Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-95-01128/USCOURTS-caDC-95-01128-0/pdf.json

Parties Involved:
Channel 51 of San Diego, Inc.
Appellant
Federal Communications Commission
Appellee
Fox Television Stations, Inc.
Intervenor
Radiotelevisora de Mexico Norte, S.A. de C.V.
Intervenor
Televimex, S.A. de C.V.
Intervenor

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 22, 1995 Decided March 29, 1996

No. 95-1128

CHANNEL 51 OF SAN DIEGO, INC.,

APPELLANT

v.

FEDERAL COMMUNICATIONS COMMISSION,

APPELLEE

FOX TELEVISION STATIONS, INC., ET AL.,

INTERVENORS

Appeal of an Order of the

Federal Communications Commission

Stanley S. Neustadt argued the cause for appellant, with whom Robert B. Jacobi was on the briefs.

Clifford G. Pash, Jr., Counsel, FederalCommunications Commission, argued the cause for appellee,

with whom William E. Kennard, General Counsel, and Daniel M. Armstrong, Associate General

Counsel, were on the brief.

Norman P. Leventhal and Barbara K. Gardner were on the brief for intervenors Televimex, S.A. de

C.V. and Radiotelevisora de Mexico Norte, S.A. de C.V.

Richard S. Rodin and William S. Reyner, Jr. entered appearances for intervenor Fox Television

Stations, Inc.

Before: WALD, SENTELLE and RANDOLPH, Circuit Judges.

Opinion for the court filed by Circuit Judge SENTELLE.

SENTELLE, Circuit Judge: Channel 51 of San Diego, Inc. (Channel 51), the licensee of

Television Broadcast Station KUSI-TV, which operates on UHF Channel 51 in San Diego,

California, appeals an order of the FederalCommunications Commission (FCC) granting a permit to

FoxTelevisionStations,Inc.(Fox), to electronicallytransmit televisionprogramming fromthe United

States to Station XETV, Tijuana, Mexico, for rebroadcast into the United States. Because we hold

that the FCC misinterpreted the effect of the North American Free Trade Agreement (NAFTA) on

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the meaning of the relevant provisions of the Communications Act of 1934, we vacate the portion

of the FCC Order granting Fox permission to electronically transmit to XETV and remand the case

to the FCC for further proceedings consistent with this opinion.

I. Statutory and Regulatory Background

Congress enacted the Communications Act of 1934 for the express purpose of "regulating

interstate and foreign commerce in communication by wire and radio so as to make available, so far

as possible, to all the people ofthe United States a rapid, efficient, Nation-wide, and world-wide wire

and radio communication service." 47 U.S.C. § 151. In keeping with that purpose, the statutory

scheme incorporated a licensing system for radio and television stations that broadcast within the

United States. Section 309 sets forth the license application procedure and standards to guide the

FCC in determining whether to grant an application. Section 309(a) requires the FCC to inquire as

to whether the "public interest, convenience, and necessity will be served by the granting" of the

application. 47 U.S.C. § 309(a). Section 309(d) and (e) require the FCC to hold an evidentiary

hearing if a substantial or material question of fact arises or if the Commission is unable to determine

whether the public interest, convenience and necessity justify the granting of the license.

Because broadcasters in many areas of the country could evade the strictures of the act by

transmitting their signals across the United States border to a foreign station which could then

rebroadcast the signal back into the United States, § 325(c) specifically prohibits such transmissions

for rebroadcast without an FCC permit. Section 325(d) provides that the procedures of § 309 shall

govern FCC consideration of applications for permits to conduct the cross-border electronic

transmission otherwise prohibited by § 325(c). Accordingly, in a § 325 proceeding, the FCC must

determine whether the "public interest, convenience, and necessity will be served by the granting" of

the § 325 permit. Prior to the present case, the FCC applied the same criteria for meeting the

programming standards component of the "public interest, convenience, and necessity" requirement

to both a domestic broadcast license proceeding under § 309 and a cross-border broadcast license

proceeding under § 325. The issue in this case is whether the FCC has adequately explained its

determination that relevant provisions of NAFTA now permit application of a different, more lenient

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standard in a § 325 proceeding.

