Additional information-Continued Trade paper articles-Continued Of the Total Votes Registered by Operators in the 1952 Cash Box Popularity Poll, 81.8 Percent Were Cast in Favor of BMI Licensed Songs, Billboard, December 20, 1952- Radio and Television Daily, by John Crosby, New York Herald 4216 Richmond Inks Ludlow, Hollis 50G BMI Deal-Contract in 4178 Spitizer Fixing Big Guarantee Pact With BMI? He says "No,' 4178 4550 Survey made by Billboard, November 12, 1955. Wayne, Bernie, letter, February 26, 1957, to Hon. Peter W. Rodino, Jr. Westinghouse Broadcasting Co., Inc.: Huggins, E. V., chairman of the board, Westinghouse Broad- casting Co., Inc., letter, November 10, 1955, to George C. McConnaughey, re proposed exchange of Westinghouse sta- tions in Philadelphia for NBC stations in Cleveland and answering other questions raised by the Commission... McGannon, Donald H., letter, November 2, 1956, to chairman, subcommittee of the Judiciary Committee... Westinghouse reply, November 10, 1955, to Commission's letter 4176 4226 3338 MONOPOLY PROBLEMS IN REGULATED INDUSTRIES (Part II The Television Industry) TUESDAY, SEPTEMBER 25, 1956 HOUSE OF REPRESENTATIVES, The subcommittee met, pursuant to adjournment, at 10 a. m., in room 110, United States Courthouse, Hon. Emanuel Celler (chairman of the Judiciary Committee), presiding. Present: Representatives Celler, Rodino, Quigley, Scott, and Keating. Also present: Herbert N. Maletz, chief counsel; Kenneth R. Harkins, cocounsel; Samuel R. Pierce, Jr., associate counsel; Leonard Appel, assistant counsel; and Julian H. Singman, assistant counsel. The CHAIRMAN. The committee will come to order. We will resume the testimony of Dr. Stanton. TESTIMONY OF FRANK STANTON, PRESIDENT, COLUMBIA BROADCASTING SYSTEM, INC., NEW YORK, N. Y., ACCOMPANIED BY BRUCE BROMLEY, OF THE FIRM OF CRAVATH, SWAINE & MOORE, NEW YORK, AND RICHARD SALANT, VICE PRESIDENT, COLUMBIA BROADCASTING SYSTEM, INC.-Resumed Mr. MALETZ. Dr. Stanton, I think there was a pending question. We asked for your comments to a quotation from the Federal Com munications Commission Chain Broadcast Report of 1941. Would you like me to repeat the quotation? Mr. STANTON. No; I do not think it is necessary, Mr. Maletz. The quote that you used as a basis for your question came from, as you have just said, the chain broadcasting report and not from from the rules that emerged or followed that report. Mr. MALETZ. That is quite right. Mr. STANTON. And the very condition that was talked about in that particular report has been taken care of, I believe, in the rules that were issued. For example, at the present time and I am reading from section 3.658 (f) in the Commission's regulations: "Network ownership of stations" is the caption. No license shall be granted to a network organization or to any other person directly or indirectly controlled by or under common control of a network organization for a television broadcast station in any locality where the exising television broadcast stations are so few or of such unequal desirability in terms of coverage power, frequency, or other related matters that competition would be substantially restrained by such licensing. There is a parenthetical provision, but it does not flow to the answer. Mr. MALETZ. In other words, you think the problem has been solved by the present FCC rules? Mr. STANTON. I do, and if you will recall, as a result of the chain broadcasting investigation of the late thirties or early forties, CBS had to divest itself of a station in Charlotte, N. C., and that divestiture took place because at that time I believe there were possibly 3 radio stations in Charlotte, but 2 of them were very low powered, and 1 was a very high powered station. While there were enough stations for all three networks, under that provision of this statement I have just read, they were not of equal desirability, and the Commission ruled that we had to dispose of that station and we so did. Mr. MALETZ. Is it your testimony, then, that the present multipleownership rules of the Commission are adequate and should not be amended, or at least should not be tightened? Mr. STANTON. What rules, now? I am sorry. Mr. MALETZ. The present multiple-ownership rules of the Commission. Mr. STANTON. I am perfectly satisfied to live under the present ownership rules. Mr. MALETZ. All right. Let me quote from Judge Hansen's testimony before this committee on Friday, September 14, 1956, at page 4121: It (referring to the Commission) justified continuation of network station ownership only because substantial interest had developed in reliance on its tolerance of the situation. The Commission deplored the trend toward concentration of ownership and control of radio stations. The same trend has been observed with respect to television. Ownership of a large number of stations by a single interest raises real antitrust problems. Such owners would be in a position to use tactics similar to those of the Griffith, Shine & Crescent Motion Picture Circuits by capitalizing on mass purchasing power and by combining their outlets in single-station markets with their outlets in multiple-station markets. We have received complaints that these tactics have already been employed by multistation owners who obtain preferences in network affiliations over singlestation owners, and who obtain preferences in the purchase of important packages of feature film. As a result, it is my considered opinion that the multiple-ownership rule should be, if anything, tightened, not relaxed. Is it or is it not a fact that multiple-station owners do obtain a preference in dealing with CBS in network affiliations over singlestation owners? Mr. STANTON. A preference, if you want to state it that way, based on the merits of operation, Mr. Maletz, not on the basis of multipleownership alone. Mr. MALETZ. Do multiple station owners receive a preference in terms of compensation from CBS? Mr. STANTON. I believe that there are some multiple-owners who have higher percentage payments than non multiple owners, but I think that you have to examine that almost on a market-by-market basis. In some cases I think you would do the same thing, even if those stations, instead of being owned by a multiple-owner, were owned by an