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07/24/84 National Association of v. Federal Communications

July 24, 1984

NATIONAL ASSOCIATION OF BROADCASTERS, PETITIONER

v.

FEDERAL COMMUNICATIONS COMMISSION AND UNITED STATES OF AMERICA, RESPONDENTS, NATIONAL CITIZENS COMMITTEE FOR

RADIO ASSOCIATION, INC., RCA AMERICAN COMMUNICATIONS, INC., INTERVENORS, NATIONAL ASSOCIATION OF BROADCASTERS, APPELLANT

v.

FEDERAL COMMUNICATIONS COMMISSION AND UNITED STATES OF AMERICA, APPELLEES, SATELLITE TELEVISION



Before TAMM, MIKVA and DAVIS,* Circuit Judges.

UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT 1984.CDC.199

Broadcasting, et al., Western Union Telegraph Company,

Forward Communications Corporation, et al., Graphic

Scanning Corporation, United States Satellite Broadcasting

Company, Inc., Direct Broadcast Satellite Corporation,

Satellite Television Corporation, Satellite Syndicated

Systems, Inc., Aerospace and Flight Test Coordinating

Council, Manufacturers Radio Frequency Advisory Committee,

CBS, Inc., National Black Media Coalition, Association of

Maximum Service Telecasters, Inc., California Public Safety

Corporation, National Citizens Committee for Broadcasting,

et al., Satellite Syndicated Systems, Inc., Forward

Communications Corporation, U.S. Satellite Broadcasting

Co., et al., Televisa, S.A., National Black Media

Coalition, CBS, Inc., Intervenors, COUNTY OF LOS ANGELES, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION and United

States of America, Respondents, Satellite Television

Corporation, Intervenor

Nos. 82-1926, 82-2233, 83-1743

Petitions for Review of an Order of the Federal Communications Commission.

Appeal from an Order of the Federal Communications Commission.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE MIKVA

Opinion for the Court filed by Circuit Judge MIKVA.

MIKVA, Circuit Judge:

Of the technological innovations currently revolutionizing the communications field, the most recent, and potentially the most significant, is direct broadcast satellite service . DBS involves the transmission of signals from the earth to highpowered, geostationary satellites which then beam television signals directly to individual homes equipped to receive them. Use of satellites massively extends the range of a broadcaster's voice by freeing it from the atmospheric limitations that traditionally limit terrestrial broadcasters to narrow broadcast areas; a single DBS signal will eventually be capable of reaching the entire continental United States. For this reason and others, DBS promises several significant advantages over existing television technology: high quality service to individuals in rural or remote areas where conventional broadcasting is inefficient; the addition of many more channels even in urban areas already receiving several television signals; "narrowcasting" of programs to specialized tastes through the ability to aggregate small, widely dispersed audiences; the development of higher quality visual and audio signals through use of high-definition-television signals; and television transmission of non-entertainment programming, such as medical date and educational information.

The regulatory approach to DBS taken by the Federal Communications Commission (the FCC or the Commission), which we review today, is as novel as the technology with which it is concerned. In essence, the Commission has chosen to deregulate DBS even before the service is born. Two proceedings are before us today that embody that approach: the Commission's Interim DBS regulations, which delineate the basic contours of the regulatory environment that DBS owners and operators will face when DBS becomes operational, and the approval of an actual application to construct this country's first multi-channel DBS system. We find that, on the whole, the FCC has done a commendable job in assuring that regulation in the communications field not impede technologies that offer substantial public benefits, and we therefore uphold the major portion of the interim DBS regulations and approve in its entirety the FCC's grant of the application to construct an actual DBS system. We also find, however, that in its zeal to promote this new technology, the FCC gave short shrift to certain of its statutory obligations, and we therefore vacate part of the Interim DBS regulations; in addition, our approval of other parts is qualified by several guidelines to which the Commission must hew in its continuing oversight of this nascent technology.

