for Consumers Union and Consumer Federation of America Robert A. Long, Jr., Esquire Kevin C. Newsom, Esquire Heidi C. Doerhoff, Esquire Covington & Burling 1201 Pennsylvania Avenue, N.W. Washington, DC 20004-1401 Counsel for CBS Television Network Affiliates Association, NBC Television Affiliates and Network Affiliated Stations Alliance Wade H. Hargrove, Esquire Mark J. Prak, Esquire Brooks, Pierce, Mclendon, Humphry & Leonard 1600 Wachovia Capitol Center 150 Fayetteville Street Mall Raleigh, NC 27601 Counsel for ABC Television Affiliates Association Henk Brands, Esquire (Argued) Patrick S. Campbell, Esquire John H. Longwell, Esquire Paul, Weiss, Rifkind, Wharton & Garrison LLP 1615 L Street, N.W., Suite 1300 Washington, DC 20036 Counsel for Fox Entertainment Group, Inc., Fox Television Stations, Inc. and Viacom Inc. 3 Michael K. Kellogg, Esquire Mark L. Evans, Esquire Kellogg, Huber, Hansen, Todd & Evans, PLLC 1615 M Street, N.W., Suite 400 Washington, DC 20036 Counsel for National Broadcasting Company, Inc. and Telemundo Communications Group, Inc. Donald B. Verrilli, Jr., Esquire (Argued) Ian Heath Gershengorn, Esquire Elaine J. Goldenberg, Esquire Jenner & Block, LLC 601 Thirteenth Street, N.W., 12 th Floor Washington, DC 20005 Henry L. Baumann, Esquire Jack N. Goodman, Esquire Jerianne Timmerman, Esquire National Association of Broadcasters 1771 N Street, N.W. Washington, DC 20036 Counsel for National Association of Broadcasters John R. Feore, Jr., Esquire Michael D. Hays, Esquire Kenneth D. Salomon, Esquire M. Anne Swanson, Esquire Theodore L. Radway, Esquire Jason E. Rademacher, Esquire Dow, Lohnes & Albertson, PLLC 1200 New Hampshire Avenue, N.W., Suite 800 Washington, DC 20036-6802 Counsel for Millcreek Broadcasting, LLC, Media General, Inc., Simmons Media Group and Paxson Communications Corporation 4 John E. Fiorini III, Esquire † Helgi C. Walker, Esquire † * Eve Klindera Reed, Esquire† * Andrew G. McBride, Esquire* Richard J. Bodorff, Esquire* James R. Bayes, Esquire †† Kathleen A. Kirby, Esquire †† Richard E. Wiley, Esquire †† (Argued) Martha E. Heller, Esquire †† Wiley Rein & Fielding LLP 1776 K Street, N.W. Washington, DC 20006 † Counsel for Emmis Communications Corporation * Counsel for Clear Channel Communications, Inc. †† Counsel for Newspaper Association of America, Belo Corporation, Gannett Co., Inc. and Morris Communications Company, LLC Kathryn R. Schmeltzer, Esquire (Argued) Barry H. Gottfried, Esquire (Argued) Tony Lin, Esquire Paul A. Cicelski, Esquire Scott R. Flick, Esquire Christopher J. Sadowski, Esquire Shaw Pittman LLP 2300 N Street, N.W. Washington, DC 20037 Counsel for Sinclair Broadcast Group, Inc. and Univision Communications Inc. Miguel A. Estrada, Esquire (Argued) Michael J. Edney, Esquire Gibson, Dunn & Crutcher LLP 1050 Connecticut Avenue, N.W. Washington, DC 20036 Counsel for Clear Channel Communications, Inc. 5 Carter G. Phillips, Esquire (Argued) R. Clark W adlow, Esquire Richard D. Klingler, Esquire James P. Young, Esquire Anita L. Wallgren, Esquire Sidley Austin Brown & Wood LLP 1501 K Street, N.W. Washington, DC 20005 Crane H. Kenney, Esquire Tribune Company 435 N. Michigan Avenue Chicago, IL 60611 Counsel for Tribune Company Jerome M. Marcus, Esquire (Argued) Jonathan Auerbach, Esquire Berger and Montague, P.C. 1622 Locust Street Philadelphia, PA 19103 Dianne Smith, Esquire Capitol Broadcasting Company, Inc. 2619 Western Blvd. 27606, Box 12000 Raleigh, NC 27605 Counsel for Capitol Broadcasting Company, Inc. David Honig, Esquire Nicolaine Lazarre, Esquire (Argued) Fatima Fofana, Esquire Julie Smith, Esquire Minority M edia and Telecommunications Council 3636 16 th Street N.W., #B-366 Washington, DC 20010 Counsel for American Hispanic Owned Radio Association, Civil Rights Forum on Communications Policy, League of United Latin American Citizens, Minority Business Enterprise Legal Defense and Education Fund, Minority Media and Telecommunications Council, National Asian American Telecommunications Association, National Association of Latino Independent Producers, National Coalition of Hispanic Organizations, National Council of La Raza, National Hispanic Media Coalition, National Indian Telecommunications Institute, 6 National Urban League, Native American Public Telecommunications, Inc., PRLDEF-Institute for Puerto Rican Policy, UNITY: Journalists of Color, Inc. and Women’s Institute for Freedom of the Press Stephen D. Gavin, Esquire Katrina C. Gleber, Esquire Patton Boggs LLP 2550 M Street, N.W. Washington, DC 20037 Counsel for Nassau Broadcasting Holdings, Inc., and Nassau Broadcasting II, LLC David A. Irwin, Esquire Irwin, Campbell & Tannenwald 1730 Rhode Island Avenue, N.W., Suite 200 Washington, DC 20036 Counsel for Family Stations, Inc., Sunbelt Communications Company, Press Communications, LLC and Diversified Communications James L. Winston, Esquire Rubin, Winston, Diercks, Harris & Cooke 1155 Connecticut Avenue, N.W., 6 th Floor Washington, DC 20036 Counsel for National Association of Black Broadcasters, Inc. and Rainbow Push Coalition, Inc. R. Hewitt Pate, Assistant Attorney General Makan Delrahim, Deputy Assistant Attorney General Catherine G. O’Sullivan, Esquire Nancy C. Garrison, Esquire James J. Fredricks, Esquire United States Department of Justice Antitrust Division 601 D Street, N.W . Patrick Henry Building Washington, DC 20530 Counsel for United States of America John A. Rogovin, General Counsel (Argued) Daniel M. Armstrong, Associate General Counsel Jacob M. Lewis, Associate General Counsel (Argued) 7 C. Grey Pash, Jr., Esquire Nandan M. Joshi, Esquire Federal Communications Commission 445 12 th Street, S.W. Washington, DC 20554 Counsel for the Federal Communications Commission OPINION OF THE COURT Table of Contents I. Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 A. The 1934 Communications Act and Early Broadcast Ownership Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 B. Deregulation Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 C. The Telecommunications Act of 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 D. Regulatory Review Since 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 E. The Commission’s 2003 Report and Order . . . . . . . . . . . . . . . . . . . . . . . . 22 F. The Order’s Modification of Broadcast Media Ownership Rules . . . . . . 24 1. Local Television Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 2. Local Radio Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 3 & 4. Newspaper/Broadcast and Radio/Television Cross-Ownership . . 26 5. National Television Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 8 6. Dual Network Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 G. Procedural History of the Current Appeals . . . . . . . . . . . . . . . . . . . . . . . . 28 H. Subsequent Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 II. Jurisdiction and Standard of Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 A. Standard of Review Under the Administrative Procedure Act . . . . . . . . . 30 B. Standard of Review Considerations Under Section 202(h) . . . . . . . . . . . 32 1. “Determine whether any such rules are necessary in the public interest.” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 2. “Repeal or modify any regulations it determines to be no longer in the public interest.” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 C. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 III. Mootness and the National Television Ownership Rule . . . . . . . . . . . . . . . . . . . . . 43 IV. Cross-Ownership Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 A. Regulatory Background and the 2002 Biennial Review . . . . . . . . . . . . . . 47 B. The Commission’s decision not to retain a ban on newspaper/broadcast cross-ownership is justified under § 202(h) and is supported by record evidence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 1. Newspaper/broadcast combinations can promote localism. . . . . . . 49 2. A blanket prohibition on newspaper/broadcast combinations is not necessary to protect diversity. . . . . . . . . . . . . . . . . . . . . . . . . . 51 C. The Commission’s decision to retain some limits on common ownership 9 of different-type media outlets was constitutional and did not violate § 202(h). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 1. Continuing to regulate cross-media ownership is in the public interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 2. Continuing to regulate cross-media ownership does not violate the Fifth Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 3. Continuing to regulate cross-media ownership does not violate the First Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 D. The Commission did not provide reasoned analysis to support the specific Cross-Media Limits that it chose. . . . . . . . . . . . . . . . . . . . . . . . . 57 1. Overview of the Commission’s Diversity Index Methodology . . . 58 2. The Commission did not justify its choice and weight of specific media outlets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 3. The Commission did not justify its assumption of equal market shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 4. The Commission did not rationally derive its Cross-Media Limits from the Diversity Index results. . . . . . . . . . . . . . . . . . . . . . 72 5. The Commission should provide better notice on remand. . . . . . . 76 V. Local Television Ownership Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 A. Regulatory Background and the 2002 Biennial Review . . . . . . . . . . . . . . 78 B. We uphold several threshold challenges to the Commission’s overall 10 regulatory approach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 1. Limiting local television station ownership is not duplicative of antitrust regulation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 2. Media other than broadcast television may contribute to viewpoint diversity in local markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 3. Consolidation can improve local programming. . . . . . . . . . . . . . . 84 4. The Commission adequately noticed its decision to allow triopolies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 C. We uphold the Commission’s decision to retain the top-four restriction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 D. We remand the specific numerical limits for the Commission’s further consideration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 E. We remand the Commission’s repeal of the Failed Station Solicitation Rule. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 VI. Local Radio Ownership Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 A. Regulatory Background and the 2002 Biennial Review . . . . . . . . . . . . . . 97 B. We uphold the Commission’s new definition of local markets. . . . . . . . . 99 1. The Commission justified using Arbitron Metro markets. . . . . . . 100 2. The Commission justified including noncommercial stations. . . . 106 C. We uphold the Commission’s transfer restriction. . . . . . . . . . . . . . . . . . 107 1. Transfer restriction is “in the public interest.” . . . . . . . . . . . . . . . 108 11 2. Transfer restriction is reasoned decisionmaking. . . . . . . . . . . . . . 109 3. Transfer restriction is constitutional. . . . . . . . . . . . . . . . . . . . . . . 110 D. We affirm the attribution of Joint Sales Agreements. . . . . . . . . . . . . . . . 112 1. Attribution of JSAs is “necessary in the public interest.” . . . . . . 113 2. Attribution of JSAs is reasoned decisionmaking. . . . . . . . . . . . . . 113 3. Attribution of JSAs is constitutional. . . . . . . . . . . . . . . . . . . . . . . 114 E. We remand the numerical limits to the Commission for further justification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 1. The Commission’s numerical limits approach is rational and in the public interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 2. The Commission did not support its decision to retain the existing numerical limits with reasoned analysis. . . . . . . . . . . . . 119 a. The Commission did not sufficiently justified “five equal-sized competitors” as the right benchmark. . . . . . . . 120 b. The Commission did not sufficiently justified that the existing numerical limits actually ensure that markets will have five equal-sized competitors. . . . . . . . . . . . . . . . 121 c. The Commission did not support its decision to retain the AM/FM subcaps. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 VII. