Mr. PENGRA. I do not think anybody can.

Senator CAPEHART. I am trying to find out if there is a monopoly or will be a monopoly.

Mr. PENGRA. You certainly have a very basic question. I will be just as anxious to get the answer on that, too.

Senator CAPEHART. Will we end up eventually with 10,000 AM, FM, and television stations, or will we end up with 5,000 or 7,000 or 10.000 or 12,000 or what is it?

Mr. PENGRA. Here is a quotation from the statement of Mr. Woods that you heard yesterday: His statement says that there are 1,751 AM stations and 854 FM stations authorized. In other words, those frequencies are set, and they are ready for operation, just as soon as construction is completed.

Senator CAPEHART. Does he tell how many television stations? Mr. Pengra. I do not see any reference to television stations in here.

Senator CAPEHART. I think it would be well, Mr. Chairman

Mr. PENGRA. Wait a minute. Excuse me, Senator. The statement goes on to say, he refers to the probability that within a few years. there will be as many as 5,000 AM and FM stations on the air, and he gives the source of the statement, the Second Annual Radio and Business Conference sponsored by the School of Business and Civic Administration of the City College of New York.

Senator CAPEHART. Can someone tell me how many stations there were 10 years ago, and 5 years ago?

Mr. PENGRA. Ten years ago in 1936, can you help me on that— about 750; at least less than a thousand 10 years ago.

Senator CAPEHART. How many today over the same number a year ago?

Mr. PENGRA. There has been a tremendous increase, of course, right in the last year.

Senator CAPEHART. I am trying to find out the situation. The industry has been growing, stations have been added each month for a number of years. There is a limit to the number, as we all know. I would be anxious to know what the total possibilities are.

Mr. PENGRA. This estimate is given here from Mr. Wood's statement and would be 5,000 AM and FM stations on the air.

He does not say that that is theoretical limit. He says within a few years they expect that.

Senator CAPEHART. At the moment, according to his figures there are about 2,500 AM and FM stations.

Mr. PENGRA. Yes, sir.

Senator CAPEHART. Which means that the industry can expand according to his figures.

Mr. PENGRA. Double again.

Senator CAPEHART. It can again double within a period of time.

Mr. PENGRA. Yes. Does that constitute a scarcity of frequencies, and if it does not, where then is the essential difference between the newspaper and the radio of the matter of its relationship in the private American business scheme?

Senator MAGNUSON. The answer to that is that although there may be the potential of 5,000 AM and FM stations, there would not be, because that number could not operate; no 5,000 operators could survive economically insofar as we can see now.

Mr. PENGRA. That is exactly it.

Senator MAGNUSON. So far as we can look into the future, even for the next few years, that number of stations probably would not survive. Mr. PENGRA. That is exactly the point that I have been trying to make. If once that point is conceded on the basis of economic survival, the question of limitation can be settled on who can get into this business, and who cannot. We then come to the place where we begin to qualify as a basic American enterprise that is free and private.

Senator MAGNUSON. As a matter of fact, probably under present business conditions you have pretty nearly reached a point almost now where in some localities another license would have the effect of wrecking all the stations.

Mr. PENGRA. You have made the point that we have reached the economic limitation before we have reached the physical limitation, which is the very basic qualification here to determine whether or not we are a free private enterprise or whether we are in some other classification. I came here assuming that we were a free American enterprise on this very basis.

Senator MAGNUSON. I think the chairman cleared your mind on that. Mr. PENGRA. Only in this respect I think he has; we do not complain about the limitations, those technical limitations that must be enforced on the radio station.

Senator MAGNUSON. What you are complaining about is the degree of regulation; is that right?

Mr. PENGRA. And where that regulation is pointed, the degree of it. Senator MAGNUSON. In two instances; one censorship, and one financial statements.

Mr. PENGRA. Yes, I object to both of those. Gentlemen, I have no other particular point to make. I think that if radio has not earned its right as a free private American business enterprise, that this basic issue will have to be settled before some kind of a court, if it has to be a court of the people, to determine whether or not we shall be free to give them the programs that they want, and I thank you very much for listening and being as patient with me as you have.

Senator MAGNUSON. Just so this is clear, even if there were only 10 stations operating in the United States, or if there were 5,000, do you not believe that Congress has some duty in the public interest to provide some degree of regulation?

Mr. PENGRA. Regulation only on the technical side of radio.
Senator MAGNUSON. Answer yes or no.

Mr. PENGRA. I cannot answer that unqualifiedly. When you say regulation in general terms, we are not talking about the same thing. Senator MAGNUSON. I said some degree of regulation.

Mr. PENGRA. If you will tell me the degree of it, and where applied, I say some degree of regulation that has to do with the licensing of the station, the traffic in the actual frequencies, the power and so forth, but beyond that, if we are a free private American business, we are not entitled to any further regulation, any more than a newspaper.

