Successes and Failures of the 1996 Telecommunications Act
Contents
- Table of Contents
- Acknowledgments and Caveat
- Preface From LCEF
- Preface From MIT's CRCP
- Introduction: Off Course on a Long Dark Road
Part One
Part Two
- Section 202
- Media Mergers (1995-2001)
- A Brief Note on Mergers
- Telecom Mergers (1996-2001)
- Section 336
Part Three
Afterword
Appendix
Section 257 - Eliminating Market Entry Barriers: The Best New Hope for Diversity and Inclusion
by David Honig and Moushumi Khan
Why We Haven't Overcome
The year l96l witnessed a dramatic advance in civil rights, perhaps even equaling in influence the lunch counter sit-in demonstrators who put their lives on the line the year before. In l96l, the Supreme Court finally made it practicable for a citizen to enforce her rights under the l4th Amendment. Nearly l00 years earlier, Congress had enacted 42 U. S. C. §l983 to help implement the l4th Amendment. Section l983 gave a cause of action to anyone deprived of a federal right by anyone acting under color of law. Nonetheless, America's post-confederate judiciary was not about to use the l4th Amendment to suddenly recognize full freedom vesting in the former slaves. Thus Section l983 languished in impotence for four generations, until the Supreme Court, in Monroe v. Pape, held that a plaintiff invoking Section l983 did not have to demonstrate that a government actor specifically intended to interfere with her federal rights. l
Most television viewers in the southern states in l96l were probably unaware that Monroe v. Pape had been decided. An all too typical southern station, Jackson Mississippi's WLBT-TV, sold White Citizens Council material in the lobby, refused to employ African Americans except as janitors, and barred African American ministers from delivering the prayers used to sign off the air each evening. No news showing African Americans was aired on WLBT -- even from the network feed -- unless it showed African Americans in a bad light.
At the time, no tools were available to civil rights organizations to hold stations like WLBT-TV accountable. Then Dick Moore experienced Three Revelations.
Earle K. Moore was a New York corporate lawyer by day and a volunteer FCC counsel for the Office of Communication of the United Church of Christ by night. In l965, the Church challenged Dick Moore to solve Fermat's Last Theorem of communications law: figure out how to make WLBT and other southern television stations fair to African American viewers.
When Moore took on his seemingly impossible assignment, FCC adjudications were dry battles between economic interests -- television owners versus cable systems, television and cable owners versus set manufacturers, and everyone against Hollywood. The end-users -- families who watched television -- had no say in these weighty matters at that time because the FCC only took notice of economic injuries. 2
This led to Dick Moore's First Revelation: television viewers invested hundreds of dollars in receivers and thousands of hours of their time as viewers, so why shouldn't they be permitted to participate in FCC proceedings too?
Genius comes in streaks, so it's understandable that Dick Moore's Second and Third Revelations followed closely behind his first one. Revelation #2: if a broadcaster discriminated on the basis of race, didn't that harm the viewers, who owned the airwaves and were arbitrarily being denied the opportunity to receive diverse programming over those airwaves? And Revelation #3: didn't a company that discriminated on the basis of race lack sufficient character to hold a broadcast license in the first place?
The D. C. Circuit of the U. S. Court of Appeals wasted no time writing all three Revelations into communications law. In l966, the court granted television viewers in Jackson, Mississippi standing to challenge the license renewal of WLBT-TV. 3 And after the FCC held a kangaroo-court "hearing," the court ordered the FCC to vacate the station's renewal and open the frequency to other applicants. 4 After just (!) another eleven years of litigation, the FCC awarded the WLBT license to an African American owned company headed by Bill Dilday, the general manager who took over WLBT after UCC II in l969.
What made this sea change within the intersection of communications and civil rights law possible? It certainly helped that a substantive FCC regulation, the Fairness Doctrine, required broadcast stations to air both sides of controversial issues of public importance. 5 The Fairness Doctrine was the substantive basis for the WLBT-TV decisions. But the FCC, never comfortable with the Fairness Doctrine and having to live with a broadcasting industry that hated it, determined in l987 that it would no longer enforce the Doctrine. 6
Given that the FCC has turned its back on the Fairness Doctrine, some civil rights advocates have whispered that if the WLBT-TV case were decided today, the United Church of Christ would lose on the programming issue and thus would be forced to argue only the character issue. Winning on character issues is very difficult, since bad character requires bad intentions. Bad intentions have to be demonstrated through the bad words of the respondent. A clever respondent (or a respondent with a clever lawyer) seldom implicates herself. It logically follows that every racist station owner today is immune from civil rights scrutiny and accountability, except one: the one that's too stupid to run a broadcast station in the first place.
Aware that the jurisdictional hook that shut down segregation in broadcasting is gone, civil rights advocates in the world of the FCC understandably feel down on their luck.
They are not alone. Minority entrepreneurship advocates have also spent the past six years in distress. A quick history: after Dick Moore's Revelations, and prodded by another court decision, 7 the FCC took steps in the late l970s to diversify the ownership of broadcast facilities. In l978, it adopted two policies, distress sales and the tax certificate, that lifted minority broadcast ownership from l6 stations in l978 to over 300 stations by l995. 8 But in that fateful year, Congress voted to repeal the tax certificate policy, 9 and in Adarand Constructors, Inc. v. Pe--a, the Supreme Court made it much more difficult for any race-conscious federal program to survive. l0 On the heels of these losses, two D. C. Circuit decisions invalidated the l97l and the 2000 FCC broadcast and cable equal employment opportunity regulations. 11 These developments have left advocates for small and minority business, and for diversity and inclusion, searching for a new statutory instrument with which to steer the FCC back onto a civil rights heading.
There are no reconstruction-era communications statutes, so if there is a forgotten communications statute waiting to be disinterred a la Monroe v. Pape, that statute will still be warm in its grave. l2 The original Communications Act of l934 has already been mined for civil rights gold; Dick Moore probably found the last nuggets. So those walking in Dick Moore's footsteps carry this question on our lips always: is there a statute we could deploy to create a second civil rights revolution in the world of the FCC?
Yes there is. And its citation is 47 U. S. C. §257 (l996).
The History of Section 257
Section 257 of the Communications Act, adopted as part of the Telecommunica-tions Act of l996 l3 and now codified at 47 U. S. C. §257, requires the FCC to identify and eliminate market entry barriersfor small telecommunications businesses. l4 Like many statutory provisions affecting communications, Section 257's potential depends on how broadly the FCC construes undefined, subjective terms such as "eliminate", "barrier" and "small." Section 257 on its face is non-self-executing; moreover, Congress required the FCC to report periodically on what it had done to comply. l5 Thus, the FCC's institutional views, both philosophical and political, will define whether Section 257 is a bandaid, a shield, a sword or an armada fighting for small businesses. This article describes what the FCC has done, and suggests what it could do, to fulfill the enormous promise of Section 257.
Section 257 was written in response to the concern that other provisions in the l996 Telecommunications Act might lead to greater consolidation of the telecommunications industry without concern for diversity in media ownership or content. l6 Underlying Congress' concern for entry barriers affecting small businesses was a specific concern that among these barriers were race and gender discrimination, and that remedial steps were necessary to repair their ill effects. Civil rights advocates, particularly Congressman Bobby Rush (D-IL) and Congresswoman Cardiss Collins (D-IL) felt that diversity needed Congressional protection in light of Adarand III, which held race-conscious federal programs to a very high standard of constitutional review, l7 and in light of Congress' repeal of the FCC's highly successful tax certificate program. l8 The legislative history of Section 257 supports this interpretation. l9
The Section 257 Inquiry and Reports
Following the passage of the Telecommunications Act, the FCC issued a notice of inquiry seeking comment on the definition of small businesses under Section 257 and on the incentives or requirements which would be most effective in eliminating market entry barriers. 20 The Section 257 Inquiry also sought comment on the constitutional standards that would apply to any efforts to eliminate and prevent race and gender discrimination. 2l Significantly, the FCC sought to create a "broad and comprehensive record from which to determine whether the experiences of women and particular minority groups in entering and participating in the telecommunications market warrant adopting more specific gender or race-based incentives...." 22 In doing so, the FCC for the first time acknowledged that its own policies of licensing and renewing the licenses of segregationists might have contributed to minority exclusion from the industries it regulated. The agency recognized that a good case could be made that:
As a result of our system of awarding broadcast licenses in the l940s and l950s, no minority held a broadcast license until l956 or won a comparative hearing until l975 and... special incentives for minority businesses are needed in order to compensate for a very long history of official actions which deprived minorities of meaningful access to the radiofrequency spectrum. 23
The following year, after receiving comments from the public and conducting a day-long public hearing, 24 the FCC issued a very comprehensive report. 25 The l997 Section 257 Report attempted to define "market entry barrier" and "small business," 26 described financial and regulatory impediments facing small businesses, 27 detailed impediments specific to each FCC-regulated service, including common carriers, wireless, cable and mass media, 28 and described unique obstacles for small businesses owned by women or minorities. 29
In August, 2000, the FCC released the second of the Section 257 reports it is required to provide to Congress every three years pursuant to 47 U. S. C. §257( c). 30 The 2000 Section 257 Report, which was based on internal agency discussions rather than a public record, described at length the impact on small businesses of a host of FCC rulemaking decisions affecting common carriers, wireless, cable and mass media. 3l Among the most significant of these decisions were the common carrier e-rate program, 32 the wireless competitive bidding incentives, 33 and the adoption of a low power radio service. 34
Noting that 47 U. S. C. §257( c)( 2) requires the FCC to identify statutory market entry barriers and recommend them for elimination, the 2000 Section 257 Report recommended ten amendments to the Communications Act. 35 The most significant of these proposals sought a new tax incentive program, much like the former tax certificate program, 36 that would permit deferral of taxes on any gain from the sales of telecommunications businesses to small telecommunications firms, including disadvantaged firms and firms owned by minorities or women, as long as that gain is reinvested in one or more qualifying replacement telecommunications businesses. 37
The Decision To Conduct Market Entry Barriers Studies
In the l997 Section 257 Report, the FCC observed that the record in the Section 257 proceeding and other proceedings "strongly indicates that minorities and women have experienced tremendous obstacles in participating in the telecommunications industry." 38 Consequently, the FCC promised to undertake "a comprehensive study to further examine the role of small businesses and businesses owned by minorities or women in the telecommunications industry and the impact of our policies on access to the industry for such businesses." 39 The study would focus on "two types of communications services, the oldest and the newest -- broadcast and wireless." 40 This research was eagerly awaited because, inter alia, it will answer the question of whether race and gender conscious remedies may be used to remedy past discrimination in the allocation of broadcast and wireless licenses. 4l
Ultimately, the FCC produced six studies. Five of them were presented to the public by their authors at a Policy Forum held on December l2, 2000. 42 Coincident with the Policy Forum, the FCC's Office of General Counsel issued a legal and policy analysis of Section 257 and an analysis of the research studies (" Policy Forum Report"). 43 Set out below is a summary of the legal analysis contained in the Policy Forum Report, and a summary of the findings of each of the research studies.