In 1972, the FCC addressed the public interest requirement for § 325 permits in American

Broadcasting Cos., Inc., 35 F.C.C.2d 1, 24 R.R.2d 471 (1972) [hereinafter ABC 1972], aff'd per

curiam, 26R.R.2d 203 (D.C. Cir.), cert. denied, 412 U.S. 939 (1973). In 1956, the FCC had granted

a § 325 permit to American Broadcasting Companies (ABC) "to transmit its network programming

to XETV, Channel 6, Tijuana, Mexico, for broadcast to San Diego, California." ABC 1972, 35

F.C.C.2d at 3. The FCC based its 1956 grant on the public interest as it existed at the time, stressing

that unless the permit were granted, ABC would have no primary affiliate in San Diego. San Diego

viewers would thereby be deprived of a significant increase in programming choice. On appeal, we

set aside the 1956 determination on the grounds that the FCC had failed adequately to consider

whether XETV's programming was objectionable by United States standards. Wrather-Alvarez

Broadcasting, Inc. v. F.C.C., 248 F.2d 646 (D.C. Cir. 1957). On remand, however, the FCC again

granted ABC's application after considering XETV's programming. American BroadcastingParamount Theatres, Inc., 24 F.C.C. 296 (1958).

In 1968, when ABC filed its annual application for renewal, a new station, KCST, UHF

channel 39, filed a petition to deny the permit. KCST argued that it could become a San Diego ABC

affiliate, that XETV's local programming was "blatantly defective," and that KCST's existence

removed the rationale for the original granting of the permit in 1956. ABC 1972, 35 F.C.C.2d at 4.

Among other things, the FCC determined that XETV's locally oriented programming was "deficient

in that it renders no local service meeting the needs and interests of the community" of San Diego.

Id. at 11. Specifically, the FCC noted that XETV had not produced any local news programming

since 1967, did not intend to resume such programming, and had never interrupted its broadcast

schedule to air any bulletins of local interest. XETV simply served as "little more than a passive

conduit of national network programming." Id. The FCC determined that the public interest no

longer supported the ABC permit, noting especially that (1) KCST was then present in San Diego

and capable of serving as an ABC affiliate, (2) KCST was a UHF station, and denying the XETV

permit would further the FCC's policy of encouraging the development of UHF television, and (3)

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"KCST's programming would meet the needs and interests of the community more effectively" than

XETV's. Id. at 12. The FCC accordingly denied ABC's permit renewal application, and we affirmed.

American Broadcasting Cos., Inc., 35 F.C.C.2d 1, 24 R.R.2d 471 (1972), aff'd per curiam, 26

R.R.2d 203 (D.C. Cir.), cert. denied, 412 U.S. 939 (1973). 

II. History of Current Proceedings

XETV is still broadcasting today, but it is now affiliated with Fox. Before Fox filed the

application at issue in these proceedings, it physically transported network programming destined for

the San Diego market to Station XETV, located across the United States/Mexico border. No FCC

authorization is required for such an arrangement, known in industry parlance as "bicycling."

Bicycling, however, obviously does not allow live broadcasts of any sort, and XETV therefore could

not transmit live news and sports programs into San Diego. This situation became

problematicsome might say criticalin early 1994, when Fox obtained the right to broadcast the

play-by-play descriptions of the National Football League's (NFL) National Conference football

games. Accordingly, on February 17, 1994, Fox filed a § 325 application for cross-border electronic

transmission.

Soon thereafter, Channel 51 filed a Petition to Deny the Fox application in accordance with

§ 325(c) and (d) and 47 C.F.R. § 73.3584(a). In this and subsequent filings, Channel 51 argued that

XETV's informational programming, found deficient in the ABC 1972 decision, was still deficient in

1994. Channel 51 conducted a two-week study of XETV's program listing in April 1994 and found

that "the station had no news programs and no regularly scheduled issues-oriented programs." Fox

Television Stations, Inc., 10 F.C.C.R. 4055, 4060 (1995) [hereinafter Fox]. XETV's sole local

program focused on "topics such as Mexican cooking rather than issues of public importance." Id.

Furthermore, XETV had provided no coverage or information about recent San Diego floods and

fires, California earthquakes, and the assassination in Tijuana of a candidate for the presidency of

Mexico. Id.

On August 2, 1994, Fox filed a second § 325 application, seeking a permit to transmit the

NFL games to station XHNUL-TV (now XHFTX) in Nuevo Laredo, Mexico, for rebroadcast in

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Laredo, Texas, and to station XHRTA-TV (now XHFOX) in Reynosa, Mexico, for rebroadcast in

McAllen, Texas, and Brownsville, Texas. Although Channel 51 did not oppose this permit

application, a Laredo, Texas, station did as to XHNUL-TV. However, no parties have appealed the

FCC permit asto either XHNUL-TV or XHRTA-TV,so we do not reach those grantsin our decision

today. See Lamprecht v. F.C.C., 958 F.2d 382, 389 (D.C. Cir. 1992) (refusing to consider certain

arguments brought by intervenor that expanded the case to new issues on groundsthat the intervenor

had decided not to appeal the FCC's denial of its construction application). Nevertheless, the

licensees of the Nuevo Laredo and Reynosa stations have intervened in these proceedingsin support

of the FCC decision because of the potential impact of the court's decision on their future ability to

obtain § 325 permits.

