THE CARROLL DOCTRINE AND RELATED POLICIES

Many times economic considerations force the FCC to choose between ap- plicants for the same broadcast service. The classic statement of this ap- proach was presented in Carroll Broadcasting Co. v. FCC, decided by the United States Court of Appeals for the District of Columbia in 1958. In that case, Carroll Broadcasting Company had opposed the grant of a radio station license in a community 12 miles from Carrollton, GA, the location of the Carroll station. The station licensee alleged that authorization of an- other station in such close proximity would impair its ability to serve the public adequately. Although the Supreme Court had established in Federal Communications Commission v. Sanders Brothers Radio Station (1940) that economic injury to an existing station was not grounds for denying a new application, Carroll argued its loss would be so significant as to deprive the public of service.

The Court of Appeals agreed, noting: [W]hether a station makes $5,000, or $10,000, or $50,000 is a matter in

which the public has no interest so long as service is not adversely af- fected; service may well be improved by competition. But, if the situation in a given area is such that available revenue will not support good service in more than one station, the public interest may well be in the licensing of one rather than two stations. To license two stations where there is revenue for only one may result in no good service at all. So economic in-

56 CORN-REVERE AND CARVETH

jury to an existing station, while not in and of itself a matter or moment, becomes important on the facts when its spells diminution or destruction of service. At that point, the element of injury ceases to be a matter of purely private concern. (Carroll Broadcasting v. FCC, 1958)

This decision forced the FCC to adopt a procedure for assessing the economic harm from its new licensing decisions. Thus, under what became known as the Carroll doctrine, when an existing licensee offered proof of detrimental economic effect from a proposed new broadcasting station, the Commission was required to consider the issue, and, if sufficient evidence was presented, conduct a nearing and make findings on the issue. The peti- tioner in such cases had to provide sufficient statistical evidence “to enable the Commission to make an informed judgment as to the overall market revenue potential” (WLVA, Inc. v. FCC, 1972). The element of such a show- ing typically included information concerning the number of businesses in the area, the total volume of retail sales, other advertising media, and other data regarding the economics of broadcasting in the specific market.

As a direct result of the Carroll decision, the FCC was required to recon- sider its decision regarding West Georgia Broadcasting Company—the potential competitor to Carroll Broadcasting. After examining the record and weighing the “speculative injury to the public interest,” however, the FCC concluded that Carroll had not met its burden of proof on the economic injury issue and granted West Georgia’s application.

Despite this inauspicious beginning, existing licensees routinely pleaded a Carroll issue when confronted with a new station applicant in its market. Although such tactics offered little chance of actually preventing competition, the required Commission review (and possible hearing) served to at least delay and drive up the cost of competition. Indeed, although the FCC applied the Carroll doctrine for a 30-year period, it never once denied a new license on the basis that a new station would result in a net loss of service.

In 1960, the Commission initiated a policy—the UHF television impact policy—protected UHF stations from economic loss associated with the licensing of new VHF television stations. This policy was enacted because VHF signals had a technical advantage over UHF signals (VHF signals were stronger and carried further). In contrast to the Carroll doctrine, the UHF impact policy protected UHF stations as a class, and not just individ- ual stations, and, at least for a time, was applied rigorously by the FCC.

Market conditions prompted the FCC to reevaluate both policies in 1988 (Policies, 1988). The Commission found that changes in the media market- place undermined whatever validity had ever existed for the economic the- ories that supported the Carroll doctrine and the UHF impact policy. The numbers of radio and TV stations had more than doubled, and newer com- munication technologies such as cable television had proliferated. Most im-

2. ECONOMICS AND MEDIA REGULATION

portantly, studies indicated that the advertising market was continuing to expand, and that new stations tended to draw their advertisers from new sources rather than take business from existing ones. Given these findings, the Commission concluded that the Carroll doctrine should be eliminated. It thus held “that the underlying premise of the Carroll doctrine, the theory of ruinous competition, i.e., that increased competition in broadcasting can

be destructive to the public interest, is not valid in the broadcast field” (Pol- icies, 1988, p. 640). At the same time, because studies revealed that many UHF stations were now operating at a profit, the Commission also elimi- 4 nated the UHF impact policy.

THE CARROLL DOCTRINE AND RELATED POLICIES