The Applicable Legal Standards
Insofar as Section 257 authorizes the FCC to eliminate any identified market entry barriers facing small businesses and minority and women owned businesses, the FCC's programs must follow the standards for both race and gender classifications. The Supreme Court held in Adarand III that any federal program that uses racial criteria as a basis for decisionmaking must satisfy "strict scrutiny"; that is, it must serve a compelling governmental interest and must be narrowly tailored to serve that interest. 44
The Policy Forum Report stated that the FCC has two main goals which could satisfy strict scrutiny: diversity and remediation of discrimination.
By promoting diversity of ownership, including racial ownership diversity, the FCC has sought to promote the broadcast of a diversity of opinions and information. In l990, the FCC's interest in promoting diversity won the endorsement of five Supreme Court justices. In Metro Broadcasting, Inc. v. FCC, the Court upheld two race conscious minority ownership incentive programs on the basis that these programs helped promote the broad-cast of diverse viewpoints. 45 However, the Policy Forum Report questioned whether today's Supreme Court would find this interest to be compelling, inasmuch as Metro Broadcasting was decided under the intermediate scrutiny standard five years before Adarand III established strict scrutiny as the standard for race conscious federal programs. 46 The Policy Forum Report also noted that in the broadcast employment context, a panel of the D. C. Circuit of the U. S. Court of Appeals, in dictum, had expressed its view that promoting broadcast diversity does not constitute a compelling governmental interest. 47
The second rationale which might satisfy strict scrutiny is the government's interest in remedying the consequences of its own involvement in past discrimination. In the Section 257 Inquiry, the FCC had acknowledged that discrimination can be a market entry barrier. 48 Further, the Supreme Court has found that the governmental interest in remedying past discrimination can meet the compelling interest standard. 49
Results Of The Market Entry Barriers Studies
l. When Being Number One is Not Enough: The Impact of Advertising Practices on Minority-Owned and Minority-Formatted Broadcast Stations, Kofi Ofori, Civil Rights Forum on Communications Policy (l999)
This study examined discriminatory advertising practices and their impact on minority owned and minority formatted broadcasters. Its central finding was that radio stations that are successful in attracting large minority audiences still do not attract the dollars their ratings should earn. Anecdotal data collected by the study suggested that in some instances the media buying process is influenced by stereotypical perceptions of minorities, presumptions about minority disposal income, a desire to control product image and unfounded fears of pilferage. 50
2. Diversity of Programming in the Broadcast Spectrum: Is There a Link Between Owner Race or Ethnicity and News and Public Affairs Programming? Christine Bachen, Allen Hammond, Laurie Mason and Stephanie Craft, Santa Clara University School of Law (2000)
This study found that minority owned radio stations aired more racially diverse programming than did majority owned stations.
Minority owned radio stations were significantly more likely than majority owned stations to broadcast programming about women's issues and live coverage of government meetings. They were also more likely to have a minority format for their music programming. Minority owned television stations were significantly more likely than their majority owned counterparts to have current events related programming and issues relevant to senior citizens.
Furthermore, radio stations and television stations with more minorities on their staffs had more racially diverse programming than comparable stations with few minority employees Owner involvement, ownership structure, and station revenue were not predictors of programming diversity.
3. Study of the Broadcast Licensing Process, KPMG LLP Economic Consulting Services (2000)
The study examined minority broadcast ownership during a period when the FCC sometimes awarded credit for minority ownership. It concluded that a dollar of assets in an application with minority presence was treated more favorably than a dollar of assets generally, while a dollar of liabilities had a more adverse impact on the probability of a win for an application with minority presence than for an application with lesser minority involvement.
KPMG also found that minority participation in comparative hearings was very low relative to minority representation in the U. S. population. The comparative hearing process seemed to have awarded credit for minority participation, as the FCC had intended. Nonetheless, there was actually a lower overall probability for an application with minority ownership winning a license than a nonminority application after controlling for a variety of important variables. This happened because minority applicants were less likely to be "singletons", i. e., applications unopposed by mutually exclusive applicants.
The study found that during the time of the FCC's policy of awarding credit for ownership by women, there was a positive and significant relationship between female ownership ---both by additional numbers of women and by a higher percentage of female ownership -- and the probability of license award. This result suggests that the FCC's policy of awarding credit for ownership by women was more effective than the FCC's policy of awarding credit for minority ownership.
4. FCC Econometric Analysis of Potential Discrimination: Utilization Ratios for Minority-and Women-Owned Companies in FCC Wireless Spectrum Auctions, Ernst & Young LLP (2000)
5. Study of Access to Capital Markets and Logistic Regressions for License Awards by Auctions, William Bradford, University of Washington (2000)
Using regression analysis, Dr. Bradford examined the capital market experiences of current broadcast license holders with respect to race, gender, the year of application or acquisition, business cash flow, equity, and size of firm (full time employees). His study found that minority broadcast license holders were less likely to be accepted in their applications for debt financing, after controlling for the effect of the other variables on the lending decision. Minority borrowers paid higher interest rates on their loans, after controlling for the impact of the other variables. Gender did not seem to affect the interest paid by borrowers. 5l
Dr. Bradford also examined wireless applicants' access to capital. Loan applications of minority wireless firms were less likely to be accepted than those of nonminority firms, after controlling for the effect of the other variables on the lending decision. Applications for debt financing from female applicants were less likely to be approved. Minority borrowers paid higher interest rates on their loans, after controlling for the impact of the other variables. Again, gender did not seem to be a factor in predicting differences in interest rates paid by borrowers.
Finally, Dr. Bradford concluded that minority status resulted in a lower probability of winning in spectrum auctions. The data showed that gender has a similar, but less pronounced negative impact on winning spectrum auctions.
6. Whose Spectrum Is It Anyway? Historical Study of Market Entry Barriers, Discrimination and Changes in Broadcast and Wireless Licensing -- l950 To Present, Ivy Planning Group (2000)
The Ivy Planning Group interviewed l20 representatives of small, minority and women owned businesses that had attempted (success-fully or not) to acquire, sell or transfer a license during the years l950 -2000. The researchers also interviewed 30 key market participants, including media brokers, lenders, attorneys, industry leaders, and FCC officials. The consensus of the interviewees was that for minority and women licensees, market entry barriers were exacerbated by the discrimination minorities and women have faced in the capital markets, in the advertising industry, in broadcast industry employment, in the broadcast station transactional marketplace, and as a consequence of various actions and inactions by the FCC and Congress. Further, the study concluded that market entry barriers have been aggravated by weak enforcement of FCC EEO regulations, underutilized FCC minority incentive policies, use by nonminority men of minority and female "fronts" during the comparative hearing process, the lifting of the broadcast ownership caps, and minimal small business advocacy before the FCC. Congress' repeal of the tax certificate program, which from l978 until its repeal in l995 provided tax incentives to encourage firms to sell broadcast licenses to minority owned firms, was regarded by interviewees as a particularly severe blow to minorities' ability to acquire broadcast and cable properties. 52
The Ivy Planning Group concluded that (l) bidding credits designed to increase the opportunities for participation in wireless auctions by small, minority and women owned businesses were ineffective and unsuccessful; (2) the relaxation of ownership caps has significantly decreased the number of small, women and minority owned businesses in the broadcasting industry; (3) the declining participation of small, women and minority owned businesses in broadcasting has resulted in diminished community service and diversity of view-points; and (4) the FCC had often failed in its role of public trustee of the broadcast and wireless spectrum by not properly taking into account the effect of its programs on small, minority and women owned businesses.
