Mr. PRALL. The law does not cover anything except what might be obscene. Mr. WIGGLESWORTH. I am speaking of candidates for public office. RECURRING APPLICATIONS FOR BROADCAST PRIVILEGES Mr. WOODRUM. Adverting again for the moment to the question of these recurring applications every 6 months, is it the experience of the Commission that that is a wise provision of the law, that those things should come up for renewal every 6 months, or could conditions be made whereby the Commission would still have control over it but where the applicant, during good behavior, or in the absence of complaint, would continue until such time as the Commission has due notice and desires to qualify the applicant. 66 Mr. PRALL. The situation, Mr. Chairman, with respect to that is this, we have about 621 stations. I would say about three-quarters of them are what I would call absolutely reliably owned stations, well conducted, and in good condition in every way and well operated. Then, we have the balance of them that are what I would classify as a poor station." They have a hard time making ends meet. They do not get the advertising sufficiently large to meet their expenses and they are liable to take almost anything that comes along to get the money, and we have most of our trouble with respect to bad programing over those stations, and I think it is the opinion of the Commission that until we succeed in bringing about a very great improvement in the standards of the programming that the 6-month period should be left as it is. Otherwise, if we had 90 percent of the stations as careful in their selection of programs and continuities as perhaps three-quarters of them are now, there would be no reason why we could not give them a year's license, but we havewell, I think at this moment we have something like 300 charges against stations, not against 300 stations, but 300 charges. CHARGES FILED AGAINST CERTAIN BROADCASTING STATIONS Mr. WOODRUM. Well, how many stations do you suppose are involved in those 300 charges? Mr. PRALL. Well, perhaps 100. Mr. WIGGLESWORTH. There is no State supervision in that field, is there? Mr. PRALL. No. Mr. WOODRUM. Do these charges involve hearings, field, examinations, inspections, and so on? Mr. PRALL. It involves neglect in following the law in respect to operation, having the proper persons in charge, and violating the rules of operation. Then, we have others that are permitting lotteries and fortune-telling schemes whereby they tell fortunes and charge a fee, and the fee is divided between the broadcasters and the station. and they have all kinds of schemes for defrauding people of money and misrepresenting articles for sale, and all that sort of thing. Until we get that in shape-and we are working very hard on that and have been for 6 or 8 months, to improve the status of programing and get them to understand that they must be careful about what goes over the air-we do not feel justified in extending that period of the license. Mr. BOLTON. Does the Commission have any jurisdiction over the program? Mr. PRALL. No. Mr. WIGGLESWORTII. If those charges are established, it merely bears on your decision whether or not to renew the license at the end of the 6 months' period. Mr. PRALL. That is all. That is the only right we have. If we had the right to suspend a station for a week or 10 days or a month, in my judgment, that would stop more of this bad programming and other violations than anything else, but we have no such right. Mr. WOODRUM. Most of our discussion has been around the activities of the Communications Commission with reference to radio. My questions have been prompted because having had the Radio Commission before the committee for a number of years we have known something about that. DUTIES OF COMMISSION RESPECTING TELEPHONE AND TELEGRAPH Now, personally, and I imagine my colleagues feel the same way, I would like to know something with reference to the other activities of your Commission as to the telegraph and telephone and I am wondering whether you gentlemen could give us a description of the functions and activities of the Communications Commission with reference to those other two divisions so that it might be available to the committee and might be available for the Members of the House when they come to examine the hearings. TELEGRAPH Mr. PRALL. Under telegraph the Commission considers problems arising in connection with all messages sent by radio, wire, or cable of which a record is preserved. This field includes not only the carriers conventionally designated as telegraph carriers in the fastgrowing field of radiotelegraph but also includes the activities of all telephone companies, including the American Telephone & Telegraph Co. insofar as they engage in record communication and in addition the field of communication relating to ships at sea in the aviation service. The Commission must consider the assignments by treaty or otherwise of radio