Senator MAGNUSON. In my opinion, if government takes its hands off you will go into government ownership of radio, which none want.

Mr. PENGRA. Have we outraged the people to that point with our programs? Have we no record in this thing? Have we not any

record before the listeners, before this country, as to what radio has done?

Senator MAGNUSON. I am not talking about what you are doing I am projecting in my own mind the eventual outcome of no regulation; you will have chaos.

now.

Mr. PENGRA. We will die any time we fail to serve the listeners. An advertiser will not live with us if we do not attract an audience. I get a little exicited about that because I myself will die a pauper. Thank you very much.

(The prepared statement is as follows:)

STATEMENT OF MARSHALL PENGRA, MANAGER, RADIO STATION KRNR,

ROSEBURG, OREG.

My name is Marshall Pengra. I am manager of radio station KRNR at Roseburg, Oreg., and supervising director of Station KFLW in Klamath Falls, Oreg. I do not own stock in either radio station, nor any stock in either newspaper to which the stations are licensed. Roseburg is a town of approximately 10,000. Klamath Falls is about 30,000.

I am here to express certain opinions relative to the proposed legislation affecting the radio broadcasting industry which this committee is considering. The major portion of my comment concerns section 16 of the proposed legislation, which has to do with the business regulation of a radio station.

During the 12 years that I have been actively engaged in the operation of radio stations my experience has been confined largely to the low-power or local station in the small town. It has been my experience during these years that radio broadcasting as an industry has been steadily and continuously losing what little freedom of operation it once enjoyed through a consistent multiplication of rules, regulations, and restrictions flowing from the FCC. Neither the proposed legislation nor past regulation has ever accorded the broadcaster in specific and unmistakable language the right and privilege to operate his station under the American system of unrestricted free enterprise.

The language of section 16 of the proposed legislation amending section 326 of the act under "Censorship" provides as follows:

"Nothing in this act shall be understood or construed to give the Commission the power to regulate the business of the licensee of any radio broadcasting station * * * unless otherwise specifically provided in this act."

The phrase "unless otherwise specifically provided in this act" is the stone wall. No sooner does the proposed legislation provide that the Commission shall not regulate the business of a broadcasting station than a catch-all condition is immediately appended and we're right back where we started. The proposal that the Commission not be allowed to regulate the business of a radio station is nothing more than a constitutional right of free enterprise which has always been guaranteed in this country to all other types of free enterprise.

The American system of broadcasting is a medium of mass communication and is a free private enterprise by any comparative standards, yet it suffers business regulation by Commission rules and practices that no other private enterprise has ever suffered since the right of freedom of speech was established.

In the very same document-this proposed legislation--which specifically provides that the Commission shall not regulate the business of a radio broadcast station unless otherwise specifically provided in the act, there appears in section 8 the following provision:

"The Commission shall have authority to make general rules and regulations requiring stations to keep records of such programs, transmission of energy. communications, or signals as it may deem desirable; and to prescribe uniform systems of financial reports which may be required from the licensee of each radio station."

Note that the provision specifically says, among other things, a “record of programs, and a system of uniform financial reports."

Let me show you the required FCC forms for the submission of these two reports which are requested annually and which are usually mailed to the broadcasters from 30 to 60 days in advance of the deadline for filing with the Commission.

Speaking of further business regulation, take the case of the man who is applying for a radio station. In his application he is required to set forth in detail with exhibits the character and types of program service he proposes to furnish when the station finally goes on the air. He is required to show (p. 36, form 301, as revised April 25, 1944) the total average weekly time to be devoted to such program classifications as entertainment, education, religious, agricultural, fraternal, news, etc. He is further required to state the number of hours and percentage of time per month to be devoted to sustaining programs-those without paid sponsors-and commercial programs. The applicant is also required to state what percentage of the total monthly time will be used for network programs (if he contemplates an affiliation) both sustaining and commercial.

This, of course, is only a small part of his application and very simple to handle since the elapsed time between the filing of his application and the time of final grant may only be a matter of 8 months to 2 years, during which time prices, labor conditions, and community problems and development remain absolutely constant to fit the information given in the application.

To get to the point in this case let's have the station granted at once-and it has now completed 3 years of operation. It is time for license renewal. Time to fill out another application and to show again how much time is being devoted to all the types of programs originally set forth in the application, and to show again how much time is devoted to paid programs and how much time to sustaining programs.

This is the check-up. This information reveals to the FCC how the broadcaster is maintaining those percentages in program time that he originally said he would, and if he took a greater percentage of paid programs than he set forth in the original application.

And what happens if his percentages have changed with changing conditions in his town? A check-up is made by the FCC before the license renewal is granted.

