Petition for Writ of Certiorari — Fidelity Television, Inc. v. Federal Communications Commission

Supreme Court brief1975

Ask Donna

What actually matters in this document.

Text

ru. & JUL 390 1975

IN THE snap JRCLER

Supreme Court of the Anited ae

OCTOBER TERM, 1975

no. Jy -/66

FIDELITY TELEVISION, INC.,

Petitioner,

FEDERAL COMMUNICATIONS COMMISSION, 2/ me

Respondent.,

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

DISTRICT OF COLUMBIA CIRCUIT

EDWARD P. MORGAN

GERALD S. ROURKE

300 Farragut Building

900 Seventeenth Street, N.W.

Washington, D.C. 20006

Attomeys for Petitioner

Of Counsel:

WELCH & MORGAN

300 Farragut Building

900 Seventeenth Street, N.W.

Washington, D.C. 20006

EERE TESTED

THE CASILLAS PRESS, INC.—1717 K Street. N. W.—Washington, 0. C.-223-1220

(i)

INDEX

Page

OR ae re ee ec ee a ee ee 1

JURISDICTION 2. 6 2 2 we ee ee es 2

QUESTIONS PRESENTED FOR REVIEW ...... . 2

CONSTITUTIONAL PROVISIONS AND STATUTES

og | Re te ae ee ae Go ee

SA cee Oe CG kk er Sow we eee 6

REASONS FOR GRANTING THE WRIT ....... 12

1. The F.C.C. and the Court of Appeals Have

Seriously Undercut the First Amendment As

Applied to Broadcasting by thisCourt. . . . . . . L2

II. It Was an Abuse of Discretion for the Commis-

sion to Refuse to Assess At Least a Comparative

Demerit Against RKO for Engaging in Reciprocal

Trade Practices in the Sale of Advertising Time

on KHJ-TV and its OtherStations . . . . .... #=&4J7

Ill. Fidelity Was Denied Due Process of Law Where

Allegations Were Made Against It in Petitions

to Enlarge the Issues, Where the Petitions Were

Denied by the Commission With the Result that

No Hearing Was Held on the Allegations, and

Where the Allegations Were Then Used Against

Fidelity in the Commission’s Decision. . . . . . . 21

IV. The Grant of a Comparative Preference to a

Renewal Applicant for the Fact That it is

Operating on the Frequency, Apart From the

Merit of its Past Performance, Violates Sections

301, 304, 307(d). and 309(h) of the Commun-

en eee. vs eee ee ee ee

(iui

Page

Loh RN a eee te ewe e

APPENDIX A — Opinion of the United States Court of

Appeals for the District of Columbia

Cwowlt, MesskG6, 1975S... ....... la

APPENDIX B — Opinion of the United States Court of

Appeals for the District of Columbia

Circuit on Petition for Rehearing En

Banc, and Statement of Chief Judge

Bazelon, June 30,1975. . . . . . . . 34a

APPENDIX C — Decision of the Federal Communica-

tions Commission, December 6, 1973 . . . 94a

APPENDIX D — Initial Decision of F.C.C. Hearing

Examiner Thomas H. Donahue, Aug-

8) eta a oe a er

TABLE OF AUTHORITIES

Cases Cited:

Associated Press v. United States,

SES ae eee a ne ey ee 12

Citizens Communications Center v. F.C.C.,

447 F.2d 1201 (DC Cir.1971) 2. 2. 2 ww 13, 23725

Johnston Broadcasting Co. v. F.C.C.,

17S F.2d 351 (DC Cir. 1949) . . ....... 13,15

McClatchy Broadcasting Co. v. F.C.C.,

poe fee Ce cee eee ee Oe ew ST EGS

Red Lion Broadcasting Co. v. F.C.C.,

eee ke ee ee ee OR

(in)

Page

TV 9, Inc. v. F.C.C.,

Gee rea ee ee a ek a 13

United States v. General Dynamics Corp.,

258 F Supp. 36 (S.DN.Y.1966) . . . 2... 2 es 1

Constitutional and Statutory Provisions:

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

Section 301 4, 23, 25

Section 304 4,23,25

Section 307(d) 5, da.e0

Section 309(h) tet cy a ete ails ice or

eres ear ees ee cd eay ae VI ae ed Ve Ss

| SRI SE OE Sit or eh gine a eee ee ey oS 10

Federal Trade Commission Act, 15 U.S.C. #41, ef seq. .

Ss Cl ae aR 5 OS. Be eR ew Va er ee az oO

no onde BMC ie eer n ag Okn aare: SaeePw ie Se 7

Se ae lr re rene rer at a Se re tie a 7

Ey a Or Ce oe ca re ye el ees Sek ad ac tg 2

U.S.Constitution, amendment] . . . . . . 3,12, 13, 16,17

U.S. Constitution,amendmentV . . . . . 6 we 4

Administrative Reports and Decisions:

Amendment of Rules Relating to Multiple Ownership

of AM, FM and Television Broadcasting Stations,

5 ge ie ke Ft | ee ieee Se eC Fe

Policy Statement on Comparative Broadcast

Hearings, 1 F.C.C. 2d 393 (1965) 2 2 | |. 9 BR TS. 22

IN THE

Supreme Court of the United States

OCTOBER TERM, 1975

No.

FIDELITY TELEVISION, INC.,

Petitioner,

FEDERAL COMMUNICATIONS COMMISSION,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

DISTRICT OF COLUMBIA CIRCUIT

Petitioner, Fidelity Television, Inc., prays that a Writ

of Certiorari be issued to review the judgment of the United

States Court of Appeals for the District of Columbia Circuit

entered in this case on March 6, 1975.

OPINIONS BELOW

The opinion of the United States Court of Appeals

for the District of Columbia Circuit, while not yet of-

ficially reported, has been unofficially reported at 32 P& F

Radio Reg. 2d 1607 (1975), and is printed in the Appendix

at page la.'! The per curiam opinion of the same court on

petitions for rehearing, reconsideration or clarification and

suggestions for rehearing en banc and the statement of

Bazelon, Chief Judge, as to why he voted to grant rehear-

ing en banc are not yet officially reported, but are unof-

ficially reported at 34 P & F Radio Reg. 2d 419 (1975),

and are printed in the Appendix at page 34a. The Deci-

sion of the Federal Communications Commission is official-

ly reported at 44 F.C.C.2d 123 (1973) and is printed in

the Appendix at page 94a. The Initial Decision of the Hear-

ing Examiner is not officially reported, but is unofficially

reported at 16 P & F Radio Reg.2d 1181 (1969), and is

printed in the Appendix at page 121la.

JURISDICTION

The judgment of the United States Court of Appeals

for the District of Columbia Circuit was entered on March

6, 1975. An order denying petitions for rehearing, recon-

sideration or clarification was entered on June 30, 1975.

An order staying the issuance of the mandate of the Court

of Appeals pending the filing of a Petition for Writ of

Certiorari was entered on July 21, 1975. The jurisdiction

of this Court is invoked under 28 U.S.C. § 1254(1).

QUESTIONS PRESENTED FOR REVIEW

1. Does the interpretation of the First Amendment

requirement of diversification of the media by the F.C.C.

and the Court of Appeals in this case comport with the

prior decisions of this Court?

1 References to the Appendix are in¢jcx*< as “(A. __)”.

2. Where it was found that the renewal applicant and

its parent company had engaged in prohibited reciprocal

trade practices, did the F.C.C. act arbitrarily in finding that

such conduct neither disqualified the renewal applicant nor

reflected adversely upon its character so as to require the

assessment of a comparative demerit?

3. Was the competing applicant denied due process of

law where allegations were made against it in petitions to

enlarge the issues, where the petitions were denied by the

Commission so that no hearing on the allegations was held,

and where the Commission then used the allegations in the

petitions as a basis for a decision adverse to the competing

applicant?

4. In a comparative broadcast license renewal case,

does the Communications Act permit the granting of a

preference for the factor of “continuation of existing serv-

ice” apart from any credit which may be given for the

past performance of the renewal applicant?

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

The following Constitutional provisions and statutes

are involved herein:

The First Amendment to the United States Constitution:

“Congress shall make no law respecting an es-

tablishment of religion, or prohibiting the free ex-

ercise thereof; or abridging the freedom of speech,

or of the press; or the right of the people peace-

ably to assemble, and to petition the Government

for a redress of grievances.”

The Fifth Amendment to the United States Constitution:

“No person shall be held to answer for a

capital, or otherwise infamous crime, unless on a

presentment or indictment of a Grand Jury, ex-

cept in cases arising in the land or naval forces,

or in the Militia, when in actual service in time

of War or public danger; nor shall any person be

subject for the same offence to be twice put in

jeopardy of life or limb; nor shall be compelled

in any criminal case to be a witness against him-

self, nor be deprived of life, liberty, or property,

without due process of law; nor shall private

property be taken for public use, without just

compensation.”

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

which provides as follows:

“Sec. 301. It is the purpose of this Act,

among other things, to maintain the control of

the United States over all the channels of inter-

state and foreign radio transmission; and to pro-

vide for the use of such channeis, but not the

ownership thereof, by persons for limited periods

of time, under licenses granted by Federal author-

ity, and no such license shall be construed to ;

create any right, beyond the terms, conditions,

and periods of the license. . . .”

* * *

“Sec. 304. No station license shall be granted

by the Commission until the applicant therefor

shall have signed a waiver of any claim to the

use of any particular frequency or of the ether

as against the regulatory power of the United

Doe ner README Ea ReRTERRISAINNE MORPH oes oo

States because of the previous use of the same.

whether by license or otherwise.”

* * *

“Sec 307(d). No license granted for the oper-

ation of a broadcasting station shall be for a long-

er term than three years and no license so granted

for any other class of station shall be for a longer

term than five years, and any license granted may

be revoked as hereinafter provided. Upon the ex-

piration of any license, upon application therefor,

a renewal of such license may be granted from

time to time for a term of not to exceed three

years in the case of broadcasting licenses and not

to exceed five years in the case of other licenses,

if the Commission finds that public interest, con-

venience, and necessity would be served thereby.”

* * *

“Sec, 309(h). Such station licenses as the Com-

mission may grant shall be in such general form

as it may prescribe, but each license shall contain,

in addition to other provisions, a statement of the

following concitions to which such license shall

be subject: (1) The station license shall not vest

in the licensee any right to operate the station or

any right in the use of the frequencies designated

in the license beyond the term thereof nor in any

other manner than authorized therein; . . es

* * *

“Sec, 313(a). All laws of the United States re-

lating to unlawful restraints and monopolies and

to combinations, contracts, or agreements in re-

straint of trade are hereby declared to be ap-

plicable to the manufacture and sale of and to

trade in radio apparatus and devices entering into

or affecting interstate or foreign commerce and to

interstate or foreign radio communications. When-

ever in any suit, action, or proceeding, civil or

criminal, brought under the provisions of any of

said laws or in any proceedings brought to enforce

or to review findings and orders of the Federal

Trade Commission or other governmental agency

in respet of any matters as to which said Com-

mission or other governmental agency is by law

authorized to act, any licensee shall be found

guilty of the violation of the provisions of such

laws or any of them, the court, in addition to the

penalties imposed by said laws, may adjudge, order

and/or decree that the license of such licensee

shall, as of the date the decree or judgment be-

comes finally effective or as of such other date

as the said decree shall fix, be revoked and that

all rights under such license shall thereupon cease:

PROVIDED, HOWEVER, That such licensee shall

have the same right of appeal or review, as is pro-

vided by law in respect of other decrees and judg-

ments of said court.”

STATEMENT OF THE CASE

This case involves a comparative hearing before the Fed-

eral Communications Commission (hereinafter “the Commis-

sion”) between RKO General, Inc. (“RKO”), a license re-

newal applicant for KHJ-TV, Channei 9, Los Angeles, Ca-

lifornia, and Fidelity Television, Inc., (“Fidelity”), an ap-

plicant for a construction permit for a new commercial

television station to be operated on the same channel.

RKO is a subsidiary of General Tire & Rubber Com-

pany and licensee of AM, FM, and TV stations serving New

York City, Los Angeles, Boston, Detroit, and Memphis, and

of AM and FM stations serving Washington, D.C., and San

Francisco. It also controls CATV franchises serving almost

100 cities and towns across the country. (A. 58a)

Fidelity is composed of 20 prominent citizens of southern

California and has no media interests apart from its applica-

tion to the F.C.C?

The two mutually-exclusive applications were filed in

1965, and following designation by the Commission in June,

1966, a hearing was held on the standard comparative issue

of which applicant would better serve the public interest.

During the hearing, on March 2, 1967, the Department

of Justice filed suit in the United States District Court for

the Northern District of Ohio against the General Tire &

Rubber Company, Aerojet General Corporation, A. M. Byers

Company, and RKO, the latter three companies all subsi-

diaries of General Tire, alleging that the four companies had

violated Sections 1 and 2 of the Sherman Act, 15 U.S.C.

8 1 and 2, by engaging in coercive and mutual patronage

reciprocity.

The record in the F.C.C. comparative hearing was closed

on June 15, 1967, and then reopened to receive evidence

conceming the anti-competitive practices of KHJ-TV, after

which it was finally closed on August 26, 1968. The anti-

trust case against General Tire and its subsidiaries was ul-

timately concluded by a consent decree on October 21, 1970.

- Une 3% stockholder of Fidelity has a 10% interest in a CATV

franchise 50 miles from Los Angeles. (A. 59a).

In his Initial Decision, released August 13, 1969, the

F.C.C. Hearing Examiner held that RKO’s “‘on-the-air op-

eration miserably failed to serve the public interest,” and

that RKO had engaged in business practices (reciprocity)

which suggested ‘‘several licensee qualification disabilities.”

(A.27S¢). He preferred Fidelity due to its “marked superi-

rity over General Tire in the areas of local ownership, diver-

sification of mass communications media, and favorable

survey and poll support.” (A234). RKO’s application was

denied and Fidelity’s granted. RKO filed exceptions with

the Commission. While the case was pending before the

Commission, the Department of Justice filed a brief urging

disqualification of RKO if the Commission agreed with the

facts found by the Hearing Examiner.

Over four years after the Initial Decision, on Decem-

ber 6, 1973, and after Fidelity was compelled to go to the

District of Columbia Circuit Court of Appeals twice on peti-

tions for writs of mandamus* to force the Commission to

decide the case (with KHJ-TV continuing to operate the sta-

tion all the while), the Commission released its decision re-

versing the Hearing Examiner and granting RKO’s application

for renewal of its license for KHJ-TV.5 (A. 109a).

In its decision, the Commission adopted the Hearing

Examiner’s findings of facts with few exceptions, but sub-

3 Now known as “Administrative Law Judge.”

4 See Fidelity Television, Inc. v. F.C.C., 502 F.2d 443 (D.C. Cir.

1974).

5 Only two of the seven Commissioners (Robert E. Lee and

Charlotte Reid) joined in the decision. Chairman Burch concurred

in the result. Two Commissioners (Johnson and H. Rex Lee) dis-

sented and issued statements. Two Commissioners (Wiley and Hooks)

did not participate. (A. 94a).

stituted its conclusion for the Examiner's. (A. 109a). It first

held that there was no reason either to disqualify RKO or to

assess a comparative demerit against RKO for its involvement

in anticompetitive trade practices. (A. 100a-101a)

Secondly, the Commission purported to apply the cri-

teria of the Policy Statement on Comparative Broadcast

Hearings, 1 F.C.C.2d 393 (1965), to the facts of record

and concluded that KHJ-TV’s past broadcast record was

average, rather than poor as found by the Hearing Examin-

er, thus warranting neither a preference nor a demerit. (A.

104a). In this regard, the Commission refused to evaluate

the quality of individual programs, but proceeded to counter-

pose the public’s expressed satisfaction with RKO’s program-

ming against its expressed dissatisfaction. The Commission

also attached weight to KHJ-TV’s local origination of some

cultural and artistic programming, to its compliance with

the Television Code of the National Association of Broad-

casters, and to the fact that KHJ-TV had no network affilia-

tion; but minimized the continuously unfavorable public re-

action to much of KHJ-TV’s programming. (A. 103a-104a)

Thirdly, under the factor of diversification of control

of the mass communications media, the Commission effec-

tively ignored RKO’s vast media holdings, including televi-

sion, AM, and FM stations in Los Angeles, and concluded

that neither applicant was entitled to a preference under

this criterion. In reaching this conclusion, the Commission

underlined that there was “no evidence . . . of any attempt

by RKO to influence the operation of KHJ-TV in such a way

as to promote any national or other uniform expression of

political, economic, or social opinion. . . .” (A. 104a-105a)

Lastly, the Commission concluded on the factor of par-

ticipation in station operation that neither applicant was en-

titled to a preference under this criterion, even though Fi-

delity proposed 22.66% full-time integration and substantial-

ly more part-time integration of its local stockholders,

whereas RKO had none. In minimizing Fidelity’s acknowl-

edged quantitative advantage, the Commission stated that

the qualitative aspects of Fidelity’s proposal “neutralized”

the quantitative. (A. 107a) The Commission further

equated RKO and Fidelity by contending that both appli-

cants would rely on a professional staff, that Fidelity’s

principals lacked broadcast experience that KHJ-TV’s had

acquired, and that RKO gave great autonomy to KHJ-TV’s

staff in operating the station. (A. 107a).

The Commission ultimately concluded that RKO was

the preferred applicant, since credit must be given in a com-

parative renewal hearing, where the applicants are otherwise

equal, for the value to the public in the continuation of

the existing service. (A. 108a-109a)

On March 6, 1975, the United States Court of Appeals

for the District of Columbia Circuit issued its opinion af-

firming the Commission’s decision.® (A. la). With re-

spect to the reciprocal trade practices issue, the Court of

Appeals asserted that the “antitrust law on reciprocity is

not entirely settled.” (A. 21a). It characterized some of

RKO’s practices as “unilateral, unsuccessful attempt[s] at

reciprocity,” (A. 22a), and expressed doubt as to whether

an antitrust violation flowed therefrom. The court also

found instances of successful reciprocity, but minimized

their import because “[m]ost of these [instances] have

little to do with RKO, and even less with KHJ[-TV]....”

