**Final Report**

History of the Broadcast License

Application Process

Prepared for the FCC as a deliverable for the study of "Estimation of
Utilization Rates/Probabilities of Obtaining Broadcast Licenses from the
FCC"

prepared by

KPMG LLP

Economic Consulting Services

For

Federal Communications Commission

November, 2000

Table of Contents

**I.** **Introduction** [3](#i.-introduction)

**II. Communications Act of 1934 and Early Comparative Hearings**
[4](#ii.-communications-act-of-1934-and-early-comparative-hearings)

**III. 1965 Policy Statement on Comparative Broadcast Hearings**
[5](#iii.-1965-policy-statement-on-comparative-broadcast-hearings)

Financial Requirements [7](#financial-requirements)

**IV. Minority and Female Employment and Ownership Policies**
[8](#iv.-minority-and-female-employment-and-ownership-policies)

A. Nondiscrimination Employee Practices of Broadcast Licensees
[8](#a.-nondiscrimination-employee-practices-of-broadcast-licensees)

B. Pre-1978 Ownership Policies [9](#b.-pre-1978-ownership-policies)

1\. Mid-Florida Television Corp. [9](#mid-florida-television-corp.)

2\. Rosemore [11](#rosemore)

3\. Atlas Communications [11](#atlas-communications)

C. 1978 Statement of Policy on Minority Ownership
[12](#c.-1978-statement-of-policy-on-minority-ownership)

D. Gender Ownership Policies [13](#d.-gender-ownership-policies)

1\. Gainesville Media, Inc. [13](#gainesville-media-inc.)

2\. Steele [14](#steele)

3\. Lamprecht [14](#lamprecht)

**V. Elimination of Comparative Hearing Process**
[14](#v.-elimination-of-comparative-hearing-process)

A. Bechtel [14](#a.-bechtel)

**VI. Broadcast Services** [15](#vi.-broadcast-services)

A. AM Radio [15](#a.-am-radio)

B. FM Radio [17](#b.-fm-radio)

C. Television Stations [17](#c.-television-stations)

D. Differences between AM, FM and TV
[17](#d.-differences-between-am-fm-and-tv)

**VII. Evolution of Ownership Rules**
[18](#vii.-evolution-of-ownership-rules)

**VIII. Recent Developments** [22](#viii.-recent-developments)

**IX. Conclusion** [23](#ix.-conclusion)

#   {#section .unnumbered}

# I. Introduction

This paper presents a history of the process by which applicants for
broadcast licenses have been awarded licenses directly by the Federal
Communications Commission ("FCC"). The paper has been prepared as a
deliverable for the Study of Estimation of Utilization
Rates/Probabilities of Obtaining Broadcast Licenses from the FCC (the
"Comparative Hearing Study"). The Study will assist the FCC in
implementing Section 257 of the Telecommunications Act of 1996 ("1996
Act")[^1] and Section 309(j) of the Communications Act of 1934 ("1934
Act").[^2] Section 257 of the 1996 Act mandates that the FCC identify
and eliminate market entry barriers for small telecommunications
businesses. Further, Section 309(j) of the 1934 Act requires the FCC to
further opportunities in the allocation of spectrum based services for
small businesses and businesses owned by women and minorities. The
Comparative Hearing Study will help the FCC in examining whether there
is evidence of past discrimination in the process by which broadcast
licenses have been awarded by the FCC.

One area of analysis for the study will focus on the FCC policies stated
in this paper and determine how these policies may have impacted the
outcomes of the licensing process. This paper is important in that it
provides a backdrop for understanding how FCC policies may have affected
small and women- and minority-owned businesses.

The paper is organized as follows. Section II describes the 1934 Act and
early comparative hearings. Section III discusses the Policy Statement
on Broadcast Comparative Hearings, 1 F.C.C.2d 393 (1965) (hereinafter
1965 Policy Statement). The 1965 Policy Statement was the first major
official FCC statement that outlined many of the criteria that would be
applied by the FCC during the consideration of multiple applications for
a single broadcast license. Section IV addresses the factors that
brought the elimination of comparative hearings. Section V discusses
broadcast services. Section VI describes the evolution of the FCC's
ownership rules. These rules have changed substantially since the early
1940s in order to reflect the views of Congress and the Judiciary about
how much concentration should be tolerated in local and national
broadcast markets. Section VII describes the chronology of FCC minority
and gender based ownership and employment policies. These policies were
developed by the FCC in order to carry out that part of its mission as
determined by Section 257[^3] of the Telecommunications Act of 1996 and
section 309(j)[^4] of the 1934 Act. This Section also provides a brief
summary of recent developments as they relate to gender and race-based
policies. Section VIII provides a summary to this paper.

# II. Communications Act of 1934 and Early Comparative Hearings

The FCC was created by the Communications Act of 1934 (the "Act").[^5]
The Act granted the FCC the authority to regulate "communications by
wire and radio so as to make available to all the people of the United
States a rapid, efficient, nation-wide, and worldwide wire and radio
communication service." This Act also empowers the FCC to issue
broadcasting licenses "as public convenience, interest, and necessity
requires."[^6]

One landmark court case that was resolved in 1945 reinforced the
importance of the comparative hearing process in awarding a broadcast
license when there are multiple applicants. In *Ashbacker Radio Corp. v.
FCC*, 326 U.S. 327 (1945), the Supreme Court of the United States held
that:

> Where the Federal Communications Commission has before it two
> applications for broadcasting permits which are mutually exclusive, it
> may not, in view of the provisions of the Act for a hearing where an
> application is not granted upon examination, exercise its statutory
> authority to grant an application upon examination without a hearing.

This decision set the legal precedent that a publicly distributed
license must be assigned through a process that does not exclude
competition for the license. The process of comparative hearings,
therefore, was upheld.

A comparative hearing was necessary when more than one applicant applied
for the same broadcast license. In the event of multiple applicants, the
FCC would hold a comparative hearing, a proceeding that was presided
over by an Administrative Law Judge (ALJ). The purpose of the
comparative hearing was to determine which applicant for a broadcast
license is best qualified to hold the license.

The rest of this section briefly describes the process to acquire a new
station license as it is related to the comparative hearing process and
the concept of "best qualified" applicant.

The FCC took several miscellaneous factors into consideration in the
pre-1965 comparative hearings. The factors that the Commission has
favored are \"(1) local residency of the owners, who are expected to be
thoroughly conversant with local needs, (2) integration of ownership and
management, whereby the owners will take an active part in the
day‑to‑day operation of the station, (3) active participation by
applicants in civic affairs, (4) broad diversification of background and
interests, and (5) past broadcast experience.\"[^7]

While diversification of control was never an officially stated
objective prior to 1965, the FCC mentioned it in the Federal Register in
1944[^8]. Early on, the FCC was sensitive to the danger and abuse that
could result from one organization owning a concentration of media
interests and so the FCC disfavored applicants who would gain a
\"monopoly\" in a particular region. Media interests were not limited to
broadcast media, rather, they could include newspaper or other media
outlets. Although not common, there were cases that were decided on the
basis of diversification.[^9] As will be discussed later in this paper,
in 1965[^10] the FCC made diversification a \"factor of primary
significance\" in the comparative hearing process.

In sum, in the early years of the comparative hearing process, the FCC
began to interpret the standard of \"public interest, convenience or
necessity\" in the distribution of broadcast licenses. These early
interpretations developed as trends in the licensing process and were
eventually upheld by decisions, and, as will be discussed later, were
finally codified in 1965.

