Broadcasting (Jan - June 1941)

from interfering with business practices in broadcasting. The minority took the view that even if the Commission had such authority, it would constitute a relaxation of the very rules with which the contract was designed to conform. Under the contract, it was argued, stations would not become "free agents". Moreover, the minority held it had not been given sufficient time to study the matter. During the three weeks of hearings, the committee thus far has heard Chairman Fly and Messrs. Alfred J. McCosker, Louis G. Caldwell and Fred Weber, for MBS; Commissioners Craven, Mark Ethridge, Mr. Paley and Judge John J. Burns, for CBS; Mr. Trammell and Duke M. Patrick, for NBC; Paul W. Morency, general manager of WTIC, Hartford, as vice-chairman of IRNA; John J. Gillin Jr., general manager of WOW, Omaha, as an independent spokesman; Samuel H. Cook, president of WFBL, Syracuse, in a similar capacity; NAB President Neville Miller; Clarence Wheeler, WHEC, Rochester; Jonas Weiland, WFTC, Kinston, N. C; J. W. Lee, KGFF, Shawnee, Okla.; Seymour Krieger, FCC legal dept.; C. P. Hasbrook, WCAX, Burlington, Vt.; Hope H. Barroll Jr., WFBR, Baltimore; Frank C. Goodman, Federal Council of Churches of Christ in America; Edward J. Heffron, National Council of Catholic Men; Mrs. Helen Wiley, General Federation of Women's Clubs. Others to Appear There was the possibility that other members of the FCC would be called prior to final "rebuttal testimony" of Chairman Fly. A number of parties who had requested time, all in opposition to the rules, were asked to submit statements for the record. Totally aside from the sharp and ofttimes personal criticism leveled against the rules and Chairman Fly, were repeated observations of committee members regarding other industry activities, particularly from the programming end. Chairman Wheeler made much ado about "soap dramas", criticizing them as bad radio. He also took the lead in assailing network commentators and individual stations for allegedly failing to give equal time to both sides of controversial issues, particularly in connection with the present isolationist-interventionist fight on the war. This was picked up by other committee members. On the business side. Chairman Wheeler repeatedly urged that networks, stations and the AT&T attempt to work out means by which all network programs could be provided smaller stations in remote and rural areas. He likewise urged that steps be taken by the FCC if necessary, to bring down the costs of wire lines with the larger, more successful stations carrying the burden for their ill-fed colleagues. When it was brought out that the three networks spend approximately $7,000,000 for line charges, representing about 10% MR. PALEY of the 1940 gross income of the networks, committee members urged that something be done. Practical Objections Every one of the rules promulgated by the FCC was assailed vigorously by witnesses for the industry on practical as well as jurisdictional grounds. Chairman Fly, who had repeatedly criticized the "two New York corporations" in his four days of testimony, was bombarded by the NBC and CBS heads. Even CBS, through its counsel. Judge Burns, vehemently attacked the rule that would force NBC to divest itself of the Blue, calling it "vicious" and unparelleled in regulatory annals. From CBS President Paley, the committee heard a castigation of PORTENTS of a new crusade by the FCC against prize contest programs, on the ground that they violate the lottery statutes, are seen in Washington as a result of the increase in such features, notably in local programming. While no formal pronouncement has been made, it is understood FCC attorneys again are looking into the "technique". If action is decided upon, it might come on application for renewals of licenses of individual stations, or the FCC again might seek to refer the cases to the Department of Justice for possible litigation. Sought by Sponsors Early last year, the FCC submitted to the Department a recommendation that it look into the NBC Pot o' Gold and other prize award programs, to ascertain whether they violated the lottery statutes. After weeks of consideration, the Department took no action, concluding that no technical violations of the statutes were involved. Revival of the issue, however, MR. TRAMMELL the regulations that brought from Chairman Wheeler the admission that he had been "convinced" there should be "time options" but had not been convinced exclusive affiliation contracts should be continued. The unusual spectacle of a witness interrogating a committee chairman developed as Mr. Paley inquired "What's the rush?" on the regulations and asked that the White Resolution be passed. Mr. Paley followed Mr. Ethridge on the stand, who in turn had succeeded Commissioner Craven. At the very outset the youthful CBS founder and president urged Congress to enact a new law and advocated that networks be licensed — a surprise shot. He suggested the FCC be divorced from the common carrier field, supporting in this view is understood to stem from the rapid development of this type of program. While a number of network programs involve prize contests, usually there is an element of skill, such as the quiz-type feature. But the local renditions, it was pointed out, usually depend upon the spin of a wheel or the random selection of telephone numbers. When the FCC began its onslaught a year ago, many new stations dropped the prize contest technique. After the Department of Justice had pigeon-holed the cases referred by the FCC, however, a revival set in and is gaining momentum daily, largely because of demands of advertisers. While no indication has been given as to the status of the FCC's study, it was expected the Commission might act as soon as the current controversy over its monopoly regulations is settled either by Congressional edict or in some other fashion. In one quarter it was indicated that it will become the "next order of business". the position taken in the past by Senator White. Mr. Paley urged that the new law clearly define the FCC's functions and that it specify fairness in dealing with controversial questions and with news, as a condition to having or holding a license. Committee members became interested when they heard Mr. Paley denounce the new rules as having provoked a "state of terror" in radio. He charged the FCC with having acted as "complaining witness, prosecutor, judge, jury, and hangman". He attributed to Chairman ! Fly "sneers, speculation, inuendos and accusations" and said that after all these weeks his company was still at a loss as to how to operate a network successfully under the new rules. Mr. Paley said that to abide by the time option ban would be "financial suicide". Without exclusivity, he predicted, it would be possible for anyone to become a network overnight, including advertisers and agencies. Trammell Criticizes Mr. Trammell, making his first ^ appearance before a Congressional committee since becoming NBC president a year ago, bitterly assailed the command to sell the Blue, and off'ered stout resistance to such a requirement. He predicted that instead of five or six networks, which Chairman Fly had said could be created, the number would dwindle to three, since CBS and MBS, as well as the Red, would "raid" the affiliates of the Blue. Taking the wind out of particular criticisms by the FCC of NBC contractual requirements, Mr. Trammell said he had asked affiliated stations to agree to the elimination of clauses in the contracts permitting NBC to cancel affiliate agreements on 12 months' notice whereas stations are bound for five years; to eliminate the requirement that rates for local business be the same as NBC network rates, and to eliminate the requirement that the station must rebate the differential between station receipts for a particular local program as against a network program. He also revealed that the total volume discount for advertisers using both the Red and Blue Network had been eliminated. Chaos Foreseen On the business side, Mr. Trammell predicted that under the new rules all would be chaos and confusion. He predicted stations would rush for the best feature of every network service; advertisers would try to preempt the best hours on the best stations; time brokers would inject unfair competition; advertising agencies could make their own arrangements for "front page" position with the bigger and better stations. All the advertiser has to do under the new regulations to set up a network, he declared, "is just rent a theatre and order phone lines." He called Chairman Fly's idea of network broadcasting a "scrambled system" in which the advertiser will get the corner. FCC Crusade Against Prize Programs Threatened as Attorneys Study Statute Page 8 • June 23, 1941 BROADCASTING • Broadcast Advertising