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 12 AM BRO, Circuit Judge In these consolidated appeals we consider revisions by the Federal Communications Commission to its regulations governing broadcast media ownership that the Commission promulgated following its 2002 biennial review. On July 2, 2003, the Commission announced a comprehensive overhaul of its broadcast media ownership rules. It increased the number of television stations a single entity may own, both locally and nationally; revised various provisions of the regulations governing common ownership of radio stations in the same community; and replaced two existing rules limiting common ownership among newspapers and broadcast stations (the newspaper/broadcast cross-ownership rule and the radio/television cross-ownership rule) with a single set of “Cross-Media Limits.” See Report and Order and Notice of Proposed Rulemaking, 18 F.C.C.R. 13,620 (2003) (the “Order”). Several public interest and consumer advocacy groups (collectively, the “Citizen Petitioners”)1 petitioned for judicial review of the Order in various courts of appeals, 1 For convenience we will use this designation throughout our opinion to refer, jointly or severally, to the petitioners and intervenor who raise anti-deregulatory challenges to the Order, including Prometheus Radio Project, Media Alliance, National Council of the Churches of Christ in the United States, Fairness and Accuracy in Reporting, Center for Digital Democracy, Consumer Union and Consumer Federation of America, Minority Media and Telecommunications Council (representing numerous trade, consumer, professional, and civic organizations concerned with telecommunications policy as it relates to racial minorities and women), and Office of Communication of the United Church of Christ (“UCC”) (intervenor). The Network Affiliated Stations Alliance, representing the CBS Television Network Affiliates Association, the NBC Television Affiliates, and the ABC Television Affiliates, and Capitol Broadcasting Company, Inc. (intervenor) also raised anti- 13 contending that its deregulatory provisions contravened the Commission’s statutory mandates as well as the Administrative Procedure Act, 5 U.S.C. §§ 551 et seq. (the “APA”). Associations of networks, broadcasters, and newspaper owners 2 also challenged the Order, arguing that pro-regulatory revisions as well as the absence of further deregulation violate the Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (1996) (the “1996 Act”), the APA, and the United States Constitution. The Judicial Panel on Multidistrict Litigation, acting pursuant to the random selection procedures of 28 U.S.C. § 2112(a), consolidated the petitions in this Court. On September 3, 2003, we stayed implementation of the rules pending our review. For the reasons stated below, we affirm the power of the Commission to regulate media ownership. In doing so, we reject the contention that the Constitution or § 202(h) of the 1996 Act somehow provides rigid limits on the Commission’s ability to regulate in deregulatory challenges to the national television ownership rule (see infra Parts I.F.5, III). 2 Rather than identifying these petitioners and intervenors individually when discussing their positions throughout this opinion, we refer to them collectively as the “Deregulatory Petitioners.” They include: Clear Channel Communications, Inc.; Emmis Communications Corporation; Fox Entertainment Group, Inc.; Fox Television Stations, Inc.; Media General Inc.; National Association of Broadcasters; National Broadcasting Company, Inc.; Paxson Communications Corporation; Sinclair Broadcast Group; Telemundo Communications Group, Inc.; Tribune Company; Viacom Inc.; Belo Corporation (intervenor); Gannett Corporation (intervenor); Morris Communications Company (intervenor); Millcreek Broadcasting LLC (intervenor); Nassau Broadcasting Holdings (intervenor); Nassau Broadcasting II, LLC (intervenor); Newspaper Association of America (intervenor); and Univision Communications, Inc. (intervenor). 14 the public interest. But we must remand certain aspects of the Commission’s Order that are not adequately supported by the record. Most importantly, the Commission has not sufficiently justified its particular chosen numerical limits for local television ownership, local radio ownership, and cross-ownership of media within local markets. Accordingly, we partially remand the Order for the Commission’s additional justification or modification, and we partially affirm the Order. The stay will continue pending our review of the Commission’s action on remand.3 I. Background A. The 1934 Communications Act and Early Broadcast Ownership Regulation In 1934 Congress authorized the Commission to grant licenses for private parties’ 3 Our dissenting colleague asserts several times (indeed it is a principal theme) that we somehow substitute our own policy judgment for that of the Commission. Our response is simple. It is impossible to substitute our policy judgment for that of the Commission when we have no view on its policies save that it act with reason. The proof for this statement is that we do not reverse, but remand (and only in part). Differences with our dissenting colleague touch only some of the many issues presented on appeal. He believes that the Commission’s work, while in part flawed, comes close enough to merit our approval. Our response: not yet. He believes that any imperfections and failings by the Commission can be rectified at the next quadrennial review without the need for a court-ordered remand. Our response: to do so is to abdicate the role assigned to us (see our standard of review discussion at Part II infra), a role, incidentally, our colleague does not deny. What we do is not novel, as it reprises many of the same reasoned analysis concerns expressed by the D.C. Circuit Court of Appeals in Fox Television Stations v. FCC, 280 F.3d 1027 (D.C. Cir. 2002), modified on reh’g, 293 F.3d 537 (D.C. Cir. 2003), and Sinclair Broadcast Group Inc. v. FCC, 284 F.3d 148 (D.C. Cir. 2002). The bottom line: the Commission gets another chance to justify its actions. Once that occurs and the case returns to us, we may yet close the loop of agreement with our colleague. 15 exclusive use of broadcast frequencies. Recognizing that the finite radiofrequency spectrum inherently limits the number of broadcast stations that can operate without interfering with one another, Congress required that broadcast licensees serve the public interest, convenience, and necessity. Communications Act of 1934, 47 U.S.C. § 309(a); see also id. §§ 307(a), 310(d), 312. “In setting its licensing policies, the Commission has long acted on the theory that diversification of mass media ownership serves the public interest by promoting diversity of program and service viewpoints, as well as by preventing undue concentration of economic power.” FCC v. Nat’l Citizens Comm. for Broad., 436 U.S. 775, 780 (1978) (“NCCB”). The Commission’s early regulations reflected its presumption that a single entity holding more than one broadcast license in the same community contravened public interest. See Genesee Radio Corp., 5 F.C.C. 183, 186–87 (1938). In 1941, the Commission announced that it would not license more than one station in the same area to a single network organization. See Nat’l Broad. Co. v. United States, 319 U.S. 190, 206–08, 224–27 (1943) (upholding the rule). At the same time, the Commission prohibited common ownership of stations within the same broadcast service (AM radio, FM radio, and television) in the same community. See Rules Governing Standard and High Frequency Broadcast Stations, 5 Fed. Reg. 2382, 2384 (June 26, 1940) (FM radio); Rules Governing Standard and High Frequency Broadcast Stations, 6 Fed. Reg. 2282, 2284–85 (May 6, 1941) (television); Rules Governing Standard and High Frequency Broadcast Stations, 8 Fed. Reg. 16065 (Nov. 27, 1943) (AM radio). Regulations limiting 16 an entity to the common ownership of seven AM radio stations, seven FM radio stations, and seven television stations survived judicial scrutiny in 1956. See United States v. Storer Broad. Co., 351 U.S. 192 (1956). In the 1970s the Commission adopted its first cross-ownership bans, which prohibited, on a prospective basis, the common ownership of television and radio stations serving the same market, as well as combinations of radio or broadcast stations with a daily newspaper in the same community. Amendment of Sections 73.35, 73.240 and 73.636 of the Commission Rules Relating to Multiple Ownership of Standard, FM and Television Broadcast Stations, 22 F.C.C.2d 306, ¶ 5 (1970); Amendment of Sections 73.34, 73.240 and 73.636 of the Commission’s Rules Relating to Multiple Ownership of Standard, FM, and Television Broadcast Stations, 50 F.C.C.2d 1046 (1975). The Supreme Court upheld the newspaper/broadcast cross- ownership ban as a “reasonable means of promoting the public interest in diversified mass communications.” NCCB, 436 U.S. at 802. B. Deregulation Initiatives The 1980s saw a deregulatory trend for media ownership. The Commission raised its national ownership limits to permit common ownership of 12 stations in each broadcast service (though still prohibiting station combinations that would reach more than 25% of the national audience). Amendment of Section 73.3555 (formerly 73.35, 73.240, and 73.636) of the Commission’s Rules Relating to Multiple Ownership of AM, FM, and Television Broadcast Stations, 100 F.C.C.2d 74 ¶¶ 38, 39 (1985). The Commission also determined that UHF television stations should not be deemed to have 17 the same audience reach as VHF stations,4 due to “the inherent physical limitations of [the UHF] medium,” and therefore applied a 50% “discount” to UHF audiences as counted under the national audience limitation. Id. ¶¶ 42–44. In other words, UHF stations count only half of their audiences in determining compliance with the national television ownership rule. In 1989 the Commission eased its “one to a market” radio/television cross- ownership rules by allowing waiver requests for radio/television cross-ownership in the 25 largest television markets. The Commission stated that it would look favorably upon requests for waivers where there would be 30 independently owned broadcast “voices” remaining in the market after consolidation. Amendment of Section 73.3555 of the Commission’s Rules, the Broadcast Multiple Ownership Rules, 4 F.C.C.R. 1741, ¶ 1 (1989). In 1992, the Commission relaxed local and national radio ownership restrictions and adopted a tiered approach to radio concentration that allowed a single entity to own more radio stations in the largest markets (up to three AM and three FM stations, subject to a local audience reach limitation of 25% and a national cap of 30 AM stations and 30 FM stations) and fewer in the smallest markets. Revision of Radio Rules and Policies, 7 F.C.C.R. 6387, ¶ 27 (1992). 4 VHF (Very High Frequency) stations (channels 2 to 13), which broadcast on frequencies between 30 and 300 MHz, can reach households up to 76 miles away. UHF (Ultra High Frequency) stations (channels higher than 13), which broadcast between 300 and 3000 MHz—reach only 44 miles, and, consequently, far fewer non-cable households than VHF stations. Order ¶ 586. 18 C. The Telecommunications Act of 1996 In 1996 Congress overhauled the Communications Act by enacting the Telecommunications Act of 1996. The 1996 Act contemplated a “pro-competitive, de- regulatory national policy framework designed to accelerate rapidly private sector development of advanced telecommunications and information technologies and services to all Americans by opening all telecommunications markets to competition.” S. Rep. No. 104–230, at 1–2 (1996). The 1996 Act eliminated all limits on national radio ownership and raised the national television audience reach cap from 25% to 35%. 1996 Act §§ 202(a), (c)(1)(B), 110 Stat. at 110–11. Congress also eased local radio ownership limits, establishing a four-tier sliding scale limit of numerical caps that allowed for as many as eight co-owned radio stations in the largest markets. Id. § 202(b)(1), 110 Stat. at 110. The 1996 Act did not contain a new local television rule, but it directed the Commission to “conduct a rulemaking proceeding to determine whether to retain, modify, or eliminate” its existing local television ownership limitations. Id. § 202(c)(2), 110 Stat. at 111. It also expanded the applicability of the one-to-a-market radio/television cross- ownership restriction waiver to the fifty largest markets. Id. § 202(d), 110 Stat. at 111. Finally, the 1996 Act instructed the Commission to review biennially its broadcast ownership rules “to determine whether any of such rules are necessary in the public interest as the result of competition.” Id. § 202(h), 110 Stat. at 111–12. Section 202(h) also required the Commission to “repeal or modify any regulation it determines to be no 19 longer in the public interest.” Id. D. Regulatory Review Since 1996 In 1999 the Commission responded to Congress’s directive under § 202(c) of the 1996 Act to review its local television rule and announced that it would relax its prohibition on the common ownership of television stations with overlapping signals. The Commission’s new rule would allow two commonly owned television stations (a television station “duopoly”) in the same Designated Market Area (“DMA” or “market”) as long as (1) neither station was ranked among the four largest (“top-four”) stations in the market and (2) eight independently owned stations remained in the market post- merger. Review of the Commission’s Regulations Governing Television Broadcasting, 14 F.C.C.R. 12,903, ¶ 8 (1999) (“1999 Television Rule Review”). In the same rulemaking, the Commission also relaxed the one-to-a-market radio/television cross-ownership restriction and allowed radio/television station combinations to exist within three-tiered limits that depend on the size of the market. Id. ¶ 9.5 Meanwhile, in 1998 the Commission began the first biennial review of its broadcast ownership regulations as required under § 202(h). In 2000 it announced that it would retain the national television ownership rule (the 35% limit provided in the 1996 5 These limits allowed an entity to own one television station (or two if permitted under the new local television rule) and (1) up to six radio stations in markets where at least 20 independent voices would remain post-merger, (2) up to four radio stations in markets where at least 10 independent voices would remain post-merger, or (3) one radio station notwithstanding the number of independent voices in the market. Id. 20 Act) and its cable/broadcast cross-ownership rule after determining that both rules remained “necessary in the public interest.” 1998 Biennial Regulatory Review—Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, 15 F.C.C.R. 11,058, ¶ 4 (2000) (“1998 Biennial Regulatory Review”).6 On appeal, however, the United States Court of Appeals for the D.C. Circuit held that the Commission had not sufficiently explained its reasons for retaining either of these rules. Fox Television Stations v. FCC, 280 F.3d 1027, 1043–44, 1051–52 (D.C. Cir. 2002) (“Fox I”), modified on reh’g, 293 F.3d 537 (D.C. Cir. 2002) (“Fox II”). As for the national television ownership rule, the Court determined that the agency had taken a “wait and see” approach in evaluating its competition and diversity effects, which was impermissible in light of § 202(h)’s mandate to repeal or modify rules found no longer necessary in the public interest. Id. at 1042. It remanded the rule to the Commission for additional justification. Id. at 1049. The Court vacated the cable/broadcast cross-ownership rule, however, finding that the Commission’s decision to retain it was arbitrary and capricious and contrary to § 202(h). Id. at 1053. 