# III. 1965 Policy Statement on Comparative Broadcast Hearings

Until 1965, comparative hearings proceeded on the premise that the
winning applicant should prove to best serve the public interest,
convenience, or necessity out of all of the applicants. These criteria
were too broad however and left many issues undecided. Realizing this,
the Commission issued the 1965 Policy Statement. This statement defined
the \"two primary objectives toward which the process of comparison
should be directed. They are, first, the best practicable service to the
public, and, second, a maximum diffusion of control of the media of mass
communications.\" While trying to avoid attaching absolute values to
each criterion, the Commission provided guidance on seven areas on which
a comparative hearing could be decided.

1\. Diversification of control of the media of mass communications.

2\. Full-time participation in station operation by owners.

3\. Proposed program service.

4\. Past broadcast record.

5\. Efficient use of frequency.

6\. Character.

7\. Other factors.

Each of these seven factors will be discussed below.

1.  The FCC treated diversification of control of the media of mass
    communication as a factor of primary importance in the comparative
    hearing process. If an applicant had controlling interests in other
    media of mass communications then there was the potential for this
    factor to reduce the probability that this applicant would be
    awarded a license.

How much the probability of success was reduced by this factor depended
upon:

> a\) the size of the applicant's other media holdings;
>
> b\) the proximity of these holdings to the community associated with
> the contested license;
>
> c\) the degree to which these other holdings were regional or
> national; and
>
> d\) the quantity and quality of competing media outlets in the
> localities associated with the applicant's current holdings.

This factor was of such significance that the details of the rules and
how they have changed over the years are worth describing (see section
IV).

2.  The FCC treated the degree of full time participation in station
    operation as of substantial importance in the comparative hearing
    process. An applicant would receive no credit for this factor unless
    he/she could demonstrate some form of daily participation in the
    operation of the station. Credit would be given if the applicant
    could demonstrate that he/she would be in a position of influence in
    the daily operation of the station (e.g. general manager, station
    manager, program director). Credit would also be received if the
    applicant could show local residency and/or civic participation.
    Finally, the applicant could receive limited credit if he/she
    proposed to move to the locality associated with the station or if
    the applicant could demonstrate some experience with the community
    even if they were not to be involved in the day**-**to**-**day
    operations of the station.

3.  Proposed program service was an additional factor considered by the
    FCC in the comparative hearing process after 1965. Applicants had to
    demonstrate that their program proposals were designed to meet a
    public need. Superior devotion to public service and local matters
    was looked upon favorably. This factor was only relevant when there
    were significant differences between the program services of
    competing applicants.

4.  The FCC considered previous broadcast experience as substantially
    important. This factor had the potential to add to or subtract from
    an applications probability of success. Unusual attentiveness to
    public needs and interests would improve the chance of a successful
    application while obvious inattention to public needs and interests
    would reduce the chances of success. This factor was usually only
    relevant for applicants with unusually good or unusually poor past
    performance records.

5.  Efficient use of frequency was a factor established to capture
    variation in the technical characteristics of each application.
    Namely, the Commission was interested in the number of people who
    lived within the proposed station's service area. This factor was
    typically evaluated on a case by case basis. It was especially
    relevant for services in which technical processes are less
    regimented (e.g. AM radio).

The 1965 Policy Statement introduced applicant character as a relevant
consideration in the comparative hearing process. Character deficiencies
associated with an applicant may be cited as grounds for
disqualification.

The FCC has scrutinized existing and potential licensees on the basis of
\"character.\" Up until 1985, the term \"character\" was often
interpreted as *moral* character and character inquiries often followed
the same interpretation. In 1981, the Commission issued a notice of
inquiry which discussed the standardization of policies regarding
character issues which was later described as an effort to
\"eliminat\[e\] . . . the morally-tinged decision-making of the past.\"
On January 14, 1986, the FCC issued a policy statement on character[^11]
that outlined which character issues should be considered and how those
issues should be investigated. Those actions to be considered include
the following:

a)  Fraudulent misconduct before a government agency;

b)  Criminal convictions; Antitrust and anticompetitive commercial
    practices;

c)  Violations of the Communications Act, Commission FCC rules and
    policies;

d)  Misrepresentation or lack of candor to the commission & abuse of
    process;

e)  Deceptive or fraudulent programming;

f)  Misconduct by corporate applicants;

g)  Employee misconduct; and

h)  Misconduct in parent-subsidiary relationships and related
    subsidiary.

While the range and scope of the character policy remained relatively
large, in practice, character issues generally amounted to one opponent
showing another opponent\'s lack of candor to the Commission regarding
finances, business dealings, or proposed station arrangements.
Eventually, character issues were eliminated as a comparative criterion
but were kept as a basic requirement.

6.  The FCC also allowed for an \"other\" category. This category
    allowed applicants, via a petition or motion to enlarge issues, and
    to submit other evidence they felt should be significant in the
    decision making process. The applicant submitting this additional
    information was required to demonstrate the relevance of the
    information. The practice of enlarging issues became widespread
    enough where, at one time, the Commission designated a separate
    board to hear and rule on these petitions. Ultimately, though, this
    responsibility was returned to the Administrative Law Judges.

##  *Financial Requirements*

While the 1965 Policy Statement did not explicitly address the financial
requirements of applicants, this was a central issue in a 1965
Memorandum of Opinion and Order issued by the FCC. The Commission
assigned a panel of three commissioners to review the financial issues
involved in three cases related to applications for UHF television
stations in Buffalo, Cleveland, and Boston. In each community, three
commercial VHF stations were in operation, and the question arose as to
whether a higher standard should be applied in determining the financial
qualifications. The panel concluded that each applicant should be
required to project estimated annual revenues over a three- year period
and to establish, by evidentiary proof, the basis for such estimates. A
majority of the panel further concluded that a realistic estimate of
construction costs and operating expenses were also essential and
required that each applicant disclose all factors which were considered
in computing such costs and expenses. On June 30, 1965, the Commission
adopted the following rules governing financial requirement for
applicants for proposed stations:

> \(a\) The Commission had to determine the basis of each applicant\'s
> (1) estimated construction costs, and (2) estimated operating expenses
> for the first year of operation.
>
> \(b\) In the event that the applicant depended upon operating revenues
> during the first year of operation to meet fixed costs and operating
> expenses, the Commission had to determine the basis of each such
> applicant\'s estimated revenues for the first year of operation.
>
> \(c\) The Commission had to determine, in light of the evidence, which
> of the applicants, if any, demonstrated a reasonable likelihood of
> constructing and continuing the operation of its proposed station in
> the public interest.

# IV. Minority and Female Employment and Ownership Policies 

Starting in the 1960s, the FCC has paid close attention to race and
gender issues as they relate to broadcasting and the award of broadcast
licenses. In this section, we describe the chronology of the FCC's
minority and female ownership policies, from their rise in the 1960s and
1970s to their reevaluation in the 1990s. The logic for these programs
is best expressed in various court cases and FCC policy statements.
Therefore we cite below the most important cases and policy statements
affecting the award of credit for minority and female participation in
the determination of license awards in the comparative hearing process.

