1926, everybody came in and asked the Department of Commerce for a license. The Department of Commerce had no authority to say whether they should have a license, or should not have a license. But they granted whatever the applicant called for; as to power, as to location, as to time of operation.

And it was that situation and that right, as the law stood in 1926, that brought about what we could call the complete break-down of radio communication. That prompted, of course, the 1927 law. That accounts for the presence of the 1927 law on the books.

What I am worrying about is whether, as a practical matter, you are not, step by step, gradually but almost inevitably heading back to that condition which existed in 1926, and which everyone then agreed we had to get away from.

But if you are satisfied with the present law, or if you see no better solution than is found in the present law, I would be glad to have your view about it.

Mr. DENNY. Well, let me elaborate, Senator. As far as the 1927 act was concerned, the situation which confronted Congress prior to the 1927 act was a technical break-down. If Mr. A and Mr. B both wanted the same frequency in the same city, the Department of Commerce, as I understand it, had to give it to them. So you had a technical break-down, with chaotic interference, and a man could move out and put his station on any frequency that he desired.

Now, the 1927 act very adequately dealt with that problem, and that has also been carried, of course, into the 1934 act. So we have full power to deal with the technical considerations of interference. And in putting new stations on the air, we have our standards of good engineering practice.

The CHAIRMAN. The thing that troubles me about the situation, which is emphasized and aggravated by what you called attention to in your testimony before the House committee, is that if you take into account nothing but the paper showing which the the applicant makes of technical knowledge, and of financial resources, and of character, and if those are the only things that you are going to consider, then I think you are going to have back upon you the conditions of 1926; and I think your testimony indicates that it is pretty well along the way. Mr. DENNY. No; the conditions of 1926, Senator, added up to a technical break-down. You won't have technical problems in this situation.

The CHAIRMAN. But are you not going to have pretty much the same effects upon the community and upon the licensees; upon the applicant and the man who has a license?

To

Mr. DENNY. The effects in 1927 were technical interference. day, these new stations are being put on, and the Commission has its standards of good engineering practice. And in spite of reports to the contrary, the fact is that the Commission is enforcing its standards of good engineering practice with increasing rigidity. We are much stricter in the application today of the standards than we were, I would say, 5 years ago.

Now, the problem today is not a problem of technical interference. It is a problem of putting more stations into a community than the community will support.

The CHAIRMAN. Is it not also a question of spreading the communication facilities equitably over the country?

Mr. DENNY. Well, section 307 (b), as presently written, and as we presently enforce it, takes care of that. Because where you have two communities asking for the same frequency, we give it to the community that needs it more.

Ithink I see what you are getting at, though. Let us suppose that we have an application from communnity 1, which has plenty of service, and no application from the adjoining community, No. 2. Then we are faced with this situation: Must we let the frequency stand idle until community 2 comes in and asks for it? Or should we put it to work in community 1?

Now, it might be possible that we could work out some formula for reservation of frequencies for communities that have not yet applied. I am very sympathetic to anything that can be done for underprivileged communities.

In FM and television, we have done that very thing. Instead of letting that thing grow up on the basis of demand, we started out in those new services with master Nation-wide allocation plans; and that does tend to insure that every town in the country gets its fair share of frequencies.

In AM you have gone, of course, in 20 years much too far to have a reengineering of the entire standard-broadcast band. I do not think there is any point in such major reengineering of the standard-broadcast band.

The CHAIRMAN. From what you say, I would understand that you do not like that section of the proposed bill.

Mr. DENNY. Senator, it may be that I do not understand it. But as I read it, it is a section that is at least capable of being interpreted as requiring the Commission to take into account how many stations a community can support. That, as I have said, pitches us into what I think is dangerous detailed economic regulations of the business aspects of this broadcasting field, and throws the competitive system out the window.

The CHAIRMAN. I agree that it pushes you into troubled waters, but I do not think it necessarily pushes the competitive system out of the window. I would not support it if I thought it did that, because I am definitely a believer in the competitive system.

Mr. DENNY. I know you are.

