Opinion ID: 4440726
Heading Depth: 2
Heading Rank: 3

Heading: “Comparable Markets” Definition

Text: Diversity Petitioners challenge the Incubator Order’s definition of comparable markets for radio stations, arguing that it was not properly noticed and in any event was arbitrary and capricious. Their argument devolves to this. The basic concept of the incubator program uses a waiver of the rules governing local radio ownership as a reward to induce participation by established broadcasters. The Notice of Proposed Rulemaking (“NPRM”) sought comment on the following questions about these reward waivers: “How should the Commission structure the waiver program? For example, should the waiver be limited to the market in which the incubating activity is occurring? Alternatively, should waiver be permissible in any similarly sized market? How would the Commission determine which markets are similar in size?” Reconsideration Order ¶ 137. Diversity Petitioners take this to indicate only that the Commission was considering two possibilities: either that the waiver could only be used in the same market where the incubating activity occurred or that it could be used in other markets of similar population. They contend that “size” in this context is most naturally read as referring to population, or some other indicator of market size (such as audience or listenership numbers), as opposed to the number of radio stations in the market. The two responsive comments on this issue, they contend, seem to have reflected this assumption. See Diversity Petitioners’ Br. at 16–17. Instead, as noted, the Incubator Order adopted a system of reward waivers that can be used in any “comparable” market, meaning not a market of similar population but one with a 29 similar number of radio stations. This proposal was first described in detail in the draft of the Incubator Order made available before the final order was promulgated. In response, Diversity Petitioners made several ex parte communications with the Commission expressing their concern over this definition of “comparable” markets. Id. at 21–22. Their letters expressed concern that the proposed rule would allow a broadcaster to incubate in a small rural market and then use its reward waiver in a much larger market, such as New York City, thus getting an outsized return for its investment. Thus Diversity Petitioners suggested that the rule should disallow using a waiver in another top-tier “comparable” market that is not within five spots of the incubating market in the Nielsen population-based rankings, but the Commission declined to adopt this proposal. See Incubator Order ¶ 68. Diversity Petitioners argue that this was not adequate notice. We have addressed similar claims in both Prometheus I, 373 F.3d at 411–412, and Prometheus II, 652 F.3d at 449–50. Essentially, “the adequacy of the notice must be tested by determining whether it would fairly apprise interested persons of the ‘subjects and issues’ before the agency.” Prometheus I, 373 F.3d at 411 (quoting Am. Iron & Steel Inst. v. EPA, 568 F.3d 284, 293 (3d Cir. 1977)). The strongest fact supporting Diversity Petitioners’ claim is the swift response by commenters expressing surprise once the eventual definition of comparable markets was made public. Courts will consider the behavior of commenters in assessing whether notice was adequate. See, e.g., Sprint Corp. v. FCC, 315 F.3d 369, 376 (D.C. Cir. 2003). But parsing the language of the Notice of Proposed Rulemaking itself suffices to show that it did provide adequate notice. Specifically, after asking whether the waiver 30 should be applicable in any similarly sized market, the NPRM asked how the Commission would determine which markets are similarly sized. This strongly suggests that the Commission was considering a range of different ways to measure market size, and it undercuts Diversity Petitioners’ assertion that the word “size” could only be read to mean population. See Diversity Petitioners’ Br. at 16 (“The reference to ‘size’ in the NPRM is generally understood in the broadcast industry to mean markets that have similar populations.”). Turning to the substance of the comparable markets definition, Diversity Petitioners assert that the FCC’s definition will create a perverse incentive for established broadcasters to incubate in markets with low populations but many radio stations (using the example of Wilkes-Barre, Pennsylvania) and then use their waivers in “comparable” markets with much greater populations (e.g., New York City). The Incubator Order responded to this concern by noting that some markets with similar populations have vastly different numbers of stations, and stated that “[i]n crafting our standard, we focused primarily on preventing the potential for ownership consolidation in a market with fewer stations and independent owners than the market in which the incubation relationship added a new entrant.” Incubator Order ¶ 68. It expected that incubating entities will not necessarily use their waivers only in the largest markets, but rather wherever they face ownership restrictions under the FCC’s rules. Id. And it noted that some incubating entities might not have relevant ownership interests in other markets of similar population size, such that they would have no flexibility under Diversity Petitioners’ proposed rules. Id. Diversity Petitioners posit this as an inadequate response, but we disagree. They are correct that the Commission did not rebut the suggestion that waivers might be used in markets with 31 much higher populations than the ones where incubation is occurring. It explained instead why it did not think this prospect overly frightening. Diversity Petitioners suggest that this dynamic could reduce the positive influence of the incubator program on ownership diversity, as (they claim) smaller markets like Wilkes-Barre are less diverse. This is not supported by the record: as Intervenors note, many smaller markets are quite racially diverse, see Intervenors’ Br. at 50, and Diversity Petitioners’ rejoinder that these markets contain fewer total people of color than big cities like New York or Los Angeles, Diversity Petitioners’ Reply Br. at 17 n.7, is essentially tautological. And we cannot say that the Commission’s focus on the potential anti-competitive effects of the waiver program is unreasonable, for the waivers relate specifically to rules designed to promote competition. We therefore hold that the definition of “comparable markets” in the Incubator Order was adequately noticed and is not arbitrary and capricious.