Broadcasting (Jan - Mar 1950)

PHONEVISION TEST Webster Sounds Alarm AMID WARNINGS by Comr. E. M. Webster that the American concept of free broadcasting may be subjected to a "momentous change," FCC last Thursday approved with multiple reservations the Zenith Radio Corp. request to test Phonevision publicly in Chicago. Reversing FCC's earlier order for thorough exploration of Zenith's plans to test its "pay-as-yousee" brand of TV [Telecasting, Dec. 12, 1949], the Commission majority ruled the limited test may help settle some of the issues for such a hearing. This ruling, however, was attended by: O Warnings by Comr. Webster in his dissent that the majority action is contrary to FCC's own rules, violates basic allocation principles, may require Congressional redefinition of broadcasting, and may have far-reaching effects— which FCC can't control — on the public and TV industry. % Concern of Comr. Robert F. Jones, who issued a separate statement concurring with the majority, over monopolistic tendency of the patent-pool situation in TV equipment and set manufacturing. His recognition of a need to encourage new developments was shared by Comr. Frieda B. Hennock in another concurrence. 9 Announcement by Zenith's Comr. E. F. McDonald, few hours after grant, that the experiment will be the "acid test" of whether the public will pay for "good" entertainment via TV in their own homes. Lengthy Hearing Not Necessary The Commission majority held it was satisfied a lengthy hearing was not necessary at this time in view of Zenith's allegations that the test sought only to determine public acceptance of the principle of "payas-you-see" television. The grant, valid for 90 days from last Thursday and to employ Channel 2 (5460 mc) facilities now being used experimentally by Zenith's KS2XBS Chicago, is subject to following conditions : 1. Action shall not be construed as determination that such experiment is or will be in public interest beyond express terms of grant, or whether Phonevision or any such system constitutes "broadcast," "common carrier" or other type of service, and FCC reserves its determination on such issues. 2. Zenith shall avoid any action that might create impression Phonevision has been or will be authorized on regular basis or that grant constitutes FCC's aporoval of Phonevision principle involved, and visual and aural notice to this effect must be made. 3. KS2XBS shall air only Phonevision shows durine test. 4. Scope of test must be confined to Zenith proposals on record. FCC denied Zenith's petition to install a new 5 kw video transmitter and other equipment at KS2XBS, without prejudice to its filing an appropriate application for construction permit for such installation. Zenith has pending an application for a regular commercial TV station on Channel 2 in C'.iicago. Comr. Webster considered sub scription radio or television as "a fundamental change" in the American system of radio which might need Congressional approval and might also lead to a revision of broadcasting's non-common carrier status. He said his mind was "completely open" on Phonevision's merits and whether it should be authorized. But, he pointed out, U. S. broadcasting has always been "a free service to the listener." He asserted "the first move" to change it should not be made without a public hearing. He centinued: I do not believe that very much vision is required to see that if the Commission should authorize subscription television, and it should prove to be the most profitable method of operating a television station, that the best evening hours, every day in the week, will be devoted to subscription television rather than to free television programming. Every television station licensee will be clamoring for a subscription television franchise and will be pounding on the Commission's door for regulations insuring that there will be no discrimination in the issuance of such franchises or the rates therefor. Television receiver owners will expect the Commission to promulgate rules which will provide to each listener a choice of some free television programs during the best listening hours and which will insure that the listener will be charged a reasonable and non-discriminatory fee for viewing television programs. These considerations point to a common carrier type of regulation of subscription television, not to the broadcast type of regulation. . . . He felt Phonevision resembles a fixed service more than broadcasting. He feared approval of the tests without hearing would lead the public to believe that Phonevision will become "the future television system," and that it might give Zenith a "foot in the door" with respect to its pending application for commercial television in Chicago. He also thought it "fair to assume" that Zenith will request an extension of both the scope and the duration of the tests. Comr. Jones, who originally voted for a hearing to precede tests, said he had concluded "the importance of the full encouragement of new television techniques" justifies tests without prior hearings in this case. He said : Television, unlike other forms of broadcasting, presents a particular problem because the Commission's engineering standards are so limited that for all practical purpeses they are written upon the patent claims of one company or upon the claims of patents which have been purchased by one company with the right to sub-license to others. The effect of writing such standards has been to permit the formation of a patent pool with the result that one company is the predominant ' patent licenser who collects fees from practically all of the television manufacturing industry. To the extent that there is a tendency toward, if not actual monopoly in the licensing of patents for television transmission