frequencies throughout the world and the allocation of frequencies for national and international use. There are also the problems of jurisdiction arising out of the use of interstate and intrastate commerce and in particular the development of the use of higher radio frequencies. The standards which shall govern rates, tariffs, and practices in the radio-telegraph and wire-telegraph fields of communication including the development of proper classifications of service, ratio of charges through rates and divisions of tolls by the carriers, is also under consideration by the Commission. A formal hearing, lasting several months, which surveyed the entire radio industry and covered the existing classes of services and the rates and practices in effect has been held and 40 carriers were represented at this hearing, together with approximately 100 private parties. This record consists of 10,000 pages and will serve as a basis for future regulation. This is the first attempt by State or National Governments to survey or regulate the telegraph industry. The Commission must also study the competition between the different wire and cable carriers and between the radio, telegraph, and telephone carriers in the interest of an efficient Nation-wide system of communication. The Commission is also engaged in analysis of contracts by the telegraph carriers, including exchange of service contracts of carriers subject to the act and carriers not subject to the act. It is also studying the intercorporate relationships, interlocking directorates, stock ownership of telegraph carriers, the use of franks, free messages, and reduced charges by telegraph carriers. TELEPHONE In the telephone division the Commission is studying various problems, such as whether per minute overtime rates on person-toperson calls are discriminatory against the per minute overtime rates on station-to-station calls, the classification of telephone services ascertaining how many different kinds of services are offered to the public and whether in the public interest the Commission should initiate a general investigation thereon, the physical connection with independent telephone companies so as to furnish toll service and a study of the interstate mileage scale of the various Bell subsidiaries as compared with the interstate mileage scale of the American Telephone & Telegraph Co. As a result of a conference recently held with the officials of one of the Bell subsidiaries, a reduction on the interstate mileage scale of that company will soon be made which will reduce the interstate rates of that company approximately $125,000 annually. There are approximately 6,500 telephone companies in the United States and it is, of course, necessary to determine what companies are subject to the jurisdiction of the Commission. Then there is the question of interlocking directorates which will necessitate some hearings and will be a continuing problem. WIRE TAPPING Mr. BOLTON. Going back to the telephone situation, does the Commission have any right to listen in on messages, and so forth, or what is the law in that respect, tapping wires? Mr. PRALL. I do not know. I do not believe we have any right. Mr. BOLTON. Is there any law on tapping wires, and so forth? Mr. PETTEY. Not within the Communications Act of 1934. Mr. BOLTON. Is there any general law? Mr. PETTEY. As far as the Department of Justice is concerned, Mr. Reynolds might be able to answer that. He used to be with the Department of Justice. Mr. REYNOLDS. I do not know. Mr. WOODRUM. I would imagine there would be State laws against that, certainly. Mr. BOLTON. I was wondering whether it was a State or Federal law. We already have the State law. SPECIAL TELEPHONE INVESTIGATION Mr. WOODRUM. Now, Mr. Prall, the last Congress made an appropriation of $750,000 for a telephone investigation. While that fund is not involved in this appropriation, yet it is a function that was given to the Communications Commission to supervise, and I understand Commissioner Walker is in charge of that investigation. We would like to have you send us for the record, if you will, a statement showing the progress of that investigation, the personnel employed, the manner of its employment, what they are engaged in doing; whatever they feel inclined to tell us about the progress of the work so far and the prospects for the need of future money in connection with that investigation, and such information as you can give us. Mr. PRALL. We will be very glad to do that. Mr. BOLTON. Why was that investigation made only in the case of the American Telephone & Telegraph Co.? Mr. PRALL. It includes all of the companies. Mr. BOLTON. I thought it was just the American Telephone & Telegraph? Mr. PRALL. The American Telephone & Telegraph is the company. Mr. WOODRUM. There is very little besides that. Judge Sykes said it was 90 percent, I think. Mr. PETTEY. Ninety-six and a fraction percent. REPORT ON STATUS OF SPECIAL