Opinion ID: 186205
Heading Depth: 3
Heading Rank: 1

Heading: Rationality of the Locality Credit

Text: We reject AFA’s claim that the FCC’s justification for adopting the three-point credit for established local entities is 9 arbitrary and capricious under the standard set forth in Motor Vehicle Manufacturers Association v. State Farm Mutual Life Insurance Co., 463 U.S. 29, 41-44 (1983). AFA argues that the localism credit is irrational because, as AFA correctly points out, the FCC justified it by analogizing to its instructional television rules, which allocate points to applicants who produce instructional television and FM radio programming, and which also heavily favor local applicants. The analogy between the two, AFA claims, is false: instructional television, for example, is used in school classrooms, whereas NCE broadcasting serves the community at large. We hold that the FCC’s analogy to the instructional television rules is not irrational. The FCC explained that there is a strong tradition of local control in NCE broadcasting, and that local entities best understand the educational needs of, and are accountable to, their communities. Order ¶ ¶ 42-48. The FCC reasoned that ‘‘local entities best understand the educational needs and academic standards of their communities[,] and are the best authorities for selecting programming to meet those needs.’’ Id. ¶ 46. NCE broadcasting is analogous to instructional television in that both are educational. It is true, as AFA points out, that NCE broadcasting does not focus solely on instructional educational programming, as do the instructional television rules. But it remains true that NCE applicants’ broadcast frequencies, as a threshold matter, all must ‘‘be used for the advancement of an educational program,’’ 47 C.F.R. 73.503, and so, by definition, are also educational. There is a rational connection between local accountability and education, since it is reasonable to expect that locals are in the best position to judge their own educational needs. That rational connection, together with local entities’ strong traditional role in NCE broadcasting, makes the agency’s explanation rational. Oregon mounts three distinct, and equally unpersuasive, challenges to the rationality of the locality credit. As noted above, the locality credit awards three points to ‘‘local’’ applicants. The rule defines a ‘‘local’’ applicant as one physically 10 headquartered in, having a campus in, or having 75% of its board members residing within 25 miles of the center of the community the broadcast license will serve. 47 C.F.R. § 73.7000. Government entities are considered ‘‘local’’ wherever their authority extends. Id. Oregon first faults the FCC for failing to award points for local origination of programming, in addition (or perhaps in lieu of) to the points for local control over programming. We find the FCC’s reason for rejecting Oregon’s proposal to be rational. The FCC explained that local broadcasters should have the flexibility to broadcast programming regardless of its source, given that NCE stations have a wide audience. Order ¶ ¶ 65-66. That explanation is quite rational. There is no reason to suppose that the supply of NCE programming is coextensive with demand for it in any given local community. In truth, the opposite assumption is plausible: local supply may well be inadequate to meet local demand, given that there are likely, on average, more listeners in any given community than there are content producers. In any event, even if local origination of programming served the needs of local communities well, fostering local control advances that goal also. Given that both options are rational, the FCC’s choice of means is well within its discretion. We also reject Oregon’s other reasons for thinking the locality credit arbitrary. Oregon argues that mere local presence, the factor the locality credit rewards, will not ensure that programming will be locally produced. This argument misses the point. As explained above, the FCC designed its locality credit not to encourage locally produced programming, but rather to reward local control over programming wherever the programming is produced. Id. ¶ 66; Reh’g Order ¶ 74. The practice of rewarding applicants who are controlled by locals is rationally related to that goal. Oregon also claims that the FCC’s definition of ‘‘local’’ is irrational. Again we disagree. Oregon argues that the 25mile radius is arbitrary because that criterion does not account for the different geographies of local communities nationwide. But the FCC offered two rational justifications 11 for not individualizing its definition of local. First, the FCC reasoned that doing so would be difficult for applicants to administer. Reh’g Order ¶ 50. Second, the FCC justified the radius by analogy to that same definition of local in the instructional television rules. Order ¶ 54. For the reasons stated above, the analogy between this rulemaking proceeding and the instructional television rules is rational. We find nothing arbitrary in this chain of reasoning. Lastly, Oregon attacks the rationality of defining governments to be local wherever their authority extends. It argues that it is irrational to so limit the definition of local, given that the signals of educational broadcasting travel across jurisdictional lines. We once again find no cognizable defect in the FCC’s reasoning. The FCC reasoned that local governments are especially accountable to people within their jurisdictions and so will be especially responsive to their needs. Reh’g Order ¶ 50. This explanation meshes quite well with the FCC’s overarching premise that encouraging local control will ensure local accountability over educational broadcasting; indeed, politicians are probably more accountable to voters in their districts than local broadcasters are to their neighbors. It is true that, unlike the 25-mile radius, this aspect of the definition of local is individualized, and so will be administratively costly. But the FCC addressed this worry as well. It pointed to ‘‘recognizable extrinsic factors, such as where a person pays taxes and what school district he lives in,’’ that will ease the administrative difficulties of making this aspect of the definition of local dependent on individualized factors. Id. We hold that these justifications are legally adequate. 