that two members of the Commission, Commissioners Wakefield and Walker, feel so strongly that we should have a division system, that it would be their view that unless the Commission adopted it voluntarily, they would urge that a mandatory provision be put into the law. They feel that way because they have had great experience in common-carrier matters, and they feel that greater leadership could be supplied in that field. I agree with them on that.

I do think though—and I think they agree with me on this-that there are very valid objections to the present formula in section 5. In other words, I think their position would be: Let us keep the present permissive provision, if possible, but let's use it. If we are not willing to use it, then let's ask for a mandatory provision, so that we will use it. But in seeking a mandatory formula, let's attempt to work out a better formula than section 5.

I think also that I can say with complete assurance that all members of the Commission would presently favor a trial of this in the fall. I think that Commissioner Durr, when we discussed this at the meeting, indicated that while as far as he could see at present, he would favor a trial of it in the fall, he is of the opinion that we do not know what is going to happen between now and fall, and we do not want to put ourselves in a position of having represented that we will do something, and then have a change in conditions occur which will make it impracticable for us to do it.

Se he would, I think, so qualify his statement.

But I think that generally I speak for the full Commission in saying that we are definitely persuaded that the Commission should, in the fall, after these conferences, undertake an experiment; I say experiment, but I mean that in the sense of an orderly, intelligent experiment in the division system, for a decent trial period, with a view to making an appraisal of how it works, and also with a view to finding out what the difficulties are with the formula that we adopt, with the thought in mind that under the permissive statute we could then refashion it and improve it.

Let me be sure now that I have covered everybody's views correctly. Does anybody want to add anything on that? Is that pretty accurate?

The Commissioners indicate I expressed their views with reasonable accuracy.

The CHAIRMAN. I think they have indicated great confidence in

you.

Senator MAGNUSON. Mr. Denny, is not this much true: That under the present framework of the Communications Act, it is perfectly possible, within the authority of the Commission, to do what this section makes mandatory to be done; you need no legislative changes to do it if the Commission saw fit so to do? Is that correct?

Mr. DENNY. Yes; that is correct, Senator Magnuson.

Section 6:

This section would amend section 4 (k) of the act to spell out in greater detail the material to be furnished annually in the Commission's report to Congress. The principal material, not now included in our reports, which would be required by this section, are the personnel histories of all new employees of the Commission and an itemized statement of cur expenditures, their sources and the authority under which they are made.

There is no objection to this section from the Commission's point. of view. We are anxious to supply Congress with any information it may desire. However, I would like to point out that most of the additional information which would be required by the new section 4 (k) is already made available annually by the Commission to the House or Senate Appropriations Committees and is printed in the hearings conducted by those committees.

Section 7

Section 7 would amend section 303 (i) of the Communications Act so as to provide that the Commission's authority to make special rules and regulations with respect to stations engaged in chain broadcasting would be limited to the physical and technical phases of regulation. The purpose of the changes is stated to be to limit the extent of the Supreme Court's decision in the so-called network case upholding the validity of the Commission's chain broadcasting regulations. It is intended to abolish the Commission's authority to issue regulations like the chain broadcasting regulations; the regulations themselves are, in most respects, to be written into the statute by section 19 of the bill.

At the outset, I should in candor, call your attention to the fact that while the proposed amendment would cast doubt on the Commission's authority to promulgate regulations of the type under discussion, it is by no means clear that the amendment would achieve the result of depriving the Commission of its authority to promulgate such regulations.

A reading of the Supreme Court's opinion in the network case shows that section 303 (i) was only one of the statutory provisions relied on by the court to sustain the Commission's regulations. Even without this provision there is a good liklihood that the regulations might have been sustained on the basis of the Commission's authority to promulgate rules and regulations which are necessary to carry out the provisions of the act.

One of the principal objectives of the act, as recognized by the Supreme Court, is the preservation of free competition in radio broadcasting. The basic purpose of the chain broadcasting regulations was to remove the fetters on free competition which were inherent in existing network practices.

On the merits, I believe it would be unfortunate if Congress did remove the commission authority in this field. It is not logical to assume that the Commission or Congress, having once legislated on these problems, will have necessarily done a perfect job.

Actual operation under the present rules or changing conditions may demonstrate need for amending or even repealing some of the provisions, or for the promulgation of new rules covering other aspects of chain broadcasting. In fact, the existing rules have been amended on several occasions by the Commission, since they were first adopted and the Commission has announced that it stands ready at any time. to make necessary changes. Moreover, since the chain broadcasting rules apply to new services like FM and television, as well as standard broadcasting, it is not unlikely that experience will show that some modifications are necessary for either FM, television, or both. If the Commission were to be required to come to Congress for each of the changes as they become necessary, I am afraid that both the public

and the broadcasting companies directly affected might very well be injured by the consequent unavoidable delay.

Nor do I believe that there is any reason to fear the authority conferred on the Commission by the existing provisions of the act. More than ample protection is afforded to interested parties. For example, the chain broadcasting regulations were adopted by the Commission only after a long and exhaustive hearing at which full opportunity was given to all parties to participate and present their views. After the Commission's proposals were issued the radio industry was given still another chance to present its views with respect to the particular regulation which the Commission proposed to put into effect, and as a result of this hearing certain changes were made. And the regulations were then litigated with great thoroughness in the courts up through and including the Supreme Court.

In addition, the networks were afforded an extensive opportunity of presenting their views to Congress on three separate occasions. I think it is clear that if any of the regulations were unreasonable or in any way went beyond the necessary and express authority of the Commission, they would have fallen by the wayside during this long process. But not only has this not proved to be the case, but this very bill proposes to enact them into law.