How The FCC Uses Section 257 In Rulemakings
Given the variety and numerosity of initiatives described in the l997 Section 257 Report and the 2000 Section 257 Report, it is not surprising that the FCC has often invoked Section 257 as an affirmative basis for its decisions in rulemaking proceedings. Perhaps the best example of the FCC's use of Section 257 in a rulemaking was in its PCS geographic partitioning proceeding. In l996, the FCC proposed to allow small businesses to carve out smaller, more affordable commercial mobile radio licenses through geographic partitioning and spectrum disaggregation. 53 The FCC's decision, with Section 257 in its very caption, concluded that its new rules would "eliminate barriers to entry for small businesses seeking to enter the PCS marketplace and will promote the rapid creation of a competitive market for the provision of PCS services." 54 In a number of subsequent rulemakings that directly impacted small, minority or female businesses, the FCC has invoked Section 257 as a key linchpin of its decision on the merits. 55
On occasion, the FCC issues rules that do not directly impact small businesses, but mentions Section 257 as an additional basis for them. For example, in l998 the FCC adopted rules that, inter alia, permitted MDS and ITFS licensees to provide regular two-way services and permitted increased flexibility in spectrum use and channelization, e. g., combining multiple channels to accommodate wider bandwidths and dividing channels into smaller bandwidths. 56 Although the notice of proposed rule-making in the proceeding had not mentioned Section 257, 57 the report and order resolving the proceeding did observe that new rules "will further the mandate of Section 257.. . which requires the Commission to identify and eliminate market entry barriers for entrepreneurs and other small businesses[.]" 58 This approach to Section 257 -- mentioning it in passing as an additional but not decisionally significant justification for a decision reached on other grounds -- has become relatively commonplace. 59 Sometimes, however, invocation of Section 257 often borders on the ministerial, with Section 257 being mentioned not even as an additional basis for a rule but simply to state that the rules are not inconsistent with Section 257, or that they fortuitously promote some of Section 257's objectives other than market entry barrier elimination. 60 These decisions sometimes evidence little effort by the FCC to craft a substantive result consistent with Section 257's objectives.
The case law has not yet answered the question of whether, in a rule-making, the FCC is always required on its own motion to consider Section 257 issues even if no commenter raises them. 6l Nonetheless, in a promising development, Section 257 has been addressed in some detail in notices of inquiry and notices of proposed rulemaking, there-by notifying the telecom world that comments addressing market entry barriers are encouraged. 62 Still, the FCC does not always emphasize the importance of Section 257 when calling for comment. 63 Moreover, the FCC has not always called for comments on Section 257 issues even when the nature of the proceeding cries out for a Section 257 dialogue. In a recent example that hopefully does not signal a coming trend, the FCC's recent notice of proposed rule-making that contemplates relaxation of those limits mentions neither Section 257 nor minority and female ownership. 64
Given the FCC's mixed record in applying Section 257 analysis in rulemakings, it will fall to civil rights lawyers to advocate forcefully and consistently for the creative, robust and consistent use of Section 257 in rulemakings and elsewhere.
Can Section 257 Provide An Independent Cause Of Action?
Civil rights law evolves one case at a time. Segregation fell in increments -- the law schools first, 65 then the graduate schools, 66 and finally the public schools. 67 The argument for segregation fell to pieces once each justice accepted the simple truth that separate is never equal. 68
A similar line of cases will need to be brought until every FCC commissioner accepts the fact that market entry barriers are imposed everywhere, and thus must be addressed in every inquiry, every rule-making, and in every significant adjudication.
Private parties have already begun to bring Section 257 into rule-makings, whether invited to or not. 69 In these cases, parties are asking the FCC to apply market entry analysis to a systemic subject area, in the hope that the resulting rule will automatically and deductively treat market entry barriers in that area across the board. 70
Although the FCC is required to consider Section 257 issues when they arise in a rulemaking, the converse does not apply. In a l996 case, Classic Telephone, the FCC determined that it was not required by Section 257 to conduct a rulemaking examining market entry barriers in an industry as a condition precedent to adjudicating controversies arising in that industry. 7l The municipality making the Section 257 argument in Classic Telephone had the right idea, but it may have reached too high. Its objective might have been achieved in a far less disruptive way: it could have used Section 257 to ask the FCC to consider whether market entry barriers were a factor in its unique situation. Decisions in several such cases could then lead the FCC inductively to undertake a market entry barriers rulemaking whose outcome would govern all future, similarly-situated cases.
This fairly moderate, evolutionary approach would enable many parties to enjoy the benefits of Section 257 without waiting for years for the FCC to complete a rulemaking. 72 This approach depends, however, on the answer to this key question: Does Section 257 provide a cause of action in an adjudication?
"Cause of action," implying a substantive mandate, can mean two things. First, it means that a party may secure broad equitable relief that benefits the public generally, such as the relief typically sought by civil rights organizations in challenges to broadcast license renewals that invoke the equal employment opportunity regulations. Ever since UCC I, 73 there has been little doubt that private attorneys general will be heard when seeking enforcement of substantive provisions in the Communications Act, and since UCC II there has been little doubt that the FCC must grant such relief when it is warranted. 74
The second meaning of "cause of action" is that a private party may secure substantive relief specific to itself. The standing of such a party is well established, 75 and nothing in the legislative history or the language of the statute expressly precludes the FCC from affording substantive Section 257 relief to a private party in an adjudication. While it is certainly useful for public interest groups to be able to secure enforcement of Section 257, allowing private parties to seek individualized or class-based relief would be a huge step toward achievement of Congress' objectives in enacting Section 257. Unlike public interest groups, private parties typically have both the economic incentive and the economic resources needed to develop the law in this area.
Two remarkable decisions -- although they each actually arose in rulemakings -- suggest that the FCC does read Section 257 as giving rise to a cause of action. In l997, in a decision that established technical and operational rules for certain specialized mobile radio (SMR) channels, the FCC rejected, as contrary to Section 257, a rather brazen industry proposal that "would, in essence, allow incumbents to divide all remaining unlicensed spectrum on the lower 230 channels among themselves, with no opportunity for new entrants to obtain or even compete for such spectrum." 76 And in l998, in its Pole Attachment Report and Order, the FCC again invoked Section 257 as an affirmative response to a commenter's request for relief that could have been harmful to small businesses. 77 Surely if the FCC regards Section 257 as a tool it can deploy to defeat an anticompetitive proposal, how far a logical leap is it for the FCC to afford private parties the same opportunity?
There are already five parties with free passes to use Section 257 affirmatively whenever they like: the individual commissioners themselves. Commissioner (now Chairman) Powell did not hesitate to deploy Section 257 in separate statements in rulemakings, 78 and former Commissioner Tristani occasionally invoked Section 257 in adjudications. 79 Again, how far a logical leap is it for the commissioners also to allow private parties to invoke Section 257 as a grounds for substantive relief?
Late in 200l, the FCC almost openly and directly proclaimed that there is a Section 257 private cause of action. In TelQuest Ventures, L. L. C., 80 a party contended that the FCC must grant its particular earth station application because Section 257 requires the FCC to eliminate market entry barriers for small businesses. Although the FCC delivered TelQuest a loss on the merits, the FCC handed the public an enormous victory on the applicability of Section 257. Rather than dismiss TelQuest's theory out of hand, the FCC reached TelQuest's Section 257 argument. On the merits, the FCC held that it "has already determined that the practice of requiring earth station license applications to propose communicating with licensed space stations does not impose burdens uniquely or predominately on small businesses, and so is not inconsistent with Section 257." 8l
To be sure, TelQuest does not completely define the extent of private cause of action under Section 257. The FCC pointed out in TelQuest that it had already rendered a Section 257 determination in a rule-making; thus, the FCC simply imported the fruit of that rulemaking into the TelQuest adjudication. In the rulemaking, the FCC had considered whether there were market entry barriers, but it had found none. But if the rulemaking had uncovered market entry barriers, the FCC would have imported that finding into the TelQuest adjudication, and on that basis the FCC might have found in TelQuest's favor.
After someone brings that kind of case, only one more step will remain in order to create a private of action under Section 257. The winning adjudication might look like this: a petitioner will allege that (l) market entry barriers exist; (2) the FCC has not yet had occasion to cure these market entry barriers in a rulemaking; (3) by the time such a rulemaking could be completed, the petitioner's injury would have become fatal; and (4) the FCC should award the petitioner relief under Section 257 immediately. This argument would provide a powerful justification for the FCC to set aside its customary preference for rulemaking over adjudication.
