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01/04/72 Wlva, Incorporated (Wlva v. Federal Communications

January 4, 1972

WLVA, INCORPORATED , LYNCHBURG, VIRGINIA, APPELLANT

v.

FEDERAL COMMUNICATIONS COMMISSION, APPELLEE, ROANOKE TELECASTING CORPORATION , INTERVENOR 1972.CDC.2



UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT

APPELLATE PANEL:

Wright and Tamm, Circuit Judges, and Johnson,* Chief Judge, United States District Court for the Middle District of Alabama.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE WRIGHT

This appeal *fn1 presents important and complex questions concerning the need for evidentiary hearings under Section 309 of the Communications Act of 1934, as amended, 47 U.S.C. ยง 309 (1970). WLVA, Incorporated , our appellant, challenges a September 9, 1970 memorandum opinion and order *fn2 of the Federal Communications Commission granting without a hearing the application of intervenor Roanoke Telecasting Corporation for a construction permit to make major modifications of its UHF television facilities in Roanoke, Virginia. Specifically, WLVA-TV contends that the Commission abused its discretion in denying its requests for (1) a Carroll hearing *fn3 on WRFT-TV's application, and (2) an Ashbacker consolidated comparative hearing *fn4 on both WLVA-TV's and WRFT-TV's allegedly mutually exclusive applications. We conclude that appellant's claims for these hearings were properly denied, and therefore affirm the Commission's order. I

Under the Commission's table of television allocations, 47 C.F.R. 73.606 (1971), Stations WDBF-TV, WSLS-TV and WRFT-TV operate on Channels 7, 10, and 27 respectively in Roanoke, Virginia, a city of approximately 100,000 nestled in the mountainous terrain of western Virginia. *fn5 WDBJ-TV is an affiliate of the Columbia Broadcasting System and WSLS-TV is affiliated with the National Broadcasting Company. Intervenor WRFT-TV, a considerably smaller operation, began broadcasting over Channel 27 in March 1966 as a primary affiliate of the American Broadcasting Company in Roanoke. Because of the limited scope of WRFT-TV's technical facilities, however, the station has encountered continuous and substantial financial difficulties ever since its inception. *fn6 As a result, its impact on the existing competitive structure of the local broadcast market has been minimal.

Approximately 45 miles east of Roanoke is Lynchburg, Virginia, a community of approximately 55,000 people, where appellant WLVA-TV, serving as Lynchburg's only operating television station, *fn7 broadcasts on VHF Channel 13 as an affiliate of the American Broadcasting Company.

Although the Commission's table of allocations treats Roanoke and Lynchburg as separate communities, the spacing is such that WSLS-TV and WDBJ-TV in Roanoke and WLVA-TV in Lynchburg can provide technically acceptable service to both communities. *fn8 Roanoke and Lynchburg are therefore considered a single television market (the 67th largest in the nation) by the major audience measurement firms (American Research Bureau and A. C. Nielson Company), the national television networks, national television advertisers, and the Research and Education Division of the Commission's Broadcast Bureau. *fn9

As a result, WLVA-TV competes for national and regional advertising with Roanoke television stations WDBJ-TV and WSLS-TV. The technical facilities of WSLS-TV and WDBJ-TV, however, are superior to those currently employed by WLVA-TV. The two Roanoke VHF stations transmit from antennas located on Poor Mountain, situated 13 miles southwest of Roanoke, with an effective radiated power of 316 kw and an antenna height of 2,000 feet. WLVA-TV's antenna is located on Johnson Mountain, approximately 17.5 miles southwest of Lynchburg, and operates with an effective radiated power of 316 kw and an antenna height of only 1,095 feet. Thus while WDBJ-TV and WSLS-TV are able to reach 543,000 and 581,000 television homes respectively, WLVA-TV's overall coverage is 326,000, or approximately 60 per cent of that attained by the two major Roanoke stations. *fn10

Despite this situation, however, WLVA-TV managed to garner a modest yet consistent profit until 1966. In that year the Evening Star Broadcasting Company, which had purchased the station in 1965 and transferred it to a wholly-owned subsidiary in 1966, made two decisions intended to improve WLVA-TV's competitive position vis-a-vis its Roanoke competitors. First, the Evening Star made sizable capital outlays and incurred sharply increased operating costs in an effort to upgrade the station's physical plant and technical equipment and to improve its public service programming. *fn11 Initially, these increased expenditures produced substantial net operating losses and negative cash flows, *fn12 but as the beneficial effects of these improvements began to take root, revenues gradually increased with the result that WLVA-TV's cash flow has increased from a negative $19,228 in 1967 to a positive $48,677 in 1968,and 9.1 per cent of total revenues in 1969.

On November 4, 1966, the Evening Star launched the second part of its drive to improve WLVA-TV's competitive standing in the Roanoke-Lynchburg market. On that date, WLVA-TV applied to the Commission for authority to move its facilities 17.5 miles to the northwest, to raise its antenna 1,250 feet, and for waiver of the Commission's spacing requirements. *fn13 The proposed transmitter site would be located atop Flat Top Mountain, 17.4 miles from Roanoke and 27.9 miles from Lynckburg. If granted, this modification would enable WLVA-TV to improve its existing signal over the areas it presently serves as well as to extend its Grade B coverage to reach a sizable audience west of Roanoke not presently served by the Lynchburg station.