(A. 22a). The court recognized that the practice under

attack was “affirmatively declared illegal” in 1966 in the

6 Jurisdiction obtained under Section 402 of the Communications

Act of 1934, 47 U.S.C. § 402.

General Dynamics case, 258 F.Supp. 36, (S.D.N.Y. 1966),

(A. 23a), yet it devaluated the precedential impact of this

case because a merger had been involved there but not here.

As to KHJ-TV’s past broadcast record, the court re-

fused to conclude “that the Commission’s decision that

programming performance was ‘average’ [was] bereft of the

support of substantial evidence,” (A. 28a), yet it readily

acknowledged that there was nothing superior about KHJ-

TV’s past record. On the basis of this evaluation—one

notably replete with negatives—the court supported the Com-

mission’s determination.

On the integration factor, the court concluded that

while “‘RKO’s local interest performance was [not] any

better than Fidelity’s could be predicted to be on the basis

of the challenger’s integration proposal,” (A. 30a), it wouid

not “overrule the Commission’s finding that it was no worse.”

(A. 30a).

With respect to diversification, the court concluded that

although Fidelity had far fewer media interests than did

RKO, a comparison is not based solely on the quantitative.

(A. 30a). The court found there to be substantial evidence

of RKO’s ability to present diverse views over its radio and

television stations and in its newspapers, (A. 31a), and the

basis of the Commission’s decision found support in its

previous decisions, “[alt] hough the Commission has vacil-

lated over the years in its general approach to diversifica-

tion.” (A. 31a).

Finally, the court ultimately concluded that ‘Fidelity

and RKO were essentially equally poor contenders —or, at

the best, both were minimally acceptable applicants.” (A.

31a). The court refused to hold, despite the foregoing

professed “‘equality,” that the Commission legally erred in

preferring the incumbent on the sole basis that it was the

incumbent, and that as such, its “minimal service” was to

be preferred to “no service at all.” (A. 31a-32a). The court

thus did attach legal weight to RKO’s “renewal expectan-

cies,” in spite of the fact that its words belied its actions.

On March 27, 1975, Fidelity petitioned the Court of

Appeals for a rehearing or clarification of its decision, and

Citizens Communications Center, a public-interest law firm,

filed a petition in support as amicus curiae.

On June 30, 1975, the court issued a per curiam order

denying Fidelity’s (and Citizens Communications Center’s)

petitions. Accompanying this order was a lengthy statement

by Chief Judge Bazelon as to why he voted to grant an en

banc rehearing (A. 39a).

REASONS FOR GRANTING THE WRIT

I. The F.C.C. and the Court of Appeals Have Serious-

ly Undercut the First Amendment as Applied by

This Court to Broadcasting

In an extensive discussion of the applicability of the

First Amendment to broadcasting in Red Lion Broadcasting

Co. v. F.C.C., 395 U.S. 367, 390 (1969), the Court said:

“It is the purpose of the First Amendment to

preserve an uninhibited marketplace of ideas in

which truth will ultimately prevail, rather than

to countenance monopolization of that market,

whether it be by the Government itself or a

private licensee.”

The basic structure of this First Amendment “marketplace

of ideas” had been previously enunciated in Associated Press

v. United States, 326 U.S. 1, 20 (1945), where the Court

had stated that the First Amendment-—

“rests on the assumption that the widest possible

dissemination of information from diverse and

antagonistic sources is essential to the welfare of

the public.”

The need for diverse and antagonistic sources of news

and information is the cornerstone of this Court’s applica-

tion of the First Amendment to broadcasting, as well as to

the resultant F.C.C. policy on diversification of the media

of mass communications. See Policy Statement On Com-

parative Broadcast Hearings, 1 F.C.C. 2d 393 (1965). Thus

the statutory and regulatory scheme hes long been directed

to the promotion of diversification of the ownership of the

broadcast media. See, e.g., Amendment of Rules Relating

to Multiple Ownership of AM, FM and Television Broad-

casting Stations, 18 F.C.C. 288, 291 (1953); TV 9, Inc. y.

F.C.C,, 495 F.2d 929, 938 (D.C. Cir. 1973); Citizens Com-

munications Center v. F.C.C., 447 F.2d 1201, 1213 n. 36

(D. C. Cir. 1971); McClatchy Broadcasting Co. v. F.C.C,

239 F.2d 15 (D.C. Cir. 1956); Johnston Broadcasting Co. vy.

F.C.C,, 175 F.2d 351 (D.C. Cir. 1949).

In this case, for the first time, the F.C.C. and the

Court of Appeals have effectively emasculated the First

Amendment policy on diversification of the ownership of

the mass media by equating diverse ownership to common-

ownership-with-autonomous-operation. By so doing, the

Commission and the court have rejected the principle, long

and vigorously defended by this Court, that the only way

to assure free, robust, and open debate on public matters is

to require that the public’s sources of news and informa-

tion be diverse and antagonistic. Such a fundamental

change in the law affecting the First Amendment rights of

the public, a change moving inexorably in the direction of

monopoly ownership of the media, should be reviewed by

this Court.

The circumstances under which this question is raised

are not complicated. The record shows that RKO is the

licensee of five major-market VHF television stations, seven

AM radio stations, and seven FM stations. It is a corporate

media conglomerate with controlling interests in a great

many CATV systems as well as microwave communications

facilities, movie theatres, and programming and advertising

services. (A. 104a). Fidelity has no media interests apart

from the application involved in this case.’ Yet in a pur-

ported but incomprehensible comparison between the two

on the issue of diversification of the media of mass com-

munications, the Commission found that neither party was

entitled to a preference over the other. (A. 10Sa).

To reach this result, the Commission referred to sev-

eral factors which allegedly ameliorate the effect of multi-

ple ownership—factors which have sometimes been consid-

ered in determining the weight to be attached to a diver-

sification preference but which have not heretofore been

considered significant enough to prevent a party without

media interests from obtaining such a preference. These in-

clude the number of other media facilities serving the com-

munity in question, the fact that RKO’s media ownership

is not in violation of the Commission’s multiple ownership

7 One 3% stockholder of Fidelity has a 10% interest in a CATV

franchise. The Commission’s reference to the alleged interest of

another Fidelity stockholder in a corporation which publishes ad-

vertising throw-aways, erroneously referred to as “newspapers” by

the Commission, was rejected by the court below and is not at issue

here. (A. 105a)

rules, that renewal of KHJ-TV’s license would not increase

the concentration of media ownership in any way, and the

Commission’s preference for rulemaking for across-the-board

changes inthe ownership pattern of the broadcast industry.

_ (A. 104a-105a). See, e.g., Policy Statement on Comparative

Broadcasting Hearings, supra; Johnston Broadcasting Co. y.

F.C.C, supra; McClatchy Broadcasting Co. v. F.C.C., supra.

However, the Commission relied heavily on one factor

new to the diversification analysis, the fact that there was

no showing of any attempt to use KHJ-TV to promote a

particular political, economic, or social opinion, nor any un-

desirable pattern in the station’s public affairs programming.

(A. 105a).

The Court of Appeals in affirming the Commission’s

decision acknowledged that if “quantitative” diversification

were the basis of comparison, Fidelity should have received

a preference on this point. However, the court went on to

discover in prior cases that there is also such a thing as

qualitative diversification:

“whether the licensee has in the past met the goals

of diversification by operating his stations autono-

mously and independently.”

(A. 30a). On this basis the court affirmed the Commis-

sion’s determination that Fidelity, with no other media in-

terests, was not entitled to any preference for diversification

over RKO, with its 19 major-market broadcasting licenses.

There has never been any such notion as “qualitative”

diversification recognized in the prior cases so as to neutra-

lize the impact of multiple media holdings under the diver-

sification issue, as Chief Judge Bazelon shows in his discus-

sion of the only two cases cited by the court in support of

this dubious proposition (A. 64a-65a).

The effect of this change in the law is profound and

disturbing. If autonomous operation of commonly owned

media facilities is equivalent in the eyes of the law to di-

verse ownership, the last barrier to monopoly ownership of

the media has fallen. If autonomous operation can prevent

a diversification preference in a comparative hearing for a

party with no media interests, surely it can be a basis for

a waiver of the Commission’s Multiple Ownership Rules to

permit multiple licensees to obtain additional stations. Af-

ter all, it is now a judicially sanctioned interpretation of

the diversification requirement of the First Amendment.

This change in the law is further contrary to the First

Amendment because it shifts the regulatory focus from the

objective fact of ownership to the sensitive area of program

content, and even beyond that to the substance of the

views and opinions expressed over the air. How is a com-

peting applicant to obtain a preference for diversification

in the future? Any practitioner before the Commission

knows the answer to that. Comparing media facilities

owned by the applicants is ao longer enough. The com-

peting applicant must now analyze the views and opinions

expressed on the commonly owned stations to discern

whether there is a pattern. Then there must be inquiry—

presumably at the hearing—as to why these common views

were expressed—for there will inevitably be common view-

points taken.

The question then is whether the common views were

imposed by higher management in the corporate structure,

or whether they were separately generated and just coinci-

dentally happened to be voiced over the commonly owned

stations. How much impact by higher management is per-

missible? After all, the licensee is responsible for the sta-

tion and everyting that goes out over the air except political

programming. What is an “undesirable pattern in the sta-

tion’s public affairs programming”? Undesirable in whose

eyes? The Commission’s?

The Commission and the Court of Appeals have serious-

ly eroded this Court’s First Amendment policy in the broad-

casting field, and they have shifted the focus of inquiry

from the objective fact of ownership to the previously

protected area of the nature of the news and opinions ex-

pressed over the air. This significant change in the law

governing diversification of the media raises important

First Amendment problems and should be reviewed by the

Court.

II. It Was an Unlawful Abuse of Discretion for the

Commission to Refuse to Assess at Least a Com-

parative Demerit Against RKO for Engaging in

Anticompetitive Reciprocal Trade Practices in the

Sale of Time on KHJ-TV and Its Other Stations.

In his Initial Decision, the Hearing Examiner set forth

twenty pages of detailed findings concerning the reciprocal

trade practices of KHJ-TV, RKO, and its parent company,

General Tire ast ). He summed up the theme of these

practices concisely: “you buy from me—I buy from you.”

(A.269@ ). Prescinding from the question whether these

documented practices constituted violations of the antitrust

laws, the enforcement of which is not the Commission’s

primary concern, the Examiner focused on the area which

is the Commission’s responsibility, and in which its exper-

tise lies, i.e., regulation of the broadcasting industry in the

public interest.

The Examiner pointed out the injury done to the pub-

lic when these reciprocal trade practices are applied to

broadcasting. The principal incentive for meritorious pro-

gramming is to enable a stztion to obtain a large audience,

which results in the sale of advertising. When the sale of

advertising is accomplished through reciprocal practices—

when Pepsi-Cola buys advertising on General Tire’s stations

because General Tire places Pepsi-Cola in its tire manufac-

turing plants (A25 14- )—a station can ignore the public, as

the Examiner found KHJ-TV largely had done in its pro-

: 266 : ’

gramming (A. wa)" As the Examiner stated:

“What stimulus is there for station ownership, man-

agement or personnel to expend energy and risk

shrinking ownership’s purse, in attempting to pro-

gram a station in meritorious fashion, when all

concerned know that the advertising with which

the programming is to be associated can be dis-

posed of through inducements largely irrelevant

to program quality?” (A.272°-),

The Examiner found that RKO’s reciprocal practices sug-

gested several licensee qualification disabilities from the point

of view of the public interest. (A.270ce). The Justice De-

partment, viewing the evidence of RKO’s reciprocal practi-

ces from the point of view of the antitrust laws, and finding

that such laws had been violated, filed an amicus brief urg-

ing that if the Commission upheld the Examiner’s findings

of fact, RKO’s renewal application should be denied. (A. 96a)

The Commission did not disturb the Examiner’s find-

ings of fact. It stated:

“{Wje do recognize that KHJ-TV was involved in

a number of mutual patronage situations during

this period, as would be normal for any separate

entity of a large conglomerate such as General

Tire. Thus the question here is not whether

reciprocal dealing was practices with respect to

KHJ-TV, but whether this conduct should reflect

adversely upon the operation of the station.’

(Footnote omitted.) (A. 100a)

The Commission concluded that the reciprocal practices

did not reflect adversely upon the station. It did so with-

out referring to the effect of these practices on the broad-

casting business or the public, but by rejecting the Justice

Department’s position concerning the application of the

antitrust laws. The Commission excused RKO’s reciprocal

practices on the ground that “the relevant legal and econo-

mic concepts were in a state of flux at the time”; that ac-

cordingly RKO cannot be charged with “knowing and wil-

full misconduct”; that many other corporations engaged in

similar conduct during this period; and that the consent

decree which terminated the civil antitrust suit was essen-

tially prospective in nature (A. 10 1a).

The Court of Appeals did not feel compelled to

overturn the Commission’s interpretation of the antitrust

laws. (A. 23a-24a). No mention was made of broadcasting.

Chief Judge Bazelon, in his Statement, after analyzing the

Court’s discussion, concludes: “The holding on this issue

is truly extraordinary.” (A. 75a)

As the Chief Judge notes, the record establishes that

successful mutual patronage reciprocity was engaged in with

Pepsi-Cola, Olin Mathieson, Alcoa, American Airlines, and

8 it is interesting to note that the Commission considers mutual

patronage situations “normal” for a station which is part of a large

conglomerate. In this connection it must be remembered that this

is the same station which the Commission exculpated from the

strictures of the diversification policy on the basis of autonomous

and independent operation.

Hertz, that resulted in significant increases in KHJ-TV's re-

venues. These acts clearly violate Section 5 of the Federal

’ Trade Commission Act and, at least after 1965, violate the

Sherman Act (A. 71a-72a) However, assuming, arguendo, that

RKO’s reciprocal practices were not technically a violation

of the antitrust laws, they were clearly destructive of the

basic economic underpinnings of the nation’s system of

broadcasting. For the Commission and the court totally to

ignore the effect of this conduct on KHJ-TV as a broad-

casting station, especially after the Examiner in his decision

had focused upon it, was an unlawful abuse of discretion

warranting review by this Court. On the basis of this

record KHJ-TV should be disqualified as a broadcaster, as

the Examiner suggested, or certainly be assessed a major

comparative demerit, irrespective of whether it is techni-

cally guilty of violating the antitrust laws. The public

interest standard of the Communications Act has here been

reduced to the standard of the criminal law under a hold-

ing that anticompetitive reciprocal trade practices do not

reflect adversely upon RKO as a broadcast licensee in any

way because it has not been proved that this was “knowing

and willful misconduct.” The Court should review this de-

nigration and diminution of the public interest standard.

IM. Fidelity Was Denied Due Process of Law Where

Allegations Were Made Against It in Petitions to

Enlarge the Issues, Where the Petitions Were

Denied by the Commission with the Result

That No Hearing Was Held on the Allegations,

and Where the Allegations Were Then Used

Against Fidelity in the Commission’s Decision.

After the Initial Decision, the Commission’s Broadcast

Bureau filed a petition to enlarge the issues against Fidelity

to inquire into the circumstances surrounding the preparation,

signing and filing of stock subscription agreements, amend-

ments of its application, and affidavits. Fidelity opposed

the petition and it was denied by the Commission (22 F.C.C.

2d 737). Thereafter, RKO filed a petition to dismiss

Fidelity’s application, alleging a number of deficiencies in-

volving an amendment filed by Fidelity. Fidelity filed its

opposition. The Commission denied the petition and de-

clined to remand the proceeding for a hearing into the al-

legations made (F.C.C. 71-973).

Then, however, in its Decision, the Commission used

these two allegations against Fidelity to deny it a compara-

tive preference to which it was unquestionably entitled on

the factor of participation of owners in management of the

station. (A. 105a-106a)

Two aspects of this matter are significant. First, the

allegations had nothing to do with the factor of integration

of ownership and management. The allegations related to

Fidelity’s compliance with the Commission’s reporting re-

quirements, not the integration issue. The Commission,

however, used these allegations to reflect adversely on Fi-

delity’s character—its intent to live up to its integration pro-

posal— and found that Fidelity could not be relied upon in

this regard.

The second aspect of this matter which requires atten-

tion is the fact that Fidelity has been found to have charac-

ter deficiencies without ever being given an opportunity to

defend itself against the charges in a hearing. Commissioner

H. Rex Lee stated the matter concisely in his dissent:

“The majority cannot have it both ways. It can-

not reject or dismiss requests for hearing issues

and then use the questions raised by the requests

against the applicant in the comparative evalua-

tion.” (A. 118a).

That, however, is precisely what the Commission did here

to deny Fidelity a preference on the factor of integration

of ownership and management.

The Court ~f Appeals did not address this question,

which was raised in Fidelity’s brief. (See Chief Judge

Bazelon’s Comment at A. 67a). Instead the Court

constructed its own justification for denying Fidelity a

preference on the factor of participation of ownership in

management, Fidelity’s lack of broadcast experience. How-

ever, the Commission itself had rejected that analysis in its

Policy Statement On Comparative Broadcast Hearings, \

F.C.C.2d 393 (1965), where the conflict between favoring

diversification of the media on one hand and broadcast ex-

perience on the other was addressed. ‘Since emphasis

upon this element [broadcast experience] could discourage

qualified newcomers to broadcasting, and since experience

generally confers only an initial advantage,® it will be

deemed of minor significance.” (1 F.C.C.2d at 396) Foot-

note 8 to the above passage states, ““Lack of experience, un-

like a high concentration of control, is remediable. See

Sunbeam Television Corp. v. Federal Communications Com-

mission, 100 U.S.App.D.C. 82, 243 F.2d 26.” (The Court

of Appeals’ emphasis on broadcast experience in this con-

text is further evidence of a prostitution of this Court’s

First Amendment policy of diversification of the media.)

The Commission’s denial of administrative due process

to Fidelity should be reviewed by this Court.