6 The Commission also announced that it would propose modification of the newspaper/broadcast cross-ownership rule and the dual network rule (which allows a broadcast station to affiliate with more than one network except that stations may not affiliate with more than one of the four largest networks: ABC, CBS, Fox, and NBC, see 47 C.F.R. § 73.658(g)). The Commission also found that the local radio rule was necessary in the public interest, but announced that it would seek further comments on alternative methods for defining radio station markets. 1998 Biennial Regulatory Review ¶ 4. 21 A few months later, the same Court reviewed the local television multiple- ownership rule. Sinclair Broad. Group, Inc. v. FCC, 284 F.3d 148 (D.C. Cir. 2002). The petitioner challenged the “eight independent voices” exception, contending that it lacked foundation or connection to the Commission’s goal of promoting diversity in local markets. Id. at 152. The Court determined that the Commission had adequately justified its decision to retain the local television rule under the APA and § 202(h), but that it had not provided a rational basis for the exclusion of non-broadcast media from the eight voices exception. Id. at 165. It remanded the rule for the Commission’s further justification. Id. at 169. E. The Commission’s 2003 Report and Order In September 2002 a Notice of Proposed Rulemaking (the “Notice”) announced that the Commission would review four of its broadcast ownership rules pursuant to § 202(h): the 35% national audience reach limit remanded in Fox; the local television rule remanded in Sinclair; the radio/television cross-ownership rule; and the dual network rule. 2002 Biennial Regulatory Review Notice of Proposed Rulemaking, 17 F.C.C.R. 18,503, ¶ 6 (2002). The Notice also advised that the Commission was incorporating into its biennial review pending proceedings on two additional rules: its rule limiting radio station ownership in local markets and its rule prohibiting newspaper/broadcast cross- ownership. Id. ¶ 7. The Commission established a M edia Ownership Working Group (“M OW G”), which commissioned twelve studies ranging from consumer surveys to economic 22 analyses of media markets. These reports were released for public comment in October 2002. Interested parties filed thousands of pages of comments, consisting of legal, social, and economic analyses, empirical and anecdotal evidence, and industry and consumer data to respond to the issues identified in the Commission’s Notice. Notably, nearly two million people weighed in by letters, postcards, e-mails, and petitions to oppose further relaxation of the rules. Statement of Commissioner Jonathan S. Adelstein, Dissenting, 18 F.C.C.R. 13,974, 13,977 (July 2, 2003). The Commission also heard public comment at a February 2003 “field hearing” in Richmond, Virginia.7 On June 2, 2003, the Commission adopted the Order modifying its ownership rules to provide a “new, comprehensive framework for broadcast ownership regulation” by a vote of 3–2.8 Order ¶ 3. The Order was released on July 2, 2003. F. The Order’s Modification of Broadcast Media Ownership Rules After reaffirming the Commission’s three traditional policy objectives in promoting the public interest—competition, diversity, and localism—Order ¶ 8, the Commission considered whether each of the six rules remained in the public interest and proposed modifications where it believed necessary. With respect to each of the rules, the Commission determined as follows. 7 Two Commissioners (Jonathan S. Adelstein and Michael J. Copps) held and attended, between them, thirteen additional public forums, using their own office resources. Statement of Commissioner Michael J. Copps, Dissenting, 18 F.C.C.R. 13,951, 13,956 (July 2, 2003). 8 Commissioners Copps and Adelstein dissented. 23 1. Local Television Ownership The existing local television ownership rule allowed television station duopolies, so long as at least one of the stations was not ranked among the market’s four largest stations and so long as at least eight independently owned and operated full-power television stations would remain in the market post-merger. 47 C.F.R. § 73.3555(b). The Order modified this rule to permit television station triopolies in markets with 18 or more television stations and television station duopolies in markets with 17 or fewer television stations. Order ¶ 134. These limits are subject to the restriction (effectively a ban subject to a waiver provision) that a single firm may not own more than one top-four station in a market. This restriction forecloses common station ownership in markets with fewer than five television stations. Id. ¶ 186. The existing rule effectively precludes duopolies in most markets; only the largest 70 markets of the nation’s 210 DM As could comply with the “eight voices” test. Adelstein Dissent, 18 F.C.C.R. at 13,998. The new rule would allow triopolies in the nine largest DMAs, which represent 25.2% of the population. Duopolies could exist under the new rule in the largest 162 markets, representing 95.4% of the nation’s population. Id. at 13,997–98. 2. Local Radio Ownership Although the Order retained the existing numerical limits on radio ownership that Congress established in § 202(b) of the 1996 Act,9 it modified other aspects of the rule. 9 In the 1996 Act, Congress directed the Commission to revise the local radio ownership limits to provide that: (1) in a radio market with 45 or more commercial radio 24 First, it changed the method for determining radio markets by replacing the “contour- overlap” method (described in detail in Part VI.B infra) with the geography-based market delineations created by Arbitron, a company that generates market data for radio advertisers. Order ¶ 239. Additionally, the Commission would now include noncommercial stations in the station count for each market. Id. The Commission grandfathered any existing radio station combinations rendered noncompliant under the newly defined markets, id. ¶ 484, but generally restricted transfer of these combinations, id. ¶ 487. The Commission also changed the local radio ownership rule by deciding to attribute “Joint Sales Agreements” (agreements under which a licensee sells advertising time on its station to a broker station for a fee) toward the brokering entity’s numerical limit. Id. ¶ 239. 3 & 4. Newspaper/Broadcast and Radio/Television Cross-Ownership The Commission has prohibited common ownership of a full-service television broadcast station and a daily public newspaper in the same community since 1975. Amendment of Sections 73.35, 73.240, and 73.636 of the Commission’s Rules Relating to stations, a party may own up to 8 commercial radio stations, not more than 5 of which are in the same service (AM or FM); (2) in a radio market with between 30 and 44 commercial radio stations, a party may own up to 7 commercial radio stations, not more than 4 of which are in the same service; (3) in a radio market with between 15 and 29 commercial radio stations, a party may own up to 6 commercial stations, not more than 4 of which are in the same service; and (4) in a market with 14 or fewer commercial radio stations, a party may own up to 5 commercial radio stations, not more than 3 of which are in the same service, except that a party may not own more than 50 percent of the stations in that market. 1996 Act, § 202(b)(1), 110 Stat. at 110. 25 Multiple Ownership of Standard, FM, and Television Broadcast Stations, 50 F.C.C.2d 1046 (1975). Additionally, the Commission regulates the number of television and radio stations that may be commonly owned with limits that vary with the size of the market. 47 C.F.R. § 73.3555(c). The Order announced the Commission’s decision to repeal both cross-ownership rules (television/newspaper, radio/television) and replace them with a single set of Cross- Media Limits. The Commission determined that neither cross-ownership prohibition remained necessary in the public interest to ensure competition, diversity, or localism. Order ¶¶ 330, 371. The new Cross-Media Limits prohibit newspaper/broadcast combinations and radio/television combinations in the smallest DM As, i.e., those with three or fewer full-power commercial or noncommercial television stations. Id. ¶ 454. In contrast, in the largest markets—those with more than eight television stations—common ownership among newspapers and broadcast stations is unrestricted. Id. ¶ 473. In medium-sized markets—those with between four and eight television stations—one entity may own a newspaper and either (a) one television station and up to 50% of the radio stations that may be commonly owned in that market under the local radio rule or (b) up to 100% of the radio stations allowed under the local radio rule. Id. ¶ 466. In structuring its Cross-Media Limits, the Commission drew upon a methodological tool named the “Diversity Index,” which the Commission developed as a measure of viewpoint diversity in local markets to identify those “at-risk” markets where consolidation would have a deleterious effect. Id. ¶¶ 391, 442. The Diversity Index, 26 explained more fully in Part IV.D.1 below, is a highly modified version of the formula for measuring market concentration—the Herfindahl-Hirschman Index—applied by the Department of Justice and Federal Trade Commission to analyze mergers. Id. ¶ 428. 5. National Television Ownership The national television ownership rule prohibits entities from owning television stations that in the aggregate reach a certain percentage of our country’s households. 47 C.F.R. § 73.3555(e)(1). Section 202(c) of the 1996 Act directed the Commission to delete the then-existing twelve-station cap and raise the audience reach limit from 25% to 35%. After the D.C. Circuit Court remanded the Commission’s decision in the 1998 biennial review to retain the limit at 35%, Fox I, 280 F.3d at 1049, the Commission decided to increase the audience reach limit to 45%. Order ¶ 499. The Commission also declined to repeal or modify its existing 50% discount for UHF stations’ audiences as counted toward the audience reach limit. Id. ¶ 500. 6. Dual Network Rule Under the dual network rule, a television station may affiliate with more than one network except that it may not affiliate with more than one of the four largest networks, ABC, CBS, Fox, and NBC. 47 C.F.R. § 73.658(g). The rule effectively permits common ownership of networks to the exclusion of the top four. Order ¶ 592. The Commission determined that the dual network rule remained necessary in the public interest, and thus 27 did not repeal or modify it. Id.10 G. Procedural History of the Current Appeals Within days of the publication of the Order, several organizations filed petitions for review of the Commission’s revised rules in various courts of appeals, some contending that the Commission had gone too far in revising the rules, and others asserting that the Commission had not gone far enough. Some of these organizations, including the Prometheus Radio Project, filed their petitions in this Court. Under 28 U.S.C. § 2112(a), petitions to review administrative orders filed in different circuit courts within the first ten days of the appeal period trigger a lottery conducted by the Judicial Panel on Multidistrict Litigation. On August 19, 2003, the Panel announced that our Court had been selected in the lottery and consolidated the appeals here. We entered a stay of the effective date of the proposed rules after a hearing on September 3, 2003. Prometheus Radio Project v. FCC, No. 03-3388, 2003 WL 22052896 (3d Cir. Sept. 3, 2003). We then denied the Deregulatory Petitioners’ motion, joined by the Commission, to transfer venue to the D.C. Circuit Court on September 16, 2003. Prometheus Radio Project v. FCC, No. 03-3388 (3d Cir. Sept. 16, 2003) (order denying motion to transfer). After pushing back briefing and oral argument at the request of the parties, on February 11, 2004, we heard approximately eight hours of oral argument addressing the merits of Petitioners’ claims. 10 No party to this case challenges the retention of this rule. 28 H. Subsequent Legislation In January 2004, while the petitions to review the Order were pending in this Court, Congress amended the 1996 Act by increasing from 35% to 39% the national television ownership rule’s audience reach cap in § 202(c). Consolidated Appropriations Act, 2004, Pub. L. No. 108-199, § 629, 118 Stat. 3, 99 (2004). The legislation also amended § 202(h) in two ways: (1) making the Commission’s biennial review obligation quadrennial; and (2) insulating from § 202(h) review “rules relating to the 39 percent national audience reach limitation.” 118 Stat. at 100. Prior to oral argument, Petitioners filed letter briefs addressing the effect of these amendments on their challenges to the Order. II. Jurisdiction and Standard of Review This is an appeal of an agency decision under the Communications Act of 1934, 47 U.S.C. §§ 151 et seq. Our jurisdiction is based on 47 U.S.C. § 402(a) and 28 U.S.C. § 2342(1). Our standard of review is governed by the APA and the 1996 Act provision authorizing the Commission’s periodic regulatory review.11 11 The Deregulatory Petitioners raise an additional threshold argument that Fox and Sinclair provide the “law of the case” because the Order results in part from the D.C. Circuit Court’s remand in those two decisions. Though we recognize that the Order must be consistent with these remand directives, the decisions themselves do not fit within the law of the case doctrine, under which a prior decision binds only future proceedings in the “same litigation.” See, e.g., Hamilton v. Leavy, 322 F.3d 776, 786–87 (3d Cir. 2003). This case involves petitions for review of the Commission’s comprehensive reexamination of a larger set of its broadcast ownership rules, in which a different set of parties participated, a different record was compiled, and different results were reached. So understood, the law of the case doctrine does not constrain our review here. 29 A. Standard of Review Under the Administrative Procedure Act Our standard of review in the agency rulemaking context is governed first by the judicial review provision of the APA, 5 U.S.C. § 706. Under it, we “hold unlawful or set aside agency action, findings, and conclusions” that are found to be “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law . . . [or] unsupported by substantial evidence.” Id. § 706(2)(a), (e); N.J. Coalition for Fair Broad. v. FCC, 574 F.2d 1119, 1125 (3d Cir. 1978). The scope of review under the “arbitrary and capricious” standard is “narrow, and a court is not to substitute its judgment for that of the agency.” Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) (“State Farm”). Nevertheless, we must ensure that, in reaching its decision, the agency examined the relevant data and articulated a satisfactory explanation for its action, including a “rational connection between the facts found and the choice made.” Id. (quoting Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168 (1962)). Normally, we may find an agency rule is arbitrary and capricious where the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise. The reviewing court should not attempt itself to make up for such deficiencies; we may not supply a reasoned basis for the agency’s action that the agency itself has not given. Id. (citing SEC v. Chenery Corp., 332 U.S. 194, 196 (1947)); see also Robert Wood 30 Johnson Univ. Hosp. v. Thompson, 297 F.3d 273, 280 (3d Cir. 2002). Put another way, we reverse an agency’s decision when it “is not supported by substantial evidence, or the agency has made a clear error in judgment.” AT&T Corp. v. FCC, 220 F.3d 607, 616 (D.C. Cir. 2000) (citing Kisser v. Cisneros, 14 F.3d 615, 619 (D.C. Cir. 1994)). We will, however, “uphold a decision of less than ideal clarity if the agency’s path may reasonably be discerned.” State Farm, 463 U.S. at 43 (quoting Bowman Transp., Inc. v. Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 286 (1974)). But an agency that departs from its “former views” is “obligated to supply a reasoned analysis for the change beyond that which may be required when an agency does not act in the first instance” in order to survive judicial scrutiny for compliance with the APA. State Farm, 463 U.S. at 41–42. Finally, the traditional APA standard of review is even more deferential “where the issues involve ‘elusive’ and ‘not easily defined’ areas such as programming diversity in broadcasting.” Sinclair, 284 F.3d at 159. Yet even when an administrative order involves policy determinations on such elusive goals, a “rationality” standard is appropriate. See NCCB, 436 U.S. at 796–97 (finding that the Commission acted rationally in determining that diversification of ownership would enhance the possibility of increasing diverse viewpoints). Additionally, when an agency has engaged in line- drawing determinations and our review is necessarily deferential to agency expertise, see AT&T Corp., 220 F.3d at 627, its decisions may not be “patently unreasonable” or run counter to the evidence before the agency. Sinclair, 284 F.3d at 162. 31 B. Standard of Review Considerations Under Section 202(h) The Order was promulgated as part of the periodic review requirements of § 202(h) of the 1996 Act. Consequently, our review standard is informed by that provision, which, at the time of the Order’s release, read: (h) Further Commission Review. The Commission shall review its rules adopted pursuant to this section and all of its ownership rules biennially[12 ] as part of its regulatory reform review under section 11 of the Communications Act of 1934 and shall determine whether any of such rules are necessary in the public interest as the result of competition. The Commission shall repeal or modify any regulation it determines to be no longer in the public interest. 110 Stat. 111–12. Section 11 of the Communications Act, to which § 202(h) refers, was also added by the 1996 Act to ensure that the Commission review periodically its regulations governing telecommunications services to “determine whether any such regulation is no longer necessary in the public interest as a result of meaningful economic competition between providers of such service” and “repeal or modify any regulation it determines to be no longer necessary in the public interest.” 47 U.S.C. § 161. The text and legislative history of the 1996 Act indicate that Congress intended periodic reviews to operate as an “ongoing mechanism to ensure that the Commission’s regulatory framework would keep pace with the competitive changes in the marketplace” resulting from that Act’s relaxation of the Commission’s regulations, including the broadcast media ownership regulations. 2002 Biennial Regulatory Review, 18 F.C.C.R. 12 As noted in Part I.H above, Congress has since replaced “biennially” with “quadrennially” in this provision. 32 4726, ¶¶ 16, 17 (2003) (citing preamble to the 1996 Act; H.R. Conf. Rep. No. 104-458 (1996)). Put another way, the periodic review provisions require the Commission to “monitor the effect of . . . competition . . . and make appropriate adjustments” to its regulations. Id. ¶ 5. As noted, the first sentence of § 202(h) requires the Commission to “determine” whether media concentration rules are “necessary in the public interest as the result of competition.” The second sentence contains a separate instruction to the Commission: to “repeal or modify” those rules “no longer in the public interest.” 110 Stat. 111–12. We analyze each of these instructions in turn. 1. “Determ ine whether any such rules are necessary in the public interest.” Recognizing that competitive changes in the media marketplace could obviate the public necessity for some of the Commission’s ownership rules, the first instruction requires the Commission to take a fresh look at its regulations periodically in order to ensure that they remain “necessary in the public interest.” This raises the question of what is “necessary.” In the context of § 11 of the Communications Act, 47 U.S.C. § 161—which, like § 202(h), requires the Commission periodically to review its telecommunications regulations and determine whether they “remain necessary in the public interest”—the Commission has interpreted “necessary” to mean “useful,” “convenient” or “appropriate” rather than “required” or “indispensable.” Setting out its rationale for this interpretation 33 in the 2002 Biennial Regulatory Review, 18 F.C.C.R. 4726, ¶¶ 14–22 (2003), the Commission determined that the 1996 Act’s legislative history indicated that Congress meant “no longer necessary” to mean “no longer in the public interest” and “no longer meaningful.” 18 F.C.C.R. 4726, ¶ 17 (citing H.R. Conf. Rep. No. 104-458, at 185 (1996)). Next, the Commission found that an “indispensable” construction of “necessary” as to § 11 would be unreasonably inconsistent with the Communications Act’s grant of general rulemaking authority to the Commission. Id. ¶ 18 n.31. Under 47 U.S.C. § 201(b) the Commission is authorized to “prescribe such rules and regulations [regarding services and charges of communications common carriers] as may be necessary in the public interest to carry out the provisions of this Act.” In AT&T Corp. v. Iowa Utilities Board, the Supreme Court interpreted this provision as a grant of “general rulemaking authority.” 525 U.S. 366, 374 (1999). Characterizing this interpretation “not as a limitation on the Commission’s authority, but a confirmation of it,” the Commission concluded that the standard of review applicable to its rulemaking authority under § 201 is a “plain public interest” standard. 18 F.C.C.R. 4276, ¶¶ 18 n.31, 22 (citing 525 U.S. at 374, 378). The Commission reasoned that the same standard must also apply to the review process required under § 11 in order to avoid absurd results. If the rulemaking and review standards were different, the Commission could promulgate any rule that is useful, but then, at the next periodic review, would have to revoke any of those rules that do not also meet a higher standard of “indispensable.” Id. ¶ 18 & n.33. Under such a 34 system, periodic review would either be inefficient or irrelevant, as the Commission could effectively sidestep the more stringent review standard by subsequently reissuing any “useful” rule that it had to repeal for failing to be “indispensable.” Id. ¶ 18. Lastly, the Commission rejected arguments that there is controlling judicial precedent for an “indispensable” construction of “necessary.” It acknowledged that the Supreme Court and the D.C. Circuit Court of Appeals have upheld such constructions, see id. ¶ 19 (citing Iowa Utils. Bd., 525 U.S. at 374, 378; GTE Serv. Corp. v. FCC, 205 F.3d 416 (D.C. Cir. 2000)), but countered that these cases “simply demonstrate that terms such as ‘necessary’ . . . must be read in their statutory context.” Id. Furthermore, the Commission found judicial support for its interpretation of “necessary” in the D.C. Circuit Court’s decision in Sinclair, 284 F.3d at 159, regarding the Commission’s periodic review of its local television ownership rule under § 202(h). The Commission noted that the Sinclair Court did not expressly adopt any particular definition of “necessary,” but, in affirming the Commission’s § 202(h) finding that the rule furthers diversity and is thus necessary in the public interest, id. at 160, it “did not articulate a new or higher public interest yardstick.” 18 F.C.C.R. 4726, ¶ 20.13 Nor did the D.C. Circuit Court’s decision in Fox foreclose its interpretation of “necessary,” the Commission 13 More generally, the Commission cited several Supreme Court decisions interpreting “necessary” to mean “useful” or “convenient” or “appropriate.” Id. ¶ 15 n.24 (citing, inter alia, McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 413 (1819) (under the Constitution’s Necessary and Proper Clause, U.S. Const. Art. I, § 8, cl. 18, “necessary” means “convenient” or “useful”)). 35 determined, because on rehearing the Court deleted language in its initial decision that the Commission had applied too lax a standard in reviewing its broadcast media ownership rules under § 202(h).14 Id. ¶ 14 (citing Fox II, 293 F.3d at 540). For these reasons, the Commission determined that § 11’s requirement that it review its telecommunications regulations to determine whether they remain “necessary in the public interest” does not require it to employ a more stringent standard than “plain public interest” found in other parts of the Communications Act. Id. ¶¶ 18, 22 (citing 47 U.S.C. § 201(b) as an example). Recently, the D.C. Circuit Court upheld, in the context of § 11, the Commission’s interpretation of “necessary” contained in the 2002 Biennial Regulatory Review. Cellco P’ship v. FCC, 357 F.3d 88 (D.C. Cir. 2004). Recognizing that “necessary” is a “chameleon-like” word whose “meaning . . . may be influenced by its context,” the Cellco Court determined that it would uphold any reasonable interpretation that did not contravene the express provisions of the Communications Act. Id. at 94, 96 (citing Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842–43 (1984)). It went on to determine that the Commission’s interpretation is both reasonable and consistent with the Communications Act, endorsing the Commission’s view that “necessary” must mean the same thing in the periodic review context as in the rulemaking 14 In addressing available remedies, the Fox I Court interpreted “necessary” to mean that “a regulation should be retained only insofar as it is necessary in, not merely consonant with, the public interest.” 280 F.2d at 1050. This language was expressly excised in Fox II, 293 F.3d at 540. 36 context in order to avoid absurd results. Id. at 98. Cellco also acknowledged that the Commission’s interpretation of “necessary” is consistent with the many courts that have endorsed a “useful” or “appropriate” interpretation over an “essential” or “indispensable” one. Id. at 97 (citing, inter alia, NCCB, 436 U.S. at 795–96; McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 413 (1819); Cellular Telecomm. & Internet Ass’n v. FCC, 330 F.3d 502, 510 (D.C. Cir. 2003) (specifically rejecting an “indispensable” connotation of “necessary” as used in the Communications Act’s enforcement forbearance provision, § 10(a))). Finally, the Cellco Court rejected suggestions that the Commission’s interpretation was inconsistent with its prior decisions in Sinclair and Fox. As noted above, Sinclair did not expressly adopt any particular definition of “necessary” and Fox I’s suggestion of a heightened standard was expressly retracted by Fox II, 293 F.3d at 540. Cellco limited Fox I’s statement that “necessary” implied a presumption in favor of modification or elimination of existing regulations, see 280 F.3d at 1048, to the context in which it was made: discussing whether vacating or remanding the national television ownership rule was the appropriate remedy. Cellco, 357 F.3d at 98. And while Sinclair apparently endorsed this language from Fox I, see 284 F.3d at 159, the Cellco Court characterized Sinclair as merely “piggyback[ing]” on Fox I without “adopt[ing] a general presumption in favor of modification or elimination of regulations when considering a substantive challenge to the adequacy of the Commission’s determinations.” Cellco, 357 F.3d at 98. In sum, the D.C. Circuit Court determined that the definition of “necessary” was not 37 constrained by either its Fox or Sinclair decision. It remained an open issue for the Commission to decide in the first instance, as it did when it released the 2002 Biennial Regulatory Review. Id. For the same reasons proffered by the Commission and endorsed by the D.C. Circuit Court to reject the “indispensable” definition of “necessary” under § 11, we do so under § 202(h). Though § 11 and § 202(h) are separate statutory provisions, they are both periodic review provisions from the same statute. As evidence of their relatedness, § 202(h) imposes periodic review obligations “as part of its regulatory reform review under section 11 of this Communications Act of 1934,” 110 Stat. at 111.15 We see no reason to adopt a different definition of “necessary” under § 202(h) than under § 11. Moreover, interpreting § 202(h)’s first sentence to require the Commission to review its rules to determine whether they are indispensable in the public interest would lead to incongruous results when compared to the instruction in § 202(h)’s second sentence, which requires the Commission to “repeal or modify any regulation it determines to be no longer in the public interest.” 