If the FCC were to reach the merits of this petitioner's claim, she will be a Civil Rights Hero even if she loses on the facts. She will have transformed Section 257 from an amorphous dream into a powerful instrument of justice.
How the FCC Can Fulfill the Promise of Section 257
As noted above, the public, and particularly minority and female entrepreneurs, waited five years for the Section 257 research studies to be completed. 82 The affected parties are still waiting for the FCC to do something with the results -- in particular, to decide whether the studies' findings justify race or gender conscious initiatives to promote diversity or remedy the effects of past discrimination. While they wait, some of the last prime spectrum real estate is being salted away forever through auctions conducted without any remedial provisions. As in the television industry, by the time the FCC gets around to developing minority or female ownership policies, the only tool left for entry will be a checkbook -- if anything is even for sale at fair market value to a new entrant.
In addition to acting on the studies' findings -- which are over a year old at this writing -- the FCC should continue to build the body of knowledge the studies have developed. Three avenues for further analysis seem especially promising.
First, in-depth historical research is needed to measure the scope of the FCC's ratification and validation of its own licensees' discrimination, and to quantify the extent to which the consequences of these FCC actions are felt by minority and female entrepreneurs today. 83 In particular, the FCC should examine such licensing factors -- none of them clearly justified to promote service to the public -- as preferences for daily newspaper owners (when minorities and women owned no daily newspapers), past broadcast record (when minorities and women owned almost no stations at which they could have established a "broadcast record"), past broadcast experience (which minorities and women could seldom acquire, thanks in large measure to discrimination by FCC-licensed facilities, including segregated schools with broadcasting programs), and a year of operating capital for a construction permit assuming zero revenue (far in excess of actual business requirements, at a time when few minorities and women had personal fortunes). 84 This analysis will be necessary if the FCC finds that narrowly tailored race conscious relief is necessary to remedy the present effects of past discrimination in which the FCC itself was involved.
Second, it would be useful to further develop the Ernst & Young study. It contains no breakdown of women and minority-owned businesses in terms of size. 85 The FCC should take a closer look at auction dropout rates, the size of the markets awarded, and whether the default rates of minorities are higher than nonminorities and why. The FCC should also determine whether its own regulations, or some other factors, account for the large discrepancy between the qualification rates of minorities and women and nonminorities in auction participation.
Third, inasmuch as the FCC's initial market entry barriers research focused on broadcasting and wireless, 86 its studies in these areas can be used as paradigms for comparable research on market entry barriers in the common carrier and cable industries.
Apart from research, one major procedural step would go a long way toward fostering the objectives of Section 257. When parties are on notice that the FCC wants to hear about a particular subject, they often come forward with valuable record evidence that the FCC can use in unanticipated ways to advance Section 257's objectives in that particular proceeding and in other proceedings. Using the geographic partitioning proceeding as a model, 87 the FCC should call for comment on Section 257 issues whenever it issues a notice of proposed rulemaking or notice of inquiry.
Operationally, the Commission should also ensure that it maintains the Office of Communications Business Opportunities (OCBO) as a fully staffed and funded central clearinghouse for Section 257 and RFA analyses in rulemakings initiated by the operating bureaus. It should also include Section 257 analysis in its Biennial Review process. 88
Finally, the FCC should always interpret Section 257 as an affirmative command from Congress to let "justice roll down like waters and righteousness like a mighty stream." 89 When beginning a rulemaking, inquiry or adjudication, the FCC should display Section 257 front and center. When faced with an argument against competition and diversity, the FCC should wield Section 257 in its response. When faced with an argument for competition and diversity, the FCC should invoke Section 257 to agree. The FCC should regard Section 257 as having created public and private causes of action -- the way the Department of Justice has regarded 42 U. S. C. §l983 since Monroe v. Pape. 90 And above all, the FCC should adopt Section 257 as part of the its culture -- breathing it in, thinking about it, invoking it, living it all of the time.
Conclusion
As the steward of valuable public property, the FCC has a deep moral duty to measure, and then remedy any consequences of its own involvement in past discrimination. That is why the FCC should embrace Section 257 in all of its day to day regulatory activities. Over time, the FCC's experience will reconfirm that when talent and brains rather than deep pockets drive one's opportunity to compete, consumers ultimately will enjoy optimal levels of competition and service.
Finally, if the authors may step out of character and address our colleagues: we civil rights lawyers should never rest until we do what Dick Moore would have done: become the master of Section 257. Our task is to craft it into an instrument for positive justice.
The authors appreciate the encouragement and thoughtful suggestions of S. Jenell Trigg and Carol F. Westmoreland. MMTC's legal internship program, in which Ms. Khan served, was renamed this year after Earle K. Moore, Esq., who passed away in 200l. A small part of Mr. Moore's work is described in this article, which the authors dedicate to him with much love.
Endnotes
1. Monroe v. Pape, 365 U. S. l67 (l96l).
2. Economic injury has long been recognized to afford standing in FCC proceedings. FCC v. Sanders Brothers Radio Station, 309 U. S. 470 (l940) (" Sanders Brothers").
3. Office of Communication of the United Church of Christ v. FCC 359 F. 2d 994 (D. C. Cir. l966) (" UCC I").
4. Office of Communication of the United Church of Christ v. FCC 425 F. 2d 543 (D. C. Cir. l969) (" UCC II").
5. Report on Editorializing by Broadcast Licensees, l3 FCC l246 (l949).
6. Complaint of Syracuse Peace Council, 2 FCC Rcd 5043 (l987), aff 'd, Syracuse Peace Council v. FCC, 867 F. 2d 654 (D. C. Cir. l989), cert. denied, 110 S. Ct. 7l7, 493 U. S. l0l9 (l990).
7. TV 9, Inc. v. FCC, 495 F. 2d 929 (D. C. Cir. l973), cert. denied, 4l8 U. S. 986 (l974) (" TV 9") (requiring FCC to take racial diversity of ownership into account in comparative hearing for a television station construction permit).
8. Statement of Policy on Minority Ownership of Broadcast Facilities, 68 FCC2d 979, 983 (l978) (" l978 Minority Ownership Policy Statement").
9. Deduction for Health Insurance Costs of Self-Employed Individuals, Pub. L. No. l04-7, §2, l09 Stat. 93, 93-94 (l995) (codified at 26 U. S. C. §l07l (l995)). If you have read this far into the footnotes, you may be asking: "why would a legislative provision repealing an FCC minority tax program be found in a bill concerning health insurance?" The answer is that the minority tax program repeal was cleverly inserted in a bill whose main provision gave Mom and Pop a badly needed break on the deductibility of their health insurance. The entire bill hit President Clinton's desk four days before April l5, l995. The l994 IRS Form l040s had already been printed -- with language directing taxpayers to watch to see whether the health insurance deductibility provision would become law before April l5. Thus, almost every pro-civil-rights member of Congress had to hold her nose and vote for this stench, and a trapped President had no choice but to sign it. Behold a tarnished sterling example of how legislative strumpetry can cause a popular civil rights initiative to disappear in a blink.
l0. Adarand Constructors, Inc. v. Pe--a, 5l5 U. S. 200 (l995) (" Adarand III").
11. Lutheran Church-Missouri Synod v. FCC, l4l F. 3d 344, petition for rehearing denied, l54 F. 3d 487, suggestions for rehearing en banc denied, l54 F. 3d 494 (D. C. Cir. l998) (" Lutheran Church") (striking down original l97l version of the FCC's broadcast and cable EEO regulations); MD DC DE Broadcasters Ass'n. v. FCC, 236 F. 3d l3, rehearing and rehearing en banc denied, 253 F. 3d 732 (D. C. Cir. 200l), petition for certiorari pending sub nom. MMTC v. FCC, D. C. Cir. No. 0l-639 (filed October l8, 200l) (striking down new, improved but far more dilute 2000 version of the same EEO regulations).
l2. There was no electronic communication during the Reconstruction; that had to wait until l909. Federal regulation of electronic communications began after (and largely because) the Titanic sank in l9l2 without an ade-quate means of communication with nearby ships. See Radio Act of l9l2, 27 Stat. 302 (l9l2), and watch the movie.
l3. P. L. l04-l04, 110 Stat. 56 (l996).
l4. Section 257 directs the FCC to complete a rulemaking proceeding "for the purpose of identifying and eliminating ... market entry barriers for entre-preneurs and other small businesses in the provision and ownership of telecommunications services and information services ...." 47U. S. C. §257( a). It establishes a "National Policy" under which the FCC shall pro-mote "diversity of media voices, vigorous economic competition, techno-logical advancement, and promotion of the public interest, convenience and necessity." 47 U. S. C. §257( b). Congress also expects the FCC to report, every three years, on "any regulations prescribed to eliminate bar-riers within its jurisdiction ...." 47U. S. C. §257( c). Congress' desire that the FCC proactively eliminate barriers to minority entry is also evident from the language it added in l996 to 47 U. S. C. §l5l, which now manifests that the FCC was created "[ f] or the purpose of regulating interstate and foreign commerce in communication by wire and radio so as to make available, so far as possible, to all the people of the United States, without discrimination on the basis of race, color, religion, national origin, or sex, a rapid, efficient, Nation-wide, and world-wide wire and radio communi-cation service . . . " (new l996 language emphasized).