The Grant of a Comparative Preference to a Renew-

al Applicant for the Fact that It is Operating on the

Frequency, Apart from the Merit of Its Past Perform-

ance, Violates Sections 301, 304, 307(d) and 309(h)

of the Communications Act of 1934.

In his Initial Decision, the Hearing Examiner found

the programming performance of KHJ-TV to be “miserable”

and in effect gave RKO a demerit for its reciprocal anti-

competitive trade practices. In proposing a grant of Fidelity’s

application, the Examiner granted preferences for diversifica-

tion of the media, local ownership, and community surveys.

Nonetheless, the Commission, through a herculean effort,

raised KHJ-TV’s programming performance from poor to

average, thus avoiding the virtual necessity of denying its

application in the face of a fully-qualified competitor,?

which Fidelity unquestionably was, and thereby necessitating

a comparison of the two applicants on other factors.

As we have seen, the Commission then washed out

the strong preference for diversification to which Fidelity

was entitled under the First Amendment as heretofore in-

terpreted, and the preference for participation of local

ownership in management to which Fidelity was also en-

titled, by crediting unsupported allegations which it has

9 See Citizens Communications Center v. F.C.C., 447 F.2d 1201

(D.C. Cir. 1971).

previously rejected as not being of decisional significance.'®

It refused to assess any demerit against RKO for its reci-

procal trade practices and thus—Eureka!— the parties were

equal.

Having concluded that neither party was entitled to

any preferences or any demerits on any of the issues, the

Commission decided to grant the renewal application of

RKO on the ground that credit must be given “for the

value to the public in the continuation of the existing serv-

ice.” (A. 108a). The Court of Appeals, suddenly grown

strangely timid after having castigating the Commission for

the deliberate delaying tactics employed in this case, saw

nothing wrong in this. The Court stated:

“We merely confirm what we intimated in the

Greater Boston Television Corporation case—that,

when faced with a fairly and evenly balanced

record, the Commission may, on the basis of the

renewal applicant’s past performance, award him

the license. 444 F.2d at 854, 859.”

However, that is demonstrably not what the Commis-

sion did here. The Commission found KHJ-TV’s past per-

formance only average, and as such not entitled to any

preference toward renewal. The Commission expressly

stated:

“Under these circumstances, we are persuaded that

there are sufficient good points to offset the less

10 in the course of its various rulings, the Commission managed to

heap an undue amount of scorn upon Fidelity, undoubtedly because

Fidelity had developed the presumptively bad habit over the years

of waiting for a decision, of going to the Court of Appeals in an ef-

fort to expedite the proceeding.

favorable aspects of KHJ’s performance and that.

on balance, its record must be deemed to be within

the bounds of average performance expected of all

licensees, thus warranting neither a preference nor

a demerit.” (Emphasis supplied.) (A. 104a)

What the Commission did was to give KHJ-TV a pref-

erence for the fact that it was operating on the frequency,

not for the quality of its past performance. Any prefer-

ence on the latter ground had been expressly rejected.

A preference based on the fact of past operation on

the frequency—mere incumbency— without more, is con-

trary to the Communications Act. Sections 301, 304,

307(d) and 309(h)(1) of the Act Clearly indicate that

a licensee is to have no rights in the frequency beyond

the term of the license. The granting of a preference based

solely on the fact of incumbency, entirely apart from the

quality of the licensee’s performance, on its face constitutes

the granting of a right in the frequency which is for-

bidden by the statute. The Commission acknowledges as

much by stating that “recognition must be given to the

rights and expectancies of an ordinary renewal applicant.”

However, by law the Commission is forbidden to recognize

any such rights. Citizens Communications Center v FCC,

supra at 1207; see also A. 50a-57a. The Court should review

this important question of the interpretation of this federal

statute which on its face prohibits the course of action fol-

lowed by the agency in this case.

V. Conclusion

The Commission and the Court of Appeals have watered

down the First Amendment rights of the public in broad-

casting; they have condoned anticompetitive practices on

the part of a licensee in derogation of its public trust;

they have denied a competing applicant an elementary as-

pect of due process of law; and they have granted a prefer-

ence to a renewal applicant which is prohibited by the Com-

munications Act of 1934. This Court should grant review

on Certiorari.

Respectfully submitted,

FIDELITY TELEVISION, INC.

By __

Edward P. Morgan

Gerald S. Rourke

WELCH & MORGAN

Its Attorneys

300 Farragut Building

900 Seventeenth Street, N.W.

Washington, D.C. 20006

July 30, 1975

Foy ae ane Ss |

oF, a

“4

saeuimsiacaiana

IN THE

Supreme Court of the Mute

OCTOBER TERM, 1975

we 75-166

FIDELITY TELEVISION, INC.,

Petitioner,

Vv.

FEDERAL COMMUNICATIONS COMMISSION,<+ al

Respondents

OORT, Syewee

APPENDIX TO

ote PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

DISTRICT OF COLUMBIA CIRCUIT

d EDWARD P. MORGAN

b GERALD S. ROURKE

' 300 Farragut Building

900 Seventeenth Street, N.W.

Washington, D.C. 20006

Attomeys for Petitioner

Of Counsel:

WELCH & MORGAN

300 Farragut Building

900 Seventeenth Street, N.W.

Washington, D.C. 20006

aD)

THE CASILLAS PRESS, INC.—1717 K Street. N. W.—Washington, D. C.-223-1220

APPENDIX A — Opinion of the United States Court of

Appeals for the District of Columbia

Circuit, March 6, 1975 .

APPENDIX B — Opinion of the United States Court of

Appeals for the District of Columbia

Circuit on Petition for Rehearing En

Banc, and Statement of Chief Judge

Bazelon, June 30, 1975

APPENDIX C — Decision of the Federal Communica-

tions Commission, December 6, 1973 .

APPENDIX D — Initial Decision of F.C.C. Hearing

Examiner Thomas H. Donahue, oe

ust 13, 1969 ct

34a

94a

. 21a

}

APPENDIX A

Notice: This opinion is subject to formal revision before publication

in the Federal Reporter or U.S. App. D.C. Reports. Users are requested

to notify the Clerk of any formal errors in order that corrections may be

made before the bound volumes go to press.

United States Comt of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 73-2213

FIDELITY TELEVISION, INC., APPELLANT

Vv.

FEDERAL COMMUNICATIONS COMMISSION, APPELLEE

RKO GENERAL, INC., INTERVENOR

Appeal from the Federal Communications Commission

Decided March 6, 1975

Walter H. Sweeney, with whom Edward P. Morgan

was on the brief, for appellant.

Joseph A. Marino, Associate General Counsel, Federal

Communications Commission, with whom Ashton R.

Hardy, General Counsel, and Joseph Volpe III, Counsel,

were on the brief for appellee. John W. Pettit, General

Counsel, Federal Communications Commission at the time

the record was filed, also entered an appearance for ap-

pellee.

Harold David Cohn, with whom John J. Duffy was

on the brief for intervenor, RKO General, Inc. J. Laurent

Scharff also entered an appearance for intervenor RKO,

General, Inc.

Before: LEVENTHAL and Ross, Circuit Judges, and

Davis *, Judge, United States Court of Claims.

Opinion for the Court filed by Judge Davis.

Davis, Judge: Nearly ten years ago, intervenor RKO

General, Inc. filed an application for a three-year renewal

of its license to operate KHJ-TV, Channel 9 in Los An-

geles. Thus began a long saga which we may not even

end today by affirming the Commission’s decision in favor

of RKO.’

RKO, a wholly-owned subsidiary of General Tire and

Rubber Company, has operated KHJ since 1951. Joint

Appendix at 52. Under the Federal Communications

Commission’s license-renewal scheme, see 47 C.F.R.

§ 73.630 (1965), this license came up for three-year

renewal with those of other California licensees in 1965,

and RKO filed an application for renewal on August

$1, 1965. Two months later, on October 25, 1965, ap-

pellant Fidelity Television, Inc. filed an application for

a construction permit to build a station at Norwalk, Cali-

fornia, also to operate on Channel 9 and to blanket the

same area.’ As applications for mutually exclusive sta-

* Sitting by designation pursuant to 28° U.S.C. § 293(a)

(1970).

? Under the “holdover” provisions of the Federal Communi-

cations Act and the Commission’s rules, RKO has been operat-

ing the station in the interim. 47 U.S.C. § 307(d) (1970); 47

C.F.R. § 1.62(a) (1) (1973). The history of this case empha-

sizing the interplay of decisions by the F.C.C. and this court

is set out in our earlier decision in Fidelity Television, Inc.

v. F.C.C., 502 F.2d 443 (D.C. Cir. 1974).

*A construction permit is a necessary prerequisite to the

licensing of a new station, and except in rare cases, it is also

Bere oe oe re oe +

tions, the requests of RKO and Fidelity were designated

for a comparative hearing by the Commission on June

8, 1966. Joint Appendix at 1-2; see Ashbacker Radio

Co. v. F.C.C., 326 U.S. 327, 383 (1945). In setting the

applications for a comparative hearing, the Commission,

as was its practice, limited the questions to be considered

to the so-called “standard comparative issues,” i.e., which

of the proposals would better serve the public interest,

and which of the applications should be granted. These

standard issues did not include programming and certain

other factors.*

a guarantee of a licensee to operate the station once con-

structed. 47 U.S.C. §319 (1970); 47 C.F.R. § 1.68 (1973).

While Channel 9 is allocated to Los Angeles under the Com-

mission’s overall television allocation scheme, 47 C.F.R.

§ 73.606 (1973), Commission rules permit a licensee to oper-

ate the station from anywhere within 15 miles of the city of

license. 47 C.F.R. § 73.607(b) (1973). Norwalk is within

15 miles of Los Angeles.

Fidelity proposed to construct the station at Norwalk be-

cause it wished to orient programming of the channel to the

“Southland,” an area described in Fidelity’s Petition to En-

large Issues as the area in Los Angeles County lying to the

south and east of the city and Orange County. Joint Appendix

at 198.

* The theory of the standard comparative issue is that the

Commission determines before setting the case for a hearing

that each applicant has the minimum character, legal, finan-

cial, and technical capability to operate the station in the

public interest. The purpose of the comparative hearing is

to determine, on that basis, which would serve the public

interest better. See Anthony, Towards Simplicity and Rational-

ity in Comparative Broadcast Licensing Proceedings, 24 STAN.

L. Rev. 1, 33-34 (1971) [cited as Anthony]. Under this

theory, an applicant’s ability to produce the programming set

out on his application is considered a non-comparative finan-

cial issue, and is not ordinarily deemed relevant in the com-

parative proceeding. See McClatchy Breadcasting Co., 19

F.C.C. 348, 375 (1954); National Broadcastirg Co., 21

F.C.C.2d 611, 625-27 (1970).

The Commission’s rules pruvide, however, that an ap-

plicant might petition the Review Board for an enlarge-

ment of the issues so that evidence could be presented

on, e.g., character or programming. See 47 C.F.R. § 1.229

(1973). Fidelity, on June 27, 1966, filed such a pe

tition, requesting the addition of three issues: which

applicant would provide for a more fair, efficient and

equitable distribution of television services; the “service

philosophy” of each applicant; * and the significant differ-

ences in programming proposed by each applicant. Joint

Appendix at 44. The F.C.C.’s Review Board denied

Fidelity’s petition on October 27, 1966, and the Com-

mission then rejected Fidelity’s application for review

of the Board’s order on December 29, 1966. Jbid. at

161-63. The comparative hearing on the two proposals,

on the standard comparative issue only, opened on Feb-

ruary 27, 1967, and the record was closed for the first

time on June 15, 1967. Jbid. at 45.

This proceeding did not, however, simply run its ordi-

nary course through the hearing examiner * and the Com-

mission after the hearing opened. On March 6, 1967,

the Commission released a decision in Chapman Radio &

Television Co., a four-sided comparative proceeding for

assignment of a new television station in Homewood,

Alabama. 7 F.C.C.2d 213 (1967). One of the competi-

tors had requested the addition of a programming issue,

and the Review Board had denied the request. The Com-

*The “service philosophy” issue deals with an applicant’s

intention to direct his programming to, or primarily to, only

a part of the area to which his signal reaches. See Central

Coast Television, 35 F.C.C. 259 (1963); Petersburg Television

Corp., 19 F.C.C. 451 (1954).

* The title of hearing examiner was changed to Adminis-

trative Law Judge effective September 6, 1972. 37 Fed. Reg.

18034 (1972). Since all decisions in this case at levels below

the Commission itself had been made before 1972, the title

“hearing examiner” will be used in this opinion.

——E

mission took the opportunity to clarify the relationship

between its general policy and the incorporation of a

programing issue, stating that “a proponent of the

programing issue should be required to make a prima

facie showing that there are significant differences in the

programing proposed and should relate his claimed sub-

stantial superiority in program planning to his ascer-

tainment of community needs.” 7 F.C.C.2d at 215. Chap-

man was then remanded to the Review Board to consider

whether a programing issue should be added under the

clarified standard. /bid.

On March 9, 1967, Fidelity filed a petition with the

Commission requesting that it itself add programming

and needs-ascertainment’ issues on the basis of Chap-

man, or that it remand to the Review Board for recon-

sideration in the light of Chapman. This application was

denied on July 12, 1967, on the ground that Fidelity had

not offered any new data and the data on which it had

originally relied did not amount to the “prima facie

showing” required under Chapman. Joint Appendix at

171-75. Fidelity then filed a further petition for clarifica-

* A “needs ascertainment” issue relates to the manner and

quality of an applicant’s efforts to discover community needs,

as required by the Commission En Banc Programming Inquiry,

44 F.C.C. 2303, 2314 (1960) and Section IV of FCC Form

301, Application for Authority to Construct a New Broadcast

Station, etc. The standards for sufficient needs-ascertainment

were substantially upgraded effective January 1, 1967 for

television license renewals, after the renewal application at

issue here was filed, and again in 1971. See Amendment of

Section IV (Statement of Program Service) of Broadcast Ap-

plication Forms 301, 308, 314, and 315, 5 F.C.C.2d 175, 181

(1966); Primer on Ascertainment of Community Problems

- by Broadcast Applicants, etc. 27 F.C.C.2d 650 (1971). Com-

pare Saul M. Miller, 4 F.C.C.2d 150 (1966) with Minshall

Broadcasting Co., 11 F.C.C.2d 796, 797 (1968), and Pleasant

Broadcasting Co., 40 F.C.C.2d 582, 585-86 (1973), aff'd, 504

F.2d 271 (D.C. Cir. 1974).

tion with the Review Board, seeking to ascertain that

tribunal’s position on whether it had in effect applied

the Chapman stardards initially. This was denied on

September 22, 1967. Ibid. at 176-79.

Concurrently, on March 2, 1967, the Department of

Justice filed suit in the United States District Court for

the Northern District of Ohio against the General Tire

and Rubber Company, Aerojet-General Corporation, A. M.

Byers Company, and RKO General, Incorporated (the

latter three companies were subsidiaries of General Tire).

United States v. General Tire & Rubber Co., No. C-67-

155 (N.D. Ohio, filed Mar. 2, 1967). This action alleged

that the four companies had violated Sections 1 and ?

of the Sherman Act, 15 U.S.C. §§1, 2, in that they had,

among other things, engaged “in a combination and

conspiracy to utilize reciprocity whereby the purchasing

power of all of said defendants is used to coerce and

persuade certain actual and potential suppliers of the

defendants to purchase tires, wrought iron products, ad-

vertising time and other products and services from said

defendants, in unreasonable restraint of . .. trade and

comimerce; .. .”” Complaint at 6, United States v. General

Tire & Rubber Co., supra.

Responding to this new development, Fidelity filed with

the Review Board, on March 8, 1967, a petition to en-

large the issues to be considered at the comparative

hearing to include a determination

in light of all the facts and circumstances surround-

ing the Complaint filed by the United States of

America on March 2, 1967, against General Tire and

Rubber Company, . . . whether RKO General, Inc.,

is qualified to be a licensee of the facility for which

it is applying herein, or alternatively, whether such

matters bear upon the comparative qualifications of

RKO General, Inc.; . . . [Joint Appendix at 164.]

‘

;

The Board denied the petition on June 20, 1967, saying

that Fidelity’s allegations of wrongdoing were not specific

enough to warrant the addition of a “disqualifying char-

acter issue,” but that “relevant facts and circumstances

forming bases for the civil suit—particularly as they

relate to RKO’s broadcast practices—can be adduced

by Fidelity under the standard comparative issue.” Joint

Appendix at 167-68. The Board also said that any grant

to RKO would be conditioned on the Commission’s right

to reopen the case should the outcome of the antitrust

suit be unfavorable to RKO.’ /bid. at 169.

All requests for additional issues having thus been

disposed of, the comparative hearing continued on the

standard comparative issue only, with Fidelity provid-

ing only a “superficial” inquiry into RKO’s trade prac-

tices. Joint Appendix at 180. The record was, as noted

above, closed for the first time on June 15, 1967, and

the hearing examiner issued his proposed findings in

September, 1967. Jbid. On February 9, 1968, however,

Fidelity petitioned the examiner to reopen the record

to receive newly discovered evidence—depositions taken

in the Government’s antitrust suit. The hearing ex-

aminer reopened the record, but cautioned that “It is not

being reopened as a repository for the record in the

Ohio anti-trust suit. ... Petitioner asks that the record

* The antitrust action was concluded by a consent decree,

with judgment entered on October 21, 1970. The judgment

stated that it was entered without “constituting evidence or

admission by any party with respect to any issue of fact or

law.” Final Judgment at 1, United States v. General Tire &

Rubber Co. It did, however, restrain General Tire and its

subsidiaries, including RKO, from engaging in the practices

of reciprocity charged in the complaint. Jbid. at 2-5. In its

decision in this case, the Commission determined that this

outcome was not unfavorable to RKO, and that the Review

Board’s condition had therefore become “a nullity.” Joint

' Appendix at 5.

be reopened for the purpose of taking evidence on the

reciprocal trade practices of RKO. With the caveat that

such evidence must be patently germane to RKO’s steward-

ship of KHJ-TV that language is adopted as words

limiting the scope of future hearing.” Joint Appendix

at 181-82." The record was closed for good on August

26, 1968, and the initial decision of the hearing ex-

aminer came down on August 13, 1969.

