Opinion ID: 220512
Heading Depth: 2
Heading Rank: 4

Heading: The Eligible Entity Definition is Arbitrary and Capricious

Text: At a minimum, in adopting or modifying its rules the FCC must examine the relevant data and articulate a satisfactory explanation for its action[,] including a `rational connection between the facts found and the choice made.' State Farm, 463 U.S. at 43, 103 S.Ct. 2856 (internal quotation omitted). Citizen Petitioners assert that the Diversity Order does not analyze the adopted proposals' effectiveness and presents no reliable data supporting the eligible entity definition chosen to achieve the stated goal of the rulemaking exercise  increasing broadcast ownership by minorities and women. Citizen Petitioners Br. 53. We agree that the Commission has not demonstrated that the eligible entity definition in the Diversity Order is based on reasoned analysis supported by the evidence before the Commission. APCO, 76 F.3d at 398. First and foremost, the Diversity Order does not explain how the eligible entity definition adopted would increase broadcast ownership by minorities and women. In the two paragraphs that discuss the definition adopted, the Commission refers only to small businesses, and occasionally new entrants, as expected beneficiaries. Diversity Order ¶¶ 6-7. The remaining two paragraphs of the FCC's discussion (1) challenge the contention that ownership by minorities and women might be diminished by the chosen eligible entity definition, [40] and (2) seek comment on taking action that would increase the ownership of broadcast stations by minorities and women specifically. Id. at ¶¶ 8-9. Nowhere in its discussion does the FCC support its conclusion that this definition will be effective in creating new opportunities for broadcast ownership by ... women and minorities. Id. at ¶ 9. Second, it is hard to understand how measures using this definition would achieve the stated goal. For example, by the Commission's own calculations, minorities comprise 8.5% of commercial radio station owners that qualify as small businesses, but 7.78% of the commercial radio industry as a whole  a difference of less than 1%. See id. at ¶ 8. Thus, these measures cannot be expected to have much effect on minority ownership. Third, the Commission referenced no data on television ownership by minorities or women and no data regarding commercial radio ownership by women. This is because, as the Commission has since conceded, it has no accurate data to cite. In May 2009, it published a Report and Order and Fourth Further Notice of Proposed Rulemaking addressing this issue. See Promoting Diversification of Ownership in the Broadcasting Services, 2006 Quadrennial Regulatory Review  Review of the Commission's Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, Report and Order and Third Further Notice of Proposed Rulemaking, 24 F.C.C.R. 5896, 2009 WL 1229684 (May 5, 2009) ( Fourth FNPR ). It states: The Commission has long sought to promote broadcast station ownership by minorities and women in order to foster diversity in broadcasting. Although some of the Commission's initiatives  such as the now-repealed minority tax certificate program  have had beneficial effects, the overall level of minority and female ownership in the broadcast industry remains dismal. Unfortunately, the Commission currently does not possess reliable data on the precise status of minority and female ownership  data that we will need to establish and maintain effective policies over time.... Fourth FNPR ¶ 1 (internal footnotes omitted) (emphasis added); see also id. at ¶ 12 (We agree with commenters, study authors, and the [General Accounting Office] that the data we have collected in the past... are not sufficiently reliable and comprehensive to form the basis for effectively assessing ownership diversity and whether additional measures to promote it are necessary.). The Order portion of the Fourth FNPR sets in motion a process for collecting better data as a basis for informed policy-making. [W]e believe that the changes we are adopting today, it states, adequately address commenters' and the [General Accounting Office's] criticisms and will allow us to undertake studies that reliably analyze minority and female ownership. Id. at ¶ 12. While this is certainly a welcome and long overdue step, it does not remedy the existing data gap in the Diversity Order. We anticipate that it will, however, lay necessary groundwork for the Commission's actions on remand. In sum, the eligible entity definition adopted in the Diversity Order lacks a sufficient analytical connection to the primary issue that Order intended to address. The Commission has offered no data attempting to show a connection between the definition chosen and the goal of the measures adopted  increasing ownership of minorities and women. As such, the eligible entity definition adopted is arbitrary and capricious, and we remand those portions of the Diversity Order that rely on it. [41] We conclude once more that the FCC did not provide a sufficiently reasoned basis for deferring consideration of the proposed SDB definitions and remand for it to do so before it completes its 2010 Quadrennial Review. [42] Despite our prior remand requiring the Commission to consider the effect of its rules on minority and female ownership, and anticipating a workable SDB definition well before this rulemaking was completed, the Commission has in large part punted yet again on this important issue. While the measures adopted that take a strong stance against discrimination are no doubt positive, the Commission has not shown that they will enhance significantly minority and female ownership, which was a stated goal of this rulemaking proceeding. This is troubling, as the Commission relied on the Diversity Order to justify side-stepping, for the most part, that goal in its 2008 Order. [43] Promoting broadcast ownership by minorities and women is, in the FCC's own words, a long-standing policy goal of the Commission, and is consistent with [the Commission's] mandate under [§] 309(j) of the Act. Fourth FNPR ¶ 12. We recognize that there are significant challenges involved in meeting this important policy goal that is shared by Congress, the Commission, and the myriad interested parties who have participated in rulemaking proceedings toward this end. However, the Commission appears yet to have gathered the information required to address these challenges, which it needs to do in the course of its review already underway. As ownership diversity is an important aspect of the overall media ownership regulatory framework, see Prometheus I, 373 F.3d at 420-21, we re-emphasize that the actions required on remand should be completed within the course of the Commission's 2010 Quadrennial Review of its media ownership rules.