BACKGROUND

In the early 1960s, the development of satellites that could transmit signals over great distances offered new promise of expanding the availability of communications services throughout the United States. To develop this satellite technology, Congress created the Communications Satellite Corporation , a privately run, government-subsidized company which was to provide international communications links via satellite. See Communications Satellite Act of 1962, now codified at 47 U.S.C. §§ 701-44. Because early communications satellites emitted relatively weak signals that could be received by only large and expensive "dish" antennas and radio receivers, these satellites were not suited to deliver broadcast signals directly to a large number of individual homes. To be practical, broadcasting directly to viewers' residences requires very small and inexpensive antennas and receivers which, in turn, require high-powered satellites. In August 1979, however, COMSAT announced its belief that satellite and receiver technology had advanced to the point that a commercial DBS system was feasible.

Even before this announcement, the development of DBS had received considerable regulatory attention both internationally and in the United States. Unlike conventional broadcasting, which generally has no extraterritorial effect, DBS requires international supervision both because the signals sent to and from a DBS satellite will spill across international borders and because agreement is needed to fix the orbital locations in space at which various countries' DBS satellites will be located. Much of the early regulatory attention focused on what part of the spectrum to assign for transmission of DBS signals. Domestically, the FCC in 1973 indicated that some spectrum space in the 11.7-12.2 GHz band might eventually be set aside for DBS systems. Frequency Allocations -- Satellite Services, 28 Rad.Reg.2d 33 (1973). In the course of preparing for the 1979 World Administrative Radio Conference (WARC-79), the Commission then decided to seek international agreement to shift the international allocation of DBS to the 12 GHz band in order to accommodate future U.S. DBS requirements. World Administrative Radio Conference, 70 F.C.C.2d 1193, 1252 (1978). WARC-79 did allocate for international purposes the 12 GHz band to DBS; WARC-79, however, postponed assignment of specific DBS orbital locations and frequencies among Western Hemisphere countries pending completion in 1983 of a Regional Administrative Radio Conference (RARC-80).

Soon after WARC-79 concluded, the Commission began to consider how to protect and advance U.S. interests in DBS use of the 12 GHz band. On October 29, 1980, the FCC initiated a domestic proceeding to consider the prospects for United States DBS service.45 Fed.Reg. 72719 (1980) (1980 Notice). The 1980 Notice noted the rapid advances being made in DBS technology and observed that DBS was a new medium with which the Commission had no practical experience. The FCC therefore specifically sought comments on whether it should adopt interim DBS regulations that would permit both the construction of experimental DBS systems prior to RARC-83 and the operation of DBS prior to the adoption of permanent domestic DBS rules. In addition, the Commission solicited comments on the feasibility of different sharing arrangements between DBS and existing terrestrial systems occupying the 12.2-12.7 GHz band, the amount of spectrum that should be allocated to each of these two mutually exclusive services, and the costs involved and lead time required if terrestrial users had to move to frequency bands other than 12 GHz.

During the course of proceedings under the 1980 Notice, Satellite Television Corporation , a subsidiary of COMSAT and an intervenor in the present action, filed an application to construct this country's first multi-channel DBS system. STC urged the FCC to consider the application in a separate and expedited adjudicatory proceeding, rather than wait until rulemaking had been completed and formal DBS regulations promulgated. The Commission declined to process STC's application in this fashion and instead placed the application in the DBS docket so that the question of authorizing DBS prior to RARC-83 could be considered in the context of a specific DBS application. The FCC then provided additional time for interested parties to comment on DBS and on the STC application.

In June 1981, after six months of reviewing comments filed during the original and extended comment periods, the Commission released a Notice of Proposed Policy Statement and Rulemaking. 86 F.C.C.2d 719 (1981) (DBS Notice). In the DBS Notice, the Commission formally proposed to establish interim DBS regulations prior to RARC-83 and explained that the Commission was unwilling to propose permanent DBS regulations at that time because it did not yet know what international constraints RARC-83 would impose on domestic DBS. Nonetheless, according to the Commission, interim DBS rules were warranted to avoid "unnecessary delays" and to gain information that would aid in setting permanent regulatory policies. 86 F.C.C.2d at 721. To this end, the proposed interim regulations were designed to assure "maximum flexibility" -- and to impose minimum regulation -- during the interim period.

