In July, the Media and Democracy Project filed a Petition to Deny the license renewal of Fox29 (WTFX-TV) in Philadelphia. The Petition rests on a particular feature of Federal Communications Commission (FCC) broadcast licensing law. Every 8 years, a broadcast station must apply to the FCC to renew its broadcast license, which requires a showing that the licensee has — among other things — the requisite character to hold a broadcast license. The scope of behavior the FCC will consider under its 1986 Character Policy and subsequent amendments is fairly narrow — it does not, for example, include littering or making a nuisance of oneself. But it is not entirely limited to behavior involving the broadcast license itself. It includes any conduct that calls into question whether you can be trusted to run a broadcast station under the FCC’s rules and as a “trustee of the community of service.” In other words, the FCC can send you to the Group W Bench (here, a hearing) where, to paraphrase Arlo Guthrie, they decide if you are moral enough to hold an FCC broadcast license.
MAD challenges renewal of Fox29 on the grounds that Fox Corp, the ultimate owner of Fox Television Broadcast Stations (FTBS) and Rupert Murdoch and son Lachlan (principle shareholders who have previously been found to have de facto influence or control over FTBS as well as Fox Corp.) lack the requisite character to hold a Commission broadcast license. They point to the settlement in the Dominion defamation case, where Fox Corp. and Murdoch as the named defendants acknowledged (but did not formally admit to the truth of) the earlier findings of the district court that they had made false statements about the outcome of the 2020 election on Fox News Cable Network and the role of Dominion Voting System machines in supposedly “stealing” the election. (They attach the relevant decision and press statement to the Petition). This conduct, they argue, violates the Commission’s Character Policy — making Fox Corp and Murdoch inherently unfit to act as a broadcast licensee. FTBS responds in opposition that this is all irrelevant because none of the behavior involved Fox29 and that refusing to renew the license would violate the First Amendment. MAD replies that actions that violate the Character Policy do not need to involve the licensee, and that holding licensees accountable under the Character Policy does not violate the First Amendment, as it is long settled that there is no First Amendment right to a broadcast license and that the Commission has an obligation to ensure that all license grants serve the public interest. (See NBC v. United States and Red Lion Broadcasting Co. generally).
Most people who have paid attention to this have dismissed the Petition as frivolous and a waste of time. But the Petition raises some interesting, novel questions under the law. It also has attracted support from a number of folks involved in the formation of Fox as the fourth TV network, including Preston Padden (Fox’s main lobbyist in the 1980s and 90s), Ervin Duggan (former FCC Commissioner) and William Kristol (conservative pundit and former frequent guest on Fox), Jamie Kellner (first President of Fox Television) and former FCC Chair Al Sikes. I also note that the FCC has taken the highly unusual step of opening this license renewal hearing to public comment. To be clear, this step by the FCC does not indicate that the FCC has made any determination about the merits, but is a recognition that there is a public interest in allowing people to file in favor and against.
My point is that while getting the FCC to hold a hearing — let alone deny Fox29’s application for renewal — is certainly a long shot given how the FCC works, this is not a frivolous claim. To the contrary, it raises some very interesting questions from an FCC law perspective. So it is worth actually walking through the process here and what questions the FCC would need to resolve either to dismiss the Petition to Deny or to Designate for a Hearing. Because ultimately, unless the FCC finds a procedural deficiency, the FCC is going to have to actually write up a real and binding decision with real consequences and real precedential value.
Full disclosure, I’ve known and been friends with Preston Padden for a long time, and I rather hope this gets to the hearing phase if for no other reason than It Would Be Fun. But I will also say up front (and for reasons I will elaborate in below), I find it extremely unlikely the FCC will grant on the Petition. Still, it cannot get out of addressing the interesting questions raised by this case.
More below . . . .
What is a license renewal? Don’t Broadcast Stations Own Their Licenses?
Despite what they would like to think, broadcasters (and every other wireless licensee) do not actually own their licenses. The Communications Act says this multiple times (See 47 U.S.C. 301, 304, and 309(h)). We settled on this back in 1927 with the Federal Radio Act, which got merged with other stuff to become the Communications Act of 1934. Most importantly, the Communications Act requires that the FCC only issue licenses when it would serve the “public interest.”