This, gentlemen, is business regulation with a capital B under implied threat of losing a license to broadcast.

True, the provisions of the present act do not specifically state that percentages in types of programs and in sustaining and commercial time cannot change, but the Commission's prescribed right of inquiry and required reports in this connection constitute a serious business regulation through implied threat of losing a license or having it held up pending investigation.

Ask any broadcaster his reaction to showing his complete break-down by hours and percentages of his program structure for his renewal of license application and his annual program report, and let him tell you what he suffers and why.

With another example, I'd like to show how the declaration of the amount of time to be devoted to sustaining programs and commercial programs very neatly devolves into the most vicious type of business regulation.

Broadcaster X applies for a radio station. In his application he states that he expects (eventually) to operate his station on a 70-30 percentage basis. Remember, this statement is a requirement of the Commission. He eventually expects to have 70 percent of his time sold and on a commercial basis and the other 30 percent will be sustaining time-no income from it. During the first year of operation his progress is comparatively slow, and he has far less than 70 percent of his time sold commercially. He's just in the normal building up process so he gages his operation carefully, keeps his expenses as low as he can in order to get into the black as quickly as possible. Two more years of hard work pass and things are looking up. The station has been on the air 3 years, and the staff has grown to pretty fair size-operation costs have gone up with station growth. New equipment has been added. The station is building itself up inside as well as outside, and lo and behold the station manager finds that he has reached the point of having 70 percent of his air time sold commercially. This is slightly serious because that was the limit provided for in the original application. And just at this point, what happens? A new station is granted in his area and goes on the air. Bingo; competition. Newsprint loosens up at the local newspaper a bit and more advertising space is available over there. Conditions have changed and prices are sky high and some of the advertisers are getting a little jittery. Now, competition has set in, conditions have tightened up. Wages haven't dropped a bit and the squeeze is on. If competition forces an advertising rate decrease because the two stations split up the audience, how

can he keep his head above water unless he steps over the 70 percent commercial deadline? Can he afford to squabble with the Commission about that? Can he cut down his staff and let the other station beat him out? He's right in the middle, and that original required regulation making him state his percentage turned out to be a very rough business regulation.

Who is to say, and by what right, how much of its time a radio station can sell? What authority, constituted or otherwise, can assume the responsibility for public taste and preference in radio programs to such a degree as to presume to say what programs are in the public interest and which are not, and how great a percentage of time should be allotted to specific types of programs? And who shall specify that any programs are to be sustaining unless at the manager's discretion? Is there a law that a grocery store must agree to give away a certain percentage of its food in order to open up for business?

The natural law of preference on the part of the public has been the natural law determining the success or failure of private American business enterprise. The manufacturer, the individual merchant, the newspaper-all survive and thrive or decline and fall on the natural law of public preference. There is no longer the scarcity of frequencies in radio that makes a licensee secure without thought of programing or listeners. Over 100 radio stations in this country are up for sale on the present market, and many frequencies are going begging. Stations in AM are springing up at a tremendous rate since the wartime freeze has been lifted on radio station applications, and the prospect of over 700 new FM stations is a matter of record at the Commission.

Can there be any question that public preference and acceptance will determine which stations will thrive and grow and which ones, through inadequate programing and insufficient listening audience, will be dropped by the advertisers and subsequently forced either out of business or into new programing fields to hold their own.

All the business regulation that radio needs is open competition in its field. and the radio audience and the advertisers will become the most compelling and exacting regulatory forces that could be devised.

That is the basic American principle of free enterprise. I challenge anyone to say that radio has not earned its right to the freedom that other free, private business enterprises enjoy.

The CHAIRMAN. The next witness is Mr. Stanton of the Columbia Broadcasting System. I make the same request of you, that you do not cover the same ground in your oral testimony that is covered in your written brief.

STATEMENT OF FRANK STANTON, PRESIDENT, COLUMBIA BROADCASTING SYSTEM, NEW YORK, N. Y.

Mr. STANTON. My name is Frank Stanton. I am president of the Columbia Broadcasting System.

I filed this brief, and I would like to highlight some parts of it, if I may. To save time I would like to just read briefly from one or two pages in the statement that has been filed.

During the past several years we have actively participated with other members of the industry in discussions and hearings looking forward to a modernization of the radio law. We welcome the introduction of S. 1333 as calling attention to the need for changes in the law, and I appreciate this opportunity to express my views upon the proposed amendments to the Communications Act of 1934.

I might add that Mr. Joseph Ream, CBS executive vice president, will follow me as a witness, and discuss the procedural parts of S. 1333. Representatives of the Columbia Broadcasting System who have appeared in the past regarding broadcasting laws have emphasized one central theme in their testimony: The necessity for a free and democratic radio in the United States. William S. Paley, then president