WLVA-TV's application was opposed by WRFT-TV in Roanoke, by permittees of two Charlottesville UHF stations, and by the Association of Maximum Service Telecasters, Inc. The matter was designated for hearing on nine issues, including "whether a grant of the application would impair the ability of authorized and prospective UHF television broadcast stations in the area to compete effectively, or would jeopardize, in whole or in part, the continuation of existing UHF television service." WLVA, Inc., 15 F.C.C.2d 757, 764 (1968). On November 24, 1969, the hearing examiner issued his initial decision *fn14 in which he recommended denial of WLVA-TV's application. The examiner concluded that a grant would have an adverse impact on WRFT-TV and that such impact would be detrimental to the public interest. Exceptions were filed and the matter is presently pending before the Commission's Review Board.

Meanwhile, on June 10, 1969, intervenor WRFT-TV applied to the Commission for modification of its own facilities. Roanoke Telecasting Corporation was organized in 1965 to establish WRFT-TV as an affiliate of the American Broadcasting Company in Roanoke. WRFT-TV commenced operations in March 1966 and was granted an hourly network rate of $75 based on predicted ultimate delivery of 10,000 to 18,000 prime time homes. Because of the modest nature of WRFT-TV's technical facilities, however, the station failed even to approach its projected coverage and the hourly network compensation was therefore discontinued in November 1967 when WRFT-TV was delivering only 1,000 prime time homes. The station's financial picture is dismal. WRFT-TV suffered a net cash loss of $41,397 during the first year of operation, $46,729 in 1967, and $52,740 for the first eight months of 1968. By June 1969 the station had lost over $200,000 and the indebtedness has since swelled to over $450,000 and is increasing at the rate of $10,000 per month. *fn15

In an effort to rectify this situation, WRFT-TV filed its application with the Commission to expand its technical facilities and to move its transmitter to Poor Mountain, the location of WDBJ-TV and WSLS-TV. WRFT-TV presently operates at a site six miles west of Roanoke with an effective radiated power of 21.4 kw and an antenna height of 410 feet. In its application, it proposes to broadcast with an effective radiated power of 250 kw and an antenna height of 2,010 feet, increases of 228.6 kw and 1,600 feet respectively. The new facilities would enable WRFT-TV to cover 46 per cent of the homes able to receive UHF service in the Roanoke-Lynchburg market, with the result that WRFT-TV would duplicate WLVA-TV's ABC network programming in approximately an additional 25 per cent of WLVA-TV's present coverage area. *fn16

On July 16, 1969, WLVA-TV filed a petition in support of WRFT-TV's application or in the alternative a petition to deny, *fn17 arguing that "the public interest compels the grant of both its application and the application of WRFT-TV." *fn18 Because of the detrimental competitive impact a grant of only WRFT-TV's application allegedly would have on WLVA-TV, however, WLVA-TV urged that "should the Commission deny its application, the application of WRFT-TV must also be denied." *fn19 To support its petition, WLVA-TV incorporated by reference relevant portions of the evidentiary record compiled in the hearing on its own application. It did not, however, submit additional data to substantiate its claim that a Carroll hearing should be held to determine whether the competitive effect of a grant of WRFT-TV's application would cause an overall derogation of service to the public.

After issuance of the hearing examiner's initial decision on WLVA-TV's own application, *fn20 appellant filed another petition with the Commission requesting consolidation of consideration of WRFT-TV's application with its own on the ground of alleged economic mutual exclusivity of the two applications. WLVA-TV contended that it would be denied its Ashbacker rights unless this petition was granted.

The Commission, in a memorandum opinion and order released September 9, 1970, *fn21 found that WLVA-TV had not pleaded sufficient factual data to raise a Carroll issue and that a consolidated comparative hearing was not required. Accordingly, the Commission, without hearing, granted WRFT-TV's application and denied WLVA-TV's petition to deny and petition for consolidation. This appeal ensued. II

Appellant WLVA-TV contends first on this appeal that the Commission erred in denying its request for a Carroll hearing to determine whether the economics of the situation would be so affected by a grant of WRFT-TV's application as to lead to an overall degradation of service to the public. The Carroll issue has created a "tricky terrain" upon which Congress, the courts and the Commission have wrestled for well over a decade in an effort to achieve a reasonable accommodation of several important yet competing interests. Southwestern Operating Co. v. F. C. C., 122 U.S.App.D.C. 137, 138, 351 F.2d 834, 835 (1965). The law in this area has reached its present posture through a gradual process of evolution, and it may therefore be useful to trace briefly this historical development as an aid to understanding the precise questions presented on this appeal.

A

The starting point of our analysis must of course be the Supreme Court's landmark decision in F. C. C. v. Sanders Brothers Radio Station, 309 U.S. 470, 60 S. Ct. 693, 84 L. Ed. 869 (1940). In Sanders Brothers the Court held that since the Communications Act was neither intended nor designed to protect licensees against competition, "resulting economic injury to a rival station is not, in and of itself, . . . an element the [Commission] must weigh . . . in passing on an application for a broadcasting license." *fn22 The Court went on to note, however, that such competition is not to be disregarded entirely by the Commission, for in certain instances it may become so ruinous as to cause not only financial hardship to the complaining station, but also an overall degradation of service to the public. Indeed, increased competition "may have a vital and important bearing upon the ability of the applicant adequately to serve his public; it may indicate that both stations -- the existing and the proposed -- will go under, with the result that a portion of the listening public will be left without adequate service; it may indicate ...


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