The examiner’s decision, without an overabundance

of enthusiasm, recommended that RKO’s application for

renewal be denied and Fidelity be granted a construction

permit to build a station to take over Channel 9. Joint

Appendix at 151, 153. He found that General Tire and

RKO had substantially contributed to the development

of broadcast technology and had the capacity to run a

good station. /bid. at 137-41. However, he also found

that KHJ’s past performance in programming and com-

munity relations, particularly in the station’s concentra-

tion on presenting old films and ignoring community

critcism of excessive violence in some of the movics, was

poor. Ibid. at 143. On the other hand, he gave Fideiity

a demerit for an integration-of-ownership-and-manage-

ment proposal which he felt was created just to win the

* While the petition io reopen the record was pending be-

fore the hearing examiner, Fidelity filed on February 19,

1968, a second request with the Review Board for enlarge-

ment of the issues to include a determination whether RKO

should be disqualified or assessed a demerit because of anti-

competitive practices. Joint Appendix at 183-85. The Board

denied Fidelity’s petition on May 10, 1968. bid. The Commis-

sion’s decision on review, released September 9, 1968, found

that the hearing examiner’s decision to reopen the record had

provided Fidelity with the opportunity to submit evidence on

RKO’s anticompetitive conduct, so that no further relief by

way of rcopening the record was required. The Commission

did, nevertheless, add to the issues to be decided by the ex-

aminer whether RKO should be disqualified or assessed a

demerit for its trade practices. Jbid. at 187.

license and would not be implemented. Jbid. at 150-51.

Fidelity, however, was found superior in local ownership,

in community-needs-ascertainment, and in providing for

diversification of ownership of the mass media. [bid.

at 149. The examiner berated General Tire’s anticom-

petitive practices, but did not give RKO a special char-

acter demerit for them. Jbid. at 144-46, 148. Finding

“neither applicant is any bargain as a broadcast licensee,”

the examiner chose to give Fidelity a chance to improve

on RKO’s performance. [bid at 151, 153.

Soon after the release of this initial decision, another

RKO station, WNAC-TV, Boston, came up for renewal.

Upon the filing of two other mutually exclusive applica-

tions for construction permits, the Commission, on Decem-

ber 11, 1969, designated the three applications for a

comparative hearing. RKO General, Inc. (WNAC-TV),

FCC 74D-36 at 2 ‘released June 21, 1974). Included

in the hearing order was an “anticompetitive” issue

much like that added in the current case after the record

was closed. [bid. at 3. On January 8, 1971, the Com-

mission’s Broadcast Bureau filed a petition with the

Commission asking that the KHJ record be reopened and

consolidated with the WNAC record on the anticompeti-

tive issue since the evidence being presented in the latter

case was far more complete than that in the present pro-

ceeding. See Joint Appendix at 5. Fidelity opposed the

move, and the Commission’s ultimate resolution of the

problem was to go ahead with a conditional decision in

this KHJ case and to make Fidelity a party in the WNAC

proceeding. RKO General, Inc., 31 F.C.C.2d 70 (1971).°

® Fidelity participated in the WNAC hearing through coun-

sel who also represented one of the WNAC challengers. RKO

General, Inc. (WNAC-TV), FCC 74D-36 at 1 (released June

21, 1974). The Review Board also added to the WNAC pro-

ceeding an issue relating to RKO’s candor in its testimony in

10a

The Commission heard oral argument in the KHJ pro-

ceeding on October 12, 1971, but as of March 22, 1973,

had not yet reached its decision. On that day, Fidelity

filed with this court a petition for a writ of mandamus.

Fidelity Television, Inc. v. Federal Communications Com-

mission, No. 73-1313 (D.C. Cir., filed Mar. 22, 1973). On

June 11, 1973, the court, while refusing to issue the writ,

stated that the Commission’s decision had been unreason-

ably delayed and ordered it to report its progress within

30 days. bid. The Commission, although it did report

on July 6, 1973, had still not issued a decision when, on

November 21, 1973, Fidelity renewed its petition here.

Ibid. On December 6, 1973, before the court could act,

the Commission announced its decision. Joint Appendix

“a i

the KHJ proceeding. RKO General, Inc., 30 F.C.C.24 128, 144

(1971).

The Department of Justice, meanwhile, filed a brief with

the Commission urging disqualification of RKO if the Com-

mission agreed with the facts found by the hearing examiner.

Joint Appendix at 320, 348.

1° After the Commission’s decision, Fidelity moved this

court to dismiss its petition for a writ of mandamus as moot.

The Commission did not oppose the move, and on December

21 this court entered an order dismissing the petition. Fidelity

Television, Inc. v. F.C.C., 502 F.2d 443, 447 (D.C. Cir. 1974).

Fidelity then filed a petition for review of the December 6

order. On February 22, 1974, two months after it had tacitly

conceded the finality of the December 6 order by not opposing

Fidelity’s motion to dismiss the petition for a writ of manda-

mus, the Commission asked this court to dismiss Fidelity’s

appeal for lack of jurisdiction, contending that the December

6 order was not a “final order” within the terms of 47 U.S.C.

§ 402(b) (1) (1970). We rejected that contention in an order

issued July 3, 1974 and an opinion of August 2, 1974. /bid.

PSION RIN tno oe meee

SRT MARE Ye?

a BG Lapel. 3 Sn ca eee

lla

By a divided vote, the agency reversed the hearing

examiner and granted RKO’s renewal application.*’ The

only expression of majority views was in the opinion

joined by Commissioners Robert E. Lee and Reid. The

opinion found that KHJ had neither engaged in nor

benefited frcm coercive reciprocity, but had engaged only

in mutual patronage reciprocity. However, the Commis-

sion concluded, partially on the basis of the widespread

nature of the practice, that the injunction entered in the

Ohio antitrust suit was sufficient to stop the practice

and that RKO should not be denied a license for doing

something arguabiy legal when done. Joint Appendix at

10-11. The opinion also determined that KHJ’s past per-

formance in terms of programming and community rela-

tions while not “unusually good” or “superior” was not

“insubstantial” or “unusually poor.” ’* Furthermore, RKO

had promised in its 1962 renewal application no more than

it had provided. Therefore, the opinion stated, since

the “record must be deemed to be within the bounds of

average performance expected of all licensees, {it} war-

rant{s] neither a preference nor a demerit.” Joint Ap-

pendix at 16.

™ There was no opinion subscribed to in toto by a majority

of the participating members. Commissioners Robert E. Lee

and Reid joined in an opinion (Commissioner Reid without

hearing oral argument); then Chairman Burch concurred in

the result without further statement; Commissioners Johnson

and H. Rex Lee dissented in opinions; and Commissioners

Wiley and Hooks did not participate. Joint Appendix at 1.

= See Policy Statement on Comparative Broadcast Hear-

ings, 1 F.C.C.2d 393, 398 (1965):

A past record within the bounds of average perform-

ance will be disregarded since average future performance

is expected. ...

We are interested in records which, because either

unusually good or unusually poor, give some indication

of unusual performance in the future.

12a

Going on to diversification, the opinion found that while

RKO superficially looked poor in this category (in that

the company was the licensee of AM and FM stations in

Los Angeles as well as stations in other states and was a

shareholder in several cable television systems), each sta-

tion was operated independently and, particularly in the

case of KHJ, was one of many media outlets in its mar-

ket. Finding that the dangers of non-diversification,

which it characterized as promotion of “any national or

other uniform expression of political, economic, or social

opinion,” did not exist in this case, the opinion concluded

that “we are not persuaded that the nature of RKO’s

interests is such as to have any adverse effect on the flow

of information for the audience to be served here.” Joint

Appendix at 17. The opinion also found that, since a

Fidelity stockholder owned an interest in several sub-

urban Los Angeles newspapers, the challenger was not

entirely free of diversification problems. Finally, noting

ongoiag rulemaking proceedings on the application of

the diversification criterion to renewal applicants, includ-

ing a proposed rule requiring divestiture, the opinion

concluded that “neither applicant has made a sufficient

showing to warrant the award of any preference under

the diversification criterion.” Ibid.

On the subject of integration, for which the hearing

examiner had given Fidelity a demerit, the opinion found

the two applicants equa!. It said that Fidelity’s conduct

as an applicant had indicated that “the record here gives

little promise that Fidelity will effectively implement its

paper integration promises.” Joint Appendix at 20. On

the other hand, RKO was found to have achieved the

purposes of integration—local control and accountability

—through its policy of station independence, and by re-

quiring active participation in community affairs by sta-

tion employces. Ibid.

tre

13a

Finding the two applicants thus equal on the standard

comparative factors, the opinion based the ultimate out-

come on a policy decision that “credit must be given in a

comparative renewal proceeding, when the applicants are

otherwise equal, for the value to the public in the con-

tinuation of the existing service.” Jbid. at 22. This was

found to have tipped the balance in RKO’s favor, and

the license was therefore renewed—conditional with re-

spect to anticompetitive practices on the final outcome of

the WNAC proceeding."

18 We do not now have before us the Commission’s decision

in the WNAC case, which has not yet issued. That decision

and the agency’s interpretation of it in deciding whether to

revoke RKO’s license for KHJ will of course constitute an

appealable order of the Commission, which may then be

appealed by either Fidelity or RKO. The fact that the ultimate

decision of the Commission will be an appealable {nal order

does not, as we stated in our earlier decision, detract from our

jurisdiction in the present case. 502 F.2d at 452.

Commissioner Johnson dissented from the decision, calling

it “the worst decision of this Commission during my term

of seven years and five months.” Joint Appendix at 29. He

objected to the decision on four grounds: (1) that RKO’s

anticompetitive conduct should disqualify it as a licensee; (2)

that RKO’s broadcast record was less than mediocre and the

fact that they had promised no more was irrelevant; (3) that

Fidelity was clearly superior in integration, local ownership,

and diversity, characteristics which the Commission had often

held absolutely to be plus factors, and (4) that Fidelity should

have been able to adduce evidence on its proposed program-

ming. Ibid. at 30-33.

Commissioner H. Rex Lee also dissented, largely because

he thought that RKO’s anticompetitive conduct should totally

disqualify the company. Commissioner Lee, while not dis-

agreeing with Commissioner Johnson’s assessment of Fidel-

ity’s virtues on the traditional criteria, stated that if the

Commission chose to disregard these criteria in a renewal

proceeding, it should at least follow a recent precedent and

decide the case on past performance, which Commissioner Lee

found “insubstantial.” Joint Appendix at 34-42: sec A.H.

Belo Corp., 40 F.C.C.2d 1131 (1973).

14a

Before considering the validity of the Commission’s

ultimate decision under the applicable standards, it is

necessary to consider some procedural and preliminary

points pressed upon us by appellant.

First, Fidelity has argued (Brief for Appellant at

37-42) that this court shouid overturn the Commission’s

decision or at least disqualify then Chairman Burch on

the grounds that “the decision in this case is nothing

more than an extension of the Commission’s operational

bias in favor of incumbent licensees.” Brief for Appellant

at 42. This bias has, appellant claims, been revealed in

prior decisions of the Commission and. in Chairman

Burch’s testimony befere Congress. The claim is almost

exactly the same as that made and rejected in F.T.C. Vv.

Cement Institute, 333 U.S. 683, 700-02 (1948), and we

find that case controlling.

Next, Fidelity charges that the Commission’s ultimate

decision was fatally defective because it was based on a

record limited by the Commission’s earlier, allegedly im-

proper, decisions to restrict the hearing to the “standard

comparative issue.” At various points in the proceeding,

Fidelity unsuccessfully sought the addition of five issues—

distribution of services (the so-called 307(b) issue),

service philosophy, programming, needs ascertainment,

and anticompetitive conduct. We consider each of these

rulings of the Commission in turn.

Section 307(b) of the Communications Act, 47 U.S.C.

§ 307(b) (1970), requires the F.C.C. “to provide a fair,

efficient, and equitable distribution” of television service

to the communities of the United States. Fidelity con-

tends that “the Southland,” which it describes as Orange

County and the communities to the south and east of

Los Angeles, Joint Appendix at 198, is a community with-

out television service but which deserves it under section

15a

307(b). This is not technically a comparative issue, since

if Fidelity were right then appellant, meeting the mini-

mum requirements, could receive the license regardless of

the merits of RKO’s operation of KHJ. See Anthony,

supra note 3 at 85-87. However, a “307(b) issue” is,

when properly raised, added to the comparative hearing

order and considered as part of the comparative hear-

ing. See, e.g., Southern Tier Radio Service, Inc., 19

F.C.C. 496 (1954); St. Louis Telecast, Inc., 22 F.C.C.

625 (1957).

The Commission denied Fidelity’s request for addition

of a 307(b) issue because Fidelity had failed to make the

necessary first showing that “the Southland” was a com-

munity, let alone a separate cornmunity in need of tele-

vision service. Joint Appendix at 160. The Commission’s

decision cannot be overturned. In failing to define the

Southland with greater specificity, Fidelity rendered its

request facially insufficient under the standards previ-

ously announced. In Southern Tier Radio Service, Inc.,

supra, § 307(b) was held not to be reievant because the

applicant was unable to define with precision “Greater

Endicott.” 19 F.C.C. at 551. When Fidelity failed even

to list the politica! units which make up “the Southland,”

the Commission was justified in rejecting the request as

facially irsufficient. Cf. United States v. Storer Broad-

casting Co., 351 U.S. 192, 205 (1956). The Commission

also found that Fidelity had not presented a prima facie

showing that Norwalk, the one c'early identified com-

munity, was “significantly independent of Los Angeles

from the economic and cuitural stardpoint.” roting that

Fidelity had based its proposed advertising revenues on

the entire Los Angeles market. Joint Appendix at 159-60.

There is no sound basis for questioning this factual de-

termination; this court has previously affirmed a finding

that a suburb only slightly closer to Los Angeles than

Norwai!: was not a separate community. Huntington

l6a

Broadcast Co. v. F.C.C., 192 F.2d 83 (D.C. Cir. 1951),

aff'g Huntington Broadcast Co., 14 F.C.C. 563 (1950).

See also St. Louis Telecast, Inc., 22 F.C.C. 625, 712-14

(1957).

As part of the same petition, Fidelity asked the Com-

mission to add a “service philosophy” issue. That concept,

as we have noted, is a term of art used to describe an

applicant’s intention to direct its programming only or

primarily to a part of the area to be covered by a sta-

tion’s signal. The Commission found that Fidelity fits

directly into the mold developed in Petersburg Television

Corp., 19 F.C.C. 451 (1954)—that appellant had sur-

veyed only three Los Angeles residents and could there-

fore be found to have ignored the actual city of license

in its planning. 19 F.C.C. at 464-65, 475; see Joint Ap-

pendix at 160. The Commission’s decision is factually

accurate, see Joint Appendix at 199, and based on the

Petersburg standard Fidelity could legitimately have been

given a demerit for “service philosophy.” The decision not

to add the issue to the comparative hearing was rot only

harmless but probably favorable to Fidelity."

Another additional issue rejected by the F.C.C. was

programming. Prior to the 1965 Policy Statement, 1

F.C.C.2d 393 (1965), the proposed programming of the

competitors was compared and the ruling on this criterion

formed an important part of the ultimate determination

of who received the license. See Jaffe. WHDH: The FCC

and Broadcasting License Renewals, 82 Harv. L. REv.

1693, 1695 (1969). In the agency’s view, this resulted

in paper battles with little assurance’ that the winner

would actually produce the programming forecast; the

issue was deemed especially unfair when a renewal ap-

plicant, who had to run on his record, was pitted against

* The hearing examiner’s decision indicates that he would

have found against Fidelity on a “service philosphy” issue

Joint Appendix at 149.

17a

a challenger who could promise any type of program-

ming the Commission favored. Ibid. The 1965 Policy

Statement put an end to this practice by requiring that

a programming issue be separately designated and by

stating that it would be allowed only “to the extent

[programming differences] go beyond ordinary differ-

ences in judgment and show a superior devotion to public

service.” 1 F.C.C.2d at 397. The Commission also made

clear that percentage differences, even with regard to the

highly favored category of local programming, must be

based on ascertained community needs in order to justify

the addition of a programming issue. /bid.

Fidelity requested that the Commission add a program-

ming issue because of its emphasis on local programming

and the “marked differences in the percentages which the

applicants propose to devote to the various program

categories.” Joint Appendix at 205. The Commission

refused on two grounds—that the program differences

were mere differences in judgment and that Fidelity

had not done an adequate needs survey to justify the

insertion of the issue on the basis of “superior devotion

to public service.” Jbid. at 161. If the agency’s decision

had been based only on the first ground, it might well

be questionable. Fidelity offered 22% less entertainment

and twice as much educational and news programming

as RKO. Ibid. at 205-06. These differences exceed those

on which an issue was allowed in WPIX, Inc., 23 F.C.C.

2d 245, 256, 259 (1970), and on which the Review Board

was requested to reconsider in Chapman Radio & Tele-

vision Co., 7 F.C.C.2d 213 (1967).*° However, the Com-

mission also found that the needs-ascertainment survey

* See F.C.C. Forms 301, Statement of Program Service,

Proposed Operation in Birmingham Broadcasting Co., Dkt

+16761; Alabama Television, Inc., Dkt #16760; Birmingham

Television Corp., Dkt #16758; Chapman Radio & Television

Co., Dkt +15461.

18a

Fidelity made, which was basically limited to the “South-

land,” did not provide an adequate basis on which ‘to

decide whether the appellant’s programming differences

were really related to the needs of the entire service

area (which of course included Los Angeles). Fidelity

understood the Commission’s position that a program-

ming issue depended on three factors—differences in pro-

gramming, adequate needs ascertainment of the area cov-

ered by the license, and relation of the needs to the pro-

posed programs. Joint Appendix at 206. In choosing to

orient its surveys only to one part of the service area,

Fidelity took the risk that if it did not win on the 307

(b) issue, supra—as it did not—the Commission could

find that it had inadequately surveyed the needs of its

area. Knowing this, Fidelity cannot now complain that

it lost its bet.’