As part of reminding licensee that they don’t actually own their licenses, the Act and FCC rules require wireless licensees to get their licenses renewed every period of years. For most wireless guys, it is something like every 10-15 years and the renewal question is basically about whether you actually built out your system and offer the service you promised. For folks like AT&T, serving the public interest means operating a mobile phone service. If they check that box, they automatically get renewed.
But broadcasters are, and always have been, very different. Why? Because broadcasting gives you the power to shape news and popular culture in super powerful and astonishing ways. This was even more powerful in the 1920s when broadcasting became a major force and one could see in Europe how the rise of radio under government control gave governments enormous power over their populations. It was obvious here in the United States when suddenly syndication allowed people to reach millions all at once, and even locally address an entire community. At the same time, unlike the Internet, only a few people in any given area could broadcast without causing destructive interference, rendering the whole medium useless. So under the Communications Act, the FCC limits the number of available licenses to the tiniest fraction of people who would like to have a broadcast license. In exchange, the broadcast licensee is a “trustee” of the spectrum for the benefit of the local community.
At each license renewal, the licensee needs to prove they are still worthy of holding the license or it goes to someone else. Back in the old days, this used to be every 3 years and it was a major hearing and parties who wanted to compete for the license could come in to try to argue why they would make better licensees. This system of comparative hearings (pejoratively referred to as “beauty contests”) got less and less competitive as time went on. Congress ultimately stretched out the renewal time to 8 years, banned comparisons with other potential licensees, and (along with the courts) established a strong (almost undefeatable) presumption in favor of renewal. Courts and the FCC have also done a lot to limit who can bring a formal challenge.
But broadcast licensees still need to do this every 8 years, which gives folks the opportunity to challenge whether or not the station is serving the public interest and whether the current licensee should continue to be the licensee.
So What Did Fox29 In Philly Do Wrong? Everything in the Petition is about how Fox Corp Kept Pushing the Stolen Election Lie, and How Murdoch Refused to Stop It Even While Admitting Biden Won the Election.
Remember that whole “trustee” thing? In theory, it’s not just about what you do with the station. You have to show that you are the sort of person who can be trusted with holding a broadcast license. That’s not just something the FCC made up. Section 308(b) of the Communications Act requires the FCC to determine, among other things, whether an applicant has the requisite “character” to hold a broadcast license. The character policy does not go to the conduct of the broadcast station but to the character of the licensee him/her/itself. You can, in theory, be doing a perfectly fine job of running the station but still lose your license because you do something that shows you don’t have the requisite moral character to hold a broadcast license.
That Sounds Pretty Arbitrary and Kind of Scary. Remember When Trump Wanted to Cancel NBC’s Licenses for Making Fun of Him.
Yes, but both case law and Commission policy prevent it from being as scary or powerful as the theory suggests. In particular, the FCC adopted in 1986 (and has modified a few times since) the Character Policy Statement (102 F.C.C. 2d 1179 (1986) for those who would like to look it up). The Character Policy Statement (and overall concerns for the First Amendment) limit character concerns to conduct involving the station, the use of the broadcast license, and/or failure to follow the FCC’s rules to such an extent (or so severely) that the FCC doesn’t trust you to run your broadcast station in compliance with the law. So, for example, when a California radio station (KDND FM) killed someone in a contest, the FCC decided that this was behavior that “shocked the conscience” and therefore designated the license renewal for hearing.
But there are some major exceptions to this rule, because the character question involves whether the FCC can trust the licensee to run the station in accordance with FCC rules and in a manner that serves the local community. So the FCC will consider outside conduct — especially where that conduct bears on the honesty and trustworthiness of the licensee. For example, when Sinclair tried to acquire Tribune back in 2017, it played lots of cute games with the application trying to hide various licenses that it would have had to divest under the rules. This displayed “lack of candor,” aka a willingness to lie by omission or implication to the FCC. As a result, the FCC not only rejected the applications for transfer, but designated Sinclair for a hearing on whether it had requisite character to hold FCC licenses.
OK, But That Clearly Involved the Broadcast Licenses. Why Does Character Policy Matter Here?