## *A. Nondiscrimination Employee Practices of Broadcast Licensees*

The first time the FCC directly addressed the issue of race in a formal
policy ruling was in its 1969 policy forbidding discrimination on the
basis of race, color, religion, or national origin in employment
practice by licensees of commercial or noncommercial broadcast stations
(18 F.C.C.2d 240; 1969 FCC LEXIS 547; 16 Rad. Reg. 2d (P & F) 1561). The
Commission asserted its authority in this area by noting that the FCC is
charged with ensuring that broadcast stations operate within the public
interest and broadcast stations that have discriminatory employment
practices do not operate within the public interest. To ensure equal
opportunity in every aspect of employment opportunity, each broadcast
station was directed to establish a proactive equal employment
opportunity program. The FCC reserved the right to act against any
broadcast station that violated this policy. This established the
Commission\'s right to, among other actions, revoke licensees and
distribute them by distress sales and to hear allegations of EEO
violations in comparative hearings. While these actions presented
themselves on very rare occasions, and such occasions were restricted to
actual findings of discrimination by a court or the EEOC, this policy
was seen as a significant gender and race based policy.

However, the U.S. Court of Appeals for the District of Columbia Circuit,
in a decision issued in April 1998 (Lutheran Church - Missouri Synod v.
FCC), held that certain provisions of the FCC\'s broadcast equal
employment opportunity rules were unconstitutional. That fall, the U.S.
Court of Appeals denied the FCC's request for a rehearing of its
decision. Thereafter, on November 19, 1998, the Commission adopted a
notice of proposed rulemaking (NPRM) outlining new rules to further
equal employment opportunity in Broadcasting in a manner that is
consistent with the court's decision.

## *B. Pre-1978 Ownership Policies*

### *1. Mid-Florida Television Corp.*

While the FCC monitored for discrimination on the basis of race in the
employment practices of broadcast stations, initially the FCC refused to
include the racial composition of an applicant group as a relevant
factor in a comparative hearing. This position was initially challenged
in 1965 by the Comint Corp applicant group in the comparative hearing
for a TV broadcast license in Orlando, Florida.

In 1965, the D.C. Court of Appeals vacated the decision that awarded the
TV license to Mid Florida Corp. and opened the license to competition.
Eight applicants filed for ownership and the matter went to comparative
hearing. In the comparative hearing, one of the applicants, Comint
Corp., filed an application which included two black owners with a 14%
shared interest. The proposed community for the license awarded had a
25% minority population. Comint argued that minority ownership should be
given comparative credit on the basis of the 1965 statement on
comparative hearings (1 F.C.C.2d 393 (1965)) which stated that the \"two
primary objectives toward which the process of comparison . . . are . .
. the best practicable service to the public, and . . . a maximum
diffusion of control of the media of mass communications.\" The FCC
noted that while it:

> \"is sympathetic with Comint\'s argument and recognizes the validity
> of the goal of increased minority ownership of the media of mass
> communications .... however, the Communications Act, like the
> Constitution, is color blind and therefore, in a comparative broadcast
> proceeding, which is governed by the Commission\'s Policy Statement .
> . . Black ownership cannot and should not be an independent
> comparative factor . . . rather, such ownership must be shown on the
> record to result in some public interest."

Comint challenged the FCC's refusal to explicitly consider race in the
comparative hearing process and appealed the FCC ruling to the DC Court
of Appeals.

In the 1974 decision 495 F.2d 929 (D.C. Cir. 1974), the DC Court of
Appeals reversed the result of the Mid-Florida comparative hearing. The
Court held that comparative merit should be awarded to an applicant, two
of whose stockholders, each owning approximately seven percent of the
applicant\'s stock, were Black and would participate in the operation of
the station. The Court pointed out that both of the Black principals
were local residents of the community being applied for who had been
active in advancing the interests of Black members of the community, and
that 25 percent of the population of the area applied for were Black. It
also noted that since the highest interest owned by any of the
applicant\'s principals was ten percent, the two stockholders\'
individual and combined ownership was substantial. In addition, no
Blacks were then participating in the ownership or management of any of
the media of mass communications in that community. In these
circumstances, the Court concluded that minority stock ownership is \"a
consideration relevant to a choice among applicants of broader community
representation and practicable service to the public.\" (161 U.S. App.
D.C. at 357, 495 F.2d at 937.) The court went on to comment:

> It is consistent with the primary objective of maximum diversification
> of ownership of mass communications media for the Commission in a
> comparative license proceeding to afford favorable consideration to an
> applicant who, not as a mere token but in good faith, as broadening
> community representation, gives a local minority group media
> entrepreneurship\.... We hold only that when minority ownership is
> likely to increase diversity of content, especially on opinion and
> viewpoint, merit should be awarded. (TV 9 Inc. v. FCC, 495 F.2d 929
> (D.C. Cir. 1973), cert. denied, 418 U.S. 986 (1974)).

Accordingly, without recommending or requiring any quota system, the
Court held that merit should be awarded for minority ownership where it
is likely to increase the diversity of program content, especially of
opinion and viewpoint. In a Supplemental Opinion, the Court emphasized
that it was not holding that merit should be based on Black ownership
alone, but rather in that case upon a meaningful combination of
ownership and participation in station affairs which indicated that
Black persons having a substantial identification with minority rights
would be able to translate their positions and their ownership stake
into meaningful effect on this aspect of station programming. The Court
also explained that \"merit\" meant only \"favorable consideration,\" or
a plus-factor, not a \"preference,\" and that it was to be weighed along
with other relevant factors in determining which applicant is to be
awarded a preference. (161 U.S. App. D.C. at 361, 495 F.2d at 941.)

This decision set a new precedent for the incorporation of minority
participation as a factor in the comparative hearing process.

### *2. Rosemore*

Not long after the Court of Appeals decided that minority credit for
integrated minority owners was appropriate, Administrative Law Judges
began deciding cases on this basis. Additionally, administrative law
judges at the FCC expanded on the *Mid-Florida* decision. In particular,
the considerations applied to race in the *Mid-Florida* decision were
applied to gender in the *Rosemore* decision.

In *Rosemore Broadcasting, Co., Inc*., (54 F.C.C. 2d 394, 418 (1975)),
the FCC reasoned that integrated female ownership should be awarded
credit in comparative hearings because women, like minorities, are
\"likely to increase diversity of content.\" The FCC went on to state
that female participation in an application can be given credit when it
"reflects broader community representation." Because two of the three
individuals associated with *Rosemore Broadcasting Co.'s* application
were female and these women planned on playing a significant role in the
day**-**to**-**day operation of the broadcast station, the *Rosemore*
application was enhanced in the FCC eyes. The *Rosemore Broadcasting
Company* went on to win the license in the comparative hearing.

### *3. Atlas Communications*

As in other cases[^12], in 1976 the FCC relied on reasoning set forth in
*Mid-Florida* when it granted a nighttime broadcast license to a
minority owned organization. In this decision, known as the *Atlas
Communications* decision (61 F.C.C.2d 995; 1976 FCC LEXIS 1997; 39 Rad.
Reg. 2d (P & F) 228), the FCC reasoned:

> ...Black ownership and participation are likely to bring about
> programming responsive to the needs of the Black citizenry. Therefore,
> it held that Garrett\'s identification with Black listeners was a
> factor to be taken into account by the Commission in passing on
> requests for waiver of its technical requirements.