TELEPHONE INVESTIGATION Hon. ANNING S. PRALL, FEDERAL COMMUNICATIONS COMMISSION, Chairman Federal Communications Commission, Washington, D. C. DEAR CHAIRMAN PRALL: I have your memorandum of the 6th instant, requesting a statement showing the progress in connection with the work of the telephone investigation authorized and directed by Public Resolution No. 8 (S. J. Res. 46), Seventy-fourth Congress, for the Appropriations Committee of the House. Request is made that this information include the personnel now employed, the increases therein contemplated, and a statement as to whether additional moneys will be necessary to complete the investigation. There is submitted herewith a statement covering in a general way the request for the Appropriations Committee of the House. It is expected, however, that reports on the work done on certain phases of the investigation will be ready for Congress in the early weeks of the new year. This Commission will then be in a better position to advise relative to necessary funds, and Congress should be able to determine therefrom its attitude toward the carrying on of the regulatory work indicated from the accomplishments of the investigation thus far. Memorandum prepared for the Appropriations Committee of the House is attached hereto. Appended to this memorandum is appendix no. 1, a paper prepared for the several State regulatory commissions and read before the forty-seventh annual convention of the National Association of Railroad and Utilities Commissioners at Nashville, Tenn. Pages 17-24 thereof refer specifically to the telephone investigation and the work thereof to the date of this convention. Very truly yours, PAUL A. WALKER, Chairman Telephone Division. IN THE MATTER OF THE TELEPHONE INVESTIGATION AUTHORIZED AND DIRECTED BY PUBLIC RESOLUTION No. 8 (S. J. RES. 46), SEVENTY-FOURTH CONGRESS By its joint resolution, regularly adopted and approved by the President on March 15, 1935. Congress authorized and directed a telephone investigation by the Federal Communications Commission. Section 1 of the resolution recites: "That it is necessary, in aid of legislation by the Congress and for the use of governmental agencies, including State regulatory commissions, for the information of the general public, as an aid in providing more effective rate regulation, and for other purposes in the public interest, that accurate and comprehensive information be procured and compiled regarding the American Telephone & Telegraph Co. and other telephone companies." In pursuance of the foregoing resolution, the Commission, through its Telephone Division, has organized and has pursued, as diligently as practicable, as the first and most important part of its work under the foregoing resolution, the investigation of the American Telephone and Telegraph Co. and its subsidiaries. THE PERSONNEL EMPLOYED AND THE MONEY EXPENDED FOR THE TELEPHONE INVESTIGATION TO DECEMBER 1, 1935 Prior to the employment of any personnel for the telephone investigation a program for the work of the investigation was mapped out and an attempt was made to secure personnel competent and experienced in the carrying out of such a program. A careful attempt was made to see to it that persons were not employed until jobs suited to their capabilities were ready for them prior to their being entered on the pay roll. This method of building an organization, though somewhat tedious and difficult, it was felt would accomplish most in the end, both in point of time in ultimately speeding up the investigation and in its final accomplishments. The resolution appropriated $750,000. To December 1, 1935, there had been expended $248,447.13 of this amount. Expenditures at the present time (Dec. 1. 1935), however, and with the present pay roll, are at the rate of approximately $60,000 per month. The total persons now employed on the investigational staff are 215, with total monthly salaries of $54,091. The telephone investigational staff is divided into three groups, with personnel and monthly salaries as shown in the following table: The foregoing staff includes accountants, economists, statisticians, engineers, attorneys, and special investigators, and clerical and stenographic help. AN OUTLINE OF THE WORK CARRIED ON BY THE INVESTIGATION As indicated in the foregoing, the work of the investigation, at the present time, is confined chiefly to American Telephone & Telegraph Co. and its subsidiaries, commonly known as the "Bell System." The companies immediately and directly under investigation are the following: American Telephone & Telegraph Co. and its direct or indirect subsidiaries, including (1) general department of American Telephone & Telegraph Co., (2) long-lines department of American Telephone & Telegraph Co., (3) Western Electric Co., Inc., which is the manufacturing and sales company of the Bell System, (4) Bell Telephone Laboratories, Inc., the research and development organization of the |