As I alluded to above, the big exceptions for when conduct not involving the license matters are: (a) things that show the FCC cannot trust you to hold a licenses because you aren’t honest; and, (b) things so awful that a normal person says “how in the hell is that person allowed to hold a license?” Usually, things in category (a) involve convictions for federal or state crimes relating to honesty — like tax evasion. Things in category (b) generally involve conviction for truly awful crimes, like child pornography.
I Notice You Keep Saying “Conviction.” There Is No Conviction Here.
Yes, and that gets us to the first and very interesting question the FCC will need to determine. Generally, as a matter of policy, when the FCC is looking at conduct that involves dishonesty to a degree that raises question as to character, unless the conduct involves the FCC itself, the FCC usually requires a conviction of some kind. But again, it doesn’t have to be a conviction in a criminal case to raise character questions. In the KDND case (the CA radio station that killed someone), there was no conviction for a federal or state crime. But there was a wrongful death civil suit. And, of course, the events transpired on a live broadcast by the licensee.
Which brings us to the first question the FCC needs to answer. Does the adjudication of facts in the Dominion defamation case (and subsequent acknowledgment by Fox Corp. in their post-settlement statement) rise to the level necessary to show dishonesty/lack of candor sufficient to raise the question of character sufficient to require a hearing? We have a fairly extensive finding of fact by a judge that Fox Corp. knew that folks on Fox News (were making and supporting false statements about the 2020 election and Dominion (and specifically not as reporting news, but as opinion). The district court also found sufficient evidence that Murdoch had actual control over what Fox News did — and apparently personally knew that the statements were false — that a jury could decide that Murdoch was personally liable for the defamatory conduct. And while this wasn’t a conviction, the post-settlement statement “acknowledged” the district court findings. This was very carefully not a statement of agreement with the court, but also did not challenge the court’s findings.
Additionally, the district court found that Fox Corp. and Murdoch had engaged in “discovery misconduct,” and sanctioned them for withholding evidence. Again, that sort of behavior before a court (or other federal agency, or state agency) can give rise to concerns over honesty and therefore raise character questions.
Importantly at this stage, what the FCC must find is not that Murdoch or Fox Corp. definitively lied or definitively lack sufficient character to hold a license. What the FCC must find is whether or not a sufficient “issue of material fact” exists to warrant requiring a hearing on the question of honesty/character.
You Said This Is the First Issue. What Else Does the FCC Need to Look At?
Petitioners also raise Fox News’ general role in promoting the January 6 attack on the Capitol. Again, this raises a number of questions under the “shock the conscience” category. As Petitioners show, there is lots of evidence linking Fox New’s promotion of the “Stolen Election” lie as motivating what turned out to be the first time in the history of the Republic we saw an effort to prevent the peaceful transfer of power by violence. But no one has convicted Fox News of anything in this regard. And even if Fox News engaged in conduct that stoked January 6 and would therefore not itself be eligible for a license, does that behavior get imputed to Fox News’ corporate parent and to the Murdochs?
This is, to put it mildly, a novel case. Generally, actions by corporate affiliates aren’t imputed to other parts of the corporation — in part because they are generally run by different people and engage in independent decision making. But the Dominion case found that Fox Corp and the Murdochs, the ultimate parents of Fox Broadcasting and therefore the ultimate parents of the licensee, had sufficient control over Fox News to go to trial in the defamation case. And attempts to prevent the peaceful transfer of power following an election should certainly “shock the conscience.” But no jury has ever found that Fox News was responsible for January 6, or played a sufficient role in it occurring that such behavior should be attributed to either Fox Corp or the Murdochs.
So does the FCC dig into this and make its own findings of fact? Or can it decide as a matter of law that this conduct is simply too attenuated from the management of the license to raise questions of character? Fun questions on an entirely sui generis fact pattern. Worthy of a law school exam. But worthy of a license hearing? Good question.
How Does the First Amendment Fit Into This?