individual living in that particular community. On XXV, in the appendix to the supplemental memorandum here in this document we gave you yesterday, point 7 was the question which said: Please indicate what effect, if any, is given to the fact that the prospective television affiliate also owns one or more television stations in other communities which are television affiliates of your network. Our answer: The fact that the owner of a prospective television affiliate in area A is also the owner of a present television affiliate in area B may be of significance in three respects in determining whether to affiliate with such owner in area A: (i) Where such owner has only just commenced operations in area A, or just purchased the prospective affiliate in area A, the quality of such owner's local station operations in area B will usually be a good indication of the probable quality of such owner's local station operations in area A; (ii) If the business relationship between CBS television and such owner in respect of the area B affiliation has been mutually pleasant, there will be a natural desire on the part of CBS television to continue that relationship in area A; and (iii) In order to obtain network coverage in, for example, three specific areas in the aggregate, it may be necessary to apply affiliation criteria to prospective and present affiliates in groups, rather than separately, weighing the merits of affiliating with the same owner in all three areas as against the merits of not covering one or more of such areas. In such a case, the decision may be to affiliate with the same owner in all three areas on the ground that aggregate network coverage will be improved. Mr. MALETZ. Thank you. Let me ask you this: The Storer Broadcasting Co. is a multiple-station owner of television stations; is it not? Mr. STANTON. Yes; I think it is the largest. Mr. MALETZ. And how many Storer stations are affiliated with the Columbia Broadcasting System? Mr. STANTON. CBS television has affiliates with Storer stations in Detroit, Toledo, Cleveland, Atlanta, and Birmingham, and Mr. Storer's company owns, I think, two additional stations which are not affiliated with us. Mr. MALETZ. Would you say in general the Storer stations get better terms from CBS for carrying network programs than other stations affiliated with CBS? This is just a general question; we will come to the specifics later. Mr. STANTON. All right. If you will come to the specifics later, I think in general that is probably true. Mr. MALETZ. We will come back to that subject after a bit, Dr. Stanton. I would like to turn now to another matter. I wonder whether we might discuss rule 3.658 of the Federal Communications Commission. Mr. STANTON. That is the one that I just quoted section (f) from. Mr. MALETZ. No, sir; I think you quoted from a different rule. Mr. STANTON. No. Mr. MALETZ. I was thinking of 3.658 (b). I am sorry, you are quite right. It is a fact, is it not, that under the FCC chain broadcast rules, a station is prohibited from having any agreement, arrangement, or understanding, express or implied, with a network which prevents or hinders another station in a different community from broadcasting any program of that network? Mr. STANTON. That is correct. Mr. MALETZ. And I take it that it is the purpose of this rule to enable a station in a different community from the affiliated station to obtain network programs? 77682-57-pt. 2, v. 4- -2 Mr. STANTON. I take it that that is the purpose. I just want to be sure that we are talking about the same thing that I am answering on. You are talking about two different geographic areas; are you not, Mr. Maletz? Mr. MALETZ. No; I am talking about two stations located in different communities. Mr. STANTON. Is there any overlap between the two communities? Mr. MALETZ. I am not talking about overlap; I am talking about the Commission's rule. Mr. STANTON. All right. Mr. MALETZ. Have I correctly stated the Commission's rule? Mr. MALETZ. All right. I would like to repeat the question in order to get this discussion in context. Would you say that it is the purpose of this rule 3.658 (b) to enable a station in a different community from the affiliated station to obtain network programs? Mr. STANTON. Yes; although I think it is a curious way to state it. Mr. MALETZ. Possibly so. Now, is it correct that CBS has an affiliated station, KGUL-TV in Galveston, Tex. Mr. STANTON. CBS Television has an affiliate, KGUL-TV, serving Galveston and Houston. Mr. MALETZ. As a matter of fact, is it not correct that the late Jesse Jones in 1955 requested a CBS affiliation for his station KTRK-TV in Houston which was turned down by CBS on the ground that there would be excessive duplication with CBS's Galveston affiliate? Mr. STANTON. There were a number of reasons why that application was turned down. One of the reasons, Mr. Maletz, was because there would be excessive duplication. Mr. MALETZ. Would you not say that was the principal reason? Mr. MALETZ. Dr. Stanton, let us take the Houston-Galveston situation as an example. Suppose a network advertiser requests a CBS program to be carried on a per program basis over a Houston station, as well as over the CBS affiliate in Galveston, and wants to pay for this coverage. Will CBS comply with the advertiser's wishes? Mr. STANTON. No, sir; we will not, and there is a case on record where we had that opportunity. The reason is that Galveston and Houston, for the sake of coverage, is one market, and you are talking about two separate markets, Mr. Maletz. Mr. MALETZ. I am talking about it in the context of the Commission's rule. Mr. STANTON. I am talking about it, sir, in context of public service. Mr. MALETZ. We understand. I am just talking about the Commission's rule now. Mr. STANTON. I think, sir, you have got the wrong rule here; have you not? Mr. MALETZ. Let me read it to you. It could be that I do have the wrong rule, but I will check it. Mr. STANTON. Well, the rule says: No license shall be granted to a television broadcasting station having any contract, arrangement, or understanding, express or implied, with a network organization which prevents or hinders another broadcast station located in the same community from broadcasting network programs. |