Action in the Event of "Failure of the Market"

The Notice states that while the Commission will no longer examine percentages of news and public affairs programming, it "will not completely absent itself from consideration of these factors." It will expect adequate performance market-by-market. In the event of "failure of the market," the Commission will "take whatever actions are required by the public interest to correct the situation" (Para. 260). Comments are sought as to what form of action this might be.

On the one hand we seem to be abandoning these time-honored measurements of the broadcasters' public-service performance. On the other hand we insist "we intend to see that the public interest is served" (Para. 242). How will we assess "failure of the market” in this area of informational programming? By what standards will the Commission judge such failure? Does the Commission have the legal authority to examine and regulate markets? How will individual stations know what is expected of them? How will public-interest groups be able to proceed?

Esther Peterson, Consumer Advisor to the President, phrased it well in testimony before the House Communications Subcommittee on July 10, 1979:

"The goal of informing the public is best served when all stations are obligated to contribute to its advancement." Otherwise, she pointed out, "minority and other citizens groups would lose their ability to negotiate with broadcasters about programming that addresses their interests."

In this proposed move the Commission gives the impression of seeking to delete informational programming requirements completely. In actuality, however, it would be jettisoning clear guidelines for news and public affairs, and substituting in their place "further actions" of an undefined nature. This somewhat equivocal posture of the Notice gives rise to the difficulties.

If the undefined "further actions" are to become specific laterfashioned on the responses to the Notice-it would seem better to withhold judgment on this course of action until all the comments are in.

Commercialization

The Commission over the years has encouraged self-regulation in this area. Examples of self-regulation are the NAB Radio Code limit of 18 minutes of commercial matter per hour, and the NAB Television Code and INTV Code limit of 9 1/2 minutes of commercial matter per hour for weekend children's television programs.

The fact that the FCC has endorsed these self-restrictions and made them its own policies has resulted in greater adherence to them by broadcasters. (It has also helped to gradually bring the commercialization levels down.) If we should now drop our interest in them, the trend would be in the opposite direction. The percentage of licensees

adhering to them would decline. It can be argued, as the Notice does, that the marketplace will take care of this, that the public will avoid stations that overcommercialize. But there is not much evidence to support this contention. In some markets the station or stations choosing to exceed the 18-minutes-per-hour limit could well pull along some of the others, who would feel that they, too, had to do so in order to be competitive. The public in these markets would then be subjected to higher levels of commercialization.

The fact is, I am convinced, that the public expects the FCC to involve itself in commercialization. It expects us to indicate reasonable limits beyond which a broadcaster is overcommercializing and imposing an undue burden on the listening and viewing audiences.

So I have trouble with any proposed action by the Commission that diminishes our consideration of, and interest in, the matter of overcommercialization. On this point, therefore, I must dissent.

STATEMENT OF COMMISSIONER JOSEPH R. FOGARTY

Concurring in Part; Dissenting in Part

IN RE: DEREGULATION OF Radio

I concur in the Notice of Inquiry and Proposed Rule Making to the extent that it seeks full public comment on the deregulatory issues and options set forth, but I dissent to the declaration of a Commission preference at this time in favor of completely abandoning our regulation concerning ascertainment, nonentertainment programming, and commercialization.

This Notice is premised on changes in the radio industry, principally the great increase in the number of radio stations since the commencement of regulation in 1934, and on "neoclassical" economic theory which contends that consumer welfare is best served by the free, unrestrained interplay of market forces of supply and demand. The Notice posits the fundamental issue of whether there can be greater Commission reliance on marketplace forces and commercial judgments in ensuring that radio will serve the public interest in programming diversity, including service to significant minority interests and tastes. With respect to our current nonentertainment programming guidelines, the Notice develops the economic argument that absent regulation the radio marketplace will still provide listeners with adequate news programming. Although the Notice concedes that "public affairs" programs would decline under deregulation, it views their potential loss as acceptable, arguing that this programming is non-economic and that the discerned industry practice of "graveyarding" public affairs indicates that listeners do not value such programs. The Notice argues a case for the deletion of all ascertainment requirements as redundant of normal business judgments in a competitive radio marketplace and as imposing unnecessary regulatory burdens. Current guidelines on

overcommercialization are considered similarly unnecessary in a competitive marketplace.

To consider carefully and to seek full public comment on these issues and arguments is proper and appropriate. We are under no mandate to prefer particular regulation simply for its own sake. Indeed, we have a continuing responsibility to reassess the costs and benefits of our regulatory means and ends to ensure that the public interest is being served in fact as well as in theory. Whether a deregulated radio marketplace can be relied upon to meet the public interest more effectively than regulation is a matter of debate before Congress and this Commission. This Notice hopefully will provide the Commission with a record for possible legislative recommendations and possible agency action as well.

While I concur in the commencement of this proceeding, I strongly believe that the Notice only states the fundamental questions; it does not answer them. The Notice raises difficult and complex legal and policy issues whose resolution is at this time far from clear. It is therefore premature for any categorical statement of a preferred course of Commission action.

