A copy of that plan has been widely discussed, as you know, with stations all over the country and there were many criticisms, some of which we then tried to meet in the changes which we effectuated in our plan.

Then there are, Mr. Chairman, apart from the substitution of the endowment for the CPB, some major differences in the way that the individuals are to be appointed to the proposed board of directors for the endowment. Also the endowment would only have 9 members, as against 15 on the present board.

We recognize, as I think everyone does, that there are some deficiencies in the way in which members are named to the board at this point. Presidents of both major political parties have been very slow in nominating successors. And it is only that provision in the act which permits retiring members to continue to serve that gives us almost a quorum at times because, as you know from the nominations now before the Senate, there are seven members whose terms have expired presently serving on the board.

So, we think that your provision, which would change that interminable service, might have beneficial effects in causing the nomination and approval of the new nominees as against the present procedure which simply causes expired members to continue to serve until their successors are named. We applaud the effort in that direction on your part.

The board feels that reduction from 15 to 9 members is not a particularly significant improvement. A 15-man board is not an unwieldy board, as the size of boards go. And as one who has had occasion to deal with a good many boards knows from some experiences, 15 is not an unwieldy number.

We have a very diverse country. We have very great regional differences. Within a board the size of 15, you can accommodate a great many of those differences. So we have some doubts that the smaller number would accommodate as well as the present number of 15. And we think the benefits that may accrue from 9 as against 15 are not significant.

Mr. VAN DEERLIN. Do you have any division of responsibilities in subject matter within the present board?

Mr. FLEMING. A year ago the board had a series of committees: programing, finance, and so forth. At the time I came on, I proposed to them that we act as a committee of the whole on all questions rather than having committees. In the nature of the board's work, some committees are inherently more important than others. I take it that is true probably in any organizational setting.

For instance, the program committee and the finance committee will tend to be more important in the scale of committees. If you have committees of the board itself, while you get the advantage of specialization in those areas, you lose some of the advantages of having all the board members informed on the entire spectrum of the operation.

And if you take into consideration that though there are 15 members, because these are all busy people, you may at any given meeting, have 12, which has been our experience as a fairly common number in this past year. Then that is not an unwieldy board to act as a committee of the whole.

So, we suggest to you that we have doubts about the advantages of cutting back from 15 to 9.

The question of how best to nominate those members has been one that has been widely debated. And as you know, the Carnegie Commission proposed one scheme and you have proposed another in your bill. And I know from our conversations with you that you have invited us, if we thought we had a better idea, to tell you how we think it might be done better.

No scheme as far as I can see has been proposed that has yet pleased everybody. We propose a somewhat different one here, though not really a new one, because it has been proposed before. We have said that, first of all, with respect to your particular provision, we have some fears that it would create two classes of membership: one class in which the President nominates them and the other in which the appointees nominate the remainder.

There would be, we believe, sensitivity on the members of the board as to which class they fell in at that point. And there would be some disposition to feel there was a kind of first-class citizenship and second-class citizenship on the board if you did it that way. For that reason we are very dubious whether that is a good way to do it. The alternative which we have offered is to say why not allow the board itself, with some restrictions as to how they did it, to produce a list of, let us say, five members for every vacancy.

You could require that the list include women and minorities, that it include people from various parts of the country. You could have that list submitted to the President with a recommendation that he draw his appointments from that list with the same understanding that you have in your plan that the President, of course, is not bound by that but one would hope that he might follow the recommendation from that list.

You could design the procedures so that the process would not be closed, we think, either in appearance or practice. You could limit the board members to one term so they would have no stake in perpetuating their own service on the board. They do know the requirements of the position, having served; they do get to know people in public broadcasting around the country quite well; they know citizens who are interested in various parts of the country. The current membership of the board, and I think any foreseeable membership, has on it women, minorities, people from different parts of the country. So, in a very real sense you have a spread of the interests which seem to be desirable in nominating some candidates.

And if they simply gave the President a list of five for every vacancy, that would still allow very considerable flexibility on the part of the President; it would produce names from all over the country with a great diversity, with some advanced knowledge of the interests of those people and their motivation for interest in public broadcasting.

So, we suggest that to you as a possible alternative to the way in which you have proposed to do it. And we do so really in response to your invitation that if we did not like the way you proposed it, was there a way we liked somewhat better? We think maybe that is a somewhat better one.

We suspect there will be criticisms of that plan just as there seem to be of any other. But to us it does seem basically sound. That is why we present it to you.

Now, with respect to the objective of better insulating the programing unit, we think within the structure of the present act we have accomplished that by the action which the board took this morning. That is, the board will no longer itself act on individual program decisions after this plan is put into effect.

It will take us until January to get all the details worked out. We have provided an advisory committee, and we have indicated what the membership on that advisory committee would be. We have provided that the programing unit would use peer panels as under the 1978 statute.

So, we believe that at least some better insulation is provided than was there before.

If you are trying to follow where I am in my paper, I think I am in the middle of page 7. One of the other major changes in the system is to provide that the endowment's sole support would be for programing. And it is certainly true that there is insufficient money now available for programing. Public broadcasting is badly in need of money.

I do not think there is any serious difference of opinion on that. It is also true that we believe there is a smooth working relationship between the CPB and the NTIA with respect to facilities' money. From our standpoint, they are administering the facilities program well.

Our relationship with NTIA and coordination with them is good. We do not see any reason to change that unless at some future point it proves unworkable, but it certainly has not up to this point in time.