Another good question. I’ve seen a number of hot takes that say that the FCC finding that Murdoch lacks the necessary character to hold a license would violate the First Amendment. But questions of license renewal are not generally subject to First Amendment scrutiny because, as explained in Red Lion Broadcasting, there is no First Amendment right to hold a broadcasting license. License renewal hearings — like most regulation of broadcasting — get subjected to “rational basis” review rather than strict scrutiny or intermediate scrutiny. Mind you, the Supreme Court is not 100% consistent on this (see FCC v. League of Women’s Voters, for example). But again, the issue isn’t simply whether the FCC likes or doesn’t like what Fox News said. The issue is whether the adjudication that Fox Corp. — parent company of both Fox News and Fox Broadcasting (and therefore ultimate holder of the license for WTXF-TV) — made false statements sufficient to show they cannot be trusted to hold an FCC license under the Character Policy, and whether the Murdochs exercise sufficient control that this conduct should be attributed to them. Those questions do not raise First Amendment issues (see Sanders Bros v. FCC and NBC v. United States).
Nevertheless, the overall principle that the federal government cannot punish a speaker for expressing an unpopular view still hovers over the case, and overall concern for First Amendment freedoms should animate the FCC’s jurisprudence. But in the world of broadcasting, the First Amendment right of listeners to receive true and accurate information is also important. It goes directly to the need for accurate local news necessary for democracy and self-governance. “A government purpose of the highest order” according to Turner Broadcasting. That’s why we have the Character Policy in the first place (that, plus 47 U.S.C. 308(b) requires the FCC to determine whether a licensee has the requisite character to hold a license).
I also expect a lot of media scholars to opine that denying the license renewal here would set bad precedent for the First Amendment (assuming we get this far). This is a subjective question that we have been debating in broadcast law for the last 90 years or so since the FCC started doing license renewal hearings and started considering character as part of those proceedings. My counter argument is that the FCC has looked at behavior outside the conduct of the licensee that shows dishonesty, and we have not previously found this to be a First Amendment violation. In the trials over the January 6 rioters and Trump’s upcoming trial regarding his role, we face similar arguments and conclude that we should not create a safe harbor for criminal conduct simply because it involves speech. Similarly, IMO, we should not create a safe harbor exemption to the Character Policy simply because the conduct involves speech. If the conduct rises to the level of dishonesty so as to trigger the Character Policy, then the FCC should apply the Character Policy.
Bottom line — as long as the FCC makes its adjudication on the basis of the Character Policy and precedent, it does not violate the First Amendment to deny the license renewal.
As a middle ground, the FCC could decide that while there was a violation of the Character Policy, it did not rise to the level warranting license revocation and provide for some lesser sanction (more on this below).
So What Happens If It Goes to a Hearing?
First, the FCC must make a determination on whether the Media and Democracy Project (and the other filers of informal objections) have demonstrated that there are “issues of material fact” warranting a hearing. That means Petitioners have made allegations supported with sufficient evidence that, if found to be true, would justify denying the license. While this decision could be made at the Bureau level, it could also be made at the Commission level. In the event the Bureau denies the Petition at this stage, MAD can appeal to the full Commission. If the Commission denies the appeal, MAD can appeal to the Federal Court of Appeals for the District of Columbia Circuit — which has exclusive jurisdiction over FCC licensing matters. See 47 USC 402(b)(2).
Assuming the FCC refers to a hearing, it will issue a “Hearing Designation Order” (or HDO). This will instruct the Administrative Law Judge (ALJ) on which issues that FCC considers relevant to the license renewal challenge. This hearing is the “Group W Bench” referred to above, where the ALJ decides if the licensee is moral enough to have an FCC license. Because this is a license renewal under 47 U.S.C. 307(c), rather than a license revocation under 47 USC 312, the Commission must affirmatively find that renewal of the license will positively serve the public interest, convenience and necessity. Still, the licensee starts with a strong presumption that continuing service will serve the public interest.
At the hearing, the Licensee can raise all kinds of defenses. They can challenge the actual facts. For example, while Fox Corp’s statement “acknowledged” the court’s findings that it made false and defamatory statements, it did not formally admit to them. Additionally, the extent to which Murdoch himself exercised sufficient control of the Fox News to be liable for its statements was a question of fact left for the jury — so Murdoch may challenge whether he personally should be associated with the false statements.
