Broadcasting (July - Dec 1940)

ilROAIDCASTO cwxA Broadcast Advertisi ngr Vol. 19 No. 11 WASHINGTON, D. C, DECEMBER 1, 1940 $3.00 A YEAR— 15c A COPY Monopoly Blast Heard in Highest Circles Torn With Dissension, FCC Orders Hearing Dec. 2 as Radical Ideas Get Congress, White House Attention By SOL TAISHOFF TORN with internal strife over repercussions to the report of its Network Monopoly Committee, which have been echoed at the White House and in Congress, the FCC Dec. 2 enters the final scheduled phase of this explosive issue when it hears oral arguments from 13 respondents, including the major networks. It is openly hinted in Administration circles that the fate of the FCC, as presently constituted, as well as the future of network broadcasting, may be involved in these proceedings. More acrimony has been engendered in the industry over these latest developments, touched off by recent moves of individual FCC members, than by perhaps any other issue before that embattled agency in several years. Not all of it, however, has been publicly aired. Justice Dept. Step? Possible Department of Justice intervention in the network monopoly situation was rumored, but responsible officials called them "premature". A report was current that Assistant Attorney-General Thurman Arnold, in charge of the Anti-Trust Division, might attempt to invoke the Sherman anti-trust laws against the major networks, based on the FCC network monopoly investigation findings. It is known that the Department has had access to the entire hearing record and has studied the FCC Committee's report. However, this has been in connection with revival of the Department's litigation against ASCAP [see page 13], expected to take tangible form prior to the end of the year. The Department apparently has been most interested in allegations of suppression of competition in the transcription field and in purported monopoly of talent through the network artist bureaus. Call for an FCC investigation by the Senate Interstate Commerce Committee was made in the Senate Nov. 29 by Senator Gurney (RS.D.). The former owner of WNAX, Yankton, said the proposed FCC rules would "strangle, if not impose a death sentence" upon established networks. The FCC Committee's report, he added, was severely criticized and generally discredited "because of its inaccuracy and demonstrable bias". If the FCC adopts the proposed rules, he concluded, it surely "will have gone 'loco' ". At a special meeting Nov. 28 the Commission, by a split vote, finally decided to proceed with oral arguments Dec. 2-3 as originally scheduled. The action followed a series of 3-to-3 deadlocks at meetings at which no words were minced. The deadlock was broken, it is understood, after Chairman Fly and Commissioners Craven and Case consistently had favored oral arguments on the basis of the Committee's report. The remaining three members (Thompson, Walker and Payne) apparently had favored full FCC Telegrams and letters of record in the latest controversy over the FCC NetworkMonopoly Report will be found on pages 70-71. action on the Committee's farreaching recommendations to regulate virtually every aspect of commercial network operations. At the Nov. 28 session, Payne cast his vote with the more conservative group. In announcing procedure for the oral arguments, the FCC advanced a series of suggested special regulations [see text on this page] designed to cover chain broadcasting, but was quick to emphasize that they were offered only to "facilitate the oral argument". The suggestions, proposing to invoke strong restrictions on network operations, including banning of exclusive affiliation arrangements and optioned time, are extreme in character and appear to be precisely the type of regulation condemned as outside the jurisdiction of the FCC by NBC and CBS, along with the Independent Radio Network Affiliates. MBS, on the other hand, had suggested regulations generally on all fours with these proposals. Two Big Days In its public notice the FCC emphasized it is to be understood "the regulations have not received the approval of the Commission and are to be taken as suggestions by the Commission intended to focus the attention of counsel upon the issues raised in the report". It added that counsel would not be limited to a discussion of these regulations but could address themselves to any of the issues of fact or policy raised by the report of the Network-Monopoly Committee. The hearings will be held at the Interstate Commerce Commission auditorium, starting at 10:30 a.m. Since there are 13 respondents, and {Continued on page 68) Suggested Regulations for Chain Broadcasting . . . IN ITS PUBLIC notice the FCC released a series of seven proposed special regulations, several of theyn in alternate form, relating to chain broadcasting. It emphasized that these suggestions were merely to "facilitate oral argument" and have not received FCC approval. Moreover, it stated that the oral argument is in no wise limited to the issues recited. Following is the text of the suggested regulations: lA — No licensee of a standard broadcast station shall enter into any contractual arrangement, express or implied, with a network organization which provides for or has the effect of establishing an exclusive affiliation with the network organization. OR IB — No licensee of a standard broadcast station shall enter into any contractual arrangement, express or implied, with a networli organization which provides for or has the effect of establishing an exclusive affiliation with the network organization ; Provided, that such restriction shall not apply to licensees of stations located in or rendering primary service to cities receiving adequate primary service from five or more fulltime stations. 2 — No licensee of a standard broadcast station shall enter into any contractual arrangement, express or implied, with any network organization which gives the network organization an option on the hours of operation of the licensee's station for the broadcasting of commercial programs (a) for more than 30% of the converted hours of operation in any city receiving adequate primary service from three fulltime stations with comparable facilities; (b) for more than 20% of the converted hours of operation in any city receiving adequate primary service from two fulltime stations with comparable facilities; (c) for more than 10% of the converted hours of operation in any city receiving adequate primary service from one fulltime station; (d) for a total number of converted hours exceeding by more than 25% the converted hours during which such licensee has broadcast commercial programs transmitted to the licensee by the network organization during the six months preceding the effective date of the contract. 3A — No licensee of a standard broadcast station shall enter into any contractual arrangement, express or implied, with any network organization, the terms of which exceed in duration the effective period of the license granted by this Commission. For the purposes of this section, an agreement shall be considered as exceeding in duration the effective period of the license if the agreement gives either party an option to extend the contract beyond the termination of the license ; Provided, that this restriction shall not be construed as preventing a licensee from entering into a contract with a network organization a reasonable period of time, not to exceed 30 days, in advance of the expiration date of the existing contract. OB 3B — No licensee of a standard broadcast station shall enter into any contractual arrangement, express or implied, with a network organization wliich gives the network organization any rights with respect to the renewal or cancellation of such contractual arrangement not given to the licensee. OB 30 — No licensee of a standard broadcast station shall enter into any contractual arrangement, express or implied, with a network organization for a period longer than two years. 4 — No licensee of a standard broadcast station shall enter into any contractual arrangement, express or implied, with a network organization which controls, restrains, limits, or in any other way interferes with the any other way interferes with the establishment of the rates to be charged by the licensee for the sale of available broadcast time to advertisers or other clients. 5 — No licensee of a standard broad(Continued on page 69) BROADCASTING • Broadcast Advertising December I, 1940 • Page 9