On July 14, 1982, the Commission in fact adopted interim DBS regulations (DBS Order). 90 F.C.C.2d 676 (1982). The Commission stated that immediate authorization of DBS service would significantly accelerate realization of the benefits associated with the technology and would strengthen this country's international position at RARC-83 by permitting the United States negotiators to "present immediate and demonstrable needs rather than vague conjectures as to possible requirements" for orbital slots and frequencies. Id. at 684. Subsequently, the Commission, on October 13, 1982, granted STC's application to construct an experimental DBS system that would provide subscription television service to the general public. STC Decision, 91 F.C.C.2d 953 (1982). Although STC's proposal called for service eventually covering the entire continental United States, the STC Decision granted STC construction authority for only the first phase of its proposed system, which involves two satellites designed to provide three channels of subscription television service over the eastern portion of the United States. (STC has subsequently asked the Commission for authority to provide six, rather than, three, channels of service, but the Commission has not yet acted on this request.) The grant was also conditioned upon the outcome of RARC-83 and included neither launch and operational authority nor assignment of specific frequencies and orbital locations for STC's DBS system.

In this action, petitioners the National Association of Broadcasters and the County of Los Angeles (the County) seek to overturn the interim DBS orders and the grant of STC's DBS application. A congery of intervenors also has filed brief on both sides of the important issues at the forefront of modern communications policy raised by these cases. We now turn to those issues:

ANALYSIS I. The FCC's Power to Approve Non-Local Broadcast Service

DBS technology is inherently unsuitable for the provision of traditional local broadcast service. The satellites involved cannot presently be located with the requisite precision nor economically equipped with a sufficiently large antenna to provide a spot beam capable of covering only a traditional size local community. STC Application Volume 1, at 55 n.100; JA 693 n.100. Moreover, many of the benefits of DBS -- including narrowcasting and provision of service to less densely populated areas -- could not practically be realized by a "local" DBS system. As a result, DBS, as authorized by the FCC, will provide regional or national service. The STC Decision, for example, authorizes transmission service to the entire Eastern coast of the United States.

Petitioner NAB argues that the FCC does not have the power to approve a technology that will sever broadcast services from their traditional link to a particular community. NAB seeks to rest this Luddite argument on section 307(b) of the Communications Act of 1934, as amended, 47 U.S.C. § 307(b) (the Act), which provides:

the Commission shall make such distribution of licenses . . . among the several States and communities as to provide a fair, efficient, and equitable distribution of radio service to each of the same.

47 U.S.C. § 307(b) (emphasis added). NAB reads this provision to require that broadcast licenses indeed be "distributed" among the "States" and "communities;" NAB thus concludes that the Act mandates a system of local broadcast licensing and service with which STC's authorization, and DBS in general, is "fundamentally irreconcilable."

We do not think it necessary to ascribe to the framers of the Act an intent so shortsighted as to preclude new technology that offers the promise of substantial public benefit. The plain language of the Act does not compel such impracticable consequences. Cf. United States v. Missouri Pacific Railroad Co., 278 U.S. 269, 278, 49 S. Ct. 133, 136, 73 L. Ed. 322 (1929) quoted infra at 1202. Instead, the Act emphasizes that the FCC's paramount responsibility is to achieve a "fair, efficient and equitable distribution of radio service . . . so as to make available, as far as possible, to all the people of the United States a rapid, efficient, nation-wide, and world-wide wire and communications service," 47 U.S.C. § 151. The ultimate touchstone for the FCC is thus the distribution of service, rather than of licenses or of stations; the constituency to be served is people, not municipalities. Moreover, the Commission also has an obligation to "encourage the larger and more effective use of radio in the public interest." 47 U.S.C. § 303(g). Given this obligation to facilitate expansion of this country's communications network and in light of the broad grant of authority delegated to the FCC to deal with "the rapidly fluctuating factors characteristic of the evolution of broadcasting," FCC v. Pottsville Broadcasting Co., 309 U.S. 134, 138, 60 S. Ct. 437, 439, 84 L. Ed. 656 (1940), it would be anomalous to read the Act to prevent the FCC from authorizing an innovative system of technology capable of conferring substantial benefits on all Americans. See Wold Communications, Inc. v. FCC, 237 U.S. App. D.C. 29, 735 F.2d 1465 at 1475 (D.C. Cir. 1984) ("The drafters of the Communications Act had no vision of a [satellite] industry, but they designed the statute "to avoid the necessity of repetitive legislation," by arming the Commission "with sufficiently elastic powers such that it could readily accommodate dynamic new developments in the field of communications.") (quoted cases omitted). Just as we have held that the Act does not bestow a vested right on any particular licensee to retention of its license, see Victor Broadcasting, Inc., v. FCC, 232 U.S. App. D.C. 270, 722 F.2d 756 (D.C. Cir. 1983), so too we now hold that the Act does not entrench any particular system of broadcasting: existing systems, like existing licensees, have no entitlement that permits them to deflect competitive pressure from innovative and effective technology.