The CHAIRMAN. And I am definitely turning my face against too great concentration of ownership in individual hands. I want to see these stations not only spread throughout the country, so far as it can be done, but I want to see ownership spread throughout the country.

Mr. DENNY. Senator, I don't think we are so far apart, then.

Let me say this: As I read the present section, it is certainly going to be argued by existing broadcasters that the present competitive system is out the window. And that before licensing a new station in a community, the Commission must take into account the economic ability of that community to support a competitor.

If we get to that point, the present competitive system is out the window. And as I see it, we are both against that.

If a section can be devised, the purpose of which is not to put restrictions upon the present competitive system, but to better insure a better equitable distribution of facilities, and to take care of the small communities, then I think we will have got something.

Now, such a provision could be made by requiring the Commission, where an application comes from a small community that has no service for a frequency that is available, to give the frequency to the small community. That is what we have, in effect, in the present 307 (b), as I read it.

Senator MAGNUSON. Mr. Denny, what you mean is new competition. You do not mean to imply that there will not be competition between the existing stations.

Mr. DENNY. That is right. Yes.

Senator MAGNUSON. That exists now, and will exist.

Mr. DENNY. You freeze competition where you find it.

Senator MAGNUSON. How many more AM stations can you grant in the United States?

Mr. DENNY. It depends upon where you put them, Senator. If it is New York City, none; if it is Cheyenne, Wyo., you could put some more in there.

Senator MAGNUSON. I mean as to number. Are not the available frequencies becoming more and more limited?

Mr. DENNY. They are limited in some areas, and in some areas they are exhausted. I do not think that you could find a new frequency to put into New York City without causing excessive interference some place.

Senator MAGNUSON. That would be a case where you would have to make a decision between two people trying to get on the same frequency; is that correct?

Mr. DENNY. In New York City, I think, all of the available frequencies are gone. But in places out West, including your part of the country, there is still room.

Now, of course, I think the record should show, Senator, that the policy the Commission has pursued in the last year, which is not a new policy, has moved a very long way in the direction that you are seeking to go. In the last year we granted 632 new broadcast-station applications, up to April 1. I do not have the figures since April 1. I use that date because it is the date of my House appropriations testimony, and I have not had time to bring it down to the present.

Of those 632, approximately half of them went into communities that did not have a radio station.

Senator MAGNUSON. How does that compare with the total number of AM broadcasting licenses? What is the total number now licensed? Mr. DENNY. On that same date, 1,610.

Senator MAGNUSON. So in 1 year you have granted almost 50 percent of the total number.

Mr. DENNY. Yes. Many people are still chiding us for being slow in the handling of their applications. And I think in fairness to the Commission it should be said that while we have a very heavy load, and while, as I regard it, the hearing cases are coming out much too slowly because we do not have a sufficient number of trial examiners, nevertheless, in the last 12 months we have done more work in granting applications, at least, than we did in the preceding 11 years.

Senator MAGNUSON. That was because of the war freeze, too.

Mr. DENNY. Well, yes. In 11 years we granted 469 applications. In 1946 alone we granted 532, and in the first 3 months of this year an additional hundred, making 632.

Senator MAGNUSON. We might as well not beat around the bush here. I think the Commission agrees that if the policy continues, some of these people that have been granted licenses are going to go broke. And the Commission wants this policy continued.

Mr. DENNY. That is the normal operation of the competitive system. Senator MAGNUSON. The Commission does not feel that that is disadvantageous to the community? That there might be some stations that sooner or later are going to go broke?

Mr. DENNY. I think that from the community standpoint that is advantageous. Because that makes the broadcasters work harder to serve the listeners better and to capture the attention of the listeners.

I am fully conscious that in that contest some broadcasters are going to resort to tactics which this committee and the industry generally would regard as cheap, and would regard as perhaps even unfair competitive practices. But that is part of the nature of things.

Senator MAGNUSON. Do you not think that some of the programing has got to that point already in some of these crowded centers?