l5. See 47 U. S. C. §257( c).
l6. Interview with S. Jenell Trigg, of Counsel, Leventhal Senter & Lerman, January 8, 2002 (" Trigg Interview"). As former Senior Telecommunications Policy Analyst with the FCC's Office of Communications Business Opportunities (" OCBO") and then Assistant Chief Counsel for Telecommunications with the Office of Advocacy, U. S. Small Business Administration (" SBA"), Ms. Trigg helped guide the FCC's early efforts to comply with Section 257.
l7. Trigg Interview, supra.
l8. The tax certificate policy was adopted as part of the l978 Minority Ownership Policy Statement. It provided a capital gains tax deferral incen-tive to companies that sold broadcast and cable properties to minorities. The policy had been responsible for two-thirds of the broadcast stations bought by minorities between l978 and l995. After conservative members of Congress objected to a single large proposed transaction, Congress repealed the entire policy. See discussion at 5 and n. 9 supra. An effort is underway to reinstate the policy or something akin to it. See S. l711, the Telecommunications Ownership Diversification Act of l999, introduced October 8, l999 by Senator John McCain and Senator Conrad Burns.
l9. The Conference Report parallels the language of the enacted provision. Joint Explanatory Statement of the Committee of Conference, l42 Cong. Rec. Hl078-03, Hlll3-l5 at 23. Congresswoman Collins offered this inter-pretation of Section 257:
[W] hile we should all look forward to the opportunities present-ed by new, emerging technologies, we cannot disregard the les-sons of the past and the hurdles we still face in making certain that everyone in America benefits equally from our country's maiden voyage into cyberspace. I refer to the well-documented fact that minority and women-owned small businesses continue to be extremely under represented in the telecommunications field .... Underlying [Section 257] is the obvious fact that diver-sity of ownership remains a key to the competitiveness of the U. S. communications marketplace.
l42 Cong. Rec. Hll4l at Hll76-77 (daily ed. Feb. l, l996) (statement of Rep. Collins).
20. Section 257 Proceeding to Identify and Eliminate Market Entry Barriers for Small Businesses (Notice of Inquiry), 11 FCC Rcd 6280, 6307-08 ¶¶ 40-42 (l996) (" Section 257 Inquiry").
2l. Id. at 6308-l7 ¶¶ 43-58.
22. Id. at 6305 ¶34. The Commission also sought "personal accounts of indi-vidual experiences, studies, reports, statistical data, or any other relevant information." Id. However, the response to the Section 257 Inquiry was "bereft of statistical evidence and woefully short on meeting the standard of empirical evidence necessary to justify gender or race-based incentives established by the Supreme Court." The insufficiency of the traditional notice and comment procedures is one reason "why it was, and still is, critical to conduct separate Adarand studies by independent consultants." Comments of S. Jenell Trigg, February 5, 2002 (" Trigg Comments").
23. Id. at 6306 ¶37 and n. s 113-115 (l996) (citing Statement of David Honig, Executive Director, Minority Media and Telecommunications Council, En Banc Advanced Television Hearing, MM Docket No. 87-268 (December l2, l995) (on file with co-author) at 2-3 and n. 2). Some of the FCC's history of involvement in discrimination is provided in A. Bush and M. Martin, in "The FCC's Minority Ownership Policies from Broadcasting to PCS," 48 Federal Comm. Law Journal 423, 439 (l996) (concluding that "the FCC's comparative hearing procedure contained an inherent bias in favor of nonminorities until reforms were finally adopted in l978.")
24. Section 257 Proceeding to Identify and Eliminate Market Entry Barriers for Small Businesses (Report), l2 FCC Rcd l6802, l6806-l6808 ¶6 (l997) (" l997 Section 257 Report"). A list of participants in the public hearing is attached to the l997 Section 257 Report. Id. at l6938-50, in Appx. A. The need for a study of advertising discrimination was planted and nurtured at this public hearing with the testimony of Jeff Cullers, President of Vince Cullers Advertising, Chicago. Trigg Comments, supra.
25. l997 Section 257 Report, supra. This report was expressly required by 47 U. S. C. ¶257( c).
26. Id. at l68l0-24 ¶¶ l2-34.
27. Id. at l6824-46 ¶¶ 35-8l.
28. Id. at l6846-l69l7 ¶¶ 82-209.
29. Id. at l69l7-35 ¶¶ 2l0-225.
30. Section 257 Report to Congress: Identifying and Eliminating Market Entry Barriers For Entrepreneurs and Other Small Businesses, l5 FCC Rcd l5376 (2000) (" 2000 Section 257 Report").
3l. Id. at l5386-l5437 ¶¶ 26-l53.
32. Id. at l5397-98 ¶¶ 53-54, describing program that provides discounts on the cost of telecommunications services, Internet access and internal connections to schools and libraries in an attempt to "bridge the 'digital divide' in access to information technology between the affluent and non-affluent[.]" Id. at l5397 ¶54.
33. Id. at l54l2-l3 ¶¶ 85-88, describing, inter alia, incentives designed to enable small businesses to compete in PCS auctions.
34. Id. at l5420-2l ¶¶ l00-l03, describing new noncommercial low power FM radio service aimed at encouraging diversity of voices in broadcasting.
35. Id. at l5443-46 ¶¶ l77-l87.
36. See discussion at 156 and n. 9 supra.
37. Id. at l5445 ¶l84.
38. l997 Section 257 Study, l2 FCC Rcd at l6934 ¶23.
39. Id. The FCC also noted that "the study will assist us in... determining whether there are constitutionally-sound bases for adopting licensing incentives for women or minorities." Id.
40. Id. at l6934 ¶225.
4l. See Review of the Commission's Regulations Governing Television Broadcasting (Memorandum Opinion and Second Order on Reconsideration), l6 FCC Rcd l067, l078 ¶33 (200l) (subsequent history omitted) (" Television Ownership Second Recon. Order") ("[ w] hile we are concerned about minority ownership, we believe . . . initiatives to enhance minority ownership should await the evaluation of various studies spon-sored by the Commission"); Amendment of the Commission's Rules to Establish Part 27, the Wireless Communications Service (Report and Order), l2 FCC Rcd l0785, l0876-78 ¶¶ l89-92 (l997) (declining to consid-er adopting race or gender conscious PCS auction provisions until the Section 257 studies are completed); Revision of Part 22 and Part 90 of the Commission's Rules to Facilitate Future Development of Paging Systems (Second Report and Order and Further Notice of Proposed Rulemaking), l2 FCC Rcd 2732, 2809 ¶l73 (l997) (" Paging Systems Second Report") (declin-ing to consider adopting race or gender conscious paging auction provisions until the Section 257 studies are completed). The studies were completed over a year ago at this writing, but the FCC has yet to act on their findings. See discussion at p. 140 infra.
42. One study, "When Being Number One Is Not Enough," had been released in l999. See discussion infra at 161.
43. Policy Forum on Market Entry Barriers Faced by Small, Minority And Women-Owned Businesses in the Communications Industry, FCC Office of General Counsel, December l2, 2000.
44. The Court has also held that gender based classifications need only meet a more relaxed (although still difficult to satisfy) standard known as "intermediate scrutiny." See United States v. Virginia, 5l8 U. S. 5l5, 53l-33 (l996). Since strict scrutiny is a higher standard than an intermediate scrutiny, FCC programs which satisfy strict scrutiny will encompass the requirements of programs serving both minorities and women.
45. Metro Broadcasting, Inc. v. FCC, 497 U. S. 547 (l990) (" Metro Broadcasting"). The two FCC programs were (l) an enhancement for minority ownership in comparative hearings for broadcast licenses (see TV 9, supra) and (2) the FCC's distress sale policy, which provided finan-cial incentives for the transfer of broadcast licenses, in hearing status, to minority owned firms (see l978 Minority Ownership Policy Statement, supra). The FCC no longer conducts comparative hearings, and the dis-tress sale policy has been used only twice since l990.
46. It is not clear that the diversity rationale would fail strict scrutiny. Adarand III only overruled Metro Broadcasting to the extent that it applied intermediate rather than strict scrutiny. See Adarand III, 5l5 U. S. at 227.