Because Fox anticipated a lengthy FCC decision process on its permit applications, it sought

and obtained Special Temporary Authority (STA) to transmit the NFL games to XETV through the

end ofthe 1994 season, or until the FCC ruled on its permit application, whichever came earlier. The

FCC granted the STA request on August 11, 1994, and Fox transmitted the 1994 football games to

XETV. On October 28, 1994, the FCC issued a brief Public Notice announcing that it had granted

the Fox permit for five years. The FCC released its Memorandum Opinion and Order on January 24,

1995. See Fox, 10 F.C.C.R. at 4055.

In Fox, the FCC examined the applicability of the ABC 1972 standards in light of the

enactment of NAFTA. It began by acknowledging that it "at one time shared the view that we should

apply all of the public interest criteria used in domestic proceedings to Section 325 proceedings," id.

at 4064, but determined that, "in light of NAFTA, that conclusion is no longer valid." Id. NAFTA

requires that "the primary criterion" for assessing the public interest, convenience and necessity in §

325 proceedings be "avoiding the creation or maintenance of electrical interference to U.S. broadcast

stations," and that all public interest criteria be applied in § 325 proceedings "in the same manner as

theywould be applied to a domestic broadcast station application undersection 309." NAFTA, Dec.

17, 1992, U.S.-Can.-Mex., Annex VI, Schedule of United States, 32 Int'l Legal Materials 289, 767

(1993); 1993 WL 574458, *3 [hereinafter NAFTA, Annex VI]. NAFTA also limits the FCC's

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authority by prohibiting it from considering a foreign station's nationality for purposes of favoring a

competing United States station and by prohibiting it from conducting § 325 proceedings "in a

manner that would constitute an unnecessary restriction on trade." NAFTA, Annex VI.

The FCC noted that it had denied the ABC 1972 permit request because, among other things,

"the Mexican station aired little to no programming meeting the local needs and interests of San

Diego residents." Fox, 10 F.C.C.R. at 4060. It recognized that it still requires domestic station

licensees to air locally oriented issue-responsive programming, and that NAFTA permits it to

continue considering programming matters in § 325 proceedings. Id. However, it also concluded

that, under NAFTA's restrictions on the FCC's authority, the programming standards under § 325

must be more lenient than those applied in domestic license proceedings under § 309. After NAFTA,

troublesome programming in a § 325 proceeding might include "programming that is obscene,

indecent, illegal, [or that] encourages [the] use of harmful products or activities." Id. at 4066. But

"[t]he types of programming allegationsraised in the present proceeding, while potentially important

with respect to a domestic station, would not generally create a substantial risk of public harm in the

case of a foreign station." Id. The FCC accordingly granted Fox a § 325 permit. Channel 51 appeals

the FCC's decision under 47 U.S.C. § 402(b)(6).

III. Legal Analysis

NAFTA, which went into effect on January 1, 1994, as a treaty approved byCongress, is "the

supreme Law of the Land." U.S. Const., Art. VI. The FCC contends that, though prior to NAFTA,

its position was that "we should apply all of the public interest criteria used in domestic proceedings

to Section 325 proceedings," Fox, 10 F.C.C.R. at 4064, it changed its position as a result of NAFTA,

concluding that the locally oriented issue-responsive programming requirement is no longer relevant

in the context of a § 325 permit application. We therefore do not consider whether the

issue-responsive programming requirement is relevant in a § 325 proceeding, but only whether the

FCC's reliance on NAFTA provides sufficient support for its departure from its prior interpretation

of requirement-relevance in a § 325 proceeding.

"It is, of course, elementary that an agency must conform to its prior decisions or explain the

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reason for its departure from such precedent." Gilbert v. N.L.R.B., 56 F.3d 1438, 1445 (D.C. Cir.

1995) (citing Greater Boston Tel. Corp. v. F.C.C., 444 F.2d 841, 852 (D.C. Cir. 1970), cert. denied,

403 U.S. 923 (1971)), petition for cert. filed, 64 U.S.L.W. 3359 (U.S. Nov. 9, 1995) (No. 95-744).

In the instant case, the FCC finds four principles in NAFTA's Annex VI that allegedly support its

position. First, the Annex requires that the "primary criterion" for determining the public interest

under § 325 be "avoiding the creation or maintenance of electrical interference to U.S. broadcast

stations." But this language merely establishes electrical interference as the primary criterion to be

considerednot the only criterion. This language certainly may affect the relative weight the FCC

assigns to the issue-responsive programming requirement in § 325 proceedings, but it does not

eliminate the issue-responsive programming criterion from consideration. Second, Annex VI directs

that the FCC not consider a foreign station's nationality for purposes of favoring a domestic

competitor. This provision clearly affects the FCC's ABC 1972 holding that the presence of a

domestic competitor willing to serve as a network affiliate weighs against granting a permit to a

foreign station. However, the FCC does not explain why subjecting a foreign station to the same

issue-responsive programming requirement to which domestic stations are subject constitutes

discrimination against a foreign station on the basis of its nationality. Indeed, such an explanation

would be well-nigh impossible to concoct.