Mr. DENNY. By law, I am forbidden to have any views on programing, but I can answer you and say "Yes."

Senator JOHNSON. Mr. Denny, either in the operation of the brute law of survival of the fittest, or in outright monopoly, the public is going to suffer. If you have two weak stations serving a community, that community is not going to be as well served as if it were served by one strong station. One strong radio broadcasting company could serve better and give the people better service than two weak companies, both of them facing bankruptcy.

Now, the question I want to ask is: Is there not some middle ground? Certainly you folks have been struggling with this thing for a long time, and you must have figured out some middle ground where the public would be amply protected by competition, and at the same time we would not have to resort to the law of the jungle.

Mr. DENNY. Well, Senator, I am sorry to say that I have not figured out that middle-ground formula. I think that is what we are perhaps seeking here.

Under the normal operation of the competitive system, either you have free competition, or you do not. Either you have free competition, or you have some restriction on free competition.

Now, if this section is adopted as written, it is certainly going to be urged that it imposes very definite restrictions on free competition; so much so that I am afraid it is going to be successfully argued that if it were enacted, it would throw the competitive system out the window. We do not want to do that, and therefore I think that if we are to have some limit on free competition, we have got to have some compass to guide us and tell us exactly what the limits are. I think we have got to work out the formula here in these sessions.

I am sorry that I am not in a position, Senator Johnson, to suggest a better formula than the one we have today, which is the formula of free competition.

Now, I was, I think, a little quick in my answer to Senator Magnuson's question, and I do not want anything on this record to indicate that I do not really have the highest regard for the job that the radio industry by and large is doing. My answer to him was "Yes" because his question was: "Hasn't it already gotten to that point in some communities?"

It certainly has in some communities. Here in this community, if you listen to the radio, I think you would find things which you would regard as very poor, cheap broadcasting.

Now, I think, however, that the public is going to be the ultimate answer to that. If the public does not support those stations, they will fail. I want the record affirmatively to show that by and large I think the radio industry over the course of the years generally has done a good job. I think today generally it is doing a good job. We are today as the result of the new stations coming on the air getting new types of broadcasting.

For example, from many FM stations, we are getting a consistent diet of good music. Certainly the networks in the last 10 years have made tremendous progress in their news programs, and in their analyses of public events. I think as a result of the free competitive system that we have followed for the last 20 years, there is no doubt in the world that America today has the best system of radio broadcasting that any country has.

I do not think the question is whether we have the best. Of course we do. The question is what we can do to make the American system of broadcasting even better and even freer. I think that is the problem that we are struggling with here today.

I do not know any formula which would place a ceiling on competition, which I feel would contribute to the over-all improvement of American broadcasting.

Senator JOHNSON. Suppose in your consideration of an applicant you allocated 10 percent of your decision, we will say, or 25 percent, or 30 percent, or some percent, some definite and reasonable percentage to the ability of a community to support a station? That is, would 10 percent of your decision, if you can divide the decision into percentages, be given over to that phase of it, and 90 percent of these other questions which you have in mind; the character of the applicant, and his financial ability and his background, and all of those things which you now take into consideration? Suppose you added to all of those things another factor in a limited sort of way, as to the ability of a community to support the station. Would that be practicable? Mr. DENNY. No, sir; I do not think it would, for this reason: If this factor is to be weighed in the scales at all, we have to appraise its value; anything that is weighed in these scales which are delicately balanced, even as little as 10 percent is going to swing the balance in a number of cases which are very evenly balanced cases.

For the most part, Senator, if we are talking as between two communities, it is easy to look at two communities for the most part and say, community A needs additional service more than community B. So the problem does not arise there. The problem arises when, let us say, we have six stations in community A, and the question is whether Mr. A, who wants to put in a seventh station, should be authorized.

We look at it and we say. "They have outlets for the four networks. They have two independent stations. They are pretty well off." If the issue was whether to give that frequency to another city that needed it more, I would have no trouble at all resolving it.

That is not the issue. The issue is, Shall that frequency which he has proved from a technical standpoint is available, lie idle or should