Fidelity’s attempt to have a separate needs-ascertain-

ment issue added requires little ciscussion. Commission

rules provide (and have so provided since 1963) that a

motion for en!argement of issues must be filed within 15

days after the notice of issues scheduled for the hearing

is published in the Federal Register. 47 C.F.R. § 1.229

(b) (1973). The Federal Register notice in this case

was published on June 11, 1966, 31 Fed. Reg. 8253

(1966), so that the time to file a petition to enlarge ran

%* Fidelity also maintains that it was error for the Com-

mission to remand Chapman to the Review Board to allow

Alabama Television, Inc., one of the competitors in that case,

to show that its programming differences were related to the

needs ascertained. Sce pp. 4-6, supra. The difference be-

tween Chapman and this case is that Alabama Television had

done an adequate survey but had not shown how the ascer-

tained needs matched the proposed programming. Here, the

Commission found that Fidelity was missing one of the pri-

mary requirements, a proper survey, and therefore that no

explanation by Fidelity could show how its programming met

unknown needs.

19a

out on Monday, June 27, 1966. The Review Board found

that Fidelity had not shown that the petition filed Jul;

24, 1967 could not have been filed in time, Joint Appendix

at 178, and Fidelity did not appeal the Board’s rulirg

to the Commission. Fidelity having failed to exhaust its

administrative remedies on this issue, the Review Board’s

determination is not properly before this court. Cf. Pine

v. United States, 371 F.2d 466, 467-68 (Ct. Cl. 1967).

Finally, we take up Fidelity’s requesi to have an issue

relating to RKO’s anticompetitive conduct added to the

hearing. While the Commission eventually did add such

an issue, Joint Appendix at 187, it acted rather late and

on a limited basis, and Fidelity argues that therefore it

was not abie to produce an adequate record on the sub-

ject. Appelilant’s Brief at 19. The background has al-

ready been touched on in Part I, supra. Borrowing

from the Justice Department’s suit against General Tire,

Fidelity charged that RKO, through its parent General

Tire, had engaged in “reciprocity,” the practice of ob-

taining sales by conditioning purchases on future orders.

The challenge was in essence that KHJ. because of its

place in the General Tire structure, automatically re-

ceived advertising without competing with other Los

Angeles stations. If proven, the anticompetitive effect on

other stations would be obvious. Reciprocity is espe-

cially complex in a conglomerate like General Tire be-

cause its needs and products are diverse; for example,

rubber purchases can be conditioned on advertising sales.

Fidelity argue: ‘hat, for this reason, it was necessary

for it to be able to present evidence on reciprocity in the

entire General Tire organization, and not simply that

which was “patently germane to RKO’s stewardship of

KHJ-TV,” as required by the hearing examiner. Appe’-

lant’s Brief at 17-20; sce Joint Appendix at 182.

Given the nature of the charges. including the alle-

gation of direct involvement by RKO and not merely

20a

General Tire, see Complaint at 7, United States v. Gen-

eral Tire & Rubber Co., supra, it seems that the Com-

mission could well have granted Fidelity’s initial request

to enlarge the issues to include anticompetitive conduct.

But the error proved harmless. By the time this case

reached this court, Fidelity had managed to create a

fairly substantial record in this proceeding on the reci-

procity practices of RKO, not merely in its operation of

KHJ, but throughout the entire broadcast side of its

business. Furthermore, Fidelity also participated in the

more intensive hearing on General Tire’s anticompetitive

conduct as part of the WNAC renewal proceeding. See

Part I, supra. The renewal of RKO’s license for KHJ

was expressly made subject to the ultimate determina-

tion in the WNAC case. A full record on the anticompeti-

tive issue has thus been compiled, and it will be avail-

able for consideration with respect to KHJ after the Com-

mission makes its final decision on the status of IKO’s

license based on the outcome of the WNAC proceeding.

Ill

It will be helpful to consider separately one other mat-

ter before coming directly to the agency’s decision on the

actual comparison of Fidelity and RKO. Before a com-

parative hearing can be held, or at least before the

winner can receive a license, it is necessary for the Com-

mission to determine that the applicant meets “the citi-

zenship, character, and financial, technical, and other

qualifications” the F.C.C. prescribes. See 47 U.S.C. § 308

(b) (1970); Anthony, supra note’3 at 34. In this case,

there was serious objection on the character issue only

as it related to RKO’s alleged anticompetitive conduct."

**RKO and the Broadcast Bureau also filed petitions ques-

tioning Fidclity’s character, but the Commission refused to

conduct hearings on those allegations. Joint Appendix at 188-

94.

21a

The basic nature of the charge and the procedural prob-

lems have been discussed in Part II, supra. Here we

assess the validity of the Commission’s determination, on

the basis of the record in this proceeding,” to disqualify

or grant a demerit to RKO because of the trade relations

practices of General Tire.’

The antitrust law on reciprocity is not entirely set-

tled. The practice of explicitly and successfully condi-

tioning orders for supplies on the supplier’s purchase of

products from the buyer has been held to be a violation

of at least Section 5 of the Federa! Trade Commission

Act since the 1930’s.*° Also, the opportunity for such

practices which might arise from a merger can result in

the merger’s constituting a Clayton Act section 7 viola-

tion.*' When no merger is involved, and in particular

where it is not clear that attempts to induce sales through

purchases are successful, the controlling rule is less

plain.*

'* The bearing of the WNAC record on this issue is left for

future determination (if the problem should be raised).

'’* Character is both a non-comparative and a comparative

consideration. While the Commission can disqualify a party

entirely on the basis of poor character, it has also retained

the option to use lesser character blemishes as demerits in a

comparative proceeding. Policy Statement on Comparative

Broadcast Hearings, 1 F.C.C.2d 393, 399 (1965).

15 U.S.C. § 45 (1970) (Section 5 of the Federal Trade

Cormission Act, 38 Stat. 719 (1914)); see Waugh Equip-

ment Co., 15 F.T.C. 232 (1931): California Packing Corp..

25 F.T.C. 379 (1937).

715 U.S.C. § 18 (1970) (Section 7 of the Clayton Act, 38

Stat. 731 (1914)); see F.T.C. v. Consolidated Foods Corp.,

380 U.S. 592, 594-95 (1965).

22 See generally United States v. General Dynamics Corp.,

258 F. Supp. 36 (S.D.N.Y. 1966). See also Northern Pacific

Ry. v. United States, 356 U.S. 1 (1958); Fortner Enterprises,

Inc. v. United States Steel Coryp., 394 U.S. 495 (1969).

22a

The evidence in this case largely shows, as the agency

opinion found, ineffective attempts at reciprocity, par-

ticularly with respect to KHJ.* Joint Appendix at 10-

11. At best, there is doubt whether unilateral, unsuccess-

ful attempts at reciprocity constitute an antitrust viola-

tion. Sce Kintner, The Anatomy of Reciprocity, 56

A.B.A.J. 232, 233 (1970). In the General Dynamics

case, so far the most expansive on the subject, only suc-

cessfully completed efforts were considered by the court

in determining whether the Sherman Act had been vio-

lated, 258 F. Supp. at 66. We do not think that the

F.C.C. is required to go further than the courts—-par-

ticularly with respect to an earlier period in which the

law and the general practice were even less clear than

today. . See infra.**

There are also instances in the record of successful

reciprocity. Most of these have little to do with RKO,

and even less with KHJ. whose ratings at times were so

poor that, even with the added push of reciprocity, no

23 As indicated above, there was disagreement whether evi-

dence relating to General’s reciprocity practices, but not to

RKO’s or KHJ’s involvement in them, should have been ad-

mitted. We think it clear that if all General Tire divisions

except RKO had been involved in reciprocity, there would be

no sufficient basis for a demerit in this broadcast license pro-

ceeding. While the entire corporate practice is relevant, this

record shows that RKO’s role was substantially less than that

of General’s other divisions.

% While it is clear that the F.C.C. may take account of

anticompetitive actions short of antitrust violations, National

Broadcasting Co. v. United States, 319 U.S. 190, 223 (1943),

it is certainly not clear that, in the absence of an actual con-

viction, it must disqualify or downgrade on such a basis. The

presence of a statutory provision which explicitly grants a

court the option of requiring revocation of a license on con-

viction of an antitrust violation suggests that the Commis-

sion retains the option to do less when no conviction is in-

volved. See 47 U.S.C. §313(a) (1970).

23a

advertising was received. Joint Appendix at 122-26, 132-

35. In addition, as was typical following the coercive

reciprocity cases of the 1930s, it appears that the reci-

procity shown in this record was considered mutually

beneficial! by both companies, and that although pur-

chases might in some cases be rerouted in response to

reduced sales, General did not attempt to use coercion

as an inducement.

Contemporary sources indicate that this type of non-

coercive reciprocity was extremely widespread in the

early 1960s, but more recent writings suggest that it

has largely been abandoned in recent years. See Handler,

Emerging Antitrust Issues: Reciprocity, Diversification

and Joint Ventures, 49 VA. L. REV. 433, 435 (1963) ;

Hausman, Reciprocal Dealing and the Antitrust Laws,

77 Harv. L. Rev. 873, 874 (1964). Compare Kintner,

The Anatomy of Reciprocity, 56 A.B.A.J. 232, 233

(1970). The practice was not affirmatively declared

illegal until the 1966 General Dynamics case, 258 F.

Supp. at 66, and even there the merger context might

have accounted for the ruling.** General Tire has been

since 1970 under a consent decree which prevents it

from engaging in most sorts of reciprocal trade relations.

In these circumstances, and remembering that KHJ was

only a small part of what went on and that antitrust

considerations are only one segment of the Commission’s

concern with the character of a broadcast applicant, we

find that the F.C.C. did not act arbitrarily, capriciously,

or illegaliy in refusing to give RKO a demerit or to dis-

25 In addition, a strict reading of General Dynamics would

be that all discussion of reciprocity as a Sherman Act violation

is dictum since the court found that an insubstantial volume

ef commerce had been affected. 258 F. Supp. at 66-67.

24a

qualify it for the reciprocity practices outlined in this

record.*

We come now to our final task—scrutiny of the F.C.C.’s

ultimate decision in the light of the standards for com-

parative renewal hearings developed by the agency in the

past.” In reviewing the F.C.C.’s decision, particulariy

2 As we have stressed, under the Commission’s decision

the agency’s ruling on anticompetitive practices is subject

to reopening in the light of the WNAC proceedings (which

have not yet been finally determined by the Commission).

27 We are not required, for present purposes, to deal with

the criticisms leveled in recent years against the comparative

hearing process, especially as it involves renewal applicants.

See, e.g., Anthony, supra note 3; Goldin, “Spare the Golden

Goose”—The Aftermath of WHDH in FCC License Renewal

Policy, 83 Harv. L. Rev. 1014 (1970); Friendly, The Federal

Administrative Agencies: The Need for Better Definition of

Standards, 75 HARV. L. REV. 1055 (1962); Grunewald, Should

the Comparative Hearing Process be Retained in Television

Licensing?, 13 AM. U.L. REV. 164 (1964); Comment, The ©

FCC and Broadcasting License Renewals: Perspectives on

WHDH, 36 U. Cul. L. REv. 854 (1969).

The 1965 Policy Staternent on Comparative Broadcast Hear-

ings, 1 F.C.C.2d 393 (1965), which sets out comparative cri-

teria for most comparative hearings, by its own terms “does

not attempt to deal with the somewhat different problems

raised where an applicant is contesting with a licensee seeking

renewal of license.” bid. at 393 n.1. While the F.C.C. held

soon after the 1965 statement was issued that the statement

would govern the introduction of evidence in a renewal com-

parative proceeding, Seven (7) League Productions, Inc., 1

F.C.C.2d 1597, 1598-99 (1965), it was not until 1970 that

the Commission attempted to delineate explicitly the stand-

ards which would apply in a comparative renewal proceeding.

Policy Statement Concerning Comparative Hearings Involv-

ing Regular Renewal Applicants, 22 F.C.C.2d 424 (1970).

The 1970 Policy Statement, however, operated to deny chal-

lengers a full comparative hearing, and it was vacated by this

court as contrary to the Communications Act and the Ash-

;

ST NETRA RAY TEN IETS

Sn, hi ot Pees

25a

under the broad mandate given that agency—that it

shall grant a license “if public convenience, interest, or

necessity will be served thereby,” 47 U.S.C. § 307(a)

(1970)—our function is, as has often been repeated,

a limited one. It is necessary only that we satisfy our-

selves that the agency acted within the bounds of its

statutory and constitutional authority.* that it has fol-

lowed its own procedural rules and regulations,” that its

findings of fact are reasonably articu!aied and based on

substantial evidence in the record as a whole,* that its

conclusions do not deviate greatly from past pronounce-

ments without sufficient explanation,” and that in general

it has engaged in reasoned decision-making.**

The two basic features of the present system as the

Commission has developed it are that a renewal appli-

cant will be judged on his past record, and that the so-

called traditional comparative factors are largely predic-

tors of the kind of service a new applicant would offer

backer doctrine. Citizens Communications Center v. F.C.C.,

447 F.2d 1201, 1214 (D.C. Cir. 1971). The Commission

thereupon undertook to develop a new set of standards for

renewal applicants, Formulation of Policies Relating to the

Broadcast Renewal Applicant, Stemming from the Compara-

tive Hearing Process, 27 F.C.C.2d 580 (1971), but this in-

quiry has not yet resulted in a new policy statement.

28 Johnston Broadcasting Co. v. F.C.C., 175 F.2d 351, 356

(D.C. Cir. 1949).

*° Service v. Dulles, 354 U.S. 363, 388 (1957).

°° Colorado Interstate Gas Co. v. F.P.C., 324 U.S. 581, 595

(1945); Universal Camera Corp. Vv. N.L.R.B., 340 U.S. 474,

487-88 (1951).

1 Columbia Broadcasting System, Inc. v. F.C.C., 454 F.2d

1018, 1026 (D.C. Cir. 1971).

% See generally Greater Boston Television Corp. v. F.C.C.,

444 F.2d 841, 850-53 (D.C. Cir. 1970), cert. denied, 403 U.S.

923 (1971).

26a

and not requirements for being a good licensee. It is

not our function to approve or disapprove this frame-

work if it falls, as it does, within the agency’s authority.

As we have said before," and as the F.C.C.’s oversight

committees in Congress have recently reiterated,* the

comparative hearing process might well come much closer

to producing licensees who act in the public interest if

standards of “substantial service” in programming and

other areas were developed either by the FCC directly

or through stricter rules for ascertainment of community

needs, and if licensees were required to follow them or

run the risk of non-renewal.* But we reiterate that it

is not our judiciai job to direct the Commission on how

to run the comparative hearing process, beyond assuring

that the administrative process respects the rights of the

public and of competitors assured under the Communica-

tions Act and the Ashbacker doctrine, and that it pro-

duces rational decisions based on factors generally known

in advance.

We consider first the Commission’s finding that RKO’s

performance was “average” and not “poor” as the hear-

3 See A.H. Belo Corp., 40 F.C.C.2d 1131, 1133 (1973);

Moline Television Corp., 31 F.C.C.2d 263, 269, 275-74 (1971).

* Citizens Communications Center v. F.C.C., 447 F.2d 1201,

1213 n.35 (D.C. Cir. 1971); see Citizens Committee to Save

WEFM v. F.C.C., 506 F.2d 246, 267-68 (D.C. Cir., 1974).

% Broadcast License Renewal Act, H. REP. No. 93-961, 93d

Cong., 2d Sess. 16-17 (1974); Broadcast License Renewal Act,

S. REr. No. 93-1190, 93d Cong., 2d Sess. 10 (1974).

%* Sec Policy Statement Concerning Comparative Hearings

Involving Regular Renewal Applicants, 22 F.C.C.2d 424, 430

(1970). The hearing examiner in this case expressed the be-

lief that if standards had been available RKO would have

met them. Joint Appendix at 152.

27a

ing examiner had found.” If the performance was poor,

then by the Commission’s own standards, RKO would

have been almost out of the running.** While the ex-

aminer’s decision is an important part of the record

before this court, particularly where he is overturned on

an inference from facts accepted by the Commission, “it

is the agency’s function, not the examiner’s, to make

.. . the ultimate decision, and where there is substantial

evidence supporting each result it is the agency’s choice

that governs.” Greater Boston Television Corp. Vv. F.C.C.,

444 F.2d 841, 853 (D.C. Cir. 1970), cert denied, 403

U.S. 923 (1971). The record shows that KHJ’s pro-

gramming during the license period was largely oriented

to the showing of feature films, usually interrupted by a

substantial number of commercials. Joint Appendix at

72-81. On the other hand, the record also shows that

RKO was the first licensee in the country to obtain a

substantial film library and to make these movies avail-

able to the television audience. Jbid. at 51. While some

films engendered substantial criticism for excessive vio-

lence, many of the movies “claim excellence” and the large

“It was not until its 1970 Policy Statement that the Com-

mission made it clear that only a licensee’s performance dur-

ing the license period, and not any effort made to upgrade

the station after a challenge was filed, would be taken into

account on renewal. 22 F.C.C.2d at 427. This overruled the

practice of considering post-term changes in a later compara-

tive hearing. See Hearst Radio, Inc., 15 F.C.C. 1149 (1951).

It is, however, inappropriate to compare KHJ’s pre-1967

performance with 1971 standards, as one of the dissenters did

in this case. Joint Appendix at 38. In fact, KHJ’s recent

performance in non-entertainment programming can be said

to have placed it among the top stations in the country in

terms of the percentage of the broadcast day spent on news,

public affairs, and local programming. F.C.C. News Release

No. 31512, Oct. 8, 1974 at 118, 220.

8°22 F.C.C.2d at 428 n.4.