Third, Annex VI requires that the FCC "apply the criteria for the grant of [a § 325] permit

in the same manner astheywould be applied to a domestic broadcaststation application undersection

309 of the Act." NAFTA, Annex VI. The FCC's argument here rests on the premise that the

issue-responsive programming requirement is neither relevant nor necessary in a § 325 proceeding,

apparently because it believes that NAFTA has made the requirement irrelevant by outlawing

unnecessary trade barriers. The FCC might reasonably conclude that some § 309 domestic licensing

requirements are irrelevant or should carry different weight in the § 325 context, but that is not the

issue before us today. The FCC has already determined, in ABC 1972, that the issue-responsive

programming requirement is relevant in a § 325 proceeding. If it is to depart from its prior ruling,

it must provide a reasoned explanation. Citing NAFTA will not fulfill this need without a reasoned

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explanation of how that agreement eliminates the relevance of this requirement, which presumably

existsto assure that events of local interest and importance receive broadcast coverage. If the focus

is on the quality of coverage of local events, the nationality of the broadcasting station should make

little difference in determining whether the station meets the requirement.

Finally, the NAFTA Annex providesthat no § 325 proceeding may be conducted in a manner

constituting an unnecessary restriction on trade. In the FCC's view, of course, the "irrelevant"

issue-responsive programming requirement is an "unnecessary" restriction on trade. But since the

FCC hasfailed to show how the requirement has become irrelevant in a § 325 proceeding, we cannot

find the requirement to be an "unnecessary" restriction on trade.

In its Memorandum Opinion and Order and in its brief in this court, the FCC attempts to

support its reading of NAFTA by engaging in a rereading of Congress' original intent behind § 325.

Claiming that NAFTA prompted this rereading, it argues that Congress never intended the

issue-responsive programming requirement to applyin § 325 cases, and that "[t]heCommission could

reasonably find that imposing requirements with respect to programming beyond what was necessary

to address Congress' concerns in adopting Section 325 would constitute an unnecessary trade

restriction under NAFTA." FCC Br. at 26. It is certainly permissible for FCC to change its existing

interpretation of § 325, but it must provide a reasoned explanation for doing so. Hall v. Baker, 867

F.2d 693, 696 (D.C. Cir. 1989). Here, as we have seen, FCC has failed to provide a reasoned

explanation for its revised interpretation.

The FCC has misconstrued NAFTA's impact on § 325 proceedings. It has failed to

demonstrate that either NAFTA or a rereading of congressional intent behind § 325 in light of

NAFTA support its decision to change its policy. Accordingly, we hold that the FCC has failed to

adequately explain its decision to depart from ABC 1972's application of the issue-responsive

programming requirement in § 325 proceedings.

The FCC also noted in its Memorandum Opinion and Order that "it is not clear to us that

[XETV's] programming is indeed deficient even under the standards currently applied to American

broadcasters." Fox, 10 F.C.C.R. at 4067. However, although it observed that "XETV's current

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programming includesregularreligious programs, public service announcements, and other programs

that may qualify as issue-responsive," id., it did not affirmatively hold that XETV meets the

requirement. It is the FCC's job to make that judgment in the first instance; we cannot review today

a decision asto whether XETV meetsthe issue-responsive programming requirement since the FCC

has yet to make such a decision.

We stressthat our holding today does not mean that XETV isineligible as a matter of law for

a § 325 permit. We also do not hold that NAFTA had no effect whatsoever on the relative

importance of the issue-responsive programming requirement in § 325 proceedings. Nor do we pass

judgment on the merits of XETV'sissue-responsive programming. We simply conclude that the FCC

erred in holding that NAFTA's Annex VI prohibits application of ABC 1972's § 325 issue-responsive

programming requirement.

IV. Conclusion

In light of our holding that the FCC misinterpreted NAFTA's impact on the role of the

issue-responsive programming requirement in § 325 proceedings, we vacate that portion ofthe FCC's

Order that grants a § 325 permit to Fox for cross-border transmission to XETV. We remand the case

to the FCC for treatment consistent with this opinion. See 47 U.S.C. § 402(h).

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