casting system (which has been demonstrated to be the finest in the world), are issued to permit private entrepreneurs to "serve the public interest." Unfortunately, sometimes the concept of "service to the public" becomes subordinated to the concept of "service to the stockholders." And sometimes, as plain spoken Harry Truman is quoted as saying in the current stage production of Give 'Em Hell, Harry, "Net profit equals net greed." When you cut to the bottom line, we are really talking about corporate profits. At a recent meeting of the National Association of Television Program Executives in San Francisco, one of the members of the panel on cable television frankly predicated his remarks on his desire to make money in "his television market." Another station owner, speaking from the audience, admonished his fellow broadcasters to "get off your fat wallets" and go to Washington and lobby against the cable television industry. You will be hearing from some of these broadcasters during the course of these hearings.

Obviously, it is not the intent of the cable television industry to damage the existing broadcast industry. We depend for our service on the service provided by the broadcast industry. A diminution of broadcasting service must, of necessity, create a diminution of the service we offer to our subscribers. And so, we are faced with the very basic question of whether deregulatory relief of the cable television industry, including the ability to provide our subscribers with more distant television signals, will have any significant adverse effect on the broadcasting industry's ability to serve the public. The issue is not whether existing high corporate profits might be reduced-it is solely whether the public will suffer withdrawal or diminution of existing broadcast services. Further, as we are discussing national policy, individual isolated instances cannot be controlling of the national public good.

In his book, Future Shock, Alvin Toffler made the statement that "To prophesy is extremely difficult, particularly with regard to the future." Yet, we can take past history and couple it with expert best estimates of the future and arrive at some reasonable projections. The most recent study which has been done on the future of the broadcast industry was released by the United States Department of Commerce in January of this year. These projections (out through 1985), coupled with the history of the broadcast industry (going back to 1966), do not indicate that the broadcast industry is in any imminent danger of demise. Rather, they show that the industry has been profitable, is presently profitable and will continue to be profitable.

While the argument is made that the importation of additional programming choices to cable television subscribers will fractionalize the audience and, therefore, result in lower revenues, the facts just do not support this allegation. Ten years ago, in 1966, the television industry had net revenues of just over 24 billion dollars. By the end of 1976, it is anticipated that the industry revenues will exceed 42 billion dollars. Thus, in this ten year period, industry revenues have risen by almost exactly 100%. Further, the projections made by the United States Department of Commerce (which allowed for the parallel and continued growth of the cable television industry) anticipate another doubling in broadcast revenues to 10 billion dollars by 1985.

Of course, under our economic system, raw revenue growth, unless accompanied by earnings growth is meaningless. Therefore, for this same period of time, we should also look at the television industry's pre-tax earnings. In 1966, pre-tax earnings of the television industry amount to slightly less than 500 million dollars. By the end of this year, these same pre-tax profits will be approaching 900 million dollars, and by 1985, the Department of Commerce estimates that the television industry will have pre-tax profits of nearly 2 billion dollars.

Thus, while net revenues over this 20 year period are expected to increase by about four times, the pre-tax earnings of the industry are also expected to increase by about four times. With the profit ratio of the industry holding steady (and improving slightly) at about a 20% of gross sales level, it would appear that that television industry is a substantially inflation-proof and CATV-proof industry.

It is axiomatic under the laws of logic that if you begin with an improper premise, you must arrive at an improper conclusion. The argument presented by the "hard-liner" broadcasters that a division of audience equals a loss of revenue or profits not only begs the question but does not stand up under

scrutiny. Again, we are not discussing possible loss of corporate profits. We are ony concerned about withdrawal of service from the public. Therefore, as you listen to the arguments of the broadcasters, do not permit them to make this equation without presenting proof-and the proof is available to you through the annual financial statements filed by the broadcasters. This same concern which I express to you today was also expressed by Mr. Thomas E. Kauper, the Chief of the Antitrust Division of the Department of Justice in January of this year when he said: "The difficulty with crediting broad claims of imminent disaster, of course, is that they have been made so casually and proven so false in the past. We must be very careful here not to fall into a semantic trap by equating the prosperity of particular firms with the public welfare."

Any dispassionate analysis of the parallel growths of the television broadcasting industry and the cable television industry will demonstrate that the television industry has not been hurt in the past (and has prospered), is not being hurt at the present (and is prospering) and will not be hurt in the future (and will continue to prosper). I think, in terms of a simplistic approach, the broadcaster who participated in the February en banc cable television hearing conducted by the FCC and was quoted as saying "Our biggest problem is that it's hard to go in there and cry poor mouth when TV is having its best year ever" was, perhaps, closest to the real truth.

