THE RISE OF FEDERAL REGULATION

THE RISE OF FEDERAL REGULATION

Unlike newer communications technologies, broadcasting was born into an unregulated environment. Wireless communications had existed for al- most a quarter of a century, but the first commercial broadcast did not occur until 1920. Consequently, existing law (The Wireless Ship Act of 1910 and the Radio Act of 1912) related principally to maritime uses of radio. With the November 2, 1920 transmission of election returns by station KDKA in Pittsburgh, commercial broadcasting began, and along with it, the justifica- tion for a whole new field of regulation.

Once initiated, commercial broadcasting grew quickly. By the beginning of 1922, the Department of Commerce had authorized 30 radio stations. That year, however, an additional 600 stations took to the air. In 1922, 1 in every 500 U.S. households was equipped with a radio receiver, but in 4 short years the number rose to 1 in every 6 households. The rapid proliferation of both transmitters and receivers led to a chaotic situation that promoted numerous calls for federal legislation. The growth of broadcasting (as well as the de- mand for regulation) accelerated in 1926, prompted in part by the decision in United States v. Zenith Corporation that the Secretary of Commerce lacked the 2 authority to assign wavelengths or deny broadcast licenses.

Congress responded by passing the Radio Act of 1927—the first attempt at establishing a comprehensive regulatory framework for radio, including broadcasting. The Act created the Federal Radio Commission (FRC) staffed with five commissioners charged with the general authority over radio broadcasting, regulating the medium in ways that would promote the pub- lic interest, convenience or necessity.

The public interest standard for broadcast regulation—a concept bor- rowed from the regulation of railroads—was not defined in the Radio Act. Rather, the FRC was mandated to perform various tasks, including classify- ing radio stations, describing the type of service to be provided, assigning frequencies, making rules to prevent interference, establishing the power and location of transmitters, and establishing coverage areas in a way that

52 CORN-REVERE AND CARVETH

maximized the public good. Of course, this begged the essential question of what constitutes “the public good.” The FRC took the position that the Su- preme Court eventually would define the public interest on a case-by-case basis. Nevertheless, the Commission outlined the primary attributes of the public interest in its policy statements and licensing decisions.

The Radio Act was superseded by passage of the Communications Act of 1934. In addition to consolidating the government’s regulation of radio, the new law created the FCC to succeed the FRC. The Communications Act simply recodified many of the essential features of the Radio Act, including the public interest standard. Other than a few general directives, as noted later, the Communications Act continued to leave the term public interest undefined.

Congress purposefully left the regulatory standard open, with the de- tailed filled in by the FCC over time. This had much to do with the fact that radio was a new and complicated technology. The FCC’s broad powers were based on the assumption that “Congress could neither foresee nor easily comprehend … the highly complex and rapidly expanding nature of communications technology” (National Association of Regulatory Utility Commissioners v. FCC, 1976). This approach has not lacked critics. As one court noted, “the [Communications] Act provides virtually no specifics as to the nature of those public obligations inherent in the pubic interest stan- dard (Office of Communication of the United Church of Christ v. FCC, 1983). Some have taken the pragmatic view that the public interest means noth- ing than what a majority of commissioners say it means at any given point in time.

Nevertheless, shortly after the Communications Act was adopted, the Supreme Court ruled that the open-ended public interest approach was sufficiently precise to withstand constitutional scrutiny. In FCC v. Pottsville Broadcasting Co. (1940), the Court called the public interest standard “as concrete as the complicated factors for judgment in such a field of delegated authority permit,” and labeled the approach “a supple instrument for the exercise of discretion.”

Despite the lack of a categorical definition of the public interest, various provision of the 1934 Act operationally defined what Congress intended. For example, the 1934 Act directed the FCC to provide, to the extent possi- ble, rapid and efficient communication service; adequate facilities at rea- sonable charges; provision for national defense and safety of lives and property; and a fair, efficient and equitable distribution of radio service to each of the states and communities. In 1983, Congress added to this list of objectives by adopting a new section establishing “the policy of the United States to encourage the provision of new technologies and services to the public.” This new provision created a presumption favoring increased competition in the communications marketplaces.

2. ECONOMICS AND MEDIA REGULATION

The reliance on competition in the communications marketplace as a de- terminant of the pubic interest brought to the surface a notion that had al- ways been implicit in the public interest standard: Media economics help define the public good. Although this is not quite the same as saying “what is good for NBC is good for the nation,” one broadcaster summed up the in- dustry by saying “there’s been a lot of [talk] about money. You guys like to talk about the public interest. To us, it’s the same thing.” Or, as FCC Com- missioner Sherrie Marshall explained to an audience at the 1990 National Association of Broadcasters Convention, there is often a “harmonic conver- gence” between the public interest and a given applicant’s private interest.

Indeed, economic issues permeate virtually every category of FCC deci- sion making. Under the 1934 Act, the Commission was responsible for allo- cating radio spectrum to various services, assigning licenses to competing parties, and otherwise managing the usage of the assigned frequencies. It is essential that the agency take into account economic factors when choosing which service should receive an allocation of increasingly scarce and valu- able spectrum. Similarly, the marketplace phenomena can be important when deciding which applicant should receive a grant of a federal radio li- cense. Moreover, regulatory choices, once made, are not necessarily perma- nent. Economic conditions often determine the shape of the pubic interest.