not continued high corporate profits. The basic question is continued service to the public.

You have asked for facts; I have tried to develop some for you. It is difficult, admittedly, to make projections, and yet we can. We have a data base available to us to enable us to make some projections. We also have a data base available to us in order to look back over, say, the last 10-year period, which is the period I used. The most recent study that was done was by the Department of Commerce in terms of their projections as to where we are going to go in the future.

If we take a 10-year period, between 1966 and 1976, which is a period of substantial cable growth, and look at the revenues of the broadcast industry. I think we have to come to the determination. that the broadcast industry has not been hurt in the past and is not hurting in the present. If we plug against that the Department of Commerce projections for the next 9 years, up to 1985, I think we can come to a conclusion that on a national basis, they are not going to be hurt in the future.

Ten years ago, in 1966, the television industry had net revenues of about $24 billion. At the end of this year, it is expected that that figure will be $42 billion, and according to the Department of Commerce, 9 years from now that figure will double again to the area of $10 billion.

Now, of course, we are looking not just at revenues in this economy, we should be looking at earnings, at profit. In 1966, the pretax earnings of the television industry were around $500 million. They are expected, by the end of this year, to be $900 million and, according to the Department of Commerce, just 9 years from now, the profit will be $2 billion.

So it appears to me that the broadcast industry is not only inflation proof, but is also CATV proof, and profits are holding steady, presently, at the level of about 20 percent of their revenues.

There is an old axiom in logic that says if you start with an improper premise, you are going to wind up with an improper conclusion, and I would suggest to you that the premise that audience division equals loss of revenue does not necessarily track. And again, the information, while it may not be made available to you by the broadcasters, is available to you through these FCC Form 323s, and if your staff cannot get it, I am sure the FCC will provide it to you. As you hear the testimony, do not allow it to stop on just the premise that my audience is being divided and, therefore, my revenues are going down. You should ask for proof.

It is obvious-it is axiomatic-that if a choice is available to the people, the people will exercise that choice.

We heard an example this morning of Bakersfield. I would sug gest that we cannot make a national policy on the basis of an isolated situation. I am not that familiar with the Bakersfield situation, but there is a remedy available specifically for a situation like that. The Federal Communications Commission has, for years, invoked what is known as the Carroll Doctrine and your own staff has recommended the use of the Carroll Doctrine. Under the Carroll Doctrine, when someone is pleading economic impact, the burden of proof

is put on the party asking for relief. Somehow, in the case of the television vis-a-vis cable situation, that burden of proof has been shifted to the cable television industry, and we are being asked to improve an impossible up-front negative: Namely, that we will not damage the broadcaster.

But I would suggest, through the implementation of the Carroll Doctrine, which has been in effect for so many years and has precedent with the FCC, that if there are cases of individual impact in the community, that the Carroll Doctrine be invoked and that the broadcaster who is requesting relief make his showing. If he is, in fact, being impacted to the point where he might withdraw his service from the public, I say he should get that relief.

I have spent about 18 years in the cable business. Before thatwell. I am still-I spent some 24 years as a radio broadcaster. I remember when my station was the only station in town.

Another station moved into town, and that obviously divided my audience. A CATV system moved into town and tripled the number of television stations that were available and, as an overreaction on my part, I sent all my business cards back to the printer and had them diagonally overprinted in red, "Help Stamp out TV." In the process, after some 20 years of experience. I have now found that that station is more profitable than it was before but what is more important, is providing a better service to the public.

We need significant deregulation. We need national policy. We need guidance from the Congress. I do not believe that implementation of a new national policy is going to come piecemeal from any kind of bureaucratic agency.

We can start with the basic premise that we are overregulated. The FCC has recognized that. One of the Commissioners was quoted as saying it was one of the most complicated set of regulations ever devised by the mind of man and some deregulatory relief, minimal, has been made available to us.

Certainly, this subcommittee, through the excellent report of its staff, is focusing on the fact that we are overregulated. The Office of Telecommunications Policy, the Justice Department, have all recognized that. The Domestic Council of the White House under the current administration has recognized that, and yet, for the last 10 years, the Federal Communications Commission has been making policy decisions which equate the public interest with that of the local broadcaster.

I would suggest to you that perhaps that is not where the public interest lies.

Our industry is perfectly willing to accept deregulation. Some industries do not want deregulation. Bills have been sent by the Administration to the Congress, and those industries object to deregulation. They like their protected status.

I can tell you that within the framework of free competition, free enterprise situations, the cable television industry would welcome deregulation because we think we can provide a better product for more people at a lower cost if we are allowed to compete in the market place. But that can only come from the establishment of a national policy by the Congress.