## *C. 1978 Statement of Policy on Minority Ownership* 

Since the DC Court of Appeals in 1974 had set in place minority
ownership and employment policies within comparative hearings the FCC
and Administrative Law Judges had started awarding minority credit to
applicants for broadcast licenses. However, in 1978 the FCC observed a
\"continuation of an extreme disparity between the representation of
minorities in our population and in the broadcasting industry\" and
subsequently issued \"further Commission action\" or Statement of Policy
on Minority Ownership of Broadcasting Facilities (See 68 F.C.C.2d 979,
982). This statement formalized the use of minority merits in the
comparative hearing process. In this statement, the Commission also
officially set in place two programs that favored minority ownership of
broadcast stations. First, the tax certificate policy encouraged and
promoted minority ownership by giving a two-year like~~-~~kind-exchange
transfer tax break (USC 1071) for the sale of licenses to minorities if
the proceeds were reinvested in a similar communication industry.

The basis of the tax certificate resulted from decisions made more than
30 years earlier. In 1941, the Commission and Congress developed tax
certificates as a means to mitigate some of the financial pain inflicted
upon RCA due to the involuntary sale of its broadcast property. Tax
certificates were used again during the 1970s to ease the pain
associated with "voluntary" divestiture of properties associated with
the new cross-ownership constraints. The use of tax credits for media
outlets, however, was repealed by Congress in 1995 on the basis of
perceived abuses but new tax incentive legislation which addresses any
previous abuse is currently being proposed by Congress. The second
program put into place was the distress sale policy, which allowed for
license owners that were under scrutiny by the FCC (and under threat of
license revocation) to sell their station to a minority for 75% of the
appraised value. In return, the FCC would cease its inquiry into the
license owner. Between 1978 and 1991, the FCC approved 15 distress
sales. Note that both of these programs apply to the secondary market,
not the initial award of a license.

*Metro Broadcasting, Inc.*

Reviewing the FCC's policies under intermediate scrutiny, the Supreme
Court held that the FCC\'s policy of minority ownership and employment
in comparative hearings which gave enhancement credit for minority
ownership and participation and the policy of allowing \"distress
sales\" to FCC-approved minority-owned firms did not violate equal
protection under the Fifth Amendment.

The Court reasoned:

> Minority preference policies adopted by the Federal Communications
> Commission (FCC)\-- do not violate the equal protection component of
> the Federal Constitution\'s Fifth Amendment, where Congress has
> enacted appropriations legislation (101 Stat 1329-31, 102 Stat 2216,
> and 103 Stat 1020) prohibiting the FCC from spending any appropriated
> funds to examine or change its minority ownership polices, because (1)
> the policies in question have been mandated by Congress; (2) the
> interest in enhancing broadcast diversity is, at the very least, an
> important governmental objective; and (3) the policies in question are
> substantially related to the achievement of the government\'s
> interest, since (a) both the FCC and Congress\--whose joint
> determination must be given great weight\--have concluded that there
> is a relationship between expanded minority ownership and greater
> broadcast diversity, (b) this judgment is based on extensive empirical
> evidence rather than on impermissible stereotyping, and (c) the
> policies are in other relevant respects substantially related to the
> goal of promoting broadcast diversity**...**

## *D. Gender Ownership Policies*

### *1. Gainesville Media, Inc.* 

Approximately one month after the Commission issued Statement of Policy
on Minority Ownership of Broadcasting Facilities, a Review Board hearing
the Gainesville Media, Inc. case reanalyzed its decision regarding
female ownership credit in comparative hearings. Initially, the board
held that . . .

> since there was no evidence in the record of the extent of female
> ownership in the mass media in Gainesville, we had no basis on which
> to conclude that such participation would achieve a public interest
> benefit. Upon further reflection, we now believe the better course is
> to consider female ownership and participation, despite the absence of
> record evidence regarding the ownership situations at other stations
> (see Gainesville Media, Inc., 70 F.C.C.2d 143, 149 (Rev. Bd. 1978)).

Soon after the Gainesville decision, a review board clarified the
justification and reasoning for female ownership policies. The Board
concluded:

> . .. merit for female ownership and participation is warranted upon
> essentially the same basis as the merit given for black ownership and
> participation, but that it is a merit of lesser significance. The
> basic policy considerations are the same. Women are a general
> population group which has suffered from a discriminatory attitude in
> various fields of activity, and one which, partly as a consequence,
> has certain separate needs and interests with respect to which the
> inclusion of women in broadcast ownership and operation can be of
> value. On the other hand, it is equally obvious that the need for
> diversity and sensitivity reflected in the structure of a broadcast
> station is not so pressing with respect to women as it is with respect
> to blacks\--women have not been excluded from the mainstream of
> society as have black people (see Mid-Florida Television Corp., 70
> F.C.C.2d 281, 326 (Rev. Bd. 1978), set aside on other grounds, 87
> F.C.C.2d 203 (1981)).

This decision demonstrated that credit is applied for female
participation in a broadcast license application, but that credit is not
as significant as the credit applied for minority participation in a
broadcast license application.

### *2. Steele*

The Steele Court, in contrast to Mid-Florida, ruled against the use of
gender policies in the comparative hearing process. \[See *Steele v.
FCC* 770 F.2d 1192\].(D.C. Cir. 1985)**.** Mr. Steele appealed a
comparative hearing decision ruling that the gender credits provided by
the FCC in the comparative hearing violated the Constitution. While not
ruling on the constitutionality of the gender distinction, the court did
rule that the FCC exceeded its authority in establishing the gender
credits.

After rendering its decision, a majority of the judges on the D.C.
circuit court agreed to rehear the case and the initial decision was
vacated. Prior to the new hearing, the FCC initiated a notice of inquiry
on the topic of race and gender ownership and employment policies in the
awarding of broadcast licenses (Reexamination of the Commission\'s
Comparative Licensing, Distress Sales, and Tax Certificate Policies
Premised on Racial, Ethnic, or Gender Classifications, Notice of
Inquiry, 1 FCC Rcd 1315 (1986), modified 2 FCC Rcd 2377 (1987)). The
goal of this inquiry was to collect information in support of the
Commission's standing policies. This inquiry was frozen in 1988 by an
act of Congress (Continuing Appropriation Act for Fiscal Year 1988) and
remained frozen through 1994.

### *Lamprecht*

The early 1990's saw a movement away from the use of gender and racial
ownership and employment policies in the comparative hearing process. In
*Lamprecht v. FCC*, 958 F.2d 382 (D.C. 1992) the D.C. Circuit Court held
that the FCC's use of gender integration as a "plus factor" in the
comparative hearing setting was unconstitutional under Metro
Broadcasting's intermediate level of strict scrutiny. The court asserted
that the employment of generalizations concerning a particular group's
behavior as contrasted with another group's behavior must be supported
by evidence. The Court found that the FCC had not met this standard by
demonstrating a measurable link between female participation in the day
to day operation of a broadcast station and the programming choices of
said station.

# V. Elimination of Comparative Hearing Process

## A. *Bechtel*

In 1993's *Bechtel* decision 10 F.3d 875 (D.C. Cir. 1993), the D.C.
Circuit Court found that the "continued application of the integration
credit is arbitrary and capricious, and therefore unlawful." The court
stated that the policy of extending additional credit to applicants who
intended to personally manage and operate the broadcast stations was
"without foundation." By invalidating the integration credit the court
effectively eliminated gender and race ownership and employment policies
associated with the integration credit. In 1994 the FCC suspended all
active comparative hearings until an adequate resolution to the issues
raised in *Bechtel* could be formulated.