16 For the “determine” instruction to be meaningful, 15 Additionally, the Commission itself impliedly incorporated the 2002 Biennial Regulatory Review’s interpretation of “necessary” under § 11 when citing it in the “legal framework” section of the Order. Order ¶ 11 n.15. 16 Because § 202(h) omits the word “necessary” in the “repeal or modify” instruction, it is arguably even more amenable to the “appropriate” or “useful” connotation of “necessary” than § 11. But like the Commission, “we do not think that difference [between § 11 and § 202(h)] is significant given what we believe ‘necessary in the public interest’ means.” 18 F.C.C.R. 4726, ¶ 14 n.20. 38 “necessary” must embody the same “plain public interest” standard that Congress set out in the “repeal or modify” instruction.17 Lastly, as explained by the Cellco Court, the “convenient,” “useful,” or “helpful” definition of “necessary” is not foreclosed to the Commission by any judicial precedent, including Fox and Sinclair. So in interpreting the Commission’s obligation under § 202(h) to review its broadcast media ownership rules to determine whether they are “necessary in the public interest,” we adopt what the Commission termed “the plain public interest” standard under which “necessary” means “convenient,” “useful,” or “helpful,” not “essential” or “indispensable.” 2. “Repeal or modify any regulations it determines to be no longer in the public interest.” Turning to the second instruction of § 202(h), the Commission is required to “repeal or modify” rules that are “no longer in the public interest.” Having concluded that the first instruction requires the Commission to determine whether any existing rule fails to satisfy the “plain public interest” standard, the relationship between the first and 17 Anticipating the argument that consistency between the first and second sentences could still be achieved using the “indispensable” interpretation of “necessary” for both, we respond that requiring the Commission to repeal or modify any regulations it determined were not essential to the public interest would lead to incongruous results when compared to the plain public interest standard that governs the Commission’s authority to regulate the broadcast industry. See NCCB, 436 U.S. at 796 (“[S]o long as the regulations are not an unreasonable means for seeking to achieve the [Commission’s public interest] goals, they fall within [its] general rulemaking authority” under the Communications Act.). Just as the Commission and Cellco observed in the § 11 context, the “repeal or modify” instruction would be meaningless because the Commission could repromulgate (in its rulemaking functions) under the lower “useful” standard any regulation it was forced to repeal or modify for not being “indispensable” under § 202(h). 39 second instruction is evident. Under the second instruction, the Commission must repeal or modify the regulations that it has determined under the first instruction do not satisfy that same standard. While we acknowledge that § 202(h) was enacted in the context of deregulatory amendments (the 1996 Act) to the Communications Act, see Fox I, 280 F.3d at 1033; Sinclair, 284 F.3d at 159, we do not accept that the “repeal or modify in the public interest” instruction must therefore operate only as a one-way ratchet, i.e., the Commission can use the review process only to eliminate then-extant regulations. For starters, this ignores both “modify” and the requirement that the Commission act “in the public interest.” What if the Commission reasonably determines that the public interest calls for a more stringent regulation? Did Congress strip it of the power to implement that determination? The obvious answer is no, and it will continue to be so absent clear congressional direction otherwise.18 What, then, makes § 202(h) “deregulatory”? It is this: Section 202(h) requires the Commission periodically to justify its existing regulations, an obligation it would not otherwise have. A regulation deemed useful when promulgated must remain so. If not, it must be vacated or modified. 18 For example, in enacting a periodic review requirement for the Commission’s broadcast media ownership regulations, Congress gave no express indication that it intended to restrict the Commission’s rulemaking authority. See, e.g., Am. Hosp. Ass’n v. NLRB, 499 U.S. 606, 613 (1991) (stating that “if Congress had intended to curtail in a particular area the broad rulemaking authority [it has] granted[,] . . . we would have suspected it to do so in language expressly describing an exception [to that authority]”) 40 Misguided by the Fox and Sinclair Courts’ “deregulatory presumption” characterization and lacking the benefit of Cellco’s subsequent clarification, the Commission concluded that § 202(h) “appears to upend traditional administrative law principles” by not requiring it to justify affirmatively a rule’s repeal or modification. Order ¶ 11. This overstates the case. Rather than “upending” the reasoned analysis requirement that under the APA ordinarily applies to an agency’s decision to promulgate new regulations (or modify or repeal existing regulations), see State Farm, 463 U.S. at 43, § 202(h) extends this requirement to the Commission’s decision to retain its existing regulations. This interpretation avoids a crabbed reading of the statute under which we would have to infer, without express language, that Congress intended to curtail the Commission’s rulemaking authority and to contravene “traditional administrative law principles.” 19 C. Conclusion Though our standard of review analysis is lengthy, it is in the end amenable to a straightforward summing-up: In a periodic review under § 202(h), the Commission is 19 A purely textual inquiry is also of no avail to the Deregulatory Petitioners. As we noted above, § 202(h) does not use the word “necessary” in the second sentence to qualify the public interest standard that governs the Commission’s “repeal or modify” instruction. Like the Commission (as we point out in note 16 supra), “we do not think that difference . . . is significant given what we believe ‘necessary in the public interest’ means.” 18 F.C.C.R. 4726, ¶ 14 n.20. But even if “necessary in the public interest” under the first sentence meant “indispensable,” we still would not have to import that heightened standard to the second. Textually it is not there. If “necessary” appears twice in § 11 and in the first sentence of § 202(h), but is absent from its second sentence, logic favors deliberate omission by Congress over inadvertence. 41 required to determine whether its then-extant rules remain useful in the public interest; if no longer useful, they must be repealed or modified.20 Yet no matter what the Commission decides to do to any particular rule— retain, repeal, or modify (whether to make more or less stringent)—it must do so in the public interest and support its decision with a reasoned analysis. We shall evaluate each aspect of the Commission’s Order accordingly. III. Mootness and the National Television Ownership Rule The national television ownership rule caps the number of television stations that a single entity may own on a national basis. In the 1996 Act, Congress limited the number of commonly owned stations to those reaching no more than 35% of the national audience. 1996 Act § 202(c)(1)(B), 110 Stat. 111. In its first biennial review, the Commission retained the 35% cap as “necessary in the public interest,” but the D.C. Circuit Court held that the Commission had not adequately justified this decision. Fox I, 280 F.3d at 1048. On remand and in connection with its 2002 biennial review proceeding, the Commission increased the cap from 35% to 45%. Order ¶ 583. The Commission also decided to retain its method of discounting by 50% the audiences of UHF stations toward the cap. Id. ¶ 586. 20 Although our dissenting colleague states that he differs “from the majority on the applicable standard of review,” we can discern no real disagreement between his formulation of the standard of review and ours. Rather, we see disagreement only over the question of whether the Commission’s Order survives the standard of review as we both have described it. 42 Subsequently, however, Congress enacted a new national television ownership cap. In its 2004 Consolidated Appropriations Act, it modified § 202(c)(1)(B) of the 1996 Act to provide that “[t]he Commission shall modify its rules for multiple ownership . . . by increasing the national audience reach limitation for television stations to 39%.” See Pub. L. No. 108-199, § 629, 118 Stat. 3, 99 (2004). Because the Commission is under a statutory directive to modify the national television ownership cap to 39%, challenges to the Commission’s decision to raise the cap to 45% cap are moot. 21 Cf. PLMRS Narrowband Corp. v. FCC, 182 F.3d 995, 1002 (D.C. Cir. 1999) (challenges to Commission’s later-modified order are moot). Although the 2004 Consolidated Appropriations Act did not expressly mention the UHF discount, challenges to the Commission’s decision to retain it are likewise moot. Congress instructed the Commission to “increase the national audience reach limitation for television stations to 39%.” 118 Stat. at 99. Since 1985 the Commission has defined “national audience reach” to mean “the total number of television households” reached by an entity’s stations, except that “UHF stations shall be attributed with 50 percent of the 21 The Deregulatory Petitioners stated that the Commission’s rationale for retaining a national television ownership limit “raises troubling First Amendment questions.” Br. of Petitioners Fox, NBC, Telemundo, and Viacom (“Network Petitioners”) at 31. We recognize that a constitutional challenge would not necessarily be mooted by intervening legislation. But even if we interpreted this “troubling . . . questions” language as raising a constitutional challenge to the 45% national audience reach limit, we see no reason to decide the constitutionality of Congress’s 39% limit, as these same Petitioners subsequently argued that “any pending challenges to the June order [regarding the national television ownership rule] will be mooted” by the 2004 Consolidated Appropriations Act. Network Petitioners’ Letter Br. at 2 (Feb. 2, 2004). 43 television households” reached. 47 C.F.R. § 73.3555(e)(2)(i); Multiple Ownership of AM, FM and Television Broadcast Stations, 50 Fed. Reg. 4666, 4676 (Feb. 1, 1985). W e assume that when Congress uses an administratively defined term, it intended its words to have the defined meaning. See, e.g., Bragdon v. Abbott, 524 U.S. 624, 631 (1998). Furthermore, because reducing or eliminating the discount for UHF station audiences would effectively raise the audience reach limit, we cannot entertain challenges to the Commission’s decision to retain the 50% UHF discount. Any relief we granted on these claims would undermine Congress’s specification of a precise 39% cap. As additional evidence of the mootness of challenges to the UHF discount, we note that the 2004 Consolidated Appropriations Act also added a sentence to § 202(h): “This subsection does not apply to any rules relating to the 39% national audience limitation.” 118 Stat. at 100. The UHF discount is a rule “relating to” the national audience limitation. See 47 C.F.R. § 73.3555(e)(2) (providing for the UHF discount in a section qualified “for the purposes of this paragraph (e),” the national television ownership rule paragraph). Congress apparently intended to insulate the UHF discount from periodic review, a position that is consistent with our reading of the legislation as endorsing the almost 20-year-old regulatory definition of “national audience reach” that provides for the UHF discount. Although we find that the UHF discount is insulated from this and future periodic review requirements, we do not intend our decision to foreclose the Commission’s consideration of its regulation defining the UHF discount in a rulemaking outside the 44 context of Section 202(h). The Commission is now considering its authority going forward to modify or eliminate the UHF discount and recently accepted public comment on this issue. 69 Fed. Reg. 9216–17 (Feb. 27, 2004). Barring congressional intervention, see, e.g., S. 1264, 108th Cong. § 12 (2003) (proposing phase-out and 2008 sunset of the UHF), the Commission may decide, in the first instance, the scope of its authority to modify or eliminate the UHF discount outside the context of § 202(h). IV. Cross-Ownership Rules The Commission’s decision to repeal its newspaper/broadcast cross-ownership rules22 in favor of new Cross-Media Limits has been attacked on all fronts. Some petitioners support the repeal but argue that the Cross-Media Limits are too restrictive. Others challenge the repeal decision and argue that the new limits are too lenient. W e conclude that the Commission’s decision to replace its cross-ownership rules with the Cross-M edia Limits is not of itself constitutionally flawed and does not violate § 202(h). But we cannot uphold the Cross-Media Limits themselves because the Commission does not provide a reasoned analysis to support the limits that it chose. A. Regulatory Background and the 2002 Biennial Review Since the 1970s, the Commission has enforced two separate limits on the common ownership of different-type media outlets in local markets. One cross-ownership rule prohibits the common ownership of a full-service television broadcast station and a daily 22 The Commission also repealed its radio/television cross-ownership rule in favor of the Cross-Media Limits, but no petitioner challenges this aspect of the Order. 