At the outset of this inquiry, it bears emphasizing that because the Commission is proposing changes in not only its regulation but also in its interpretation of its legislative charter, the Communications Act of 1934, as amended, strict adherence to the principles of reasoned agency decision making is essential. While the Commission's exercise of its quasi-legislative rule making power is entitled to a wide degree of deference, our discretion is not unbounded. Our rule making actions must be consistent with the standards of the Administrative Procedure Act which require the setting aside of any "agency action, findings, and conclusions" which are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,"1 or "in excess of statutory jurisdiction, authority, or limitations, or short of statutory right." The stringency of review under these standards depends in a given case "upon analysis of a number of factors, including the intent of Congress as expressed in the relevant statutes, particularly the agency's enabling statute; the needs, expertise, and impartiality of the agency as regards the issue presented; and the ability of the court effectively to evaluate the questions posed."3 Beyond these general principles, court decisions have established that more exacting scrutiny will be called for when for some reason the presumption of regularity usually accorded agency decision making is rebutted. Such rebuttal may be implicated when an agency departs from its consistent and

longstanding precedents or policies. As the Court of Appeals for the Second Circuit has stated:

changes in policy must be rationally and explicitly justified in order to assure "that the standard is being changed and not ignored, and that [the agency] is faithful and not indifferent to the rule of law." Although an agency must be given flexibility to reexamine and reinterpret its previous holdings, it must clearly indicate and explain its action so as to enable completion of the task of judicial review. [citation omitted] There must be a thorough and comprehensible statement of the reasons for the decision. . .[citation omitted]*

I have set out these principles of reasoned decision making at some length because of the conviction that how we arrive at our ultimate decision on the issues presented in this Notice is as critically important as the substantive result reached. Any deregulation we adopt will be of no avail to either public or industry if it is not done right. The judicial teachings mean that as a minimum requirement, the Commission must demonstrate that any contemplated deregulation of radio will continue to meet and serve the public interest goals and purposes of our existing regulation; or, in the alternative, we must show why the public interest will be better served by modifying or abandoning those goals and purposes, if that is to be the intent or effect of any deregulatory action. The Commission must also square any deregulation with its legislative mandate, the Communications Act of 1934, as amended, and the intent of Congress in its enactment.

While I do agree with the Notice that the economic concepts of competition and "consumer well-being" are essential elements of the "public interest" standard established by the Act, they are but component parts of the public interest and not its whole. Other values in addition to "economic" satisfaction are implicated: "It is the right of the public to receive suitable access to social, political, esthetic, moral, and other ideas and experiences which is crucial here."5 In interpreting its statutory mandate, the Commission has long recognized that "the paramount and controlling consideration is the relationship between the American system of broadcasting carried on through a large number of private licensees upon whom devolves the responsibility for the selection and presentation of program material, and the congressional mandate that this licensee responsibility is to be exercised in the interests of, and as a trustee for the public at large which retains ultimate control over the channels of radio and television communications."6 The Commission's regulatory responsibility in the broadcast field "essentially involves the maintenance of a balance between the preservation of a free competitive broadcast system, on the one hand, and the reasonable restriction of that freedom inherent

♦ Office of Communication of the United Church of Christ v. FCC, 560 F. 2d 529, 532 (2d Cir. 1977).

• Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 390 (1969).

• Editorializing by Broadcast Licensees, 13 FCC 1246, 1247 (1949).

in the public interest standard provided in the Communications Act, on the other."7 8

In meeting this regulatory responsibility of balancing free competition with public interest obligation, the Commission has left broadcasting's development and presentation of entertainment programming largely to marketplace competition. However, long-standing Commis

"En Banc Programming Inquiry, 44 FCC 2303, 2309 (1970).

8 The section of the Notice treating "Historical Perspective" implies the Congress in its 1927 and 1934 enactments of broadcast legislation was primarily concerned with the incipient RCA radio monopoly. Although not entirely clear, the further implication appears intended that since the RCA monopoly has long since passed away, there is no longer any continuing statutory mandate for public interest regulation of radio. This revisionist history is conspicuously devoid of any supporting citation to the legislative record of the 1927 and 1934 Acts. Secretary of Commerce Hoover's often-cited "warning," quoted at paragraph 11 of the Notice, is on its face of broader import and effect than any such restrictive interpretation. It squares better with the long-held view that Congress considered the airwaves a natural resource to be held in trust for all the people of the United States and intended that broadcasters who receive their radio frequencies free take them as fiduciaries for the public whose interests they are licensed to serve. To quote Hoover, broadcasting was "not to be considered as merely a business carried on for private gain. . ."

The Notice also contains several recurring references to public, federally-financed broadcasting, particularly National Public Radio, in contexts which suggest that the creation and development of noncommercial radio may provide a basis for abandoning the public interest regulation of commercial radio. See paragraphs 56, 90, 133, 144 n. 155, and 156–59. Again, the Notice offers no citation to the legislative history of the public broadcasting statutes in support of this novel interpretation. There is, however, plain language to the contrary. In its Report of the legislation that created public broadcasting, the Public Broadcasting Act of 1967, the Senate Committee on Commerce stated:

The programming of these [public broadcasting] stations should not only be supplementary to but competitive with commercial broadcasting services. This competition will benefit both types of service.

In this connection your committee wishes to make crystal clear that the enactment of this legislation and the growth of noncommercial broadcasting services, will in no way relieve commercial broadcasters of their responsibilities to present public affairs and public service programs, and in general to program their stations in the public interest. S. REP. NO. 222, 90th Cong., 1st Sess. 6 (1967). Similarly, the corresponding Report of the House Committee on Interstate and Foreign Commerce stated that “The program support provided by Title II of the Bill will, among other things, enable the noncommercial educational broadcast stations to provide supplementary analysis of the meaning of events already covered by commercial newscasts." H.R. REP. NO. 572, 90th Cong., 1st Sess. 10 (1967) (Emphasis added). The legislative record of subsequent amendments to the public broadcasting charter discloses no contrary views.

The point of this digression is that the equating of "historical perspective" and legislative intent is a slippery and perilous enterprise.

• Although the subject of continuing Commission disputation, the Commission's statutory responsibility to pass upon voluntary assignments of radio licenses has been construed to require that the Commission consider whether the proposed abandonment of a distinctive radio programming format is in the public interest; where a