The Telecommunications Act of 1996 eliminated the role of comparative
hearings in the renewal of broadcast licenses. The 1994 suspension of
the comparative hearing process effectively became permanent in 1997
when Congress mandated that the FCC utilize a competitive bidding
process for the distribution of all future commercial broadcast license
awards.[^13] The first auction associated with this mandate occurred in
October of 1999 and generated (unofficially) about \$58 million from the
distribution of 116 broadcast licenses and included several frozen
license applications from the *Bechtel* ruling.

While minority ownership policies were not included in this auction
process, first-time broadcasters and "small" broadcasters were accorded
with auction bidding credits to assist in their bidding.

# VI. Broadcast Services

Before 1965, AM radio was the primary broadcast service. Both television
and FM radio were generally in the experimental stage prior to World War
II and therefore, the early years of the license application process and
comparative hearing process consisted almost entirely of AM radio.

## *A. AM Radio*

In these early years (and still today), the AM radio license application
process largely consisted of meeting technical requirements. The
applicant was required to find a frequency that did not interfere with
existing stations and had to meet a variety of other technical
requirements. Some of the technical tests necessary to complete the
application process can be complex and therefore quite expensive. In
particular with AM radio, applicants must deal with the use of
directional patterns and the use of different transmitter power during
the day and night to minimize potential interference with other
stations. Applicants were also required to demonstrate that an award in
their favor would result in an "efficient and equitable" distribution of
radio spectrum. For example, each applicant was required to describe the
local community\'s broadcasting needs and how their station would meet
those needs.

Once the applicant had met the technical requirements, the application
for an AM radio broadcast license was listed in the Federal Register for
30 days. During this time, interested parties could file a complaint
against the applicant or apply for the same license. Because the initial
applicant received no preference for filing first, these rules presented
a significant amount of risk for the initial applicant that they might
not receive the benefits from their investment in time, effort and money
spent to pass the technical requirements.

In cases where there was a legitimate objection to a license application
from a third party or even when there was an objection from a
superficially qualified competing applicant, then the license
application would be redirected to a comparative hearing. If there were
no competing applicants and no third party objection**,** then the
license would be granted if the applicant had no other significant
defects.

As is the case with almost all formal legal proceedings, it was possible
for the interested parties to settle the dispute outside the formal
proceeding. In particular, comparative hearings could be settled by the
competing parties before the ALJ reached a decision. Often one of the
applicants competing for a license "bought-out" the other applicants by
offering money, payment of costs, cooperation or outright merger.

In the 1940s, the Federal Communications Commission (the successor to
the Federal Radio Commission) created a group of 25 powerful stations
operating at 50kw. Each station shared its daytime channel frequency
with other stations around the country, but at sundown as the other
stations left, the air the channel was clear except for the powerful
stations that at night could reach distant and remote areas of the
country.

In 1980, the FCC decided to end the "clear channel" protections but to
protect those stations from interference for a radius of 750 miles. It
allowed the clear channel stations to reach larger areas than ordinary
stations, but permitted an additional 125 stations at night. The new
stations were limited in power to 1 kw except in special cases, and the
FCC expressly refused to allow the clear channel stations to raise their
power above 50kw.[^14]

International developments led the FCC to decide to reduce the
congestion in the existing AM band. By allowing existing AM licensees to
operate new stations in the expanded band and then after a transition
period shut down their old stations, the FCC hoped to reduce
interference and improve signal quality. The FCC limited the entire
expanded band to the migrating AM stations.

In 1990, there was a freeze on all AM broadcast applications during the
inquiry into improving AM radio. Final assignment of the new channels
was delayed by petitions for reconsideration filed by the NAACP, the
League of United Latin American Citizens, and the National Black Media
Coalition. They asserted that \"awarding 100% of the expanded band to
incumbent broadcasters \'will have little or no impact on AM band
interference,\" whereas awarding some of the expanded band to minorities
would substantially alleviate the \'gross underrepresentation\' of
minorities in the ownership of broadcast stations.\" These groups
proposed that incumbent broadcasters migrating to the expanded band
would issue tax certificates for selling their existing band stations to
minorities. The seller would retain its license for a station in the
expanded band. The FCC rejected this proposal and held that its earlier
decision in reducing AM congestion had to be the top priority in
awarding expanded band licenses.

## *B. FM Radio*

FM is located in the VHF band. It occupies frequencies between 88 and
108 MHZ and is allowed a broadcast range of 30 to 75 miles. That
spectrum space is divided into 100 assignable channels each 200 kHz
wide. The lowest 20 channels are reserved for noncommercial educational
stations; the remaining 80 are for commercial use.

In 1983, in an effort to meet the increased demand for FM stations, the
FCC initiated a drop-in rulemaking[^15] allowing new FM stations to be
started without interfering with present broadcasters. In the FM drop-in
rulemaking, the FCC voted to give a preference to both AM daytime
broadcasters and to minority applicants.

## *C. Television Stations*

By the end of 1956, 395 VHF stations and 96 UHF stations were on the
air. By 1960 only 75 (15%) of the 575 commercial stations on the air
were UHF, even though 70 percent of the total channel assignments were
UHF. The underutilization of UHF spots led the FCC to reallocate
frequencies to other uses, e.g., land mobile use. In 1980, 63 percent of
the television assignments were UHF.[^16] The vacancy rates were as
follows: 61 of the 578 VHFs; 266 of the 648 commercial UHFs. In the top
100 markets, vacancies existed on 86 UHF channels but on no commercial
VHF. In the top 200 markets, the figures were 176 UHF vacancies and six
VHF vacancies.

Starting in 1979, UHF stations became more attractive due to the growth
and development of cable television. When received through cable, UHF
and VHF stations are of comparable quality. Moreover, FCC rule changes
regarding cable allowed a single television station to become a
\"superstation\" by supplying its programs by satellite to cable systems
throughout the country.

## *D. Differences between AM, FM and TV*

The television and FM radio license application process had a few
important differences from the AM radio license. Technically, television
and FM licenses were less complicated and therefore less expensive to
apply for. In particular, the guidelines associated with the assignment
of frequency and distance separation of stations is relatively
straight-forward given that both of these services broadcast on a
"line-of-sight" principle and are not subject to the same impact that
the ionosphere inflicts upon AM transmission. Rules for the separation
of television and FM stations are even listed clearly in the Code of
Federal Regulations (47 CFR Part 73). Further, the Commission had
allocated television and FM "channels" to cities, which as a result
frequently eased the search for an open frequency. As with AM radio
license applications, the initial application for a particular FM radio
license was listed in the Federal Register for 30 days. Again, during
this listing period additional license applicants could enter the
process or a third party, not associated with an applicant, could object
to any of the applications. In particular, an incumbent radio station
could have objected to an application on the basis that the market in
question could not economically support another station or if they felt
that the new station would improperly interfere with their signal.
Mutually exclusive licenses would eventually be resolved through the
comparative hearing process. Also, similarly to AM stations, these
mutually exclusive applicants could settle their case prior to an ALJ
decision.

# VII. Evolution of Ownership Rules 

As discussed previously, diversification of control of mass media was of
primary importance as a factor in the comparative hearing process.
Therefore the ownership rules had a very significant effect on
determining who could apply for a broadcast license. This section
describes the chronology of the ownership rules as they have evolved
since the early 1940s.