45 public newspaper in the same community. 47 C.F.R. § 73.3555(d). The other limits the number of television and radio stations to the following combinations: (1) in markets where at least 20 independently owned media voices would remain post-merger, two television stations and six radio stations or one television station and seven radio stations; (2) in markets where at least 10 independent voices would remain, two television stations and four radio stations; and (3) in other markets, two television stations (subject to the local television ownership rule) and one radio station. Id. § 73.3555(c). The Commission considered both cross-ownership rules during its 2002 biennial review under § 202(h). In the Order, the Commission announced that because neither rule remained necessary in the public interest, it was repealing them and replacing them with a single set of Cross-M edia Limits. The three-tiered Cross-Media Limits regulate common ownership depending on the size of the market: small (those with three or fewer full-power commercial or noncommercial television stations), mid-sized (between four and eight television stations), and large (more than eight television stations). In small markets, newspaper/broadcast combinations and radio/television combinations are prohibited. Order ¶ 454. In medium-sized markets, an entity may own a newspaper and either (a) one television station and up to 50% of the radio stations that may be commonly owned in that market under the local radio rule or (b) up to 100% of the radio stations allowed under the local rule. Id. ¶ 466. In large markets, cross-ownership is unrestricted. Id. ¶ 473. B. The Comm ission’s decision not to retain a ban on newspaper/broadcast cross- 46 ownership is justified under § 202(h) and is supported by record evidence. The Commission determined that the rule prohibiting newspaper/broadcast cross- ownership was no longer necessary in the public interest for three primary reasons: (1) the ban is not necessary to promote competition in local markets because most advertisers do not view newspapers and television stations as close substitutes, Order ¶ 332; (2) the ban undermines localism by preventing efficient combinations that would allow for the production of high-quality local news, id. ¶ 343; and (3) there is not enough evidence to conclude that ownership influences viewpoint to warrant a blanket cross-ownership ban, thus making it unjustifiable on diversity grounds, id. at ¶ 364, (and moreover, the presence of other media sources—such as the Internet and cable—compensate for the viewpoint diversity lost to consolidation, id. ¶ 365). The Citizen Petitioners object to the localism and diversity components of the Commission’s rationale. We conclude differently, as reasoned analysis supports the Commission’s determination that the blanket ban on newspaper/broadcast cross-ownership was no longer in the public interest. Part II.C supra. 1. Newspaper/broadcast combinations can promote localism. The Commission measured the promotion of localism by considering “the selection of programming responsive to local needs and interests, and local news quantity and quality.” Order ¶ 78. Evidence that existing (grandfathered) newspaper-owned broadcast stations produced local news in higher quantity with better quality than other stations convinced the Commission that the ban on newspaper/broadcast combinations 47 undermined its localism interest. The Commission principally relied on the findings of its MOWG study that newspaper-owned television stations provide almost 50% more local news and public affairs programming than other stations, an average of 21.9 hours per week. Id. ¶ 344 (citing Thomas C. Spavins et al., The Measurement of Local Television News and Public Affairs Programs (MOW G Study No. 7) at 3 (Sept. 2002)). The Commission also found corresponding advantages in quality of local coverage provided by newspaper-owned stations, as shown by ratings (measuring consumer approval) and industry awards (measuring critical approval). Id. ¶ 344–45 (citing, among other things, findings by the Project for Excellence in Journalism that newspaper-owned stations “were more likely to do stories focusing on important community issues and to provide a wide mix of opinions, and they were less likely to do celebrity and human interest features”). The Citizen Petitioners argue that the MOW G study was flawed because it examined all newspaper/broadcast station combinations, including “intermarket” combinations (entities that own a newspaper and broadcast stations in different cities), as well as “intramarket” combinations (entities that own a newspaper and a broadcast station in the same city). But the Citizens Petitioners do not suggest that a study entirely focused on intramarket combinations would have different results. The six intramarket combinations that were included in the study (grandfathered exceptions to the cross- ownership ban) averaged more local news and public affairs programming as compared to the overall average (26 weekly hours compared to 21.9) and higher ratings for their 5:30 p.m. and 6:00 p.m. news programs (9.8 and 11 compared to 7.8 and 8.2). MOWG Study 48 No. 7 app. A; Comments of Newspaper Association of America, MB Docket No. 02-277 at 15 (Jan. 2, 2003). The Citizen Petitioners also protest the Commission’s reliance on anecdotal evidence of pro-localism combinations and its disregard of anecdotal evidence to the contrary. Significantly, however, the Commission used anecdotal evidence23 merely to illustrate its statistical findings— it did not rely on anecdote as the sole basis for its conclusions about localism. Moreover, the Commission properly discounted anecdotal evidence of a Canadian newspaper conglomerate’s detrimental effect on localism. Can West, which controls 30% of Canada’s daily newspaper circulation, requires its newspaper editors to publish editorials from headquarters, which it forbids local editorials to contradict. But the Commission explained that the Can West example shows the peril of national ownership and corporate centralization of media services, which is not relevant to the Commission’s regulations on local combinations. Order ¶ 352. In summary, the Citizen Petitioners’ arguments do not unsettle the Commission’s conclusion that the newspaper/broadcast cross-ownership ban undermined localism. 2. A blanket prohibition on newspaper/broadcast combinations is not necessary to protect diversity. 23 For example, Gannett Company reported that the “media integration” resulting from its newspaper/broadcast combination in Phoenix “improved efficiency, particularly in situations characterized by fast-breaking news such as the massive wildfires near Phoenix last year.” Both of Belo Corporation’s Dallas outlets “have been able to cover a wider range of stories through information sharing between the separate newspaper and television news staffs.” Order ¶ 348. 49 The Commission offered two rationales for its conclusion that a blanket prohibition on newspaper/broadcast combinations is no longer necessary to ensure diversity in local markets. First, it found that “[c]ommonly-owned newspapers and broadcast stations do not necessarily speak with a single, monolithic voice.” Id. ¶ 361. Given conflicting evidence in the record 24 on whether ownership influences viewpoint, the Commission reasonably concluded that it did not have enough confidence in the proposition that commonly owned outlets have a uniform bias to warrant sustaining the cross-ownership ban. Id. ¶ 364. Second, the Commission found that diverse viewpoints from other media sources in local markets (such as cable and the Internet) compensate for viewpoints lost to newspaper/broadcast consolidations. Id. ¶ 366. We agree record evidence suggests that cable and the Internet supplement the viewpoint diversity provided by broadcast and 24 On one hand, the record contained examples of a newspaper-owner’s affiliations and biases influencing the news and editorial pages. But there were also examples of commonly owned newspapers expressing different viewpoints (such as that the Tribune Company’s newspapers did not endorse the same candidate in the 2000 presidential election). The MOWG submitted a statistical study of 10 newspaper-television combinations; in half of them the newspaper’s overall “slant” was noticeably different from the broadcast television’s “slant” on the news. See David Pritchard, Viewpoint Diversity in Cross-Owned Newspapers and Television Stations: A Study of News Coverage of the 2000 Presidential Campaign (MOW G Study No. 2) (Sept. 2002). But the Pritchard Study was the subject of much criticism for its flawed methodology (no control group of independent media outlets for comparison) and narrow scope (it only looked at one factor in judging “slant”). Order ¶ 362. 50 newspaper outlets in local markets.25 As discussed more fully below, we believe that the Commission gave too much weight to the Internet in deriving the Cross-Media Limits. But separate from the question of degree, we conclude that it was acceptable for the Commission to find that cable and the Internet contribute to viewpoint diversity. C. The Commission’s decision to retain some limits on common ownership of different-type media outlets was constitutional and did not violate § 202(h). The Deregulatory Petitioners support the Commission’s repeal of the newspaper/broadcast cross-ownership ban but object to its decision to retain any restriction on the common ownership of newspaper and broadcast media outlets. First they argue that any limits on newspaper/broadcast cross-ownership violate § 202(h), because, as the Commission acknowledges, the evidence suggests that the cross- ownership restrictions are not in the public interest. They also argue that the Cross-Media Limits violate the First and Fifth Amendments of the United States Constitution. We disagree on all counts. 1. Continuing to regulate cross-media ownership is in the public interest. The Commission’s finding that a blanket prohibition on newspaper/broadcast cross-ownership is no longer in the public interest does not compel the conclusion that no regulation is necessary. See Order ¶ 364. As described above, the Commission found 25 See, e.g., Joel Waldfogel, Consumer Substitutability Among Media (MOW G Study No. 3) (Sept. 2002) (suggesting that consumers view Internet news sources as a substitute for daily newspapers and broadcast news). 51 evidence to undermine the premise that ownership always influences viewpoint,26 but it did not find the opposite to be true. And while the Commission found that other media sources contributed to viewpoint diversity in local markets, it could not have found that the Internet and cable were complete substitutes for the viewpoints provided by newspapers and broadcast stations. See MOW G Study No. 3 (finding that the Internet and cable rank as sources of local news, but they do not outrank newspapers and broadcast television). Given the Commission’s goal of balancing the public’s interests in competition, localism, and diversity, it reasonably concluded that repealing the cross- ownership ban was necessary to promote competition and localism, while retaining some limits was necessary to ensure diversity.27 2. Continuing to regulate cross-media ownership does not violate the Fifth Amendm ent. 26 Indeed, ample evidence supported its conclusion that ownership can influence viewpoint. See Order ¶¶ 24–25; Comments of the UCC et al., MB Docket No. 02-277 at 4 (Jan. 2, 2003) (“UCC Comments”) (citing a Pew Research Center study of television journalists and executives that found nearly one quarter of journalists purposefully avoid newsworthy stories and nearly as many soften the tone of stories to benefit the interest of their news organizations); id. at 5 (citing a 2002 study finding that outlets included more references to their own products and services and treated those items more favorably than others, thus exhibiting a “synergy bias”); Comments of Consumer Federation of America, MB Docket 02-277 at 41 (Jan. 2, 2003) (citing a 2002 study finding that election information on news pages was slanted in favor of candidate endorsed on the editorial page); id. at 44 (citing a 2001 survey of news directors finding that media owners and sponsors pressure reporters to slant the news). 27 We also note that the Commission provided for a waiver of the Cross-M edia Limits upon a demonstration “that an otherwise prohibited combination would, in fact, enhance the quality and quantity of broadcast news available in the market.” Order ¶ 481. 52 The Deregulatory Petitioners argue that the Cross-Media Limits violate the Equal Protection Clause of the Fifth Amendment because they single out newspaper owners for special restrictions that do not apply to other media outlets. This argument is foreclosed, however, by the Supreme Court’s decision in NCCB that endorsed the constitutionality of the 1975 newspaper/television cross-ownership ban. 436 U.S. at 801–02. Rather than concluding that newspaper owners were singled out for different treatment, the Court determined that “the regulations treat newspaper owners in essentially the same fashion as other owners of the major media of mass communication” by imposing limits on them as well as owners of television and radio stations. Id. at 801. We decline the Deregulatory Petitioners’ invitation to disregard Supreme Court precedent because of changing times. Surely there are more media outlets today (such as cable, the Internet, and satellite broadcast) than there were in 1978 when NCCB was decided. But it cannot be assumed that these media outlets contribute significantly to viewpoint diversity as sources of local news and information. See Part IV.D.2 infra. Even if it could, it is the Supreme Court’s prerogative to change its own precedent. See State Oil Co. v. Khan, 522 U.S. 3, 20 (1997) (stating that only the Supreme Court can overrule its own precedent); Am. Civil Liberties Union of N.J. v. Black Horse Pike Reg’l Bd. of Educ., 84 F.3d 1471, 1484 (3d Cir. 1996) (stating that we are obliged to follow Supreme Court precedent “until instructed otherwise by a majority of the Supreme Court”). 