I can't emphasize too strongly that you must not permit our broadcaster adversaries to discuss just audience division and avoid a discussion of economic impact leading to withdrawal of service. It is obvious that, if a wider choice of programming is made available to the public, they will exercise that choice in their own interests and there will be audience division. However, as you have the financial facts available to you, and as they will not be offered by the broadcasting industry, you must make your own determination as to whether this audience division has had any appreciable economic impact on the broadcast industry to the point where existing services are threatened. I can only speculate, as the necessary information is not available to me, but I think you will find that the individual segments of the broadcasting industry which are crying the loudest are, at the same time, on an ascending curve of both revenues and profits. With these facts in your hands (whether presented by the broadcasters or your Staff), and with the projections available from the United States Department of Commerce, you can make a reasoned determination as to whether the relief needed by the cable television (in the form of more available programming for our subscribers) is likely to cause any withdrawal of service by the broadcast industry.

It has been demonstrated again and again that free and open marketplace competition is not only in the greatest interest of the public but, also, in the best interests of the competing parties. While I have been engaged exclusively in the cable television industry for the past 18 years, I have also been a radio broadcaster for the last 24 years. At one time, my radio station in Minnesota was the only station in the market. Subsequently, an additional radio station was licensed to the same market (which, obviously, divided our audience). Further, a CATV system began operating in the market which provided three times the number of television signals normally available. I can remember that. as an overreaction to this situation, I sent my business cards back to our local printer and had them diagonally overprinted in red with the legend “Help stamp out TV." I am happy to be able to report to you that, after some 20 years of additional experience, my radio station is not only doing better than ever before but, through the pressures of competition, is now a better station and is providing a better service to the public.

SIGNIFICANT DEREGULATION

The permissible carriage of additional distant signals, as critical as it is to the future development of the cable industry and service to the public, is only a part of the total need for significant deregulation of our industry.

Happily, among the policymakers, we can start from the basic premise that cable television is one of the most over-regulated and repressively-regulated industries in the country. In fact, one of the FCC Commissioners has been quoted as saying that (to paraphrase). "The cable television regulations existing today are the most complicated regulations ever devised by the mind of man."

The extent of repressive over-regulation of our industry has been recognized by the Congress as evidenced by the report of this Sub-Committee issued in January of 1976. The current Administration has focused on this situation through the efforts of the Domestic Council which were carried on during 1975 (and called to an abrupt hait because of the election pressure of 1976). The Office of Telecommunications Policy has consistently emphasized the impossible regulatory burden carried by our industry. Further, the Justice Department is fully cognizant of the anticompetitive and antitrust implications of the present morass of regulations and is actively advocating relief.

During the last ten years, the regulatory philosophy of the Federal Communications Commission has been one of protecting the local television broadcaster. While the Communications Act of 1934 makes no reference to cable television (as would be expected), two Supreme Court cases have determined that our industry is "ancillary" to broadcasting. Therefore, we have been warped into the aegis of the FCC and the Communications Act of 1934. In the process, regulation in favor of the public interest has, consistently, been subordinated to the private interests of local television broadcasters. A study of FCC rulings over the past ten years has demonstrated that it is repleat with decisions which were predicated only on the basis of the then prevailing attitude of the local broadcaster. In short, through such rulings, the FCC has consistently equated the public interest as being the interest of the local broadcaster rather than that of the interest of the public being served.

As a result of this broadbrush approach, the repressive regulation presently applied to the cable television industry does not take into consideration the needs and requirements of individual local markets. The large and profitable (and, sometimes, network-owned) stations, being enveloped in an overall approach to a specific problem, are enabled to pile profits on top of profits. While the issue of the need for additional distant signals is a necessary cornerstone of the ultimate deregulatory effort, our industry is not going to be fulfill its promise until multiple other deregulatory burdens are lifted from us. Throughout the history of the FCC, the burden of requesting relief from possible economic impact has always been on the party requesting relief. This is known as the "Carroll Doctrine." Somehow (and I believe it is through raw economic pressure), in the case of conflict between cable television and broadcasters, this burden has been shifted to the cable television industry. In essence, we are being asked to prove, up front, an impossible negative. Rather than the broadcaster having to demonstrate that he will be impacted to the point where he must withdraw service from the public, our industry, is being asked to prove that the regulatory relief we need will not impact the broadcaster.

During 1975, the Administration sent bills to the Congress which were designed to reduce costs and provide greater service in the railroad, airline and trucking fields. Regretably, the regulated industries involved are resisting these attempts to create more, better and lower cost services. They prefer their protected status as a regulated industry. While no such legislation has been submitted, as yet, relating to the communications industry, I can assure you that the cable television industry would not only welcome a significant deregulatory effort, but would endorse such an effort as being the vehicle which would provide more and better communications services to the public.

In the light of the experience of the proposed legislation offered by the Administration in the fields of trucking, airline sand railroads, we must ask what has happened to the concept of "public interest" legislation-where did it get lost-who really loses when you subordinate the public interest to the private profit interest.

I am confident that, ultimately, the necessary interest of the public will prevail. While the very sincere deregulatory interest of the Administration which existed in 1975 was derailed because of the election pressures of 1976, once these pressures are removed, the public will be heard and deregulation will take place because the public will demand it.