However, when one comes back to the point that in the future money out of the proposed endowment would be solely for programing, it does remain true that the stations are very hard-pressed for money in a number of other areas, not just programing.

And we think that one really cannot in good conscience abandon the needs of stations beyond the programing area. And we understand that that will not take place in any event until some years from now.

If it is the desire of the Congress to allocate more of the public broadcasting appropriation to the programing area, consideration could be given to the total amount going into programs from CPB appropriations. And instead of leaving that totally unrestricted, one could say that x amount of that should go into programing, thereby allowing some of that money to be used for certain other purposes.

Meanwhile, I should note that we have partially adopted the suggestion that you make both in your bill and in the Carnegie report that part of the cost of the interconnection be passed back to the stations. And under the plan which was adopted, half of the cost of the interconnection for the television station will be passed back to the station.

We think there is merit in that, as we judge you did, because the stations are really in a better position than we are to judge the priority of interconnection versus other needs. As long as we fund

it, then we know less about where that stands in the stations' total priority of need.

Henceforth, half of that cost on the television side will be picked up by the television stations.

Now, we concur in your comments that a communications technology revolution is in process and that the market forces themselves will provide the consumer with a wider choice of programing service no matter what we do.

We believe that it was precisely developments of that kind, however, that led you in the Financing Act of 1978 to give CPB the responsibility to plan for the development of public telecommunications services and to assist NTIA with the responsibility to develop a 5-year plan.

H.R. 3333 omits any reference to that planning and to any organization with institutional responsibilities to help what are now public broadcasting stations evolve into public telecommunications entities. It would seem to us that commercial broadcasting, for instance, in the sole mode of broadcasting in the past, or in the multimode future, will probably continue to respond to audiences that are best able to pay and they will continue to leave unmet some of the needs of the historically underserved and unserved. Therefore, we think it desirable that the corporation or the endowment take an active role in this field. Demonstrations to assess the potential of new technologies are by their very nature risky so the industry must have an organization which has the capacity for undertaking and evaluating such high-risk ventures.

These could range from cost-effective service for small, widely scattered audiences using a satellite to pull them together, to providing instructional programing intended to be used off-line by video cassettes. As we adopt a budget, we will be considering whether we ought to allocate certain amounts for developing programs by nonbroadcasting techniques.

Software development is only part of that. We believe, therefore, that the communications revolution will increase rather than decrease the need for a national organization with responsibility to provide leadership in some of these areas. Therefore, we would leave that with the corporation or the proposed endowment.

Now, as to the financing of public broadcasting, H.R. 3333 substitutes, as you know, a permanent authorization for broadcasting at $1.50 per every resident of the United States for the present arrangement. Our concern is principally that unless the $1.50 had attached to it an escalator, it will of course continue to be eroded by inflation.

And as the population plateaus, as it is tending to do, you would reach a stable level of absolute funding based upon population and you would have an eroded fund because that $1.50 would purchase less if inflation continues as it now is.

Now, we recognize that erosion could be corrected, the figure might from time to time be amended and changed to correct for inflation. If it were adopted, however, it would seem to me consideration ought to be given at least to whether it should have an escalator built onto it in some fashion so as to keep it up to date.

You know, I am sure the difficulties the BBC is having now with its system of funding is partly because of a stabilized receiver fee and partly because of inflation.

We know that this idea of fixed criteria authorization for public broadcasting works pretty well in some countries. So, we applaud you for thinking up a different way which genuinely does produce some more immediate dollars, which are badly needed.

We believe if the inflation aspect of it could be tied in for a correction of the inflationary factor and a periodic review set so that if it is simply stabilized on the basis of population you could cope with that problem, Mr. Chairman, and we think it might be a workable scheme. And it certainly does press, expose and bring forward the need for increased funding.

In any event, we think that the necessity for forward funding is very desirable. Of course your proposed permanent authorization would accomplish that. If that should not prove workable, we would hope that the present rolling appropriation of 3 to 5 years would continue.

Mr. VAN DEERLIN. Would you be content to stop now for about 10 minutes while Mr. Collins and I go and fulfill our constitutional function?

[Brief recess.]

Mr. VAN DEERLIN. I believe you had just expressed the view that inflation might be a recurring problem when we stopped?

Mr. FLEMING. I think that is a fair statement. I was just ready also to move on to that provision in the bill which provides that each State would receive a percentage of available programing funds equal to the percentage of the U.S. population that resides in that State.

We think that unless you work that out carefully, you would end up with some quite uneven results. We have submitted some examples of that. We think it could probably be corrected by some further refinement but we think stated as it is, it would be likely to result in some inequity.

That brings me to the matching fund concept. We are a bit ambivalent about that. Stations clearly are underfinanced and they do rely heavily on private fundraising. There is no doubt about that. There is really no effective way of proving whether they raise more money because there is a Federal match or whether they would raise the same amount of money if there was not a match, because there is no very good way to test that out.

People speculate about it in different ways. But there are some drawbacks to the match and that bothers us. Certainly there is a limit to the public's tolerance of fundraising drives and there is increasing evidence that this tends to level off after a while and you reach a plateau in how much giving there is from the private front.

Stations are unequal in their capacity to raise funds despite their ingenious efforts and the vigor with which they approach it. It is true that the matching system does encourage citizen participation, but we are uneasy with the idea of a total dependence on match. We would not be disposed to rule the match out as a device but we would also be happy if we thought there were more satisfactory ways of doing it.