So, if I may summarize my remarks, we want to expand our present service to a nationwide service, but, in order to be able to do that, we must have a basic programming package which appeals to our subscribers, and one which is wanted by our subscribers. The determination of what is in that package should be made by our subscribers, by the public, and not by an agency which is pre-conditioned to establish and maintain the status quo.

In order to arrive at this position, we must eliminate all of the artificial restrictions which exist on our ability to carry programing to our public, restrictions which work against public choice. With such elimination, we can expand our service, and. in the process, we can bring along the new benefits which are available through our technology.

Both the past broadcast economic history and the best available projections demonstrate that there is no adverse impact on the broadcast industry which would lead to an elimination of a service. That information is available to you, can be gleaned; you can make your own reasonable determinations as to whether that is a fair statement.

So we are talking, really, about the main issue, which is a possible withdrawal of service, not a possible lessening of profits on an individual local market basis. Where such impact might exist, I suggest to you there is a safety valve through the Carroll Doctrine, and I would recommend that the Carroll Doctrine be invoked and, in those cases where economic hardship, leading to possible withdrawal of service can be shown, that waivers be granted and that that station be offered protection.

Ultimately, in order to realize the full benefits of the technology that we have, we again need a national policy. We cannot continue to drift; we cannot piecemeal it by bureaucratic rules and regulations. We need the guidance of the Congress.

Thank you, Mr. Chairman.

[Mr. Allen's prepared statement follows:]

EDWARD M. ALLEN, PRESIDENT, WESTERN COMMUNICATIONS, INC., WALNUT CREEK,

CALIF.

My name is Edward M. Allen. I am the president of Western Communications, Inc., a medium-sized multiple system cable television operator headquartered in Walnut Creek, California. Western Communications, Inc. operates six cable television systems. Five of our systems are located in California with the sixth being located in New Mexico. Presently, we are providing our cable television service to approximately 75,000 families (or about a quarter of a million people). The specific issue under consideration this morning is that of the carriage of distant television signals by cable television systems and I shall address that issue, specifically. However, this one issue is so intermixed with multiple other issues which are also the subject of these hearings (and can be categorized under the broad general heading of the necessary future deregulation of the cable television industry), that I must, of necessity, comment on the broader issue as well.

I recognize, fully, the political and economic interests which are arrayed against our industry. Further, I recognize that this is a political election year which creates a natural inclination to avoid "rocking the boat." Therefore, at first blush, the comments I wish to make today might seem to be politically naive.

I don't believe they are. I have to believe that, ultimately, the public interest will surface ahead of private interests. I have to believe that a majority of the

Congress sincerely believes in the traditional concepts of free and open competition under our free enterprise system. I further believe that, when all of the facts are in, and when a careful and rational weighing of these facts is completed, the men and women of the Congress who hold the future of our industry in their hands will not tolerate a continuance of the repressive and anti-competitive regulatory atmosphere which is presently strangling an infant industry which has so much to offer to the American people.

In my remarks today, I should like to develop three specific areas for your examination.

First, it is my belief that it is absolutely essential, in terms of our ability to serve our public and your constituents, that there be a total elimination of the existing restrictions on the programming we are permitted to present to our subscribers. Second, I am persuaded that the elimination of these restrictions is not only in the public interest but, at the same time, will have no adverse economic effect on the ability of the existing broadcasting industry to continue to serve the public. And third, while immediate relief in the form of lifting programming restrictions is needed now, this relief is only a part of the general

ELIMINATION OF SIGNAL CARRIAGE RESTRICTIONS

It is the stated national policy of both the Congress and the Federal Communications Commission to provide the greatest possible television reception to the greatest number of people for the greatest public good. The Federal Communications Commission, through its allocation of television channel frequencies across the country, has sincerely tried to implement this national policy. However, the existing television channel assignments which were made under the Table of Allocations by the FCC must, of necessity, fall short of fulfilling the national policy as the radio spectrum is a finite national resource which is bound by physical laws. As a result, the existing broadcasting industry has been based on an economy of limitation and scarcity rather than on an economy of choice and abundance.

However, an alternative to this scarcity created by physical laws is available to us through the technology of the cable television industry. The cable television industry makes not use of the radio spectrum. It does not transmit programming through the air. It presents an unparalleled opportunity to provide the American people with a television of abundance and choice.

It appears to me that the concept of abundance coupled with free choice is patently in the public interest. Conversely, a policy of perpetuating scarcity and restriction of choice is totally inimical to the public interest.