The only information that we have seen regarding rules prior to the
1950s pertains to the breakup of RCA in the early 1940's. Resulting from
the Chain Broadcasting Report, the FCC, with the blessing of the Supreme
Court, ordered RCA, which owned two separate NBC radio networks (the Red
and Blue networks), to divest the Blue network to Edward Noble (the Blue
network would eventually become ABC). In response to the dramatic growth
in broadcast outlets and their growing influence in the transmission of
information to society in addition to the possibility of a firm
controlling too much of an area's media, the FCC introduced its first
set of ownership rules in the 1950s.

In its role of ensuring that a diversity of viewpoint exists, the FCC
has the authority to determine how many stations a single person or
group may control and at times has determined what percentage of the
audience a single person or group may achieve. The limits on ownership
have changed over the years as prevailing views have changed on just
what constitutes too little diversity or too much control of the media.
Also impacting these prevailing views has been the increase in media
outlets in most markets, from new radio and television stations to
cable/satellite television to now the Internet. Until recently, though,
the limits on the local ownership of media outlets did not vary
according to the size of the market that the station is trying to reach.
In effect, the local ownership constraints were "one size fits all."

> The logic for the ownership limitation were reaffirmed in a number of
> judicial decisions. For example, in *Citizens Communications Center v.
> FCC*, 447 F.2d 1201 (D.C. Cir. 1971), the United States Court of
> Appeals for the District of Columbia observed that \"public interest,
> convenience, and necessity\" would be best served if licenses were
> owned by a diverse set of people. The court stated:
>
> Since one very significant aspect of the 'public interest,
> convenience, and necessity' is the need for diverse and antagonistic
> sources of information, the Commission simply cannot make a valid
> public interest determination without considering the extent to which
> the ownership of the media will be concentrated or diversified by the
> grant of one of the applications before it.

While this decision reflected the belief that ownership should not be
concentrated in the hands of a few, it also reflected the belief that
even a diffuse ownership did not necessarily fulfill the public need for
a diversity of viewpoint. In this decision, the court also recognized
the disparity between the number of licenses held by minorities versus
the number of licenses held by non-minorities.

> 'As new interest groups and hitherto silent minorities emerge in our
> society, they should be given some stake in and chance to broadcast on
> our radio and television frequencies. According to the uncontested
> testimony of petitioners, no more than a dozen of 7,500 broadcast
> licenses issued are owned by racial minorities. .... While no quota
> system is being recommended or required, and while the fairness
> doctrine no doubt does serve to guarantee some minimum diversity of
> views, we simply note our own approval of the Commission\'s
> long-standing and firmly held policy in favor of decentralization of
> media control. Diversification is a factor properly to be weighed and
> balanced with other important factors, including the renewal
> applicant\'s prior record, at a renewal hearing. For two strong
> statements by the Commission itself on the importance of
> diversification, see Bamberger Broadcasting Service, Inc., 3 Pike &
> Fischer R.R. 914, 925 (1946), and Policy Statement on Comparative
> Broadcast Hearings, 1 F.C.C.2d 393, 394 & n. 4 (1965).'

Table 1 shows the ownership limits and how they have changed from 1950
to today. From 1950 until 1970, any single person or group could own 1
AM and 1 FM station and 1 television station in a local market. For the
national market, the limits were 7 AM and 7 FM and 7 television
stations, of which only 5 could be VHF. There was no limitation on cross
ownership during this period. During this period, owners of an AM
station frequently applied for and/or purchased FM and television
stations to complement the AM station that they already owned in the
market.

The 1970s introduced cross-ownership rules to stimulate the growth in
diversity in the media. First in 1970, the Commission prohibited the
cross ownership of radio and TV facilities in a city. Later in 1975, the
Commission extended the cross-ownership prohibition to newspapers and
broadcast facilities. In both cases, the new rules prohibited new
combinations, but grandfathered prior combinations. To encourage
breaking up pre-existing cross ownership situations, the FCC offered the
use of tax certificates which provided some monetary incentives for
owners holding a variety of media interests to voluntarily divest. In
some occasions, interested parties challenged the broadcast licenses of
firms that had not voluntarily divested of some properties.

In contrast to the more stringent regulations with respect to cross
ownership of local media, the local and national ownership regulations
regarding television and radio stations have, in general, become less
stringent over time. Since 1985, there has been a gradual relaxation of
the restrictions on the number of radio and TV stations that can be held
in both local and national markets, with dramatic rule shifts in 1992
and 1996. Today, the number of stations per market now depends on the
number of stations in the overall local market (although both the
Department of Justice and the FCC frequently review the share of
advertising revenue held by the merged firm before approving of any
transaction.). For the national market, there has been a gradual
increase in the number of stations until finally in 1996 there is now no
limit on the number of stations that can be held nationally (although,
firms cannot own television stations that serve more than 35% of the
nation's population).

With respect to cross ownership rules, there has also been some gradual
increase in flexibility. By 1985, the FCC began granting occasional
waivers (such as in the case of Capital Cities purchase of ABC in which
Capital Cities was allowed to maintain cross ownership of radio and
television stations in several markets), allowing some degree of cross
ownership of TV and radio stations and between broadcast stations and
newspapers. As recent as this year, the FCC has begun to liberalize the
rules prohibiting cross ownership and has formally relaxed the
prohibition so that cross ownership between radio and television
stations can occur in markets where there are at least a minimum
threshold number of media outlets. The relaxation of cross ownership
restrictions has so far not been extended to joint ownership of TV and
newspapers, or radio and newspapers.

