Yesterday, we wrote about a case involving an applicant for a new commercial FM station, where the FCC clarified its policies on reasonable assurance of transmitter site availability – holding that an applicant in an auction process can amend to a new site if it is found that its originally specified site is not available for its use. That policy does not apply to applications for LPFM stations or noncommercial FM stations, which are not settled by an auction but instead through the application of a point system. That point system analysis can be preempted in a proceeding between mutually exclusive applicants for the same noncommercial radio station if one applicant is preferred on 307(b) grounds (Section 307b of the Communications Act being a section that requires that the Commission make a “fair, efficient and equitable” distribution of broadcast service, which the FCC has interpreted to mean that it must evaluate the coverage area of proposed new stations and determine if any would bring new services to underserved populations so that the new service, in and of itself, is in the public interest and outweighs any point system analysis). A Court of Appeals decision released last week clarified the application of the 307(b) policy.
The noncommercial case involved an appeal of a “points system” grant favoring one applicant over another. The loser complained that it would provide service to a substantially greater population, including a great number of people who did not currently receive two or fewer noncommercial services. Under the FCC’s policies, an applicant will receive a 307(b) preference that will preempt a points system analysis, but only if it meets certain specific coverage requirements (see our discussion of the FCC’s analysis of which competing applicant for the same noncommercial channel will be preferred here). In this case, the requirement at the center of the argument was one that says that, to be qualified for a 307(b) preference, the applicant’s proposed new station must propose a coverage area providing service to at least 2,000 people that don’t already receive two noncommercial radio services, and the population in the area currently receiving fewer than two noncommercial services must constitute at least 10% of the people to be served by the applicant. Here, the applicant appealing its loss covered over 28,000 people who received only one noncommercial service, while the winning applicant would provide a second noncommercial service to fewer than 5,000 people. But, as the area receiving only one noncommercial service constituted less than 10% of each applicant’s service area (about 9.6% of the loser’s coverage and about 5.5% of the winner’s), no applicant was preferred on the 307(b) criteria, and the winner was preferred on other comparative criteria.
The loser complained that it served many more people and should have been preferred – arguing that the FCC’s requirement that the service be to 10% of an applicant’s service area made no sense as it provided significantly better service which was in and of itself in the public interest. The Court disagreed, finding that the FCC’s judgment that applicants needed to meet this 10% threshold to qualify for the preference was adequately justified, as the Commission used it to make sure that applicants in more sparsely populated areas could prevail over those in more urban areas. Otherwise, applicants in more densely populated areas could almost always prevail in a comparison, as their absolute numbers of underserved audience would likely be greater, even though such underserved areas could form but a small percentage of the overall service provided by an applicant.
This decision may make sense in some circumstances, but one could easily imagine a circumstance where the decision would make less sense. If, for instance, an applicant designed a coverage area where it served a total of 19,000 people, 2500 of whom received less than 2 noncommercial services, it would be entitled to a preference. But, what if it was competing against another applicant that covered the same 2500 underserved people, plus 5000 more people who had less than 2 noncommercial services – but its total service area was over 100,000 so that the underserved coverage was less than 10%. Under the FCC’s standards, the second applicant would not be entitled to a preference, even though it covered all of the underserved people covered by the first, plus many additional people. One would think that the absolutely greater service to underserved populations and to others generally, on top of the coverage to the underserved area served by the first applicant, would be a public interest plus. A mechanistic application of the FCC policy might not lead to that conclusion. But this appears to be a question for another day.
This decision, and the comparative case for commercial applicants that we discussed yesterday, address very specific issues that can arise in connection with applications for new broadcast stations. What both show is that applications for new stations need to be carefully planned so that they don’t run afoul of the very specific rules that govern new applications. These two cases just scrape the surface of the potential issues that can arise in connection with applications for new stations. So when an FCC filing window opens, be ready to carefully plan your application to take advantage of what benefits you can to increase the likelihood of the success of your application in case it and another application filed in the same window are “mutually exclusive” (where their technical proposals preclude both being granted), and to avoid other pitfalls that may await the unwary.