In so holding we do not denigrate the importance of local programming to a national broadcasting system that is designed to serve the public interest. See Pasadena Broadcasting Co. v. FCC, 181 U.S. App. D.C. 109, 555 F.2d 1046, 1050-51 (D.C. Cir. 1977). We need not define the outer limits of the Commission's authority to make this country's broadcasting system a regional or national one, however, for two reasons. First the DBS Order does not by its terms eliminate local programming. Second, the Commission explicitly found that DBS will merely supplement the existing local broadcast system, rather than replace it, DBS Order, 90 F.C.C.2d at 691-92, and we find no error in that finding. We therefore need not decide how far the Commission may go toward the elimination of local programming to hold that not every communications service approved by the Commission need be tied to a local community.

It is true that the Commission historically has followed a policy of "localism" as a sound means of promoting the statutory goal of efficient public service. See Malrite T.V. v. FCC, 652 F.2d 1140,1144 (2d Cir. 1981). Although a regulated industry may come to regard an agency's policies as immutable elements in the background against which the industry is set, there is no need for the agency itself to confuse means with ends; when new technology permits the statutory objectives to be attained through novel means that require the alteration or abandonment of past Commission policies, the Commission may adjust its means to retail fidelity to the legislative end. See Washington Utilities & Transportation Commission v. FCC, 513 F.2d 1142, 1157 (9th Cir.), cert. denied, 423 U.S. 836, 96 S. Ct. 62, 46 L. Ed. 2d 54 (1975) ("Regulatory practices and policies that will serve the "public interest" today may be quite different from those that were adequate to that purpose in 1910, 1927, or 1934, or that may further the public interest in the future."). Indeed, the Commission has long been criticized as acting primarily to preserve the status quo, thus discouraging innovative technology, see, e.g., E. KRASNOW & L. LONGLEY, THE POLITICS OF BROADCAST REGULATION 20, (1973); D. DELUC, CABLE TELEVISION AND THE FCC 28 (1973); when it instead seizes upon the "comprehensive powers to promote and realize the vast potentialities of radio" that Congress has conferred upon it, National Broadcasting Co. v. United States, 319 U.S. 190, 217, 63 S. Ct. 997, 1010, 87 L. Ed. 1344 (1943), the Commission is to be commended rather than castigated. This is not a case in which a regulatory agency is rushing willy nilly to remove past regulations in the face of a clear congressional mandate to the contrary; here the Commission instead has sought aggressively to fulfill the statutory objectives by acting to enhance the level of services available to the public.

We therefore find little need to tarry long on the argument of the local broadcasters that the statute immunizes them from DBS competition. Because DBS has the potential to yield broadcast services that significantly further the public interest, a finding of the Commission not truly disputed by any of the parties, the Commission acted well within its powers in approving the non-localized broadcasting characteristic of DBS. II. Applicability to DBS of Broadcast Restrictions

The most innovative of the steps taken by the FCC with respect to DBS was the Commission's decision, in the service of a "flexible regulatory approach" designed to stimulate DBS technology, not to apply to DBS the major regulatory restrictions traditionally imposed on broadcasters. Central to this approach was the Commission's refusal to extend the ...


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