**Table 1. Local, National, and Cross Ownership Rules**

**(1950 -- 1999)**

+--------+-------------------+----------------------+----------------+
| **     | **Local Market**  | **National Market**  | **Cross        |
| Year** |                   |                      | Ownership**    |
|        |                   |                      |                |
|        |                   |                      | **Rules**      |
+--------+-------------------+----------------------+----------------+
| **1950 | 1 AM and 1 FM     | 7 AM and 7 FM        | None           |
| R      |                   |                      |                |
| adio** |                   |                      |                |
+--------+-------------------+----------------------+----------------+
| **TV** | 1 TV              | 7 TV of which only 5 |                |
|        |                   | can be VHF           |                |
+--------+-------------------+----------------------+----------------+
| **     | Prohibit          | Same as 1950         | Prohibit       |
| 1970** | ownership of      |                      | ownership of   |
|        | radio and         |                      | radio and      |
|        |                   |                      |                |
|        | TV stations in    |                      | TV stations in |
|        | the same market.  |                      | the same       |
|        |                   |                      | market.        |
|        | Grandfathered     |                      |                |
|        | existing cross    |                      | Grandfathered  |
|        |                   |                      | existing cross |
|        | ownership.        |                      |                |
|        |                   |                      | ownership.     |
+--------+-------------------+----------------------+----------------+
| **     | Same as 1970      | Same as 1970         | Additional     |
| 1975** |                   |                      | prohibition of |
|        |                   |                      |                |
|        |                   |                      | ownership of   |
|        |                   |                      | TV and         |
|        |                   |                      |                |
|        |                   |                      | newspapers in  |
|        |                   |                      | same market.   |
|        |                   |                      |                |
|        |                   |                      | Grandfathered  |
|        |                   |                      | existing cross |
|        |                   |                      |                |
|        |                   |                      | ownership.     |
+--------+-------------------+----------------------+----------------+
| **1985 | 1 AM and 1 FM     | 12 AM and 12 FM;     | Same as 1975,  |
| R      |                   | plus 2 additional AM |                |
| adio** | 1 TV except could |                      | However,       |
|        | add a 2^nd^ if it | and FM if they are   | waivers        |
| **TV** | was a             | controlled by        |                |
|        |                   | Minorities           | occasionally   |
|        | satellite of the  |                      | granted.       |
|        | first.            | or small business.   |                |
|        |                   |                      |                |
|        |                   | 12 TV plus 2 TV if   |                |
|        |                   | they are controlled  |                |
|        |                   | by                   |                |
|        |                   |                      |                |
|        |                   | minorities or small  |                |
|        |                   | business. TV         |                |
|        |                   | Stations             |                |
|        |                   |                      |                |
|        |                   | may reach no more    |                |
|        |                   | than 25% of          |                |
|        |                   | population.          |                |
|        |                   |                      |                |
|        |                   | UHF receive 50%      |                |
|        |                   | credit in population |                |
|        |                   |                      |                |
|        |                   | determination.       |                |
+--------+-------------------+----------------------+----------------+
| **1989 | Same as 1985.     | Same as 1985.        | > The          |
| R      |                   |                      | > Commission   |
| adio** |                   |                      | > adopted      |
|        |                   |                      | > ruling that  |
| **&**  |                   |                      | > relaxed      |
|        |                   |                      | > previous     |
| **TV** |                   |                      | > rulings      |
|        |                   |                      | > prohibiting  |
|        |                   |                      | > cross        |
|        |                   |                      | > ownership of |
|        |                   |                      | > TV and       |
|        |                   |                      | > Radio. The   |
|        |                   |                      | > FCC adopted  |
|        |                   |                      | > a waiver     |
|        |                   |                      | > policy       |
|        |                   |                      | > permitting   |
|        |                   |                      | > many Radio/  |
|        |                   |                      | > TV           |
|        |                   |                      | >              |
|        |                   |                      |  combinations. |
|        |                   |                      | > (for summary |
|        |                   |                      | > See MM       |
|        |                   |                      | > Docket No.   |
|        |                   |                      | > 91-221,      |
|        |                   |                      | > Released     |
|        |                   |                      | > Aug. 5,      |
|        |                   |                      | > 1999)        |
+--------+-------------------+----------------------+----------------+
| **1992 | In markets with   | 18 AM and 18 FM;     | Same as 1989   |
| R      | 15 or more        | plus a non           |                |
| adio** | stations, 2       | controlling          |                |
|        |                   |                      |                |
| **TV** | AM and 2 FM as    | attributable         |                |
|        | long as the       | interest in 3 AM and |                |
|        | combined          | 3 FM if              |                |
|        |                   |                      |                |
|        | Share of audience | they are controlled  |                |
|        | is less than 25%. | by minorities or     |                |
|        | In                | small                |                |
|        |                   |                      |                |
|        | Markets with less | business.            |                |
|        | than 15 stations, |                      |                |
|        | 3                 | Same as 1985.        |                |
|        |                   |                      |                |
|        | Stations with no  |                      |                |
|        | more than 2 as AM |                      |                |
|        |                   |                      |                |
|        | or FM as long as  |                      |                |
|        | it has no more    |                      |                |
|        | than              |                      |                |
|        |                   |                      |                |
|        | 50% of market's   |                      |                |
|        | stations.         |                      |                |
|        |                   |                      |                |
|        | Same as 1985.     |                      |                |
+--------+-------------------+----------------------+----------------+
| **1994 | Same as 1992      | 20 AM and 20 FM plus | Same as 1989   |
| R      |                   | a non controlling    |                |
| adio** | Same as 1985      |                      |                |
|        |                   | attributable         |                |
| **TV** |                   | interest in 3 AM and |                |
|        |                   | 3 FM if              |                |
|        |                   |                      |                |
|        |                   | they are controlled  |                |
|        |                   | by minorities or     |                |
|        |                   | small                |                |
|        |                   |                      |                |
|        |                   | business.            |                |
|        |                   |                      |                |
|        |                   | Same as 1985         |                |
+--------+-------------------+----------------------+----------------+
| **1996 | In markets with   | No limit             | Same as 1989   |
| R      | 45 or more        |                      |                |
| adio** | stations, 8       | No limit, as long    |                |
|        |                   | the stations do not  |                |
| **TV** | Stations with no  | serve                |                |
|        | more than 5 in    |                      |                |
|        | either            | more than 35% of the |                |
|        |                   | nation's population  |                |
|        | AM or FM. In      |                      |                |
|        | markets with 30   | UHF receive 50%      |                |
|        |                   | credit in population |                |
|        | -- 44 stations: 7 |                      |                |
|        | radio with no     | determination        |                |
|        | more              |                      |                |
|        |                   |                      |                |
|        | than 4 in either  |                      |                |
|        | service. In       |                      |                |
|        | markets           |                      |                |
|        |                   |                      |                |
|        | with 15-29        |                      |                |
|        | stations: 6 radio |                      |                |
|        | stations          |                      |                |
|        |                   |                      |                |
|        | with no more than |                      |                |
|        | 4 in either       |                      |                |
|        | service.          |                      |                |
|        |                   |                      |                |
|        | In markets with   |                      |                |
|        | fewer than 15     |                      |                |
|        | stations:         |                      |                |
|        |                   |                      |                |
|        | 5 radio stations  |                      |                |
|        | with no more than |                      |                |
|        | 3 in              |                      |                |
|        |                   |                      |                |
|        | either service.   |                      |                |
|        |                   |                      |                |
|        | Same as1985       |                      |                |
+--------+-------------------+----------------------+----------------+

##### Table 1. Local, National, and Cross Ownership Rules continued

+--------+-------------------+----------------------+----------------+
| **     | **Local Market**  | **National Market**  | **Cross        |
| Year** |                   |                      | Ownership**    |
|        |                   |                      |                |
|        |                   |                      | **Rules**      |
+--------+-------------------+----------------------+----------------+
| **1999 | Same as 1996      | Same as 1996.        | If the market  |
| R      |                   |                      | has at least   |
| adio** | Two TV stations   | Same as 1996 but in  | 20 separately  |
|        | in market if the  | markets where firms  | owned          |
| **TV** | second outlet is: |                      | broadcast,     |
|        | Financially       | own 2 TV: doesn't    | newspaper,     |
|        | troubled[^17],    | double count towards | cable          |
|        | not yet built, or |                      | "voices:" 2    |
|        | is not among the  | 35% of nationwide    | TVs and 6      |
|        | market's 4        | population limit.    | radio stations |
|        | top-rated         |                      | or 1 TV and 7  |
|        | stations at time  |                      | radio          |
|        | of purchase and 8 |                      | stations.      |
|        | independently     |                      |                |
|        | owned TV stations |                      | If the market  |
|        | remain. An owner  |                      | has at least   |
|        | may also control  |                      | 10 separately  |
|        | overlapping       |                      | owned          |
|        | stations if they  |                      | broadcast,     |
|        | are based in      |                      | newspaper,     |
|        | different         |                      | cable          |
|        | designated market |                      | "voices:" 2 TV |
|        | areas.            |                      | and 4 radio.   |
|        |                   |                      |                |
|        |                   |                      | 1 TV and 1     |
|        |                   |                      | radio allowed  |
|        |                   |                      |                |
|        |                   |                      | everywhere.    |
|        |                   |                      | TV/Newspaper   |
|        |                   |                      |                |
|        |                   |                      | c              |
|        |                   |                      | ross-ownership |
|        |                   |                      | remain         |
|        |                   |                      |                |
|        |                   |                      | prohibited     |
|        |                   |                      | (for now).     |
+--------+-------------------+----------------------+----------------+

**Source:** FCC Records and case law: After 1950, only policy changes
are presented in the table. Where "same" is indicated, the same limits
exist as have existed in previous periods.