However, before the promise of the cable television industry's contribution to the American public can be realized, we must make gigantic strides forward in making our service more generally available to the people of this country. Unfortunately, the present regulatory climate which is preconditioned on the protection of the status quo does not permit this expansion of service. As a result, cable system construction in the Top-100 markets of the United States (which contain about three-fourths of our population) has been effectively stopped in its tracks.

Faltering efforts have been made to provide our service in these major markets but, for the most part, because of the overly protective Rules and Regulations issued by the Federal Comunications Commission in 1972 they have been spectacular economic disasters. The industry just cannot provide enough programming product in these markets to interest potential subscribers in our service and, as a result, the future potential benefits of cable television service are also not being realized.

In my own state of California, our State Capitol (Sacramento) is without cable television service and, unless a significant change is made in the present Rules and Regulations as they relate to the product we are permitted to deliver, it is safe to predict that Sacramento will never have cable television service. The truth of this statement can be verified by examining the current situation in neighboring Stockton, California where, in spite of a massive effort by an expert cable operator, the service being offered is meeting minimum acceptance. This situation, of course, is not peculiar to California. As you know, Washington, D.C. does not have any cable television service and it is equally predictable that, absent significant deregulatory relief, the Capitol City of our nation will also be denied the benefits available through cable technology.

While our industry has tremendous future potential which is substantially untapped, our primary function is still the dissemination of more television programming with better television reception. This function is what creates our subscriber interest and it is this function which must be fulfilled on a national basis before we can even approach the unrealized potential of additional public services.

Therefore, as a first step toward realizing our potential, the present programming shackles which prevent us from delivering the services our subscribers need and desire must be totaly eliminated. We must have the ability (as do broadcasters and publishers) to make a "marketplace determination" as to the service package which we are going to offer to our subscribers—a determination which is based on the demonstrated wishes of our subscribers (and that can be read as being "in the public interest"). The first key to this greater service package is, of course, the ability to bring our subscribers additional television programming of their desire from anywhere in the country. However, this is not the only key involved. We must also have relief from the artificial restraints imposed on our industry through the present restrictions on potential leased channel services, we must have relief from the impossibly complicated exclusivity rules, and we must have relief from the totally unnecessary and monstrously irritating non-duplication rules.

This shift away from absolute government regulation to competitive marketplace determination is not only essential, but is consistent with every principle of our free enterprise society. The current status of our industry has demonstrated that excessive government regulation has not worked. By the same token, virtually every other area of our economy has demonstrated that marketplace competition in the public interest does work. Perhaps Jonathan Rose, a Deputy Assistant Attorney General in the Antitrust Division of the Department of Justice, in remarks presented to the Federal Communications Bar Association in February of this year, set forth this premise best when he stated: “Government generally does not work nearly as efficiently to allocate resources as the marketplace and competition do. Government regulation can sometimes work affirmatively against the public interest. Too often we have seen some regulatory agency become so preoccupied with the balancing of competing private interests that they have ended up with an ultimate balance against the public interest."

Therefore, as a first step toward realizing the ultimate potential of a sig nificant new national communications technology, we must be able to provide. without restriction, a service which is truly desired by the American public. That service, still, consists of more and better television pictures. If we cannot give the public what it wants at the present, we shall have to deny them what they will want and need in the future.

ECONOMIC IMPACT ON THE BROADCASTING INDUSTRY

For almost all of the 25 year history of the cable television industry (and, more particularly, during the past ten years of FCC jursidiction over the cable television industry), a sometimes acrimonious debate has been carried between the industry and certain (but not all) television broadcasters who proudly describe themselves as "hard-liners." Isn't it about time that we begin to focus on some basics? Isn't it time to put away the inflammatory rhetoric and, as Al Smith used to say, "Let's look at the record"? Isn't it time to conduct a dispassionate analysis on the basis of facts (as requested, repeatedly, by both the Federal Communications Commission and the Congress) rather than continuing to indulge in pure speculation and conjecture?

In allocating the scarce television frequencies across the country, the FCC. recognizing that it was dealing with a national public asset (the radio speetrum), never envisioned creating "private markets" for individua llicensees. Rather. in spite of the spectrum scarcity, the allocations were made on the basis of providing the most service to the most people. Unfortunately, some broadcasters have lost sight of this basic philosophy and consider their tele vision license allocations as a "personal" fiefdom covering their "personal" market.

What is the proper function of a television broadcast license? I would suggest that this license was never intended to be (and is not now) a "license to print money." Rather, television broadcast licenses, under our free enterprise broad