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History of the Broadcast License Application Process

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History of the Broadcast License Application Process kpmg 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 kpmg Table of Contents I. Introduction............................................................................................................................. 3 II. Communications Act of 1934 and Early Comparative Hearings ....................................... 4 III. 1965 Policy Statement on Comparative Broadcast Hearings ............................................. 5 Financial Requirements............................................................................................................ 7 IV. Minority and Female Employment and Ownership Policies .............................................. 8 A. Nondiscrimination Employee Practices of Broadcast Licensees.............................................. 8 B. Pre-1978 Ownership Policies................................................................................................... 9 1. Mid-Florida Television Corp........................................................................................ 9 2. Rosemore..................................................................................................................... 11 3. Atlas Communications ................................................................................................ 11 C. 1978 Statement of Policy on Minority Ownership.................................................................. 12 D. Gender Ownership Policies .................................................................................................... 13 1. Gainesville Media, Inc................................................................................................ 13 2. Steele........................................................................................................................... 14 3. Lamprecht ................................................................................................................... 14 V. Elimination of Comparative Hearing Process.................................................................... 14 A. Bechtel..................................................................................................................................... 14 VI. Broadcast Services ................................................................................................................ 15 A. AM Radio .................................................................................................................... 15 B. FM Radio .................................................................................................................... 17 C. Television Stations ...................................................................................................... 17 D. Differences between AM, FM and TV......................................................................... 17 VII. Evolution of Ownership Rules............................................................................................. 18 VIII. Recent Developments............................................................................................................ 22 IX. Conclusion ............................................................................................................................. 23 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 2573 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. 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.” 3 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, 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
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