# VIII. Recent Developments

### *Adarand* and *U.S. v. Virginia*

After the suspension of the comparative hearing process due to the
*Bechtel* decision, but before the implementation of the broadcast
license auctions, two important court cases were decided which will
impact the ability of the FCC to implement minority and female ownership
and employment policies in the future.

In the 1995 *Adarand* decision \[515 U.S. 200 (1995)\], the Supreme
Court held that any federal program that uses racial or ethnic criteria
as a basis for decision making must serve a compelling governmental
interest such as remedying past discrimination and must be narrowly
tailored to serve that interest. Furthermore, the court ruled that any
racial distinctions employed by a local, state, or the federal
government "must be analyzed by the reviewing court under strict
scrutiny," specifically overruling the standard of review used in *Metro
Broadcasting*.

In *United States v. Virginia,* 518 U.S. 515 (1996), the Supreme Court
considered the distinctions made by local, state, and the federal
government with respect to gender. In this case the court reaffirmed
that these gender distinctions need only satisfy "intermediate
scrutiny". While the definition of intermediate scrutiny is somewhat
vague, it is clear that intermediate scrutiny is a lower standard than
strict scrutiny.

# IX. Conclusion

As described above, the history of the license application process has
been subject to many changes over the years. Continuous changes in
ownership regulations, and minority and female ownership and employment
policies have occurred throughout the period. The 1960s and the 1970s
saw an increase in minority and gender policies. The basis for many of
these policies were court rulings that reversed comparative hearing
results. Yet, it was not until 1978 when the comparative hearing process
specifically outlined the use of minority ownership policies and the
introduction of other programs aimed to spark minority interest in the
secondary license market. Since this date, however, the
constitutionality of minority and gender ownership policies have become
more uncertain and can be implemented only under more rigorous
circumstances.

[^1]: 47 U.S.C. §257 (1996).

[^2]: 47 U.S.C. §309(j) (1934).

[^3]: 47 USCS § 257 states that the \"Commission shall complete a
    proceeding for the purpose of identifying and eliminating . . .
    market entry barriers for entrepreneurs and other small businesses
    in the provision and ownership of telecommunications services and
    information services, or in the provision of parts or services to
    providers of telecommunications services and information services."

[^4]: 47 USCS § 309(j)(3)(B) states that the FCC has the responsibility
    of \"promoting economic opportunity and competition and ensuring
    that new and innovative technologies are readily accessible to the
    American people by avoiding excessive concentration of licenses and
    by disseminating licenses among a wide variety of applicants,
    including small businesses, rural telephone companies, and
    businesses owned by members of minority groups and women."

[^5]: Communications Act of 1934, ch. 652, 48 Stat. 1064, 73rd Cong., 2d
    Sess. (1934) codified as amended at 47 U.S.C. §151 et seq. (1937).

[^6]: Lawmakers anticipated the possibility that disputes might arise in
    the process of awarding broadcast licenses. Section 309 (a) of the
    Act grants authority to the FCC to assign any dispute over a license
    to a judicial hearing:

    If upon examination of any application for a station license or for
    the renewal or modification of a station license the Commission
    shall determine that public interest, convenience, or necessity
    would be served by the granting thereof, it shall authorize the
    issuance, renewal, or modification thereof in accordance with said
    finding. In the event the Commission upon examination of any such
    application does not reach such a decision with respect thereto, it
    shall notify the applicant thereof, shall fix and give notice of a
    time and place for the hearing thereon, and shall afford such
    applicant an opportunity to be heard under such rules and
    regulations as it may prescribe.

[^7]: 64 Harv. L. Rev. 947

[^8]: 9 FED. REG. 702

[^9]: 4 F.C.C.2d 227. 8 RR 2d 330 (1966) (3 R.R. 1961 (1948)

    ? 1 F.C.C.2d 393 (1965).

[^10]:

[^11]: *Policy Regarding Character Qualifications in Broadcast
    Licensing*, 102 FCC 2d 1179 (1986) (\"Character Qualifications\"),
    modified, 5 FCC Rcd 3252 (1990) (\"Character Qualifications
    Modification\"), recon. granted in part, 6 FCC Rcd 3448 (1991),
    modified in part, 7 FCC Rcd 6564, 6566 (1992) ( \"Further Character
    Qualification Modification\").

[^12]:
    ###  Flint Family Radio Inc.

    In the 1977 Flint Family Radio (61 F.C.C.2d 995; 1976 FCC LEXIS
    1997; 39 Rad. Reg. 2d (P &F) 228) decision the FCC appears to
    heighten the importance of minority ownership and proposed
    participation in the comparative hearing setting. The Commission
    applied the rationale of the TV 9 case to this proceeding, and
    decided that "it is apparent . . . substantial merit for . . . Black
    ownership and proposed participation must be awarded to an applicant
    with minority ownership interests." Ultimately, the FCC awarded
    \"moderate preference for integration of ownership and management
    and a substantial preference for Black ownership and participation\"
    and made \"these preferences. . . decisive\" in awarding the license
    to Flint Metro Mass Media, Inc. The commission stated that:

    > While we agree that civic participation is a factor to be
    > considered in determining the significance of the merit, the
    > Supplemental Opinion of the Court makes it quite clear that the
    > two essential elements necessary to receive merit are Black
    > ownership and participation by these owners in station affairs.
    > Moreover, as detailed in the Initial Decision (see paragraphs
    > 59-78 of the Initial Decision), Metro\'s principals sufficiently
    > participated in civic affairs to sustain the award here.

    This statement clarified the primacy of importance of both minority
    ownership and the participation of these owners in station affairs.

[^13]: See Omnibus Budget Reconciliation Act of 1993. Pursuant to this
    Act, the FCC received the authority to conduct auctions. Also note
    that competitive bidding was not required for broadcast license
    awards in which only one applicant expressed interest.

[^14]: The FCC also expanded the AM band in 1979 as part of the World
    Administrative Radio Conference. At this time the AM band was
    increased in the Western Hemisphere from 525 to 1705 kHz. Agreements
    reached at subsequent Regional Administrative Radio Conferences
    limited the stations in the new section of the band to 10kw.

[^15]: See 94 F.C.C.2d 152; June 14, 1983 Released; Adopted May 26, 1983

[^16]: UHF stations are more expensive to operate because it takes 10
    times as much power for a UHF transmitter to reach the same area as
    a VHF transmitter.

[^17]: At least one of the following conditions must apply:1) Station
    has been off the air for at least four months (because of financial
    difficulty) and the buyer is the only "reasonably available" entity
    willing to operate the station; 2) the station has an audience share
    below 4%; 3) station is in poor financial condition (negative cash
    flow for the previous 3 years); 4) there is proof of no out of town
    buyer; 5) there is a demonstration of "tangible and verifiable"
    public-interest benefits beyond mere cost savings and efficiencies.