47. Lutheran Church, supra, l4l F. 3d at 355.
48. See Section 257 Inquiry, 11 FCC Rcd at 6282-83 ¶3.
49. See City of Richmond v. J. A. Croson Co., 488 U. S. 469, 500 (l989) (" Croson"), finding that in order to establish a compelling interest, the government must show "a strong basis in evidence for its conclusion that remedial action (i) s necessary" (quoting Wygant v. Jackson Board of Education, 476 U. S. 267, 277 (l986)). The Croson court also held that a government actor may not rely on general societal discrimination in order to justify a race conscious program. Id. at 499. Instead, the government must show that it is remedying either its own discrimination, or discrimination in the private sector in which the government has become a "pas-sive participant." Id. at 492 (plurality opinion). The governmental actor must possess evidence that its own practices are "exacerbating a pattern of prior discrimination," and must "identify that discrimination, public or private, with some specificity," to establish the factual predicate necessary for race conscious relief. Id. at 504.
50. The study identified two particularly egregious practices: "no urban/ Hispanic dictates" (an advertiser's instructions to its agency to refuse to buy airtime on stations with Black or Spanish formats) and "minority discounts" (an advertiser's refusal to pay as much to reach minority audiences as it would pay to reach white audiences, other factors being equal). A followup regression analysis (not part of the FCC's Section 257 process), Minority Targeted Programming: An Examination Of Its Effect On Radio Station Advertising Performance, Kofi Ofori (January, 200l), found that advertisers paid less for time on stations owned by minorities (especially standalone stations), stations having minority formats, and stations targeted to young audiences. These factors appeared to be a proxy for "no urban/ Hispanic dictates" and "minority discounts."
5l. These findings bear a close similarity to the FCC's l982 conclusion that access to capital was the number one market entry barrier facing minorities. See Commission Policy Regarding the Advancement of Minority Ownership in Broadcasting, 92 FCC2d 849, 852-53 (l982).
52. See discussion at 156 n. 9 supra.
53. Geographic Partitioning and Spectrum Disaggregation by Commercial Mobile Radio Services Licensees; Implementation of Section 257 of the Communications Act -- Elimination of Market Entry Barriers (Report and Order and Further Notice of Proposed Rulemaking), 11 FCC Rcd 2l83l (l996), recon. denied, l5 FCC Rcd 8726 (2000).
54. Id. at 2l882 ¶114. The Commission followed a similar approach in six subsequent proceedings that also proposed spectrum partitioning and disaggregation. Amendment of Part 95 of the Commission's Rules to Provide Regulatory Flexibility in the 2l8-2l9 MHz Service (Order, Memorandum Opinion and Order and Notice of Proposed Rulemaking), l3 FCC Rcd l9064, l9092-93 ¶52 (l998); Amendment of Part 90 of the Commission's Rules to Facilitate Future Development of SMR Systems in the 800 MHz Frequency Band (Second Report and Order), l2 FCC Rcd l9079, l9l29-35 ¶¶ l42-l59 (l997) (" 800 MHz Report and Order"); Amendment of the Commission's Rules Regarding the 37.0-38.6 GHz and 38.6-40.0 GHz Bands (Report and Order and Second Notice of Proposed Rulemaking), l2 FCC Rcd l8600, l8669 ¶l68 (l997); Amendment of the Commission's Rules Concerning Maritime Communications (Second Report and Order and Second Further Notice of Proposed Rulemaking), l2 FCC Rcd l6949, l6995-97 ¶¶ 9l-95 (l997); Amendment of the Commission's Rules Regarding Multiple Address Systems (Notice of Proposed Rulemaking), l2 FCC Rcd 7973 7987 ¶27 (l997) (" MAS NPRM"), rules adopted in Amendment of the Commission's Rules Regarding Multiple Address Systems (Report and Order), l5 FCC Rcd 11956, 11982 ¶68 (2000); Paging Systems Second Report, supra, l2 FCC Rcd at 2806 ¶l68.
55. See Review of the Commission's Broadcast and Cable Equal Employment Opportunities Rules and Policies (Report and Order), l5 FCC Rcd 2329, 2350 ¶48 (2000), reversed on other grounds sub nom. MD/ DC/ DE Broadcasters Ass'n. v. FCC, supra, 236 F. 3d l3 and 253 F. 3d 732 (in adopting new broadcast and cable EEO regulations, Commission notes that Section 257( b) identifies "diversity of media voices" as one of the "policies and purposes" of the Communications Act); Review of the Commission's Regulations Governing Television Broadcasting (Report and Order), l4 FCC Rcd l2903, l29l3 ¶2l (l999) (" Television Ownership R& O"), recon. denied, l6 FCC Rcd l063, further recon. denied, Television Ownership Second Recon. Order, supra, l6 FCC Rcd l067, appeal pending sub nom. Sinclair Broadcasting Group v. FCC, D. C. Cir. No. 0l-l079 (filed February 20, 200l); l998 Biennial Regulatory Review -- Streamlining of Mass Media Applications, Rules and Processes, and Policies and Rules Regarding Minority and Female Ownership of Mass Media Facilities (Report and Order),(" l998 Biennial Review -- Mass Media Streamlining"), l3 FCC Rcd 23056, 23095-98 ¶¶ 96 (l998) (decid-ing to collect data on broadcast owners' gender and race in order to "determine accurately the current state of minority and female ownership of broadcast facilities, determine the need for measures designed to pro-mote ownership by minorities and women, to chart the success of any such measures that we may adopt, and to fulfill our statutory mandate under Section 257 ...."), recon. denied on this issue (and elsewhere granted in part on other issues), l4 FCC Rcd l7525, l7530 ¶l7 (l999); Paging Systems Second Report, supra, l2 FCC Rcd at 2806 ¶l68 (declaring goals of Section 257 are fostered by system of bidding credits, installment plan and geographic area partitioning); Amendment to the Commission's Rules Regarding a Plan for Sharing the Costs of Microwave Relocation (Second Report and Order), l2 FCC Rcd 2705, 27l4-l5 ¶l9 (l997) (shortening voluntary negotiation period for entrepreneurs' "C block" winners in order to "assist small businesses in C block to deploy service to the consumer faster.")
56. Amendment of Parts 2l and 74 to Enable Multipoint Distribution Service and Instructional Television Fixed Services Licensees to Engage in Fixed Two-Way Transmissions (Report and Order), l3 FCC Rcd l9112 (l998), recon. granted in part on other grounds, l4 FCC Rcd l2764 (l999), further recon. and clarification granted in part on other grounds, l5 FCC Rcd l4566 (2000).
57. Amendment of Parts 2l and 74 to Enable Multipoint Distribution Service and Instructional Television Fixed Services Licensees to Engage in Fixed Two-Way Transmissions (Notice of Proposed Rulemaking), l2 FCC Rcd 22l74 (l997).
58. Id. at l9113 ¶2.
59. See l998 Biennial Regulatory Review -- Testing New Technology (Policy Statement), l4 FCC Rcd 6065, 6077 ¶28 (l999) (finding that revised testing and trials program for new technologies "should enable smaller carriers to engage in such trials" and therefore would help "eliminate market entry barriers for entrepreneurs and other small businesses in the provision and ownership of telecommunications and information services" (fn. omitted)); Regulatory Treatment of LEC Provision of Interexchange Services Originating in the LEC's Local Exchange Area (Second Report and Order in Docket No. 96-l49 and Third Report and Order in CC Docket No. 96-6l), l2 FCC Rcd l5756, l5878 n. 6l0 (l997) (noting that "with respect to small independent LEC's. . . this decision may promote their expansion into new telecommunications services and information services consistent with Section 257 of the Act"); Replacement of Part 90 by Part 88 to Revise the Private Land Mobile Radio Services and Modify the Policies Governing Them (Second Report and Order), l2 FCC Rcd l4307, l4325-26 ¶34 (l997) (holding that "allowing frequency coordinators to serve all eligible users in their respective pool rather than only serving users that meet each radio service's eligibility requirements should minimize, if not eliminate, market entry barriers for small businesses"); Rulemaking to Amend Parts l, 2, 2l, and 25 of the Commission's Rules to Redesignate the 27.5-29.5 GHz Frequency Band, To Reallocate the 29.5- 30.0 GHz Frequency Band, To Establish Rules and Policies for Local Multipoint Distribution Service and For Fixed Satellite Services (Second Report and Order, Order on Reconsideration, and Fifth Notice of Proposed Rulemaking), l2 FCC Rcd l2545, l26l4-65 ¶¶ l57-58 (l997) (invoking Section 257 as a basis for imposing short term eligibility restrictions on potential LMDS providers); Review of Sections 68. l04 and 68.2l3 of the Commission's Rules Concerning Connection of Simple Inside Wiring to the Telephone Network (Order on Reconsideration, Second Report and Order and Second Further Notice of Proposed Rulemaking), l2 FCC Rcd 11897, 11925 ¶48 (l997) (allowing customers to connect wiring installations of up to four access lines provides more options for small businesses to interconnect CPE to the public switched telephone network); Implementation of the Telecommunications Act of l996: Reform of Filing Requirements and Carrier Classifications (Report and Order), l2 FCC Rcd 807l, 8095 ¶l22 (l997) (" Filing Requirements and Carrier Classifications") (noting that decision not to require new, small LECs to comply with certain otherwise applicable filing and reporting requirements is consistent with Section 257); Implementation of Sections of the Cable Television Consumer Protection and Competition Act of l992: Leased Commercial Access (Second Report and Order and Second Order on Reconsideration of the First Report and Order), l2 FCC Rcd 5267, 5336 ¶l40 (l997) (noting that provisions for part-time leased access "are especially suited to allow small or entrepreneurial leased access programmers to enter the telecommunications programming marketplace.")