28a

bulk were inoffensive. Jbi!. at 60. In addition, RKO did

present, at a substantial expenditure of money, some other

entertainment programs which enriched the Los Angeles

television scene. Jbid. at 60-61. In the non-entertainment

category where RKO had not promised much,” the show-

ing was similarly. mixed. News coverage, for example,

even for the 1962-65 era of 15-minute national news, was

not overabundant, but on the other hand the station did

present a certain amount of coverage of Los Angeles

City Council hearings. Jbid. at 64-65. On an absolute

basis, it might be difficult for all of us, if we were regula-

tors, to characterize KHJ’s past performance as “su-

perior,” entitling it to “a plus of major significance,” “°

but as judges we are agreed that we cannot, on the

record as a whole, say that the Commission’s decision

that programming performance was “average” is bereft

of the support of substantial evidence.

Having decided that RKO’s programming performance

was only “average,” the Commission had to go on to the

other traditional criteria, comparing Fidelity’s predicted

success in achieving the goals of integration, local owner-

ship, and diversification with RKO’s actual performance

in those areas.

As we noted above, the examiner, but not the Com-

mission, gave Fidelity a demerit for its integration

proposal. The agency’s reversal of the hearing examiner

on this point was more apparent than real, since both

felt that the proposal, while on paper all that the Com-

mission could have wanted, had extremely little chance

* There is no issue of promise versus performance in this

case as there was in Moline Television Corp., 31 F.C.C.2d 263

(1971). As the hearing examiner found, RKO’s performance

matched its promises almost exactly. Joint Appendix at 58-

59.

1213 (D.C. Cir. 1971).

29a

of being implemented. Joint Appendix at 150-51, 18-20.

The examiner’s decision was presumably based on his

observation of Fidelity’s witnesses and on his oppor-

tunity to discern the character of Fidelity’s owners and

their ability to perform. This is precisely the type of

examiner’s decision which must be given the most weight

by the agency, and the Commission’s ultimate decision

on this point, which in effect agreed with that of the

hearing examiner, can stand on the record the hearing

examiner created. See Universal Camera Corp. v.

N.L.R.B., 340 U.S. 474, 496 (1951).

On RKO’s behalf, the Commission found that, through

the company’s policy which “requires the management

of its stations to involve themselves in a wide range of

community and civic organizations and to use the informa-

tion gained from such contacts to help determine the

direction and programming of the station,”” RKO’s man-

agement had acquired the kind of interest in local] affairs

which made the station responsive to the community—

the ultimate goal of the integration and local ownership

criteria. Joint Appendix at 20. The examiner’s decision

shows that KHJ’s supervising personnel were long-time

residents, including natives, of the Los Angeles area, and

were active in a wide variety of civic associations both

locally and nationally. Joint Appendix at 55-56. The

record also shows more formal efforts to ascertain com-

munity needs, as well as the results of these efforts in

KHJ’s programming. /bid. at 57-58.*' While we can-

‘1 While the hearing examiner found that “the most solid

preference that Fidelity enjoys stems from the fact that its

proposal is backed by a comprehensive sampling of public

opinion,” that sample was oriented almost entirely to “the

Southland,” and was found by the examiner “to further con-

tribute to the city of Los Angeles’ becoming the hole in the

doughnut of its surrounding communities.” Joint Appendix

at 149. Furthermore, the affidavits provided by Fidelity to

support its claim that its programming was community-

30a

not say that RKO’s local interest performance was any

better than Fidelity’s could be predicted to be on the

basis of the challenger’s integration proposal, we also

cannot properly overrule the Commission’s finding that

it was no worse. Jbid. at 20-21.

With respect to diversification, it was apparent on this

record that Fidelity had far fewer media interests than

did RKO“ and that if diversification in its quantitative

form were the basis of comparison, Fidelity should have

been preferred on this point. Joint Appendix at 149.

However, in a renewal hearing, or in a standard com-

parative hearing where »ne applicant is the licensee of

other stations, the Commission has on occasion considered

whether the licensee hes in the past met the goals of di-

. Versification by operating his stations autonomously and

independently. See McClatchy Broadcasting Co., 19 F.C.C.

343, 380-81 (1954). But cf. Chronicle Broadcasting Co.,

18 F.C.C. 2d 120, 123 n. 9 (1969). In addition, the num-

ber of other outlets for diverse views in the market is an

important consideration in weighing the need for a new

organization to receive the license. See Greater Boston

Television Corp. v. F.C.C., 444 F.2d 841, 859-60 (D.C.

induced were of the “here’s our schedule-don’t you like it”

variety which the Commission now considers unacceptable.

Joint Appendix at 208-12; see Ascertainment of Community

Needs by Broadcast Applicants, 13 P&F Rap1o REG 2p 1903,

1904 (1968).

“The agency’s opinion used the ownership by one of

Fidelity’s minor stockholders of a substantial interest in sub-

urban Los Angeles newspapers to diminish Fidelity’s rating

on diversification. Joint Appendix at 17. Fidelity contends,

however, that the newspapers were mere advertising throw-

aways which cannot be considered media interests. Appel-

lant’s Reply Brief at 37. This is one of the charges on which

no hearing was held; it should not have been used at all by the

Commission. The error, however, was minor and, in our view,

did not control or significantly affect the outcome.

3la

Cir. 1970), cert. denied, 403 U.S. 923 (1971); City of

Camden, 18 F.C.C.2d 412, 422 n. 22 (1969). Here, both

the Commission and the examiner found that KHJ was

operated independently of control from the national of-

fice of RKO or General Tire, except in broad policy areas.

Joint Appendix at 17, 57. While the examiner’s report

shows some headquarters supervision, particularly in mak-

ing sure that local stations live up to their promises to

the F.C.C., ibid. at 52-53, there is nowhere near enough

evidence in the record for us to require the Commission

to come to any other conclusion on station autonomy.

There is also substantial evidence to support the Com-

mission’s findings that there is sufficient opportunity to

present diverse views through the area’s 126 radio sta-

tions, 12 commercial] television stations ** and 350 news-

papers, including two general circulation dailies. Though

the Commission has vacillated over the years in its gen-

eral approach to diversification, its determination in this

case was not in direct conflict with any rule or any policy

as enunciated in prior decisions, and we cannot say that

the approach here was an unreasonable or unlawful ap-

plication of the existing diversification principles to this

renewal case.

On the whole it is fair to say that the Commission

found that the ultimate effect of its analysis of the record

was that Fidelity and RKO were essentially equally poor

contenders—or, at the best, both were minimally ac-

ceptable applicants. While the agency was under no obli-

gation to give the license to either competitor, we cannot

say that it committed legal error when, in its attitude

as of the times pertinent in this case, it took the view

that “minimal service is to be preferred to no service

** The Commission’s decision states that there are 15 com-

mercial television stations assigned to the Los Angeles Market.

Joint Appendix at 16. However, only 12 commercial stations

are currently operating. 44 Television Factbook, at 70-b.

32a

at all.” Compare Broadcast License Renewal Act, H.

REP. No. 93-961, 938d Cong., 2d Sess. 17 (1974). There

is no need here te expand on “renewal expectancies.” We

are not faced with a situation where a superior ap-

plicant is denied a license because to give it to him would

work a “forfeiture” of his opponent’s investment. We

merely confirm what we intimated in the Greater Boston

Television Corporation case—that, when faced with a

fairly and evenly balanced record, the Commission may,

on the basis of the renewal applicant’s past performance,

award hiin the license. 444 F.2d at 854, 859.

It is worth emphasizing the special posture of this par-

ticular case. It is based on a record built under standards

which have since been upgraded or modified or reconsid-

ered by the Commission. New community ascertainment

criteria have been issued and there is now a requirement

for something of a continuing dialog between a station

and its audience. The agency has also undertaken its

rule-making process on cross-ownership. The development,

through rule-making, of standards of “substantial per-

formance” also seems immineni and shouid prove hclp-

ful. We hold here only that under the former criteria the

Commission, when faced with a poor challenger who of-

fers little more and is likely in fact to provide somewhat

less than the incumbent, did not commit reversible error

by awarding the license to the incumbent.“

Affirmed **

“* Judges Leventhal and Davis join in the court’s affirm-

ance of the Commission for the reasons given, but wish to

note, speaking for themselves, that the Commission could have

considered the alternatives of granting RKO a short or con-

ditional license rather than limiting itself to a choice of non-

renewal or a full three-year license. The FCC’s authority to

grant short licenses was made explicit by the 1960 Communi-

cations Act Amendments, now codified at 47 U.S.C. § 307(d)

(1970), and the agency has in fact granted short licenses

a Pens ae

tard se On a a a PI i Be IE,

33a

particularly where ex parte communications or other conduct

have raised questions about a potential licensee’s character

or where the successful licensee has succeeded only by de-

fault. See Greater Boston Television Corp. v. F.C.C., 444 F.2d

841, 845 (D.C. Cir. 1970), cert. denied, 403 U.S. 923 (1971);

South Florida Television Corp. v. F.C.C., 349 F.2d 971, 972

(D.C. Cir. 1965), cert. denied, 382 U.S. 987 (1966). The

Commission also has the authority to grant conditional

licenses, 47 U.S.C. § 303(r) (1970), and has in the past even

granted a one-year conditional license, see Office of Communi-

cation of the United States Church of Christ v. F.C.C., 359

F.2d 994 (D.C. Cir. 1966). While in that case this court

disapproved the grant of any license to WLBT the court did

state that, where the licensee showed signs of being willing

to live up to the conditions, such a limitation on the license was

completely proper. Jd. at 1008 n.28.

Particularly where a qualified competitor brings a licensee’s

weaknesses to the FCC’s attention, the public interest might

be better served by the Commission’s considering whether

a short or conditional license would induce the licensee to cor-

rect the weaknesses—here going both to programming and

to character. See Golden, supra note 26 at 1026-27. In ad-

dition, such a license could serve, if needed, as a basis for

treating the licensee as a new applicant when the license

comes up for renewal. See Greater Boston Television Corp.

v. F.C.C., supra at 854, 856.

Since this point, though suggested from the bench at oral

argument, was not raised before the Commission, nor pre-

sented to this court in the appeal papers, it is not fairly be-

fore us for decision at this time. We note the point, however,

to avoid the possibility that our affirmance will be taken as

precluding such a more limited disposition when the FCC

comes to consider the impact of the WNAC proceeding.

** Our affirmance, as already observed (see notes 9, 12, 17,

and 25, the text appurtenant thereto, and the text at the

end of Part III, supra), is conditional (as was the Com-

mission’s decision) on the ultimate outcome of the WNAC

proceedings. See Fidelity Television, Inc. v. F.C.C., 502 F.2d

443, 451-52 (D.C. Cir. 1974).

34a

APPENDIX B

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

FIDELITY TELEVISION, INC.,

Appellant,

Vv.

FEDERAL COMMUNICATIONS COMMISSION,

Appellee,

RKO General, Inc., Intervenor

No. 73-2213

United States Court of Appeals,

District of Columbia Circuit.

June 30, 1975.

ON PETITIONS FOR REHEARING, RECONSIDERATION

OR CLARIFICATION AND SUGGESTIONS FOR REHEAR-

ING EN BANC

Before LEVENTHAL and ROBB, Circuit Judges, and DAVIS*,

Judge, United States Court of Claims.

PER CURIAM:

Fidelity Television, Inc. has filed a petition for rehear-

ing of our March 6, 1975 decision in this case. Also, the

Citizens Communication Center (CCC), a non-profit organ-

ization supporting diversity in broadcasting, has asked for

leave to file as amicus curiae a petition in support of re-

*Sitting by designation pursuant to 28 U.S.C. § 293(a) (1970).

35a

hearing or clarification of our decision, and has submit-

ted such a petition. We regret that CCC did not ask to

participate in this case at an earlier time. As intervenor

RKO has noted in its opposition to CCC’s petition, the

Center’s concern is really with what the Commission, rather

than the court said and did, and the arguments it now

makes could have been cogently made earlier. We have,

however, decided to allow the Center’s petition to be filed,

to give us the opportunity to reemphasize the limited scope

of the previous opinion. Having done so, we deny the

petitions for rehearing and reconsideration.

Our opinion affirmed the Federal Communication Com-

mission’s decision to renew the license of intervenor RKO

General, Inc. for station KHJ-TV in Los Angeles rather

than awarding the license to challenger Fidelity Television,

Inc. The decision in no way approves a return to the

partial comparative hearing procedure of the 1970 Policy

Statement Concerning Comparative Hearings Involving Reg-

ular Renewal Applicants, 22 F.C.C.2d 424 (1970), which

procedure we vacated in Citizens Communications Center

v. F.C. C., 145 U.S.App.D.C. 32, 447 F.2d 1201 (1971).

The Commission here held, as it must, a full comparative

hearing under the 1965 Policy Statement on Comparative

Broadcast Hearings, 1 F.C.C.2d 393 (1965). The “spur

to competition” of that procedure was preserved here, and

in fact reaffirmed when the Commission required KHJ,

upon a finding that its service had not been superior, to

run the gamut of comparison with Fidelity on the tradi-

tional comparative factors of integration and diversification.

What we decided (slip pages 31-33, ___U.S.App.D.C.

pages .. -.... ... F.2d pages. - _) is that the

Commission could permissibly determine after such a full

comparative hearing that (a) “Fidelity and RKO were es-

sentially equally poor contenders—or at the best, both were

— NR OSRRY

ane SS a ee ee PO oR Se Te aes! we

36a

minimally acceptable applicants”, (b) though in this situa-

tion the agency might well have rejected both the exist-

ing licensee and the challenger, that position was not put

before the Commission and in those circumstances we can-

not overturn its decision to follow the theory that “mini-

mal service is to be preferred to no service at all’’; (c) since

a choice was to be made, between two competitors on an

equal plane, it could properly light on the existing licen-

see; and (d) the issue of whether the license could or

should have been renewed conditionally or for a period

shorter-than-normal was not before us, not having been

raised below or here.

As we pointed out in the opinion (slip Pages 31-32,

____ U.S. App. D.C. pages _, Ss, ___—sO*#F-«.2d-: zpaagess

___, ___), Fidelity did not show itself a superior or pref-

erable applicant but rather “a poor challenger who offers

little more and is likely in fact to provide somewhat less

than the incumbent.” On this general subject the hearing

examiner said: ‘Once it clears the easy (for it) hurdles—

local ownership, radio diversification and public opinion—

Fidelity does not !ook too good. Attached to its qualifi-

cations are no experience in the field of broadcasting, no

contributions to the art, no proof through the school of

experience of licensee answerability for stewardship, no

proof, through the same school, of ability to stand the

shock of adverse financial conditions, and no demonstrated

ability to conceive and present programs of high quality

[footnote omitted].” In the same connection, the examiner

severely criticized the applicant’s integration proposals,

which placed inexperienced stockholders, working part-time,

in supervisory roles. He said: “If Fidelity is serious about

its proposal, it is projecting an operation that will, at best,

be signalized by confusion, and, at worst by chaos. * * *

Proposals such as this are susceptible of two interpreta-

37a

tions that should not be shrugged off. Either the propo-

nents honestly believe that operation of a television sta-

tion, unlike any other enterprise, can be effectively direct-

ed by an inexperienced group on a part-time basis, or they

advance the proposal for show purposes only without in-

tention to effectuate it. Neither inference is very palatable.

The former suggests witlessness. The latter raises questions

as to the advisability of entrusting stewardship to those

who would attempt to fob off on a licensing agency such

a tall tale.” That is the type of challenger this case con-

cerns.

Moreover, we stated several times in the opinion that our

review of the Commission looked to the manner in which.

in 1/973, not 1975 or any date in the future, the agency

applied its then existing policy and rules to the case at hand.

At that time, the Commission, by rule and by decision, con-

sistently distinguished, in making assessments under the

diversification criterion, between situations in which a mul-

tiple licensee wished to obtain a new station and those

in which the organization was applying for renewal of a

pre-existing license. On the other hand, the Commission’s

decision in this case was rendered prior to promulgation

of the 1975 newspaper cross-ownership rules, Second Re-

port and Order, Docket No. 18110. F.C.C. 75-104 §131

(Jan. 31, 1975). These rules adopt a structural rather

than a functional approach to diversification even as to

existing licenses under which an entity which owns a news-

paper may not, in some structurally specified cases, retain

a broadcast license. We made and make no decision wheth-

er, under such an aprroach, it would be possible to allow

any entity to retain multiple licenses. We decided only

that, as of 1973, the FCC applied its contemporaneous

diversification policy which, as to renewal applicants, en-

compassed consideration of functional separation of activi-

38a

ties, in a manner which was essentially consistent with prior

law.

When the smoke clears away, we are left with the dis-

tinct impression that we have a “nothing” applicant, who

has offered an artificial construction of a Southland ser-

vice philosophy; who has an integration philosophy that the

examiner correctly derided as being either “witless” or in-

sincere; who has shown lack of candor in certain aspects!

—and who comes before the FCC rather naked, saying that

even so I am better naked than the incumbent, because he

lacks diversification.

And what we answer is that, on the criteria at the time,

the FCC was not in violation of law in applying a diversi-

fication criterion that held that RKO’s operation of sta-

tions autonomously and independently met the objectives

sufficiently to withstand the competition of a “nothing”

competitor.”

The petitions for rehearing and reconsideration are denied.

lin para. 33, the Commission stated that there was a “repeated failure

to make timely and necessary reports of new developments affect-

ing a proposal.” It noted that “this practice continued even after

its attention was directed to the need to keep its house in order.”

