Nelson Bros. Bond & Mortgage v. Federal Radio Commission

ROBB, Associate Justice. Appeals from a decision of the Radio Commission granting the application of the Johnson-Kennedy Radio Corporation (Station WJKS) of Gary, Ind., that it be assigned the 560 ke. frequency shares by Stations WIBO (owned by the Nelson Bros. Bond & Mortgage Company) and WPC'O (owned by the North Shore Church) of Chicago, 111. Station WJKS commenced broadcasting in August, 1927, with a frequency of 1,290 ke. and 500 watts power, sharing time with Station WSBC of Chicago. Under the reallocation in November, 1928, the station was assigned a frequency of 1,360 kc. and shared time with Station WGES of Chicago. Shortly thereafter, as a result of its complaint to the Commission of interference, the station was granted a power output of 1,250 watts daytime and 1 kw. nighttime, and continued to operate on that frequency and power. In February, 1931, the station applied for the frequency of 560 ke. and unlimited time, and suggested that, if the granting of its application “would require the removal of a station or stations using the facilities requested in an, overquota State of the fourth zone, then the applicant desires Stations WIBO and WP-CC, Chicago, as the stations to be removed.” The application was designated for hearing before the chief examiner and notice given appellants and other parties in interest. Over a period of seven days voluminous testimony was taken. After a careful review of the established facts, the examiner recommended that the application be denied. He found that the station is rendering a commendable public service on its present part-time assignment, but that the service “would be improved by the installation of the most modem radio equipment and the operation of this station in the most efficient manner on its present frequency.” He further found that it is possible that “more objectionable interference would result from the operation of Station WJKS on the 560 ke. channel than now results from the operation of this station at Gary on the 1,360 kc. channel, since Station WNOX at Knoxville, Town., is separated from Gary by a distance of only 440 miles, whereas the nearest station on applicant’s present assigned frequency, operating with 1 kw., is at Syracuse, N. Y., separated from Gary by a distance of 600 miles.” He also found that Stations WIBO and WPCC “are meritorious stations, serving public interest, convenience, and necessity”; that “the owners and operators of these stations have at great cost prepared themselves to exercise the broadcasting privileges heretofore granted them by the Federal Radio Commission, and in the opinion of the examiner, clear and sound reasons of public poliey demand that these broadcasting privileges be not taken from them and assigned to applicant station”; that Stations WIBO and WPCC provide radio service for people within the service area of the applicant station, who also “receive a large proportion of their radio1 broadcasting service from stations operating in the State of Illinois, none of tohidh service may be charged against the quota of the State of Indiana.” (Italics ours.) Exceptions to the report were filed by the J ohnson-Kennedy Radio Corporation, of which appellants received notice. Thereafter, without notice to appellants or other parties in interest, the Commission filed a statement of facts and grounds for its decision, together with its order, stating the issue to be “whether or not the public interest, convenience, and/or necessity would be served by the granting of this application and the consequent forfeiture of the facilities now assigned Stations WIBO and WPCC.” The decision of the examiner was reversed, and the application of the Johnson-Kennedy Radio Corporation granted. The Commission found that the applicant station “now renders an excellent public service in the Calumet region (in which Station WJKS is located) and the granting of this application would enable that station to further extend and enlarge upon that service”; that the “granting of this application and deletion of Stations WIBO and WPCC would work a more equitable distribution of broadcasting facilities within the fourth zone.” We have held that the business of broadcasting, being a species of interstate commerce, is subject to the reasonable regulation of Congress. Technical Radio Lab. v. Fed. Radio Comm., 59 App. D. C. 125, 36 F.(2d) 111, 66 A. L. R. 1355; City of New York v. Fed. Radio Comm., 59 App. D. C. 129, 36 F.(2d) 115; Chicago Federation of Labor v. Fed. Radio Comm., 59 App. D. C. 333, 41 F.(2d) 422; KFKB Broadcasting Ass’n v. Fed. Radio Comm., 60 App. D. C. 79, 47 F.(2d) 670; Journal Co. v. Federal Radio Comm., 60 App. D. C. 92, 48 F.(2d) 461; Trinity Methodist Church v. Fed. Radio Comm., 61 App. D. C. 311, 62 F.(2d) 850. [856] The question., therefore, in this case is whether the decision of the Commission assigning to the applicant station the frequency enjoyed by Stations WIBO and WPCC since 1928 “and the subsequent forfeiture” of the assignment held by Stations WIBO and WPCC is a reasonable exercise of regulatory power or an arbitrary and capricious assertion of power. Station WIBO was established in April, 1925, and represents a total cost of about $346,000, less a reserve for depreciation of about $54,000. It employs 55 persons; has monthly operating expenses of from $16,000 to $18,000. It serves a radius of from 50' to 100 miles, and, on the basis of its earnings, is estimated to be worth between $500,000 and $700,000. There is not even a suggestion that it has failed to comply in any respect with the regulations of the Commission; on the contrary, it affirmatively "appears that this station has been operated in the public interest. Station WPCC was established in July, 1924, and is owned by the North Shore Church of Chicago. Prior to the installation of this broadcasting station, the church was largely in debt. The installation of the radio greatly increased the church’s audiences. There are 20 radio stations in Chicago broadcasting about sixty hours of religious programs on Sundays, but there are practically no weekday spiritual programs broadcast except those of Station WPCC. That the operation of this