60. See Definition of Markets for Purposes of the Cable Television Broadcast Signal Carriage Rules (Order on Reconsideration and Second Report and Order), l4 FCC Rcd 8366 8393 ¶65 (l999) (cursory discussion of Section 257 under "Administrative Matters," mentioning media diversity and competition but not small businesses or market entry barriers); Implementation of Cable Act Reform Provisions of the Telecommunications Act of l996 (Report and Order), l4 FCC Rcd 5296, 5366 ¶l68 (three sentence discussion of Section 257 issues in section entitled "Market Entry Analysis," stating that new rules "eliminate provisions of the Act which disadvantaged new competitors" and hasten video competition, while not mentioning small businesses or market entry barriers); Amendment of Parts 2 and l5 of the Commission's Rules to Deregulate the Equipment Authorization Requirements for Digital Devices, l2 FCC Rcd l0623, l0636 n. 29 (l997) (finding that new equipment authorization regulations "are consistent with Section 257" because they "generally ease the equipment authorization requirements for all manufacturers and suppliers, including small manufacturers and suppliers"); Administration of the North American Numbering Plan, Carrier Identification Codes (CICs) (Second Report and Order), l2 FCC Rcd 8024, 8l4l n. 110 (l997) (finding that "the use of four digit CICs would serve the goal of Section 257 of the Act, by reducing barriers to entry of new small carriers and perhaps other small entities"; see also n. 70 supra, discussing a troubling application of Section 257 in a subsequent order in this same proceeding); Implementation of Infrastructure Sharing Provisions in the Telecommunications Act of l996 (Report and Order), l2 FCC Rcd 5470, 5483 ¶27 and 5496 ¶5l (l997) (finding that approach which relied on negotiations between small and large entities was consistent with Section 257); Petition to Amend Part 68 of the Commission's Rules to Include Terminal Equipment Connected to Basic Rate Access Service Provided via Integrated Services Digital Network Access Technology (Order on Reconsideration), l2 FCC Rcd 46l5, 46l8 n. l4 (l997) (finding that allowing smaller (as well as all other) manufacturers and suppliers "a reasonable opportunity to recoup costs invested in any remaining equipment inventory" is consistent with Section 257); Amendment of the Commission's Rules to Provide for Operation of Unlicensed NII Devices in the 5 GHz Frequency Range (Report and Order), l2 FCC Rcd l585 ¶l7 (l997) (finding that providing spectrum for wireless unlicensed digital network communications devices will promote Section 257 goals of "vigorous competition and technological advance-ment," while saying nothing about market entry barriers).
6l. The FCC does have a statutory duty under the Regulatory Flexibility Act (" RFA"), 5 U. S. C. §60l et seq, as amended by the Small Business Regulatory Enforcement Fairness Act of l996 (" SBREFA"), Pub. L. No. l04-l2l, 110 Stat. 857 (l996), to address and minimize the significant eco-nomic impact of its rulemakings on small business. In the early stages of a rulemaking proceeding, the FCC is required, inter alia, to identify and describe the potential economic impact on all classes of small business affected by the proposed rule and describe any alternatives to minimize that impact, while accomplishing the stated objectives of the proposed rule. 5 U. S. C. §§ 603, 605. This Initial Regulatory Flexibility Analysis is required to be a part of every rulemaking pursuant to Section 553( b) (5 U. S. C. §553( b)) of the Administrative Procedure Act, 5 U. S. C. §60l( 2).
In fact, the Final Regulatory Flexibility Analysis, which is also required in every final rule, 5 U. S. C. §604, has been judicially reviewable since l996 given the passage of SBREFA, 5 U. S. C. §611. This means that an adversely affected or an aggrieved small business can sue the FCC in federal court for its failure to properly identify the class of small entity affected by a rule, failure to consider alternatives to the rule that would minimize the significant economic impact on small business, and failure to reasonably explain why it rejected such alternatives. 5 U. S. C. §611( a)( l).
There have been few judicial challenges to the FCC's fulfillment of its duties under the FRA, and none has been successful. See, e. g., ValueVision Int'l. Inc. v. FCC, l49 F. 3d l203 (D. C. Cir. 2000) (finding that the RFA was a procedural rather than a substantive mandate and that the FCC had reasonably complied with the requirements of the RFA). In other industries, however, there have been successful challenges under the RFA. See, e. g. Northwest Mining Ass'n. v. Babbitt, 5 F. Supp. 2d 9 (D. D. C. l998) (finding that the Bureau of Land Management failed to incorporate the correct definition of small entity in its rulemaking and regulatory flexibility analysis). An increased and strategic use of the RFA, in conjunction with Section 257, by the small and minority business communities could be formidable. See pp. 30-38 infra (discussing possible use of Section 257 as a substantive mandate.)
62. See Amendment of Parts 2 and 25 of the Commission's Rules to Permit Operation of NGSO FSS Systems Co-Frequency with GSO and Terrestrial Systems in the Ku-Band Frequency Range (First Report and Order and Further Notice of Proposed Rulemaking), l6 FCC Rcd 4096, 4208-l0 ¶298-99 (2000); Amendments to Parts l, 2 and l0l of the Commission's Rules To License Fixed Services at 24 GHz (Notice of Proposed Rulemaking), l4 FCC Rcd l9263, l9275-76 ¶20 (l999); l998 Biennial Regulatory Review -- Testing New Technology (Notice of Inquiry), l3 FCC Rcd 2l879, 2l895-96 ¶3l (l998); Implementation of the Cable Television Consumer Protection and Competition Act of l992: Review of the Commission's Cable Attribution Rules (Notice of Proposed Rulemaking), l3 FCC Rcd l2990, l2999 ¶l7 (l998); Implementation of Section 703( e) of the Telecommunications Act of l996; Amendment of the Commission's Rules and Policies Governing Pole Attachments (Notice of Proposed Rulemaking), l2 FCC Rcd 11725, 11727 ¶3 (l997); MAS NPRM, supra, l2 FCC Rcd at 7982-83 ¶l7 and 7987 ¶27; Amendment of Parts 2, l5, l8 and Other Parts of the Commission's Rules to Simplify and Streamline the Equipment Authorization Process for Radio Frequency Equipment (Notice of Proposed Rulemaking), l2 FCC Rcd 8743, 875l ¶l7 (l997); Annual Assessment of the Status of Competition in Markets for the Delivery of Video Programming (Notice of Inquiry), l2 FCC Rcd 7829, 7844 ¶20 (l997); Guam Public Utilities Commission (Declaratory Ruling and Notice of Proposed Rulemaking), l2 FCC Rcd 6925, 6944 ¶32 (l997); Implementation of Section 304 of the Telecommunications Act of l996 -- Commercial Availability of Navigation Devices (Notice of Proposed Rulemaking), l2 FCC Rcd 5639, 5674 ¶84 (l997); Electronic Filing of Documents in Rulemaking Proceedings (Notice of Proposed Rulemaking), l2 FCC Rcd 5l50, 5l52 ¶5 (l997); Closed Captioning and Video Description of Video Programming (Notice of Proposed Rulemaking), l2 FCC Rcd l044, l080 n. l65 (l997).
63. See, e. g., Amendment of Rules and Policies Governing Pole Attachments (Notice of Proposed Rulemaking), l2 FCC Rcd 7449, 7470 ¶48 (l997) (in final section entitled "Other Matters," FCC briefly stated that it believed that "market entry barriers are minimized for small cable operators and telecommunications carriers by the application of Section 224 which requires just, reasonable and nondiscriminatory rates", a formulation which would deprive Section 257 of any meaning with respect to pole attachments).
64. Rules and Policies Concerning Multiple Ownership of Radio Broadcast Stations in Local Markets (NPRM and Further NPRM), FCC 0l-329 (released November 9, 200l). But compare Implementation of Section 309( j) of the Communications Act -- Competitive Bidding for Commercial Broadcast and Instructional Television Fixed Service Licenses (Notice of Proposed Rulemaking), l2 FCC Rcd 22363, 2240l ¶90-9l (l997) (in light of Section 257, seeking comment on how the FCC could constitutionally foster minority and female ownership through broadcast auctions).
65. Sweatt v. Painter 339 U. S. 629 (l950).
66. McLaurin v. Oklahoma State Regents, 339 U. S. 637 (l950).
67. Brown v. Board of Education, 347 U. S. 483 (l954).
68. See M. Tushnet, Making Civil Rights Law: Thurgood Marshall and the Supreme Court, l936-l96l (l994) to learn more. He tells perhaps the best war story and the best love story in the history of American law.