Section 8

This section would authorize the Commission to prescribe a uniform system of financial reports to be required from all radio stations. These reports are to be kept confidential except that they are available for the information of any committee of Congress or may be used in any proceeding before the Commission on order of the Commission. Apparently the purpose of this section is specifically to confer the authority on the Commission to require uniform annual reports from licensees of radio stations. The Commission presently requires licensees to file annual financial reports on forms prescribed by the Commission. The bill would not change this, although the statement accompanying the bill does state that it is intended to limit the authority of the Commission to require reports and information which are not necessary to carry out its functions. The statement does not specify what reports it refers to.

Section 8 also provides that the annual financial reports should be kept confidential except in specified instances. This is the procedure presently followed by the Commission. The majority of the Commission therefore does not have any objection to this provision.

However, Commissioners Walker and Durr are of the opinion that any financial reports which are submitted to the Commission as a basis of enabling the Commission to carry out its statutory obligations should be open for public inspection in the same way as material furnished in connection with applications. They are, therefore, of the opinion that there should be no requirement that the reports be kept confidential.

Section 9

Under section 307 (b) of the Communications Act as presently written, the Commission is required to provide a fair, efficient, and equitable distribution of radio service among the several States and communities "insofar as there is demand for the same."

Section 9 would delete the requirement as to demand and instead require the Commission to give effect to the needs and requirements of the various communities.

The purpose of this change is not clear. On the one hand, the section as revised might be construed merely as requiring the Commission to consider the needs and requirements of communities when the issue before the Commission is a question of which of two competing applications from different communities should be granted.

If this is the purpose of the change, there is no objection thereto, but, on the other hand, it is unnecessary since such a determination is already authorized and indeed required under section 307 (b) as it now stands. Obviously, a choice cannot be made between two communities without first considering what facilities each already has, and the comparative need of each for the new facility.

On the other hand, the amendment may be construed as requiring the Commission to consider the ability of a community to support an additional radio station when there is no competitive application from another community for that frequency. In the Commission's opinion, this, if this is what is intended, would be an undesirable change. The Commission has felt that since radio broadcasting is designed to be operated on a basis of free and competitive private enterprise, and is neither a common carrier nor subject to rate and other financial regulations, it was not and should not be part of the Commission's job in licensing radio stations to consider the effect of the licensing of such stations on the economic position of existing stations in the same community, or, conversely, the possible impact of such existing stations on the financial position of the applicant.

We have insisted that all applicants demonstrate that they have sufficient financial resources to construct and operate a station to insure that the limited number of available radio frequencies will be adequately utilized to give the listening public maximum radio service. We do not go beyond that to consider the possible economic effects of competition. And I should like to point out that if you do require the Commission to take such factors into consideration, you will be going a long way toward vesting existing stations with a property right in their licenses in spite of the disclaimers contained in sections 304 and 309 (b) of the act.

What is equally important is an understanding of just what consideration of economic and competitive factors by the Commission would involve. Suppose, for example, a city has five stations and an appli cation is made for a sixth. As we see it, we could not adequately make any determination as to the economic effect of a sixth station without first making an estimate of the potential radio advertising revenue in the market, and, as this would inevitably vary with the efficiency of the operators to tap that potential market, we would have to make an ap praisal of the efficiency of the present broadcasters and the new appli

cant.

Then, it would be necessary to determine what a fair revenue for the existing broadcasters would be in order to determine whether there would be enough left over for a new station. To insure that all similarly situated broadcasters are treated alike, we would have to prescribe a uniform system of accounting. The result inevitably would be to require the Commission to concern itself with the details of the

business activities of the broadcasters even to the point of saying what their income should be.

I don't think the industry wants this, and I don't think requiring the Commission to consider these economic factors would serve the public interest. In fact, by limiting the number of available stations I believe the listening public would be adversely affected.

The Commission does not share the fears held by some broadcasters of the dangers of increased competition. Of course new competition brings with it some changes; it always does. It brings in men with new ideas, new ways of doing business and new ways of programing. To meet this competition the existing stations will have to find new and better ways of serving the public, and it is, of course, possible that in the process some of the less progressive broadcasters will fall by the wayside. But by this very competition to find new and better ways to serve the public, the public interest should be advanced. And we do not subscribe to the idea that a new station entering the field can only secure business and listeners at the expense of stations already in existence. There are vast opportunities in radio and large reservoirs of both listening audiences and sources of revenue which are not yet tapped.

We feel that the theory of free competition in broadcasting upon which the present law is based has worked well. We urge that this basic theory be left unchanged. But, if the committee feels that it should be changed then the precise formula to be applied for restricting competition in the broadcast field should be written into the bill so that we will know just how much of the present theory of free competition is retained and how much is discarded. In other words, please do not simply tell us to "give effect to the needs and requirements." Give us the yardstick to apply in determining how many stations a particular community can properly support.

The CHAIRMAN. You have made it perfectly clear that you do not like this section as it is written. And I would have to admit to you that I am not free from question and doubts about it. But I do think it would be interesting if you would indicate to us just what is your present practice and policy and rule with respect to the issuing of licenses.

What do you take into account when an applicant comes in?

Mr. DENNY. First we have the regular application form from the applicant, which shows who he is, what businesses he has previously been engaged in, what his citizenship is, what his financial resources are, whether he has even been involved in any suit in connection with a violation of the antitrust laws, pursuant to the specific requirement of statute, what his plans for serving the community are, what his technical installation is going to be, where he is going to put his antenna,

et cetera.

We then examine the applications that have been filed on the basis of file numbers, so that they come up for consideration on a first-comefirst-served basis. In about half of the cases we find there is no conflicting application, and in that event the application, the man's qualifications being satisfactory in all respects, can be granted. When there is a competing application a hearing is necessary. And there you get into the business of comparing the qualifications.