It concluded “we believe that the record here gives little promise

that Fidelity will effectively implement its paper integration prom-

ises ... .” (JA 19-20)

2 Even as of 1973, this was not a ruli..g that exluded all new-

comers. Even a newcomer to TV can make a presentation built

on the experience of at least one or two key stockholders identi-

fied with management, on a reasonably bona fide and practicable

approach, the kind presented by at least one applicant in the much-

discussed WHDH case, see Greater Boston TV Corp. v. FCC, infra,

143 US. App.D.C. at 405, 444 F.2d at 863.

peepee gS

Ma ar PNM AS ILE LPT ILLS NUGEE LE TEINS DORN oe:

39a

Statement of BAZELON, Chief Judge, as to why he

voted to grant rehearing en banc:

In an earlier day, this court tended to affirm compara-

tive licensing decisions with only the most limited inquiry

into the process of decision-making. If the FCC denomi-

nated the factors operative in its decisions with some rea-

sonable clarity, this court would not intervene even if the

decision under review was illogical in terms of Commission

policy, conflicted with past decisions of the agency or

otherwise was not fairly reasoned out from established

standards. In revent years this court has, it appeared to

me, moved away from this posture into a more demand-

ing stance, requiring of the Commission that it adhere to

the rule of law in its comparative and other discretionary

decisions.! The decision here adopts the form of this

more recent approach—assuming a basically in depth in-

quiry into the Commission’s process of decision—but, I

think, not the substance. In our earlier approach, we took

the view that the comparative decision was essentially po-

litical and not bound by the rule of law; the least that

could be said for this approach was that it did not attempt

to justify in rational terms the helter-skelter so often pres-

ent in comparative decisions. The court’s opinion in this

case unfortunately may be seen as a rational justification

for an essentially un-rational decision. Moreover, the cen-

tral issue of the applicability of the rule of law to highly

! See Greater Boston Television C orp. v. FCC, 143 U.S.App.D.C.

383, 444 F.2d 841, 850-52 (1970), cert. denied, 403 US. 923, 91

S.Ct. 2229, 29 L.Ed.2d 701 (1971); WAIT Radio, Inc. v. FCC, 135

U.S.App.D.C. 317, 418 F.2d 1153 (1969), on subsequent appeal,

148 U.S.App.D.C. 179, 459 F.2d 1203 (1972); Star Television, Inc.

v. FCC, 135 US.App.D.C. 71, 416 F.2d 1086, 1089, cert. denied,

396 US. 888, 90 S.Ct. 171, 24 L.Ed.2d 163 (1969) (Leventhal, J..

dissenting). Compare note 87 infra.

Deneeeessss eo are RA OEE

40a

discretionary decisions is not sufficiently delineated and

our choices in regard to this issue are therefore less in-

formed to that extent.

The purpose of this statement is to discuss these mat-

ters in the course of demonstrating the manner in which

the Commission has failed to follow the rule of law in this

case. This project involves a consideration of the admin-

istrative policies and judicial decisious which the Com-

mission either ignored or misapplied in its decision. The

organization of the statement is as follows. First I indi-

cate the manner in which the Commission has granted an

illegal renewal expectancy to RKO General, Inc., one of

the comparative participants, in contravention of our de-

cision in Citizens Communication Center v. FCC, 145

U.S.App.D.C. 32, 447 F.2d 1201 (1971). This entails

(A) a consideration of the manner in which the past per-

formance of a renewal applicant may be considered under

the CCC decision and an argument that this consideration

entitles RKO to no renewal expectancy (slip-pages 3-8,

US Asso. seems - Pe pees

(B) a discussion of the subliminal process the Commission

used to avoid a comparative decision and to grant an illegal

renewal expectancy (slip-pages 8-12, ___ U.S.App.D.C. pages

See eile Gey - ___); (C) an argument

that the Commission failed to follow its own precedent in

its ruling on the diversification of ownership comparative

factor (slip-pages 12-17, ___ _U.S.App.D.C. pages - ;

___ F.2d pages ___-___): and (D) a review of a passel

of related errors which taken together strongly indicate that

the Commission nullified the comparative hearing process (slip-

pages 17-21, __ U.S.App.D.C.___-__, __F.2d pages__-

__). Second, I suggest that the Commission improperly de-

nied a hearing on a specialized programming issue raised by

Fidelity Television, Inc., the other comparative participant,

4la

on extremely technical grounds and in contravention of

our recent decision in Citizens Committee to Save WEFM

v. FCC, 165 U.S.App.D.C. ___, 506 F.2d 252 (1974) (en

banc). This involves (A) a consideration of the grounds

upon which the programming issue was denied and a re-

jection thereof (slip-pages 21-27, __ _U.S.App.D.C. pages

_ F.2d pages ___-__); and (B) a review of

First Amendment issues implicated by consideration of

past and proposed programming in comparative hearings

(slip-pages 27-29, __-—-U.S.App.D.C. pages _, _s,

F.2d pages _, ).

I. RKO General Was Granted an Illegal Renewal Preference

A. CCC and the Permissible Extent of Renewal Ex-

pectancies

As the court explains, RKO General, Inc., a wholly

owned subsidiary of the General Tire and Rubber Company,

was until 1965 the licensee of KHJ-TV, Channel 9 in Los

Angeles. On August 31, 1965, RKO filed an application

for renewal of its license for KHJ-TV. On October 25,

1965, Fidelity Television, Inc., filed a mutually exclusive

application for a construction permit to operate Channel

9. The two applications were set down for a comparative

hearing. There then ensued four years of litigation over

Fidelity’s attempts to enlarge the issues to be heard in the

comparative hearing. The result of this litigation is de-

scribed and criticized in Part II. On August 13, 1969, the

Hearing Examiner recommended that Fidelity’s application

be granted and that RKO’s application be denied. Two

further years of delay ensued as the Commission pondered

whether to reopen the record at the comparative hearing

and take further evidence of anti-competitive violations by

42a

General Tire. Having decided against this course of action,”

the Commission then delayed decision for two further years.

After prodding from this court, the Commission finally is-

sued its decision almost another year after that.> This de-

cision declined to accept the Hearing Examiner’s recommen-

dation and instead granted RKO’s renewal application and

denied Fidelity’s application.* The vote in the Commission

was 3—2, with the deciding vote being cast by Chairman

Burch who concurred in the result of the majority only and

not the opinion issued.

Accepting for the moment the scope of the hearing held

and the propriety of the Commission’s treatment of the stand-

ard comparative issues, the ratio decidendi of the Commission

was this:> .

From our consideration of these [applications] up to

this point, we have established that each applicant is basi-

cally qualified to be a licensee, that the characteristics of

the [applications] differ in certain respects, but that none

of those differences provides a basis for making a choice

between the two applicants in this proceeding. Nonethe-

less a selection must be made, and so we shall look to

other aspects of the record affecting the public interest.

In this connection, we believe that recognition must be

given to the rights and expectancies of an ordinary renew-

al applicant... .

3 The history of the extraordinary delay in this case is discussed

in Fidelity Television, Inc. v. FCC, 163 U.S.App.D.C. 441, 502 F.2d

443 (1974).

4 RKO General, Inc., 44 F.C.C.2d 123 (1973).

5 Jd, at 136-37 (emphasis added).

Cd a

43a

{In light of RKO’s substantial investment in the station

to make the Channel viable and in light of the renewal ex-

pectancies of RKO], we believe that there is a public in-

terest, both in the Los Angeles area and the nation at large,

in insuring the predictability and stability of broadcast

service. If there is no such security for applicants seeking

facilities with the intention of providing good service to

the public, the overall development and motivation of the

industry will suffer.... [We] are persuaded that credit

must be given in a comparative renewal proceeding, when

the applicants are otherwise equal, for the value to the

public in the continuation of existing service. ... [Since]

the record is clear that Fidelity has not demonstrated that

it will in fact provide a better service than RKO, we are

convinced, for the reasons set forth above, that RKO’s re-

newal application . . . must be preferred.

Initially, it appears that the court misapprehends this

rationale for decision. The reader may wish to compare

the foregoing quotation with the following representation

of it in the court’s opinion:®

On the whole it is fair to say that the Commission

found that the ultimate effect of its analysis of the

record was that Fidelity and RKO were essentially

poor contenders—or, at the best, both were minimally

acceptable applicants... . [We] cannot say that [the

Commission] committed legal error when, in its atti-

tude as of the times pertinent in this case, it took the

view that ‘minimal service is to be preferred to no ser-

vice at all.” Compare Broadcast License Renewal Act,

H.Rep.No. 93-961, 93d Cong., 2d Sess. 17 (1974).

There is no need here to expand on ‘renewal expec-

pages ——, ——- (emphasis added).

RAT Sy eR NER ORD: TENTHS G apes NR RRS PME ME RMI AGE NINE SLITS LIT WEIRD atteias

44a

tancies.. We are not faced with a situation where a

superior applicant is denied a license because to give

it to tim would work a ‘forfeiture’ of his opponent's

investment. We merely confirm what we intimated

in [Greater Boston Television Corp. v. FCC, 143 US.

App.D.C. 383, 444 F.2d 841, 854, 859 (1970), cert.

denied, 403 U.S. 923, 91 S.Ct. 2229, 29 L.Ed.2d

701 (1971)] that, when faced with a fairly and evenly

balanced record, the Commission may, on the basis of

the renewal applicant's past performance, award him

the license.

The court does not inform us from whence comes the quote

“minimal service is to be preferred to no service at all.” It

surely does not come from the Commission's opinion. The

Commission referred to the value of “continunation of ex-

isting service” and not to the value of minimal service over

no service at all. And indeed it had no other choice since

we confront here not a petition to deny—where the value

of minimal service over no service at all is certainly relevant

—but rather a comparative hearing—where the issue is not

the existence of service but rather who shall provide it.

Why ihe court finds no need to “expand upon renewal ex-

pectancies” is not at all clear to me, since I read the Com-

mission as basing its decision squarely on renewal expec-

tancies.

The court suggests that the Commission’s decision was

based on a rule that among equal applicants, the renewal

applicant may be preferred on the basis of “past perform-

ance.” First, the court’s point about the non-superionity

of Fidelity’s application is entirely circular since that issue

can only be determined by making a comparative evalua-

tion. But the Commission’s decision, as the quoted ex-

cerpt shows, did not make a comparative decision since it

chose largely on the basis of “renewal expectancies.” In

éh

45a

other words, Fidelity’s application was not “superior” sim-

ply because the Commission never decided whether it was!

"As is discussed in more detail in slip pages 9-10, ___

VEO. 000. gs Ss PSG ee

infra, use of the renewal expectancies, clearly relied upon

by the Commission, completely short-circuits the compara-

tive evaluation process. Hence, the Commission did not

choose between ‘‘equal” applicants since the very notion

of a comparative choice requires that one applicant be

“more equal” than others. The question is why is that

applicant better. lo that question, the Commission’s only

answer is ‘“‘renewal expectancies.”

Second, the Commission did not, repeat did not, award

renewal to RKO on the basis of RKO’s past performance.

The previously quoted excerpt should make that point

clear. If further proof is needed, the following additional

quote should provide it:’

[We] are persuaded that there are sufficient good

points to offset the less favorable aspects of KHJ-—

TV’s performance and that, on balance, its record

must be deemed to be within the bounds of average

performance expected of all licensees, thus warrant-

ing neither a preference nor a demerit.

Earlier in its opinion, the court expressly affirms this hold-

ing.® Indeed, both the Commission and the court had to

7 RKO General, Inc., 44 F.C.C.2d 123, 133 (1973). Presumably,

if the Commission had in fact made a comparative decision, RKO’s

past record would be entitled to some weight in comparison with

Fidelity’s advantages.

8 Slip pages 26-28, —— US.App.D.C. pages —-, ——, —— F.2d

pages -—-, ——. At slip page 28, —— US.App.DC. at page —,

PREIS O OS i i i a aia RESORT TE! ERE OES

46a

labor valiantly, for what purpose I do not know, to over-

turn the Examiner's finding that RKO deserves demerit for

its past performance.? The Commission’s decision is based

purely on renewal expectancies, on the value of ‘“‘continu-

ation of existing service.”

The issue thus delineated is whether the Commission

may use the value of “continuation of existing service”,

quite apart of the quality of that existing service, as a

factor in comparative renewal hearings. Initial reference

to the relevant statutory provisions would indicate that

this factor is legally irrelevant."° However, early Commis-

sion practice was to grant a basically insuperable advantage

to the incumbent on the basis of past performance.'! Thus,

__ F.2d at ——, the court makes the rather opaque statement that

RKO’s past performance as a licensee in the areas of integration, diver-

sification and local ownership as well as past programming performance

are to be considered as part of the renewal applicant’s past performance.

This statement is confusing. Of course, the renewal applicant’s proposal,

as well as a new applicant’s propoaal will be scrutinized and compared on

the above-mentioned factors. But such factors have no significance in

regard to a renewal expectancy engendered by past performance. And,

of course, RKO’s “past performance” on those factors is dreary indeed.

9 see RKO General, Inc., 44 F.C.C.2d 123, 130-33 (1973); Slip pages

26-28, —— US.AppD LC. pages —, ——: —— F.2d pages —.

10 see 47 U.S.C. 8 301; 304; 307(d); 309%(h)(1) (1970), quoted and

discussed Citizens Communications Center v. FCC, 145 U.S.App.D.C. 32,

447 F.2d 1201, 1209 n. 23 (1971).

i Hyde, FCC Policy and Procedures Relating to Hearings On

Broadcast Applications in Which a New Applicant Seeks to Displace

A Licensee Seeking Renewal, 1975 Duke LJ. 253, 256-61. See also

Citizens Communications Center v. FCC, 145 U.S.App.D.C. 32, 447

F.2d 1201, 1207-08 (1971); Greater Boston Television Corp. v. FCC,

143 US.App.D.C. 383, 444 F.2d 841, 854-858 (1970), cert. denied,

403 US. 923, 91 S.Ct. 2229, 29 L.Ed.2d 701 (1971); WOKO, Inc.

v. FCC, 80 U.S.App.D.C. 333, 153 F.2d 623, 629-30, rev'd on other

47a

administrative practice, confirmed by the courts, was that

some consideration must be given to incumbency or renew-

al expectancies. The question became not whether renewal

expectancies were to be recognized but what was the prop-

er consideration of renewal expectancies.

This court provided the framework for analysis of that

issue in Citizens Communications Center v. FCC, 145 U.S.

App.D.C. 32, 447 F.2d 1201 (1971). There we considered

a Commission policy of refusing to assess the comparative

qualifications of competing applicants in renewal hearings

until after the Commission had determined whether the

incumbent licensee had performed “substantial service.” If

the licensee had performed such service, then renewal was

granted without consideration of comparative factors. If

the licensee did not so rerform, a full comparative hear-

ing was held.!2_ We rejected this policy as inconsistent

with the statutory and caselaw requirement for a full com-

parative hearing on the qualification sof competing appli-

cations. This holding was not purely formal: the nght to

a full comparative hearing involved not only the right to

grounds, 329 U.S. 223, 67 S.Ct. 213, 91 L.Ed. 204 (1946). Com-

pare these statements with FCC v. Sanders Bros. Radio Station, 309

US. 470, 475, 60 S.Ct. 693, 84 L.Ed. 869 (1940); Crowder v. FCC,

130 U.S.App.D.C. 198, 399 F.2d 569, 571, cert. denied, 393 US.

962, 89 S.Ct. 400, 21 L.Ed.2d 375 (1968); Transcontinental Televi-

sion Corp. v. FCC, 113 U.S.App.D.C. 384, 308 F.2d 339, 341-42

(1962); American Broadcasting Co. v. FCC, 89 U.S.App.D.C. 298,

191 F.2d 492, 496-97 (1951), quoting Ashbacker Radio Corp. v.

FCC, 326 US. 327, 331-32, 66 S.Ct. 148, 90 L-Ed. 108 (1945); FCC v

FCC v. Pottsville Broadcasting Co., 309 U.S. 134, 137-38, 60 S.Ct. 437

437, 84 L.Ed. 656 (1940); L. B. Wilson, Inc. v. FCC, 83 U.S.App.

D.C. 176, 170 F.2d 793, 798 & n.5 (1549).

12 Policy Statement Concerning Comparative Hearings Involving

Regular Renewal Applicants, 22 F.C.C.2d 424, recon. denied, 24

F.C.C.2d 383 (1970).

RE eae oD ees Ee ce

48a

present a competing applications but also the duty of the

Commission to make a decision on the basis of a compara-

tive examination of the competing applications. '3 The

CCC case thus establishes that the Commission may not

use renewal expectancies of incumbent licensees to short-

circuit the comparative hearing process.

In particularly famous dicta, the CCC court defined the

proper consideration of renewal expectancies:

We do not dispute, of course, that incumbent li-

censees should be judged primarily on their records

of past performance. Insubstantial past performance

should preclude renewal of a license... . At the

same time, superior performance should be a plus

of major significance in renewal proceedings. The

court recognizes that the public itself will suffer if

incumbent licensees cannot reasonably expect renewal

when they have rendered superior service.

The statement reflected administrative practice (or, at least,

stated administrative practice) and was quickly adopted by

the Commission after the CCC decision. This form of

“renewal expectancy” fitted easily into the doctrinal frame-

13 Citizens Communications Center v. FCC, 145 U.S.App.D.C. 32,

447 F.2d 1201, 1212 (1971), citing Johnston Broadcasting Co. v.

FCC, 85 US.App.D.C. 40, 175 F.2d 351, 356-57 (1949).

14 447 F.2d at 1213 & n.35.

15 See Formulation of Policies Relating to the Broadcast Renewal

Applicant, 31 F.C.C.2d 443, 444 & n.1 (1971), mandamus denied,

Citizens Communications Center v. FCC, 149 U.S.App.D.C. 419, 463

F.2d 822 (1972) referencing Formulation of Policies Relating to the

Broadcast Renewal Applicant, 27 F.C.C.24 580, 582 (1971) and

Policy Statement Involving Regular Renewal Applicants, 22 F.C.C.2d

424, 425 & n.1 (1976). See also A. H. Belo Broadcasting Corp., 40

49a

work established in CCC. A licensee’s past performance

was clearly indicative of potential as a licensee and thus

must be given comparative weight against a challenger’s ad-

vantages in proposed programming, ascertainment efforts,

diversification or whatever. The proper weight to be giv-

en to past performance is, of course, a matter for the Com-

mission’s judgment.

It is obvious, and the Commission does not seriously

deny it, that RKO is entitled to no renewal expectancy

under the reasoning of CCC ostensibly adopted by the

Commission. RKO barely avoided a finding of insubstan-

tial service and received only a lukewarm finding of “‘aver-

age” performance which deserved neither merit nor de-

stantial” service under the Commission’s post-CCC suggest-

ed guidelines.'7 And, as established above, the Commis-

F.C.C.2d 1131 (1973), on further proceedings, 47 F.C.C.2d 540 (1974);

Moline Television Corp., 31 F.C.C.2d 263 (1971).