Additionally, the licensee can introduce evidence of mitigating factors as to why the facts do not warrant a violation of the Character Policy or that the violation should not result in a decision not to renew the license. For example, the licensee can point to corporate firewalls and safeguards that insulate the station from Fox Corp and Murdoch, so that the Commission should only consider the conduct of Fox Broadcasting even if Fox Corp and Murdoch have sufficient ownership interest to be the attributed licensee. (See the 1986 Character Policy and Order on Recon for the discussion of how the behavior of a corporate affiliate may or may not violate the Character Policy.) The licensee can argue that steps it has taken since the incident demonstrate that it remains fit to hold a license. Remember, license renewal is not a punishment for bad conduct. The ultimate question is whether the FCC can trust the licensee to obey FCC rules and act as a trustee for the community of service going forward.
The hearing is basically a trial, with discovery and witnesses and everything. As a general rule these hearings are open to the public, but the ALJ may decide to close the hearings if they think it necessary. Of note, it is not the FCC that prosecutes the case, but the party filing the Petition to Deny. The FCC can participate, and it will be represented by its lawyers at the hearing who may or may not chose to cross-examine witnesses. The FCC lawyers can also make a recommendation to the ALJ after the hearing on what they think the outcome should be. But the ultimate decision is made by the ALJ.
After the ALJ decision, whoever doesn’t like the decision can appeal to the Media Bureau, then up to the full Commission, then to the DC Circuit.
What Kind of Punishments Can the FCC Impose?
The FCC does not have to revoke a license simply for violation of the Character Policy. The FCC can decide that some lesser sanction is suitable, along with a warning not to do it again. For example, when the FCC designated Sinclair for a license revocation hearing for lack of candor and other fun and games, the FCC ultimately entered a consent decree with Sinclair to settle all investigations (including the lack of candor/Character Policy issue) for $48 million and a “compliance program” to prevent future violations.
So the Commission could find that yes, an adjudication by a court that the licensee made false statements on an affiliated corporate entity (Fox News) can give rise to a violation of the Character Policy, but in this particular case the conduct doesn’t warrant license revocation. Oddly, this is where the novel nature of the conduct may work in Fox29’s favor. The Commission could say: “well, while we left the door open for conduct like this to be a Character Policy violation, this is the first time we actually ever found this sort of conduct to be a Character Policy violation. So we will give you a stern warning and tell you (and all other licensees) not to make false and defamatory statements through corporate affiliates ever again.”
Alternatively, the FCC could require Fox Corp and Murdoch to do some sort of restructuring/license transfer that would ensure that the operation of the licensee cannot be influenced by them. Or require some sort of compliance plan to ensure that they do not exercise sufficient influence over the licensee to worry the FCC about whether they can operate the license in accordance with the Commission’s rules and the public interest. Again, this isn’t about punishing anyone. It is about whether the FCC can trust the licensee to operate in accordance with FCC rules and the public interest.
Disappointed Petitioners can appeal this decision, but the Commission has very broad discretion in how it structures penalties.
This is not a frivolous case. It raises real, if novel, questions for the FCC under its Character Policy and past precedent. The FCC opening the license renewal proceeding to public comment indicates that the FCC recognizes that this case is not frivolous and that the matter is of importance to the public. At the same time, we need to recognize that the presumption of renewing a license is extremely strong. The flip side of “novel questions” is that we don’t have binding precedent that clearly shows how the FCC should decide. There is plenty in the Petition to support a violation of the Character Policy worthy of denying the license renewal. But there are plenty of ways the FCC could decide that this conduct doesn’t warrant denying license renewal.
More importantly, the FCC first has to make an initial decision on whether to refer the matter to a hearing. A referral to a hearing is not an indication of the agency’s ultimate decision. But it would be an important decision because it would show that this kind of conduct — making repeated false statements that result in the first attempt to prevent the peaceful transfer of power since we started doing this in 1797 — does reflect on the character of the licensee and can justify violation of the Character Policy. Perhaps most importantly, it would serve as a major reminder to licensees and the public that broadcasting is different from other kinds of communication. Broadcasters get a valuable commodity — a spectrum license — free. These spectrum licenses act as little government protected monopolies because no one else gets to have them. For anyone who thinks internet access somehow balances out the power of broadcasting, I will cheerfully swap this blog and my YouTube account for one of those broadcast licenses. It is worthwhile to remind broadcasters that they do not own their licenses, and to at least try to make the concept of “trustee to the community of service” a shade more real.
Stay tuned . . . .