69. See, e. g., Assignment of Orbital Locations to Space Stations in the Ka-band (Memorandum Opinion and Order)), l6 FCC Rcd 8476, 8482-83 ¶¶ l5-l6 (200l) (reaching, but rejecting contention that Ka-band orbital assignment plan would create barriers to entry for small businesses, contravening Section 257); Advanced Television Systems and Their Impact Upon The Existing Television Broadcast Service (Memorandum Opinion and Order on Reconsideration of the Sixth Report and Order), l3 FCC Rcd 74l8, 7595 ¶¶ 582-83 (l998) (reaching commenter's contention that in light of Section 257, the FCC should try harder to cure television station's anticipated service loss attendant to the DTV transition; but finding that there is no engineering solution to the commenter's problem.)
70. As shown by the cases discussed in n. 69 supra, parties raising Section 257 objections to rulemaking proposals have enjoyed little success after the FCC reached the merits. A particularly troubling example is Administration of the North American Numbering Plan, Carrier Identification Codes (CICs), Order on Reconsideration, Order on Application for Review, and Second Further Notice of Proposed Rulemaking, l2 FCC Rcd l7876 (l997), in which the FCC proposed a switch from three to four digit carrier identification codes (" CICs") that enable local exchange carriers providing interstate interexchange access services to identify the interstate interexchange carrier that the original caller wishes to use to transmit its interstate call. A small interstate interexchange carrier, VarTec Telecom, contended that the new CIC plan violated Section 257 by creating a market entry barrier for small business. Id. at l7899 ¶38. The FCC reached VarTec's Section 257 claim, but found that Section 257's directive to eliminate "barriers to entry" does not mean that we must give preference to small carriers .... we were careful to treat all carriers the same, whether large, small, incumbent provider, or new market entrant. When the conversion to four digit CICs is completed, more CICs will be available to new market entrants, many of whom will be smaller carriers. Thus, contrary to VarTec's claims, we conclude that the actions taken... eliminate market entry barriers and advance the pro-competitive purposes of the Act.
Id. at l79l7 ¶76. The FCC's decision was probably sustainable, since an abundance of CICs would benefit small (and especially new) carriers who might have been without a CIC if the supply were exhausted. Nonetheless, the FCC probably overreached in suggesting that Section 257 "does not mean that we must give preference to small carriers." In some circum-stances, small concerns, particularly disadvantaged minority and female owned concerns, may face barriers so severe that only a size, race or gen-der conscious program could possibly offer a cure. If Section 257 never contemplates these remedies, the FCC could satisfy Section 257 just through rulemaking-as-usual, deregulating across the board without regard to whether a particular action, e. g., technically benefits all firms while actually placing large firms at an insurmountable competitive advantage vis-a-vis small ones. Fortunately, the Commission has not quite gone so far as to declare that Section 257 never requires a leg up for small businesses. See Filing Requirements and Carrier Classifications, supra, l2 FCC Rcd at 8095 ¶l22, in which the Commission adopted certain new filing and reporting requirements but did not apply them to new, small LECs, partly in light of the policy underlying Section 257.
Nonetheless, the standard for when Section 257 is satisfied was hopelessly muddled in Florida Public Service Commission Request for Interpretation of the Applicability of the Limit on Change in Interstate Allocation, Section 36. l54( f) of the Commission's Rules (Order), l2 FCC Rcd 3406, 34l8 n. 74 (l997) (" Florida PSC"), recon. denied sub nom. Beaver Creek Cooperative Telephone Company, l3 FCC Rcd l75l8, l7522 ¶l0 and n. 26 (l998) (defining the standard for a decision that is "fully consistent with and furthers the overall congressional mandate reflected in Section 257" as "taking no action that will result in significant adverse economic consequences for small carriers.") Florida PSC has to be an aberration. By its terms, Section 257 is designed "for the purpose of identifying and eliminating... market entry barriers." 47 U. S. C. §257( a) (emphasis supplied). Thus, backtracking (particularly measured by an arbitrary term like "significant") cannot be what Congress intended. For example, a finite but "insignificant" additional dose of segregation does not help "eliminate" a two-class society. Merely "taking no action that will result in significant adverse economic consequences for small carriers" may be appropriate for RFA, but not for Section 257.
7l. Classic Telephone, Inc. (MO& O), 11 FCC Rcd l3082, l309l ¶l5 (l996), rejecting municipality's theory that the FCC must conduct a proceeding under Section 257 to determine whether market entry barriers exist in local telephone markets before the FCC may consider a carrier's allegation (raised under 47 U. S. C. §253) that the municipality had imposed requirements that had the effect of prohibiting the provision of telecommunications services.
72. Actually, the FCC is not required to undertake a rulemaking at all unless Congress specifically directs it to do so. An individual has "the right to petition" for rulemaking, but no statutory provision requires the FCC to grant such a petition. See 5 U. S. C. §553( e).
73. UCC I, supra.
74. UCC II, supra.
75. Sanders Brothers, supra.
76. 800 MHz Report and Order, supra, l2 FCC Rcd at l9l03 ¶¶ 60-6l.
77. Implementation of Section 703( e) of the Telecommunications Act of l996; Amendment of the Commission's Rules and Policies Governing Pole Attachments (Report and Order), l3 FCC Rcd 6777, 6787-89 ¶l9 (l998) (" Pole Attachment Report and Order"), rejecting proposals to impose a one year statute of limitations on the filing of complaints and establishment of an amount in controversy threshold of $5,000 because they are "unnecessarily restrictive as they could foreclose remedy of an unjust or unreasonable rate, term, or condition of pole attachments, especially for small enterprises" (citing Section 257 at 6789 n. 82).
78. Review of the Commission's Regulations Governing Attribution of Broadcast and Cable/ MDS Interests (Report and Order), l4 FCC Rcd l2559, Separate Statement of Commissioner Michael K. Powell at l2667 (l999), recon. denied, l6 FCC Rcd l097 (200l); Television Ownership R& O, supra, l4 FCC Rcd l2903, Separate Statement of Commissioner Michael K. Powell at l2987.
79. Shareholders of AMFM, Inc. and Clear Channel Communications, Inc., l5 FCC Rcd l6062, Separate Statement of Commissioner Gloria Tristani at l6117 and n. 3 thereto (2000); Applications for Consent to the Transfer of Control of Licenses and Section 2l4 Authorizations from MediaOne Group, Inc. to AT& T Corp., l5 FCC Rcd 98l6, Concurring Statement of Commissioner Gloria Tristani at 99l4 and n. l thereto (2000), recon. denied, l6 FCC Rcd 56l0 (200l).
80. TelQuest Ventures, L. L. C., l6 FCC Rcd l5026 (200l) (" TelQuest").
8l. Id. at l5037 ¶3l, citing l997 Section 257 Report, l2 FCC Rcd at l6909-l0 ¶¶ l97-98.
82. See discussion at l59 and n. 4l supra.
83. Trigg Interview, supra.
84. The original requirement predated and was essentially codified in Ultravision Broadcasting Co., l FCC2d 544, 547 (l965) (" Ultravision"). Ultravision was repealed in l98l because it "conflicts with Commission policies favoring minority ownership and diversity because its stringency may inhibit potential applicants from seeking broadcast licenses." Revision of Application for Construction Permit for Commercial Broadcast Station (FCC Form 30l); and Modification of Processing Standards for Determining the Financial Qualifications of Broadcast Station Purchasers, 87 FCC2d 200, 20l (l98l). In this extraordinarily prescient l98l ruling, the FCC expressed perfectly what we now regard as solid Section 257 analysis.
85. Trigg Interview, supra.
86. l997 Form 257 Report, l2 FCC Rcd at l6934 ¶225.
87. See discussion at 165-167 supra.
88. In Section ll( a) of the Communications Act of l934, 47 U. S. C. §l6l( a) and Section 202( h) of the Telecommunications Act of l996, Congress required the FCC to review its regulations every two years and determine whether they continue to serve the public interest and whether some of them should be repealed or modified This requirement overlaps 47 U. S. C. §257( c), which requires the FCC to report every three years on "any regulations pre-scribed to eliminate barriers within its jurisdiction ...." 47 U. S. C. §257( c). Biennial Review reports sometimes discuss Section 257 issues; see, e. g., l998 Biennial Review -- Mass Media Streamlining, supra l3 FCC Rcd at 23095-98 ¶¶ 96 (deciding to collect broadcast ownership race and gender data in order to, inter alia, "fulfill our statutory mandate under Section 257"). Sometimes, however, a Biennial Review will not substantively address Section 257 issues. See, e. g., 2000 Biennial Regulatory Report (Report), l6 FCC Rcd l207, l227 ¶57 (200l) (containing only a passing mention of Section 257 and OCBO's role in Section 257 review).
89. Dr. Martin Luther King, Jr., Address at the March on Washington, August 28, l963. Copyright Intellectual Properties Management, Atlanta, GA, as manager of the King Estate.
90. See pp. 168-170 supra.