3. Continuing to regulate cross-media ownership does not violate the First Amendm ent. 53 The Deregulatory Petitioners argue that the Commission’s decision to retain restrictions on the common ownership of newspapers and broadcast stations contravenes the First Amendment because it limits the speech opportunities of newspaper owners and broadcast station owners, and hence limits the public’s access to information. Yet again their challenge is foreclosed by NCCB, where the Supreme Court affirmed the Commission’s authority, despite a First Amendment challenge, to regulate broadcast/newspaper cross-ownership in the public interest. Due to the “physical scarcity” of the broadcast spectrum, the Court scrutinized the regulation to discern a rational basis. 436 U.S. at 799. The Commission’s action, it held, was “a reasonable means of promoting the public interest in diversified mass communications.” Id. at 802. The Deregulatory Petitioners suggest, as they did in mounting their Fifth Amendment challenge, that the expansion of media outlets since NCCB’s day requires a rethinking of the scarcity rationale and the lower level of constitutional review it entails. Again we decline their invitation to disregard precedent, and we are not alone. See FCC v. League of Women Voters of Cal., 468 U.S. 364, 376 & n.11 (1984) (upholding the scarcity rationale until Congress speaks to the issue); Fox I, 289 F.3d at 1046 (“First, contrary to the implication of the networks’ argument, this court is not in a position to reject the scarcity rationale even if we agree that it no longer makes sense. The Supreme Court has already heard the empirical case against that rationale and still ‘declined to question its continuing validity.’” (citing Turner v. FCC, 512 U.S. 622, 638 (1994))). Even were we not constrained by Supreme Court precedent, we would not accept 54 the Deregulatory Petitioners’ contention that the expansion of media outlets has rendered the broadcast spectrum less scarce. In NCCB, the Court referred to the “physical scarcity” of the spectrum—the fact that many more people would like access to it than can be accommodated. 436 U.S. at 799. The abundance of non-broadcast media does not render the broadcast spectrum any less scarce. See, e.g., Ruggiero v. FCC, 278 F.3d 1323, 1325 (D.C. Cir. 2002), rev’d en banc, 317 F.3d 239 (D.C. Cir 2003) (citing the Commission’s statement that “[n]ow . . . radio service is widely available throughout the country and very little spectrum remains available for new full-powered stations.”). In this context, we will apply a rational basis standard to the Commission’s restrictions on the common ownership between newspaper and broadcast stations, and uphold them if they are rationally related to a substantial government interest. See NCCB, 436 U.S. at 799–800; see also Am. Family Ass’n v. FCC, 365 F.3d 1156, 1168 (D.C. Cir. 2004). In NCCB, the Supreme Court endorsed a substantial government interest in promoting diversified mass communications. Id. at 795, 802. The Supreme Court held that the Commission had “acted rationally in finding that diversification of ownership would enhance the possibility of achieving greater diversity of viewpoints.” Id. at 796. Here, as in NCCB, the Commission justified its continued restrictions on common ownership of newspapers and broadcast stations as promoting the public interest in viewpoint diversity. Order ¶ 355. The Court has said that limiting common ownership is a reasonable means of promoting the public interest in viewpoint diversity. NCCB, 436 U.S. at 796. Therefore, applying NCCB, we hold that the Commission’s continued 55 regulation of the common ownership of newspapers and broadcasters does not violate the First Amendment rights of either. D. The Commission did not provide reasoned analysis to support the specific Cross-Media Limits that it chose. The Commission concluded that cross-ownership limits were necessary in specific situations to guard against “an elevated risk of harm to the range and breadth of viewpoints that may be available to the public.” Order ¶ 442. But recognizing that ownership limits impede the speech opportunities for both broadcasters and newspapers, the Commission endeavored to craft new limits “as narrowly as possible.” Id. ¶ 441. In that vein, the Commission sought to identify “at risk” local markets—those with high levels of viewpoint concentration—where continued regulation was necessary. By focusing its regulation on those markets, the Commission hoped to avoid needlessly overregulating markets with already ample viewpoint diversity. But for all of its efforts, the Commission’s Cross-Media Limits employ several irrational assumptions and inconsistencies. We do not object in principle to the Commission’s reliance on the Department of Justice and Federal Trade Commission’s antitrust formula, the Herfindahl-Hirschmann Index (“HHI”), as its starting point for measuring diversity in local markets. In converting the HHI to a measure for diversity in local markets, however, the Commission gave too much weight to the Internet as a media outlet, irrationally assigned outlets of the same media type equal market shares, and inconsistently derived the Cross-Media Limits from its Diversity Index results. For these 56 reasons, detailed below, we remand for the Commission to justify or modify further its Cross-M edia Limits. 1. Overview of the Commission’s Diversity Index Methodology The Commission designed a methodology called the Diversity Index to identify “at risk” markets where limits on cross-media ownership should be retained. The Diversity Index was “inspired by” the HHI, which the Department of Justice and the Federal Trade Commission use to measure proposed mergers’ effect on competition in local markets. Id. ¶ 394. A market’s HHI score is the sum of market shares squared. A highly competitive market will have a lower HHI score than a concentrated one. For example, compare the HHI score of a market with 10 equal-sized competitors (10 [competitors] x 10 [each competitor’s market share percentage]2 = 1000) to the HHI score of a market with only five equal-sized competitors (5 x 202 = 2000).28 The Department of Justice and the Federal Trade Commission categorize markets with HHI scores above 1800 as “highly concentrated.” If a proposed merger would exceed that level of concentration, the agencies believe that it would be harmful to the competition in that market. At its core, the Diversity Index here uses the same sum of market share-squared formula. First, the Commission selected which media outlets to include in its analysis of viewpoint diversity in local markets based on consumers’ reported preferences for 28 Of course, the HHI formula also works where the components of a market are not of equal size. In a market where one company controls 50% of the market share, two control 20%, and another controls 10%, the HHI formula is 50 2 + 20 2 + 20 2 + 10 2 = 3400. 57 sources of local news and information. The Commission determined that broadcast television, daily and weekly newspapers, radio, and Internet (via cable connection and DSL, dial-up, or other connections) are the relevant contributors to viewpoint diversity in local markets. See Neilsen Media Research, Consumer Survey on Media Usage (MOWG Study No. 8) (Sept. 2002). Based on the popularity of each media source, the Commission assigned each a relative weight: broadcast TV 33.8%, daily newspapers 20.2%, weekly newspapers 8.6%, radio 24.9%, Internet (cable) 2.3% and Internet (DSL, dial-up, or other connection) 10.2%. Order ¶¶ 412, 415, 427. Next, the Commission selected many sample markets 29 for which it would determine a Diversity Index score. In each of those markets, it counted the number of outlets within each media type and assigned each outlet an equal market share. (For example, the New York City market has 23 television stations, so each one was attributed an equal 4.3% 30 market share.) The Commission calculated the ownership share by multiplying the number of outlets owned by an entity by the market share. (Univision 29 The Commission calculated Diversity Index scores for all markets with five or fewer television stations, all markets with 15 and 20 television stations, and ten randomly selected markets with between six and ten stations. For sample market Diversity Index calculations, see Order app. C. 30 Throughout this discussion of the Diversity Index, we adopt the Commission’s convention and report the decimals of intermediate products and quotients (such as 4.3 here) rounded to the nearest tenth. Final products (such as 13.0 reported in the next sentence) are derived from the unrounded intermediate product and then rounded to the nearest tenth. 58 owns three television stations in New York, so its ownership share was 3 x 4.3% = 13.0%.) Each ownership share was then given its relative weight by media type. (Univision’s 13.0% share was thus subject to the 33.8% multiplier for television stations). The Commission then squared all of the weighted ownership shares; their sum was the market’s total Diversity Index score. But in markets with cross-owned shares (outlets of different media types owned by the same entity) the entity’s weighted ownership shares were summed together before they were squared. (ABC owned one television station and four radio stations in New York, so the Commission added its weighted ownership share for the television station (4.3% x 33.8% = 1.45%) to its weighted ownership share for the radio stations (6.7% x 24.9% = 1.67% ) for a combined ABC ownership share of 3.12%. The square of 3.12 was included in the summation). See generally Order app. C. After the Commission calculated Diversity Index scores for markets of different sizes, it determined how those scores would change in several different consolidation “scenarios.” To illustrate, the Commission determined that markets with five television stations had an average Diversity Index score of 911. If a newspaper and television station combined in a market of that size, that score would increase by 223, to 1134. The other combination scenarios were: (1) one television station and all of the radio stations allowed to be commonly owned under the local radio rule; (2) one newspaper and all of the radio stations allowed to be commonly owned under the local radio rule; (3) one newspaper, one television station, and half of the number of radio stations allowed to be commonly owned under the local radio rule; (4) two television stations; (5) one 59 newspaper and two television stations; and (6) one newspaper, two television stations, and all of the radio stations allowed under the local radio rule. Order app. D. Finding that all of the consolidation scenarios resulted in relatively high increases to the average Diversity Index scores for the smallest markets (those with three or fewer television stations), the Commission prohibited newspaper/television, newspaper/radio, and radio/television combinations in those markets. Order ¶¶ 456, 459, 460. In the large markets (nine or more stations), all of the consolidation scenarios resulted in acceptable increases to the average Diversity Index scores, so the Commission imposed no limits on cross-media ownership in those markets. In the mid-sized markets (between four and eight television stations), the Commission found that all of the scenarios, except the two involving a newspaper and television duopoly, should be allowed, based on their modest increases to the average Diversity Index scores for those markets. Id. ¶ 466. 2. The Commission did not justify its choice and weight of specific media outlets. Petitioners from both sides of the regulatory spectrum attack the Commission’s selection of media outlets for inclusion in the Diversity Index formula. The Citizen Petitioners argue that the Commission gave too much weight to the Internet at the expense of television and daily newspapers, thereby understating the level of concentration and overstating the level of diversity in a market. The Deregulatory Petitioners, on the other hand, argue that the Diversity Index understates the actual amount of diversity in a market by ignoring important media outlets, primarily cable 60 television. As explained below, we affirm the Commission’s reasoned decision to discount cable. But we think that the same rationale also applies to the Internet. Therefore, its decision to count the Internet as a source of viewpoint diversity, while discounting cable, was not rational. The Commission properly excluded cable because of serious doubts as to the extent that cable provided independent local news—the Commission’s recognized indicator of viewpoint diversity in local markets. Order ¶ 394 (“News and public affairs programming is the clearest example of programming that can provide viewpoint diversity. . . . [and] the appropriate geographic market for viewpoint diversity is local.”). While the responses to one question in the Commission’s survey suggested that cable is a significant source of local news, see MOWG Study No. 8 tbl. 8, the Commission did not find this credible because the responses to other survey questions suggested that respondents were counting broadcast signals that are transmitted as cable channels as sources of local news on cable. See id. tbl. 18 (from a list of popular national cable news channels and a choice for “local cable news channels,” almost half of the respondents chose “other” as their source for cable network news, indicating that cable news channels were probably confused with broadcast networks’ news). The survey’s indication that cable is an independent source of local news was also undercut by external evidence, including Neilsen ratings, that local cable channels are the least watched of any broadcast or cable stations in the market. Order ¶ 414. Furthermore, the Commission noted that local cable channels are not available everywhere, but only in select markets. Id. ¶ 414 61 n.924; see also UCC Comments at 30–31 (reporting that only 10 to 15% of cable systems include channels that provide local and public affairs programming—i.e., public, educational, and governmental access channels—and that there are only 22 local news cable channels in the country, five of which serve the New York City area). Thus, the Commission justifiably excluded cable from its Diversity Index calculations. Similarly, the responses to one of the Commission survey questions suggested that the Internet is a source of local news. See MOW G Study No. 8 31 tbl.1 (18.8% of respondents listed the Internet as a source of local news). But the survey did not identify which websites respondents used as sources of local news. 32 There is a critical distinction between websites that are independent sources of local news and websites of local 31 The dissent suggests that the MOWG Studies, “although not perfect . . . , are a significant improvement over the study in Sinclair” that the D.C. Circuit Court determined did not support the Commission’s decision to limit the definition of “voices” in its local television rule. But this comparison is not relevant because, as we point out, the Commission inconsistently applied the results of its analysis. 