2. Rationality of the State-wide Educational Credit AFA also assails the FCC’s justification for adopting the state-wide educational network credit. That credit, again, awards two points to certain very large schools and universities that do not qualify for diversity-of-ownership credit but operate in a single state. AFA’s argument is that this credit does not advance the cause of broadcast diversity. AFA points out that as a practical matter, the only beneficiaries of 12 the credit will be large state universities, many of which already hold many NCE licenses and offer ‘‘a uniform viewpoint[ ] determined (in most cases) by a distant bureaucracy.’’ AFA Br. at 38. That two-point advantage, the argument goes, negates the edge a truly diverse entity, one who qualifies for the two-point diversity credit, would otherwise have. The state-wide network credit therefore undermines the FCC’s stated goal of advancing broadcast diversity, AFA submits. We do not think AFA’s argument carries its high burden of demonstrating that the FCC’s justification for the state-wide network credit is on its face arbitrary and capricious. First, the FCC reasoned that large schools are especially attractive candidates for NCE broadcast licenses, as they ‘‘ensure[ ] that educational programming is available throughout a specific area in a coordinated and organized manner most appropriate to that area, and especially to schools.’’ Therefore, these institutions carry ‘‘distinct benefits’’ even if they do not qualify for the diversity-of-ownership credit. Order ¶ ¶ 56, 58. Second, only large schools should be eligible for the credit, the FCC reasoned, because smaller schools, including private entities, will more easily be eligible for the diversity credit and will not need an extra boost. Id. ¶ 60. Third, single-state networks provide more focused educational benefits than do ‘‘national and regional’’ networks, since national and regional networks cannot ‘‘set the educational policies of schools or have schools accountable to them.’’ Id. We cannot say that this explanation is arbitrary and capricious on the record before us. As explained above, there is a rational link between NCE broadcasting and educational programming. It is reasonable to assume that educational institutions are in an especially good position to provide educational programming, whether or not that programming is ‘‘diverse.’’ It follows that there is a rational basis in providing educational institutions with extra points even if they do not qualify for diversity credit. There is no question that state-wide network credit does that. 13 The more difficult issue is whether limiting that educational benefit only to educational organizations of a certain size and in a single state – in particular, organizations with a minimum of 50 secondary and elementary schools in a single state or at least five campuses in a single state – is rational. The FCC’s explanation for this aspect of the credit, again, relies on two premises: first, its prediction that smaller educational organizations will easily qualify for the diversity credit; and second, the empirical assumption that multi-state and regional networks ‘‘are generally satellite operations of distant stations, without the ability to set educational policies for schools or have schools accountable to them,’’ and therefore as educational providers are inferior to large single-state networks. Order ¶ 60. These assumptions appear rational on the current record. We have no obvious way of verifying the FCC’s assertion regarding the general characteristics of multi-state and regional networks. Neither party has directed us to empirical information in the record either verifying or contradicting this assumption. We must defer to the Commission’s expert judgment in the absence of record evidence indicating that the Commission’s assumption is a clear error of judgment, or a showing that the empirical assumption is facially implausible or inconsistent. The FCC’s predictive judgment that smaller and multistate educational organizations will more easily qualify for the diversity credit is also on its face rational. It is rational to assume that the credit will capture the distinct, yet (in the FCC’s judgment) less educational benefits that flow from favoring such entities, since those entities are less likely to have overlapping signals. If those entities are significantly more likely to be eligible for the diversity credit, then it is rational to assume that this credit will adequately account for those benefits, as the state-wide network credit does for large single-state networks. And because large, single-state educational entities cannot receive the state-wide network credit if they qualify for diversity points, there is less risk of doublecounting the extent of those networks’ distinct educational benefits. In sum, the FCC’s reasonable assumption that 14 multi-state and regional networks are inferior educational providers, together with the prediction that those entities will typically be eligible for the diversity credit (while state-wide networks who receive the state-wide credit will not), is enough to make the credit nonarbitrary. We caution, however, that we are not foreclosing any and all future challenges to the rationality of the state-wide network credit – or, for that matter, any aspect of the point system that relies on verifiable empirical predictions or assumptions. The Commission may well have a future obligation to reevalute the point system if the empirical predictions and premises it used to justify the point system turn out to be erroneous. As we have previously noted, the FCC’s ‘‘necessarily wide latitude to make policy based on predictive judgments deriving from its general expertise implies a correlative duty to evaluate its policies over time to ascertain whether they work – that is, whether they actually produce the benefits the Commission originally predicted they would.’’ Bechtel v. FCC, 10 F.3d 875, 880 (D.C. Cir. 1993) (internal quotation marks and citation omitted). For example, experience may establish that, contrary to the FCC’s prediction, most multi-state and regional educational institutions will not be able to obtain diversity credits to compensate for the advantage the state-wide educational credit gives large singlestate educational organizations. On the present record, however, the Commission’s empirical assumptions and predictions are sufficiently rational to survive arbitrary-and-capricious review. 3. Rationality of the Attribution Rules AFA challenges the rationality of the point system’s attribution rules, which we described above. AFA’s argument on this score is that the attribution rules arbitrarily favor public broadcasting networks like PBS and NPR over private religious networks like AFA. AFA points out, correctly, that the rules do not attribute control of NPR’s and PBS’s licensees to NPR and PBS, even though NPR and PBS provide those affiliates with money and programming. In contrast, because AFA and similar organizations own and control their affili15 ates, the attribution rules treat AFA as a single, large, nonlocal entity. We do not consider the merits of this challenge because we do not believe that any party raised it with sufficient clarity before the FCC. It is black-letter administrative law that 47 U.S.C. § 405 bars us ‘‘from considering any issue of law or fact upon which the Commission has been afforded no opportunity to pass.’’ AT&T Corp. v. FCC, 317 F.3d 227, 235 (D.C. Cir. 2003) (internal quotation marks and citation omitted). The FCC argues in its brief that no party to the Commission’s proceedings challenged the rationality of the attribution rules. AFA does not respond to this argument in its reply brief. In response to questioning at oral argument, AFA’s counsel said that this issue had been raised in comments by the Educational Media Foundation. The Foundation, however, argued that the attribution rules were unconstitutional, not that they were arbitrary and capricious. Reh’g Order ¶ ¶ 15–21. Because the constitutionality of the rules is distinct from its substantive policy rationale, we do not believe that a ‘‘reasonable Commission necessarily would have seen [that] question raised before [the Court] as part of the case presented to it,’’ AT&T Corp., 317 F.3d at 235 (internal quotation marks, emphasis, and citation omitted), simply because the Foundation challenged the constitutionality of the attribution rules. We therefore do not consider the merits of this claim. 4. Rationality of the FCC’s System for Screening out Factually Incorrect License Applications Oregon also takes issue with the FCC’s system for verifying that NCE applicants actually have the attributes they claim on their license applications. We reject this challenge as well. Oregon claims, specifically, that the FCC irrationally failed to require NCE applicants to submit documentary evidence of their bona fide NCE status. We hold, once again, that the FCC adequately addressed this concern. The FCC noted that competing applicants have incentives to bring factually incorrect license applications to its attention, which they no doubt do. Order ¶ ¶ 88-89. Also, the Commission 16 said that it will delegate to its staff the task of developing documentation that will verify whether applicants qualify for the points they claim, and that the FCC staff will randomly audit that documentation for compliance. Id. Finally, the FCC said that it will conduct ‘‘acceptability’’ studies to determine whether the applicant with the most points is actually eligible. Id. ¶ 90. Even if Oregon is correct that these steps are inadequate to the task, that does not change the fact that there is a rational connection between them and the stated problem. The FCC’s explanation is not arbitrary. 5. 47 U.S.C. § 398 The final statutory issue we must address is Oregon’s argument that the point system conflicts with 47 U.S.C. § 398. That section provides, in pertinent part: Nothing contained in this part shall be deemed TTT to authorize any department, agency, officer, or employee of the United States to exercise any direction, supervision, or control over public telecommunciations, TTT or over the curriculum, program of instruction, or personnel of any educational institution, school system, or public telecommunications entity. TTT (c) Control over content or distribution of programs. Nothing in this section shall be construed to authorize any department, agency, officer, or employee of the United States to exercise any direction, supervision, or control over the content or distribution of public telecommunications programs and services, or over the curriculum or program of instruction of any educational institution or school system. 47 U.S.C. § 398(a) & (c). Oregon argues that the final rule violates this provision because the rule directs ‘‘the curriculum [or] program of instruction’’ of educational institutions by influencing educational content. Id. § 398(a). We do not consider this argument on its merits because it was not presented to the Commission below. As Oregon concedes, the proper waiver 17 standard to apply under the law of the circuit is ‘‘whether a reasonable Commission necessarily would have seen the [§ 398] question raised before us as part of the case presented to it.’’ Time Warner Entm’t Co., L.P. v. FCC, 144 F.3d 75, 81 (D.C. Cir. 1998) (emphasis in original). The comments to which Oregon points did not preserve the issue under this standard. Oregon argues that comments by the Educational Media Foundation and the Station Resource Group raised the question. However, those comments argued only that the FCC’s explanation for favoring certain types of educational programming over others was irrational. Station Resource Group Pet. for Recons. at 8; Order ¶ 60. They did not mention § 398. Nor could the Commission have obviously inferred from the substance of the comments that § 398 was relevant to the issues they raised. Challenging the way in which the FCC regulates NCE content says nothing about whether the FCC can influence content at all. The FCC therefore had no opportunity to offer a construction of § 398 for our review. We are barred from deciding such issues in this procedural posture.