and receiving equipment, it is very important from the Commission's standpoint that new developments of the art be encouraged. While patent holders are entitled to a monopoly in the development and manufacture of the equipment covered by the patents, it does not follow that the Commission has to join in that monopoly. Comr. Jones noted Zenith proposed to turn over proceeds from the test to charity. "There are many inventors or developers of many techniques who can't aflford to be so generous," he said. "The Commission must be ever vigilant," he continued "because of the inability of the small inventor to get his invention before the American public without having to part with it for a pittance and place it in the hands of those who may let it rest in their files." He said that "300 customers is considerably less public sampling" than other public reaction tests, such as those being conducted in color television "where to date over 10,000 people have viewed one of the color systems." But he considered the Zenith proposal a solution to the problem of canvassing public reaction. Comr. Hennock similarly cited the importance of encouraging new developments. She said she still feels public hearings should precede action on potential new and different services. But, she added : "Upon reconsideration I have concluded that such a hearing on Phonevision at this time would serve little purpose." She said the main problems which Phonevision will pose are "economic and social rather than technical," and that the tests were designed to gather data on these aspects. "I believe that the holding of hearings at this time would be an impeding rather than an encouraging move with little to be gained on behalf of the public," she asserted. McDonald Outlines Preliminary Plans Within hours after FCC announced conditional approval of Zenith Radio Coi-p.'s plan to publicly test its Phonevision system in the Chicago area, Comdr. E. F. McDonald Jr., Zenith president, issued preliminary details for the 90-day experiment. No date for its commencement was specified. Comdr. McDonald said "this test will climax 19 years of technical research and three years of actual transmission of Phonevision broadcasting here in Chicago. It will enable us for the first time to put to an acid test a question which for years has concerned both the motion picture and television industries: 'Will the public pay for good movies shown via television in their own hoines; and more specifically, how frequently will they pay $1 per feature for such movie service?' " "Although Zenith has had Phonevision perfected for more than three years," he said, "we have delayed our actual commercial test until the present for three important reasons: (1) Zenith delayed for the purpose of extending its patent picture in the United States and foreign countries. (2) Three years ago, television broadcasters refused to believe that the advertisers could not pay for the type of top entertainment the public would demand from television. It took last year's operating loss of well over $15,000,000 to convince them. (3) The movie industry would not believe three years ago that this new competitor, television, would do to the movie box-ofSce what it is doing today, " h't It is goini? to do before the end of this year when 30 to 40 million people will be viewing television in their homes. Many television viewers will go to the movies less and less, and some will stop going altogether. "The test, which will cost Zenith more than $500,000," the Zenith president continued, "will include participation by 300 Chicago families." Every day for 90 days Zenith plans to broadcast a different full length feature picture. TV SET EXCISE RMA to Fight Levy PROPOSAL to place an excise tax on television sets will retard the rapidly expanding TV industry, Radio Mfrs. Assn. will contend before the House Ways & Means Committee's hearings on the levy submitted by Secretary of the Treasury John W. Snyder. Set industry spokesmen drew up plans for RMA's presentation at a meeting held Friday at the Hotel Statler, Washington. The subject will be taken up this week during the RMA winter conclave in Chicago. Joseph Gerl, Sonora Radio & Television Corp., chairman of RMA's Excise Tax Committee, said the tax will prove a hardship on small manufacturers and dealers, who are in the great majority in the industry, and also will force a substantial increase in TV set prices by which low-income groups will be deprived of television entertainment. Mr. Gerl recalled that the present 10% excise tax on radio sets was imposed in 1941 as a national defense revenue measure, double the original 5% levy adopted in 1932. "The radio and television industry already is bearing more than its share of the tax load," he continued. "In addition to the high income and corporate taxes paid by the manufacturers and their merchandising outlets, the industry has paid the government about $290 million in excise taxes since 1932. Last year alone it paid the government $40.6 million. "Contrary to some opinion, the television-radio industry is made up largely of small manufacturers, small jobbers and small dealers. Less than a dozen of the 100 set manufacturers and only a handful of several hundred parts manufacturers in this Industry can be accurately called large corporations. As for dealers, the bulk of them are small shops and stores." He noted that Secretary. Snyder had said an excise tax reduction would stimulate employment' and production, at the same time proposing the new TV impost. The FCC's freeze, he said, already is having a deterrent effect on the TV industry and a 10% tax "would add another load on the public and the industry, for the manufacturers and TV broadcasters." 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