“Here we are again.” The Third Circuit has had enough in Prometheus Radio Project v. FCC (“Prometheus IV”), the FCC’s fourth loss in a series of cases spanning over fifteen years, as the court vacated a set of FCC policies for analytical shortcomings. In reaching this decision, the court implicitly invoked two central principles: that the FCC cannot treat diversity as a single, homogeneous category and that FCC deregulation is largely a partisan issue.
Under the Communications Act of 1934, the FCC maintains broadcast ownership rules that limit consolidation and promote interests including diversity, competition, and localism. Section 202(h) of the Telecommunications Act requires that the FCC regularly review the broadcast ownership rules to, in part, “repeal or modify any regulation it determines to be no longer in the public interest.” Recently, the FCC issued two orders under review: (1) a reconsideration order that made “sweeping changes” to ownership rules and (2) an incubator order establishing a radio incubator program. Eligibility for the incubator program assistance required that an incubated entity both qualify as a small business and also qualify as a “new entrant” in that it owns no television stations and no more than three radio stations. While the incubator order’s eligibility requirements did not explicitly reference race or gender, the FCC concluded that the criterion would increase women and minority ownership.
Recently in Prometheus IV, the Third Circuit vacated and remanded “the bulk of [the FCC’s] actions” from the past three years regarding its “sweeping rule changes.” Writing for the court, Judge Thomas Ambro addressed several challenges to the FCC’s actions before upholding the FCC’s decision to retain the restriction on mergers among two or more of the four largest stations in a market (the “top-four rule”) and the incubator program’s definition of “comparable markets” as within the FCC’s policy-making discretion and not arbitrary or capricious.
However, despite these conclusions the court ultimately held that the FCC did not adequately consider the effect that its sweeping rule changes would have on women and racial minority ownership of broadcast media, and thus vacated and remanded the reconsideration and incubator orders, as well as the “eligible entity” definition. In reaching this decision, the court noted that the FCC’s analysis was “so insubstantial” that its decision was effectively arbitrary and capricious. First, despite the court instructing the FCC to consider the effect of any rule changes on women ownership, the court noted that “[t]he only ‘consideration’ the FCC gave to the question of how its rules would affect female ownership was the conclusion there would be no effect.” Second, the court emphasized the shortcomings of the racial-minority-ownership analysis. In reaching this conclusion, the court pointed to incomparable data sets that relied on “entirely different methodologies.” The court also found the FCC’s statistical conclusions “woefully simplistic” in part because the FCC compared only absolute numbers rather than percentages, failed to control for possible confounding variables, and failed to estimate the counterfactual scenario absent deregulation.
Judge Anthony Scirica concurred in part and dissented in part. While Judge Scirica agreed with the majority’s rejection of the challenges relating to the “comparable markets” and “top-four” restrictions, he argued that the reconsideration and incubator orders were not arbitrary and capricious. In reaching this conclusion, Judge Scirica emphasized the deferential standard of review and that the FCC balanced competing policy goals to reasonably predict that the regulatory changes were unlikely to harm ownership diversity.
Underlying the court’s decision are two important and distinct points: that diversity cannot be treated passively, viewed through a single lens, and that the push for FCC deregulation is a partisan issue. The majority aptly noted the FCC’s flawed analysis in accordance with not only the court’s prior decisions but also the spirit of those holdings: that genuine promotion of diverse and inclusive media ownership requires more than a cursory, token nod to diversity. As FCC critics noted in the aftermath of Prometheus IV, the FCC “can no longer get by with the bad data and shoddy analysis.” However, the court missed an important opportunity to provide further clarification in its holding. By emphasizing that the FCC’s failure to consider gender is tantamount to “entirely fail[ing] to consider an important aspect of the problem,” the court implicitly acknowledged that treating diversity as a single category is insufficient, yet it failed to emphasize why such independent consideration matters. An explanation may include noting the differing barriers to entry for women and racial minorities, and, as such, explaining that policies improving racial diversity may do little for gender diversity.
Furthermore, the implications following Prometheus IV are more than simply an anticipated appeal and, perhaps inevitably, Prometheus V. It may come as no surprise that Judges Ambro and Fuentes, the majority in Prometheus IV, were appointed by Democratic President Bill Clinton, while Judge Scirica, who dissented in part, was appointed by Republican President Ronald Reagan. Support for FCC deregulation, at least in the current court, falls largely along political lines. This divide, however, expands beyond the courts.
As the 2020 election approaches and this “indefinite pause” on further deregulation continues, a combination of unresolved media ownership issues and administration change could significantly impact FCC policies and limit deregulation. Media consolidation became “a priority item on the FCC’s agenda after the election of President Donald Trump,” as it had been under George W. Bush over a decade earlier. With the months until the election trickling down, what the court advances as a temporary hold may become something much more substantial in FCC policymaking.