This kind of renewal expectancy is supported by the various state-

ments of this court on the issue. See, e. g., Greater Boston Televi-

sion Corp. v. FCC, 143 U.S.App.D.C. 383, 444 F.2d 841, 854, 859

(1970), cert. denied, 403 U.S. 923, 91 S.Ct. 2229, 29 L.Ed.2d 701

(1971); Office of Communications of United Church of Christ v.

FCC, 123 US.App.D.C. 328, 359 F.2d 994, 1007 (1966).

16 See slip-page 6 & nn. 7-9, US App.D.C. page

F.2d page Ss & nn. 7-9, supra.

17 Compare Formulation of Policies Relating to the Broadcast Re-

newal Applicant, 27 F.C.C.2d 580, 582 (1971) with RKO General,

Inc., 44 F.C.C.2d 149, 161, 173-77 (1969) (Hearing Exam.) (discusses

in detail RKO’s programming in the various categories of programming

identified in Network Programming Inquiry, 25 Fed.Reg. 7291 (1960)).

The court, slip page 26 n.36, __ US.App.D.C. page, _—si*F

2d page ____n. 36, makes the assertion that the hearing Examiner

“expressed the belief’ that RKO would have met standards of “sub-

50a

sion did not find that RKO was entitled to renewal on

the basis of past performance. Indeed, the renewal expec-

tancy granted to RKO had nothing to do with RKO’s own

performance as a licensee, but rather was premised upon a

general policy of ensuring the “continuation of existing

service” unless a challenger proved that it would “‘in fact”

provide better service than the existing licensee.

We thus have seen that the renewal expectancy awarded

to RKO is quite distinct from that approved in CCC and

accepted by the Commission. It remains to be seen wheth-

er that renewal expectancy is inconsistent with the hold-

ing and reasoning of CCC and the Federal Communications

Act.

B. The Renewal Expectancy Granted to RKO Shortcir-

cuits the Comparative Hearing Procedure.

The first thing one notices about the renewal expectancy

granted to RKO and considered in this comparative hear-

ing is that it has nothing whatsoever to do with RKO’s

comparative merit as a licensee. Rather it is a general

policy, existing wholly apart from RKO, which mandates

that renewal will be granted unless a challenger proves that

it will “in fact’? provide better service that the existing

licensee. Initially, we may strike the “unless” clause off

the last sentence. The comparative factors in general are

designed to determine which competing applicant will pro-

stantial service” if they had existed. However, reference to the Ex-

aminers opinion, 44 F.C.C.2d at 228, reveals that this was no more

than an expression of confidence that RKO would have upgraded its

station to meet the established standards, if such standards had

existed, and is not any suggestion, much iess a holding, that RKO en-

gaged in substantial service within the intendment of the 1971 pro-

posed guidelines.

S5la

vide the “best practicable service.”"8 And indeed. the

Commission has affirmed that the factor of diversification

of ownership of communications facilaities is a factor above

and beyond the “best practicable service” determination.’

Thus, the comparative hearing process is designed to deter-

mine whether the challenger will, under the only predictors

the Commission recognizes, “in fact” provide better service.

The issue is whether the grant of a renewal expectancy

such as was given to RKO itself prevents that determina-

tion. 1 think it does.

The whole of the Commission’s effort in its opinion

prior to the passage quoted in Part A above is to estab-

lish that neither applicant has a significant advantage over

tne uther. Making the heroic assumption that the Com-

mission succeeded in this effort, it still must, under CCC,

make a comparative choice; it must make a selection. The

mandate of the Act is that the Commission must choose

and it has on previous occasions managed to choose on

the basis of fairly equal records.2” But it is precisely at

18 See Policy Statement on Comparative Broadcast Hearings, 1 F.C.C.

2d 393, 394, 395-98 (1965).

19 See Terre Haute Broadcasting Corp., 25 F.C.C.2d 348, 353-55

(1970).

20 See, e. g., Star Television, Inc. v. FCC, 135 U.S.App.DC. 71,

416 F.2d 1086, cert. denied, 396 US. 888, 90 S.Ct. 171, 24 L.Ed.

2d 163 (1969) aff'g Flower City Television Corp., 9 F.C.C.2d 249,

recon. denied, 10 F.C.C.2d 718 (1967); Community Broadcasting

Corp. v. FCC, 124 U.S.App.D.C. 230, 363 F.2d 717 (1966); Ten-

nessee Television, Inc. v. FCC, 1u4 US.App.D.C. 316, 262 F.2d 28

(1958); Pinellas Broadcasting Co. v. FCC, 97 U.S.App.D.C. 236, 230

F.2d 204, cert. denied, 350 U.S. 1007, 76 S.Ct. 650, 100 L.Ed. 869

(1956); W. S. Butterfield Theatres, Inc. v. FCC, 99 U.S.App.D.C. 71,

237 F.2d 552 (1956).

52a

this point that the Commission pulls up short and refuses

to make a comparative choice, holding that when in doubt

it must renew. As I have stated, the renewal expectancy

granted to RKO has nothing to do with its comparative

qualifications and thus use of that factor may not be jus-

tified as simply one more element in the comparative bal-

ance. So, the use of the renewal expectancy prevents the

challenger from making its case that it will in fact be a bet-

ter licensee by forestalling the comparative decision which

will establish the challenger’s contention. This Catch-22

reasoning completely shortcircuits the comparative decision

process since it avoid the “overall relative determination

upon an evaluation of all factors’?! which is the sine qua

non of comparative licensing.

It is no answer to this analysis to assert that the Com-

mission simply imposed a “burden of proof” on the chal-

lenger to prove that it is better qualified under the com-

parative criteria. First, the Commission has not hereto-

fore ever informed challengers that they have a special

burden of proof which exists wholly apart from the com-

parative criteria and, as far as one can tell from the lan-

guage of the reports, has never expressly applied such a

“burden of proof.”” The Commission advances no reasons

in its opinion for departing from its pnor practice and none

are apparent. Thus, the matter should at least be remand-

ed for that purpose.22. Second, it is clear that the Commis-

sion did not truly use the renewal expectancy as a “‘bur-

den of proof.”” Nowhere does the Commission make a

comparative judgment between the two applicants, even

with a burden of proof on Fidelity. Its whole discussion

goes only to prove that RKO is qualified to be a licensee

21 Johnston Broadcasting Co. v. FCC, 85 U.S. App.D.C. 40, 175

F.2d 351, 357 (1949).

RL EOE AS RO LIME ELEN I OE TOST BI IETS SOE TIPU Oc mt Ree -*

53a

and is entitled to a renewal expectancy. Indeed, the Com-

mission expressly refuses to make a comparative judgment,

saying by fiat that none of the differences in the applica-

tions provide the basis for making a choice.23 The Com-

mission nowhere provides any reasoned comparison of these

differences; it treats the advantages and disadvantages of

the two applicants but makes no comparison. To be sure,

the Commission asserts that none of the parties are enti-

tled to a preference or a demerit, as if those two concepts

were all or nothing issues. Put it never holds that in com-

parison to each other, Fidelity or RKO should have some

advantage or disadvantage because of, respectively, diversi-

fication or past performance. And, as will be developed

in Parts C and D below, there are very significant differ-

ences between the applicants which even under the Com-

mission’s reasoning could provide the basis for a compara-

tive choice.

22 See Garrett v. FCC, 167 US.AppD.C. __, 513 F.2d 1056

(1975); Columbia Broadcasting System, Inc. v. FCC, 147 U.S.App.

D.C. 175, 454 F.2d 1018, 1026 (1971); see also Local 814, Team-

sters v. NLRB, 167 US.App.DC. __, 512 F.2d 564, 571-72 &

n.15 (1975) (Bazelon, C. J. concurring in part, dissenting in part)

and authorities cited.

23 RKO General, Inc., 44 F.C.C.2d 123, 137 (1973):

24 This point might, at first glance, appear too attenuated. If the

reader has this reaction, | would suggest a comparison between the

cases cited in note 20 supra and the discussion in Parts C and D

infra in regard to their treatment of relative “preferences” and “de-

merits.” Reference may also be made to Mid-Florida Television Corp..

33 F.C.C.2d 1, 9-10, 21, reviews denied, 37 F.C.C.2d 559 (1972),

rev'd on other grounds, TV 9, Inc. v. FCC, 161 US.App.D.C. 349,

495 F.2d 929 (1973), cert. denied, 419 U.S. 986, 95 S.Ct. 245, 42

L.Ed.2d 194 (1974).

54a

But more important than these two points, I would hold

that the renewal expectancy granted to RKO violates the

express provisions of the Federal Communications Act re-

lating to renewal expectancies. 47 U.S.C. §301 (1970)

states that “no such license shall be construed to create

any right, beyond the terms, conditions, and periods of

the license.” Other statutory provisions, buttressed by

case law, provide reinforcement for this command. The

very concept of a three year license demands that the

holder be subject to competition at the license’s term.

To grant an advantage in the comparative hearing process

to the incumbent licensee for reasons wholly unrelated to

its performance, past and future, nullifies the competition

that the three year licensing scheme was designed to pre-

serve. A renewal expectancy based on past performance

could in fact encourage competition by providing a safe

haven for the diligent licensee. A renewal expectancy not

based on past performance will have an opposite result

since any competitive spur provided by the three year li-

cense will be substantially eliminated. And, of course,

there is no precedent in the Commission or in the courts

for a renewal expectancy not based on past performance.

I need hardly point out that CCC specifically and express-

ly relied on this competitive spur argument to strike down

the Commission’s previous renewal policy.

There are substantial antitrust and First Amendment

considerations which support my position. As CCC ex-

pressly recognizes, perhaps the most significant comparative

qualification which is ignored by a policy that entrenches

the inct:mbent licensee is diversification of ownership.2’

25 See authorities cited notes 10-11 supra.

26 447 F.2d at 1214.

27 id. at 1213 1.36.

Te EPCOT A ET 4

55a

The diversification guides, the most important single fac-

tor in the comparative hearing, constitute the prime legal

rule for dealing with the extremely concentrated VHF tele-

vision market.2? The guides thus serve both antitrust con-

28 Terre Haute Broadcasting Co., 25 F.C.C.2d 348, 353-55 (1970);

Policy Statement on Comparative Broadcast Hearings, 1 F.C.C.2d 393,

394 (1965). See WHDH, Inc., 16 F.C.C.2d 1, 12-13, on recon., 17

F.C.C.2d 856 (1969), aff'd, Greater Boston Television Corp. v. FCC,

143 U.S.App.D.C. 383, 444 F.2d 841, 859-60 (1970), cert. denied,

403 US. 923, 91 S.Ct. 2229, 29 L.Ed.2d 701 (1971); Lorain Com-

munity Broadcasting Co., 13 F.C.C.2d 106, 114, recon. denied, 14

F.C.C.2d 604, rehearing denied, 15 F.C.C.2d 388 (1968), review de-

nied, 18 F.C.C.2d 686 (1969), aff'd, Allied Broadcasting, Inc. v. FCC,

140 U.S.App.D.C. 264, 435 F.2d 68, 69 (1970); Ultravision Broad-

casting Corp., 11 F.C.C.2d 394, 410-11 (1968), aff'd, WEBR, Inc. v.

FCC, 136 U.S.App.D.C. 316, 420 F.2d 158 (1969). See generally

TV 9, Inc. v. FCC, 161 U.S.App.D.C. 349, 495 F.2d 929, 938 (1973),

cert. denied, 419 U.S. 986, 95 S.Ct. 245, 42 L.Ed.2d 194 (1974).

29 See Hale v. FCC, 138 US.App.D.C. 125, 425 F.2d 556, 562

& n.2 (1970) (Tamm, J. concurring); Bennett, Media Concentration

and the FCC: Focusing with a Section Seven Lens, 66 Nw.U.L.Rev. 15

159, 181-86 (1971). See also R. Noll, M. Peck & J. McGowan,

Economic Aspects of Television Regulation 15-16, 104-06 (1973);

House Comm. on Interstate and Foreign Commerce, Report on Net-

work Broadcasting, H.R.Rep. No. 1297, 85th Cong., 2d Sess. 559-75

(1958); Barnett, Cable Television and Media Concentration, Part 1,

22 Stan.L. Rev. 221 (1970). Failure to grant significant weight to

a diversification advantage in a comparative renewal hearing would

tend to entrench this present pattern of concentration of control by

eliminating the prospect of potential competition on the edge of the

market. Elimination of this “edge effect” has been one factor that

has weighed heavily in more recent anti-trust case law. See United

States v. Marine Bancorporation, Inc., 418 U.S. 602, 623-41, 94 S.

Ct. 2856, 41 L.Ed.2d 978 (1974); United States v. Falstaff Brewing

Corp., 410 U.S. 526, 532-37, 93 S.Ct. 1096, 35 L.Ed.2d 475 (1973)

and sources cited. If one inspects the Los Angeles viewing and ad-

EG LES NG, FOIL IE Oe my A aes od ts oP EVIE LSE TR PEG OP

56a

cerns, in regard to the market for television advertising,

* and First Amendment concerns by increasing the number

of diverse speakers. The diversification guides serve

First Amendment concerns in another manner as well.

The passle of program~regulation policies presently en-

forced by the FCC would viol%e the First Amendment

in any context other than telecommuntatjons. The jus-

tification for providing a different First Amendntatysegime

to the telecommunications field is the alleged “scarcity =

of broadcast speakers, a scarcity which if the truth were

known is a product of the extremely concentrated VHF

television market.3! Failure to effectively deal with the

concentrated VHF television market will only increase the

pressure for more program control. We thus erode our

vertising market for VHF and daily newspapers (on this definition

of the relevant market, see Multiple Ownership of Standard, FM and

Broadcast Television stations, 50 F.C.C.2d 1046, 1056, 1077, 1083

(1975)), one finds seven VHF television stations and two daily news-

papers, a total of nine competitors. Elimination of the threat of

potential competition from a merket structured in this manner would

surely fall within the rule of the cases cited previously on “edge effect”,

although the elimination of potential competition does not occur in a

merger context.

30 See Citizens Comm. to Save WEFM y. FCC, 166 U.S.App.D.C.

___, 906 F.2d 252, 270-72 (1974) (Bazelon, C. J., concurring in the

result); TV 9, Inc. v. FCC, 161 US .App.D.C. 349, 495 F.2d 929,

937-38 (1973), cert. denied, 419 U.S. 986, 95 S.Ct. 245, 42 L.Ed.2d

194 (1974); Multiple Ownership of Standard, FM and Television

Broadcast Stations, 50 F.C.C.2d 1046, 1048 (1975) and id. at 1116,

1119 (Robinson, Comm’r, concurring in part, dissenting in part),

citing Associated Press v. United States, 326 U.S. 1, 20, 65 S.Ct.

1416, 89 L.Ed. 2013 (1945).

31 See Bazelon, FCC Regulation of the Telecommunications Press,

1975 Duke LJ. 213, for a complete discussion of this powtt

57a

First Amendment freedoms in two days by a refusal to

enforce the diversification guides.

I conclude from the foregoing discussion that the court's

decision in the present case is inconsistent with CCC both

because it shortcircuits the comparative process and because

it eliminates the competitive spur upon which CCC relied in

significant part in its holding. Moreover, I think the renew-

al expectancy granted to RKO violates the Federal Commun-

ications Act independently of CCC. A review of the Com-

mission’s treatment of the diversification guides in the pres-

ent case provides additional evidence that the Commission

both shortcircuited the comparative hearing process and vio-

lated the Federal Communications Act with its renewal ex-

pectancy for RKO.

C. The FCC Failed to Follow Its Own Precedent In Its

Ruling on Fidelity’s Diversification Advantage

The FCC has traditionally granted a significant compara-

tive advantage to an applicant which possesses no other media

interests over an applicant which does possess other media in-

terests. In its 1965 Policy State on Comparative Broadcast

Hearings, the Commission had this to say about the diversi-

fication guides: *?

We believe there are two primary objectives toward

which the process of comparison should be directed.

They are, first, the best practicable service to the pub-

lic, and, second, a maximum diffusion of control of

the media of mass communications. ... Since inde-

pendence and individuality of approach are elements

of rendering good program service, the primary goals

32 Policy Statement on Comparative Broadcast Hearings, 1 F.C.C.

2d 393, 394-95 (1965).

DEOL TE ABE ORE NRRL SS RTOS IIS, SRY PAE PALER RS MOVE a

2 Ae * a i a ia I

58a

of good service and diversification of control are also

fully compatible.

As in the past, we will consider both common con-

trol and less than controlling interests in other broad-

cast stations and ether media of mass communications.

The less the degree of interest in other stations or me-

dia, the less will be the significance of the factor. Other

interests in the principal community proposed to be

served will normally be of most significance, followed

by other interests in the remainder of the proposed

service area and finally, generally in the United States.

However, control of large interests elsewhere in the

same state or region may well be more significant than

control of a small medium of expression . . . in the same

community. The number of other mass communica-

tions outlets of the same type in the community pro-

posed to be served will also affect to some extent the

importance of this factor in the general comparative

scale.

The diversification issue is a standard comparative issue and

was duly considered by the Hearing Examiner and the Com-

mission,

The following facts were developed. RKO was the licen-

see of standard, FM and broadcast television licenses in

New York City (# 1 viewing market in the country); Los

Angeles (# 2 viewing market); Boston (# 5 viewing mar-

ket): Windsor, Ontario (serving # 6 Detroit market) and

Memphis (# 45 viewing market). RKO was the licensee

of standard and FM stations in Washington-Bethesda (# 9

viewing market) and San Francisco (# 10 viewing market).

RKO has controlling interests in a massive number of

CATV franchises serving almost 100 cities and towns.

59a

Several towns are within the Grade B contour of Channel

9. RKO has other media interests, including microwave

communications facilities, a chain of movie theaters, pro-

gramming and advertising servic

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.