32 The follow-up question for the respondents who reported using the Internet as a news source asked which sites they had used in the past seven days as a source of local or national current affairs, so their responses to this question are not helpful in determining whether the Internet is a source of independent local news. To the extent that we can glean anything from this question— unlikely, as the predominant response was “other” (34.9%)—the most popular websites identified were those of national cable news channels, MSN.com (22.4%) and CNN.com (19.1%), indicating that most people had those types of websites in mind when they reported using the Internet for news. (The other responses were: Yahoo.com (17.9%), MSNBC.com (5.9%), NewYorkTimes.com (5.1%), FoxNews.com (2.2%), USAToday.com (1.8%), ABCNews.com (1.8% ), CBSNews.com (1.7%), Netscape.com (1.7% ), Excite.com (1.3%), Iwon.com (1.2%), AT&T.net (1.1%), WallStreetJournal.com (1.0%), none (7.3%), don’t know (3.5%), and refuse (0.5%)). 62 newspapers and broadcast stations that merely republish the information already being reported by the newspaper or broadcast station counterpart. The latter do not present an “independent” viewpoint and thus should not be considered as contributing diversity to local markets. Accordingly, the Commission should have discounted the respondents who primarily rely on these websites from its total number of respondents who indicated that they use the Internet to access local news. 33 Furthermore, just as the Commission discounted responses indicating that cable was an independent source of local news because this finding conflicted with other record evidence, it should have discounted the Internet responses as well. The Commission does not cite, nor does the record contain, persuasive evidence that there is a significant presence of independent local news sites on the Internet. According to the record, most sources of local news on the Internet are the websites for newspapers and broadcast television stations. See, e.g., UCC Comments at 33 (62% of Internet users get local news from newspaper websites, 39% visit television station websites). And the examples the Commission does cite—the Drudge Report and Salon.com— have a national, not local, 33 The dissent acknowledges the flaws in the MOWG Study No. 8 survey, but suggests that because the survey “can be fine-tuned on the next round of reviews” it should not be the basis for remand. But we decline to abdicate our obligation to provide meaningful judicial review. Just as the Commission may not rely on a “wait-and-see” approach to rulemaking, Sinclair, 284 F.3d at 164, neither can we. We review an agency’s decision for whether it is rationally derived from the record evidence—not whether the agency may (or may not) “fine tune” the record at the next mandated review. Furthermore, just as we may not supply a reasoned basis for the agency’s action that the agency itself has not given, State Farm, 463 U.S. at 43, we also do not supply evidence to an agency in the hopes that the agency will include that evidence in a future study. 63 news focus. 34 Order ¶ 427. The Commission suggests that “the virtual universe of information sources” on the Internet qualifies it as a source of viewpoint diversity. Order ¶ 427. But to accept this rationale we would have to distort the Commission’s own premise that local news is an indicator of viewpoint diversity. E.g., id. ¶ 391 (Diversity Index measures “the relative importance of these media as a source of local news”).35 Search-engine sponsored pages such as Yahoo! Local and about.com,36 which were suggested by commenters as sources of local news and information, may be useful for finding restaurant reviews and concert schedules, but this is not the type of “news and public affairs programming” that the Commission said was “the clearest example of programming that can provide viewpoint diversity.” Id. ¶ 394. To accept its “universe of information” characterization of the Internet’s viewpoint 34 Moreover, the Drudge Report is an “aggregator” of news stories from other news outlets’ websites and, as such, is not itself normally a “source” of news, national or local. 35 The Order also speaks of “news and public affairs programming” or “local news and current affairs information” when referring to measures of viewpoint diversity. E.g., Order ¶¶ 394, 406, 409. 36 The dissent also takes notice of the Independent Media Center websites such as phillyimc.com. We agree that this is a good example of independent local news on the Internet. But the IMC provides local links in only eight markets in the United States. The Commission does not even mention these websites in its analysis of the Internet, let alone argue that IM C websites in eight local markets will offset the viewpoint diversity lost when newspapers and broadcast stations are allowed to consolidate. And even if we believed that to be the case, it is not our role to insert our own analysis to substitute for that which is missing from the agency’s rationale. State Farm, 463 U.S. at 43 (“[W ]e may not supply a reasoned basis for the agency’s action that the agency itself has not given.”). 64 diversity, we would also have to disregard the Commission’s professed intent to focus its consideration of viewpoint diversity on media outlets. Id. ¶¶ 20, 391. In terms of content, “the media” provides (to different degrees, depending on the outlet) accuracy and depth in local news in a way that an individual posting in a chat room on a particular issue of local concern does not. But more importantly, media outlets have an entirely different character from individual or organizations’ websites and thus contribute to viewpoint diversity in an entirely different way. They provide an aggregator function (bringing news/information to one place) as well as a distillation function (making a judgment as to what is interesting, important, entertaining, etc.).37 Individuals (such as political candidates) and entities (such as local governments or community organizations) may use the Internet to disseminate information and opinions about matters of local concern (such as the extension of a bike path on the Schuylkill River in Center City Philadelphia, see dissent Part IV.A.1), but these individuals and organizations are not, themselves, media outlets. W e agree that the Internet “helps citizens discharge the obligations of citizenship in a democracy,” Order ¶ 393, when someone can go cityofglenfalls.com to find the city council’s next agenda or use sfgov.org to learn how to get a marriage license in San Francisco. See Comments of the Hearst Corporation, MM Docket No. 01-235 at 11 & n.36, apps. A & C (Dec. 3, 2001) (“Hearst Comments”) (listing these website addresses, among others, as examples of local government websites). But local governments are 37 See Brief of Petitioner Media General, Inc., at 55 (noting “each media outlet in a community is actually a platform for the expression of many viewpoints”). 65 not, themselves, “media outlets” for viewpoint-diversity purposes. Like many entities, they just happen to use a particular media outlet—the Internet— to disseminate information. Similarly, advertiser-driven websites such as hvnet.com and sfadvertiser.com, see Hearst Comments at apps. A & C, hardly contribute to viewpoint diversity. Like local governments, the sponsors of these websites are not “media outlets” just because they have “local information” that they want the public to have— if they were, their advertisements in telephone directories would also have to count toward viewpoint diversity. Compare Order ¶ 424 (explaining that the Commission would not count toward viewpoint diversity a local newspaper’s comics and classified ads because, while the subscriber is “undoubtedly getting a valuable service, it is not clear that the service has anything to do with news and current affairs”). The Commission attempts to justify different treatment for cable and the Internet by suggesting that local cable news channels are only available in select markets, while the Internet is available everywhere. Not only is this distinction demonstrably false (as even the Commission acknowledged that almost 30% of Americans do not have Internet access, Order ¶ 365), it is irrelevant. That the Internet is more available than local cable news channels does not mean that it is providing independent local news. On remand the Commission must either exclude the Internet from the media selected for inclusion in the Diversity Index or provide a better explanation for why it is included in light of the exclusion of cable. See Sinclair, 284 F.3d at 163–65 (unexplained inconsistency was 66 arbitrary and capricious). 3. The Comm ission did not justify its assumption of equal market shares. Both the Citizen Petitioners and the Deregulatory Petitioners object to the Commission’s decision to assign all outlets within the same media type (that is, television stations, daily papers, or radio stations) an equal market share. The assumption of equal market shares is inconsistent with the Commission’s overall approach to its Diversity Index and also makes unrealistic assumptions about media outlets’ relative contributions to viewpoint diversity in local markets.38 The Commission’s decision to assign equal market shares to outlets within a media type does not jibe with the Commission’s decision to assign relative weights to the different media types themselves, about which it said “we have no reason to believe that all media are of equal importance.” Order ¶ 409; see also id. ¶ 445 (“Not all voices, however, speak with the same volume.”). It also negates the Commission’s proffered rationale for using the HHI formula in the first place—to allow it to measure the actual 38 The dissent views these flaws, effectively, as “harmless error” because the Commission called the Diversity Index a “useful tool” that “informs, but does not replace, our judgment in establishing rules of general applicability that determine where we should draw lines between diverse and concentrated markets.” Order ¶ 391. But nowhere in the Order, in its briefs, or in its oral argument did the Commission identify any consideration other than the Diversity Index as having influenced the formulation of the Cross-M edia Limits. Rather, the Cross-Media Limits prospectively ban certain combinations in specific markets, and allow others, based on nothing but the relative increases those combinations would have on the average Diversity Index scores of markets of that size. 67 loss of diversity from consolidation by taking into account the actual “diversity importance” of the merging parties, something it could not do with a simple “voices” test. Id. ¶ 396. Finally, assigning equal market shares to outlets that provide no local news almost certainly presents an understated view of concentration in several markets, thus contravening the Commission’s goal of making “the most conservative assumption possible” about viewpoint diversity. Id. ¶ 400. Additionally, there is no dispute that the assignment of equal market shares generates absurd results. For example, in New York City, the Dutchess Community College television station and the stations owned by ABC each receive an equal 4.3% market share. Or compare the Dutchess Community College station’s weighted share of 1.5% (4.3% times the 33.8% multiplier for television) to a mere 1.4% weighted, combined share assigned to the New York Times Company’s co-owned daily newspaper and radio station. Order app. C. A Diversity Index that requires us to accept that a community college television station makes a greater contribution to viewpoint diversity than a conglomerate that includes the third-largest newspaper in America39 also requires us to abandon both logic and reality. The Commission’s attempt to justify its failure to consider actual market share of outlets within a media type is not persuasive. It suggests that actual-use data use data is not relevant because “current behavior is not necessarily an accurate predictor of future 39 Source: Audit Bureau of Circulations. See http://www.accessabc.com/. 68 behavior.” Order ¶ 423. But this truism did not prevent the Commission from preferring actual-use data in [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/3014050. Public record. Not legal advice.