station has been in the-public interest clearly appears. In the reallocation of 1928 following the enactment of the Davis Amendment (Act of March 28,1928, § 5, 45 Stat. 373 [47 TJSCA § 89]), the Commission found that conditions warranted the assignment of the frequency of 560 kc. to Station WIBO (originally established in April, 1925) and Station WPGC (originally established in July, 1924), and the assignment of the frequency of 1,360 kc. to Station WJKS (originally established in August, 1927). The evidence fails to disclose that there has been a material change in conditions since the reallocation of 1928. The Davis Amendment declared it to be the policy of Congress that the people of the five zones established by the Radio Act of T927 are entitled to equality of radio broadcasting service, both of transmission and of reception, and that, in order to provide such equality, the licensing authority shall, as nearly as possible, make and maintain an equal allocation of broadcasting licenses, bands of frequency or wave lengths, periods of time for operation, and of station power, to each of the zones, “and shall make a fair and equitable allocation of licenses, wave lengths, time for operation, and station power to each of the States, the District of Columbia., the Territories and possessions of the United States within each zone, according to population.” It will be observed that the statute directs the licensing authority.to establish and maintain, “as nearly as possible,” equality of broadcasting service to each of the several zones, and to “make a fair and equitable allocation of licenses,” etc., to each of the states within those zones. The requirement that there shall be an equal allocation to each of the zones, and “a fair and equitable allocation” to the states within each zone, according to population, is significant. Crawford v. Burke, 195 U. S. 176, 190, 25 S. Ct. 9, 49 L. Ed. 147; Johnson v. United States, 225 U. S. 405, 415, 32 S, Ct. 748, 56 L. Ed. 1142; Brewster v. Gage, 280 U. S. 327, 337, 50 S. Ct. 115, 74 L. Ed. 457. The fourth zone, in which the stations direetly involved in this controversy are located, comprises the states of Indiana, Illinois, Wisconsin, Minnesota, North Dakota, South Dakota, Iowa, Nebraska, Kansas, and Missouri. Congress declared that the people of all the zones are entitled to equality of broadcasting service, but evidently recognized that the licensing authority might not be able to establish and maintain an exact mathematical equality among the zones, hence the language, “establish and maintain as nearly as possible.” After providing for the establishment and maintenance of nearly equal facilities among the zones, Congress, in dealing with the problem, evidently anticipated that greater difficulty would arise in undertaking to equalize allocations to the several states within a zone, and therefore provided for, not equal, but “fair and equitable allocation” to the states witAin a zone. The House committee report on the amendment states, inter alia: “This amendment looks to the future. It declares in terms the duty of the licensing authority to make an equal allocation among the five zones, of broadcasting licenses, * * * and provides that within each zone there shall be an equitable allocation among the States thereof in proportion to the population and power. The equality here sought is not an exact mathematical division. That may be physically impossible.” H. R. Rep. No. 800, 70th Cong., 1st Sess. We have repeatedly held' that “it would not be consistent with the legislative policy to equalize the comparative broadcast [857] ing facilities of the various states or zones by unnecessarily injuring stations already established which are rendering valuable service to their natural service areas.” Reading Broadcasting Co. v. Fed. Radio Comm., 60 App. D. C. 89, 48 F.(2d) 458, 459; Chicago Fed. of Labor v. Fed. Radio Comm., 59 App. D. C. 333, 41 F.(2d) 422. In Strawbridge & Clothier v. Fed. Radio Comm., 61 App. D. C. 68, 57 F.(2d) 434, we sustained the Commission, although the applicant station was in an underquota state and an underquota zone, and sought an increase of power which would have affected stations in an overquota state in an overquota zone. There would have been more justification for the granting of tho application in that case than in this, for here the parties most affected are in one zone and the applicant station is located within 30' miles of Chicago, from which Gary and surrounding territory receives much of its radio service, although, as observed by the examiner, none of that service is charged against the Indiana quota. While Station WJKS, through this application, seeks greater opportunity to furnish broadcasting service to the people of Gary and surrounding territory, it is in evidence that it even now devotes from two to three hours daily to broadcasting phonograph records. It also suggests that it has special programs for the foreign-born element of Gary, but the record discloses that the total number of foreign horn in Chicago is greater than in Gary and vicinity. Station WIBO had been broadcasting for more than two years, and Station WPCC more than throe years, when Station WJKS entered the field. The only apparent reason for granting the application of Station WJKS and destroying the other two stations is that Indiana is underquota, which in tho circumstances furnishes no substantial justification for the decision of the Commission. As already observed, the evidence discloses that Stations WIBO and WPCC have been and are “serving public interest, convenience, and necessity” certainly to as great an extent as the applicant station. In our view, tho conclusively established and admitted facts furnish no legal basis for the decision of the Commission. In other words, tho decision is in a legal sense arbitrary and capricious. Another point remains. Appellants complain that the decision of tho Commission was rendered without notice to them. Not having sought a hearing, appellants are not in a position to raise this question. Goldsmith v. United States Board of Tax Appeals, 270 U. S. 117, 46 S. Ct. 215, 70 L. Ed. 494. The decision is reversed, and the case remanded. Reversed and remanded.