Mr. VAN DEERLIN. We will withhold questioning of you until we have also heard from Mr. Turner, who is a broadcaster in Atlanta, also owner of the Atlanta Braves.

We thought maybe. Mr. Turner, you should assure Mr. Wirth that when you paid more than $2 million for Andy Messersmith, you did not dip into station profits, but kept the books separate.

79-571-76-pt. 1-30

STATEMENT OF TED TURNER

Mr. TURNER. Mr. Chairman, Mr. Messersmith did not get anything like that amount. You know, when presidents of baseball teams are not too different from people seeking political office. A lot of the things that you say are not exactly what you end up doing. Besides, you can't do it. You always try to accentuate the positive and eliminate the negative, and I think we have been hearing a lot of that this morning.

Mr. WIRTH. I might say, Mr. Chairman, that I was concerned not because it might have dipped into profits, but because I have always been a Dodger freak and I was sorry to see him leaving the Dodgers and going to Atlanta.

Mr. TURNER. It doesn't seem to make a lot of difference, though. His record is not any better-not as good as the Bird, who is making 1/50th as much money. I think it is a more intelligent way of doing things, is to develop your own players rather than to try to buy them at astronomical sums.

But at any rate, this is not a hearing on baseball.

I think you are going to hear from some gentlemen who are a little upset about me, quite frankly, appearing here. I wear so many hats that I am not sure which one I am wearing at the present time, but I am one of those guys who is in the independent, UHF television business, which, five years ago when I went into it, it was noted as the lunatic fringe of the broadcast industry, and as far as exorbitant profits are concerned we, believe it or not, are making a profit in independent UHF television which surprised even me, because in the beginning we were losing millions literally which, luckily we turned it around just before we ran out of some very carefully harvested money that I had made in the outdoor advertising business, which, you know, stop billboard blight, I figured I ought to diversify a little bit because that business lived under such regulatory problems that every night when I went to bed I had nightmares that the City Council or the State government or the Federal commission would put us out of business the next day by making us remove all of our signs from the highways.

I figured if I got into broadcasting, it would be different. Actually, it is worse. The regulation in broadcasting, in the cable business -I do not have any cable systems. I am unique, I think, or fairly unique in being friendly to the people in the cable industry and I am considered a bit of a traitor to be here on behalf of the cable industry this morning, although I do feel that I have a pretty reasonable position. I know in a few minutes we are going to knock off for lunch and I won't be here this afternoon, so I have a carefully prepared, very short statement which-is it necessary for me to read it, or do you want me to read it?

Mr. VAN DEERLIN. It is unique in its brevity. Why do you not share it with us?

Mr. TURNER. All right.

You already introduced-it was actually Don Anderson who used to be in the cable industry printed this up, because I am not very good at printed statements; I am not a college graduate. If I had

been, and was very smart, I would not have gotten into the UHF independent business at the time, so I am kind of like the bumble bee who does not know that he cannot fly, that aerodynamically it is impossible.

So this statement says, I purchased Channel 17 about six years ago. At that time, the station sad only a small off-air viewing audience and was received on only a handful of cable television systems.

A UHF independent television station in a market such as Atlanta where there are three VHF network affiliated stations has to do a lot of scratching to attract audiences that are going to attract advertisers to buy commercial time. That is a masterpiece of understatement.

I put a lot of money-and that is also a bit of an understatementI put some money into improving the technical quality of WTCG. I put a lot of money into buying the best programing available, and I secured the television rights to Atlanta's three major league professional sports teams, in basketball, baseball, and hockey.

And I did one thing more. I visited the cable systems. I attended their association meetings and I told them all about the things we we doing with channel 17. Kind of like a Republican congressman in a district you can see is going Democratic. I figure I had better go out and meet the Democrats too, you know, because you have to get all the votes you can.

Today, nearly 100 cable television systems in 5 States bring WTCG to more than 400,000 cable TV subscribers. A lot of the success we are beginning to enjoy at channel 17 is due to these cable television audiences, I think.

Once you get outside Atlanta, there are very, very few independent television stations in the South, mainly because they are mostly smaller markets. The only commercial television available to most people off the air is from the three national networks out of New York City.

The people in Columbus, Ga. or Knoxville, Tenn. or Tallahassee, Fla. and all the towns and cities in between, the only program choice they have is what the national networks choose for them to seeplus, of course, a minimal amount of local programing and newscasts on those affiliates in those markets.

I came into the independent television station business because I believe there should be more voices to be heard than the network voices out of New York, and more opportunity for program selection by the American people.

In most towns and cities in the South, there are no allocations available for local television stations-that should say VHF, because there are quite a few UHF allocations-and even if there were, most of the towns could not support another commercial television station, and that means an independent station rather than, say, a network station.

So the only chance for most people in the South to get a choice in the programing other than the national networks is for cable. television operators to bring in distant independent signals like WTCG from Atlanta.