Motion Picture Herald (Sep-Oct 1941)

October 18, 194 1 MOTION PICTURE HERALD 37 FCC MODIFIES AIR RULES; "THEY'RE JUST AS DANGEROUS," SAY NETWORKS Broadcasters Vow to Carry the Fight to Courts and Congress; Regulations Would Prohibit Exclusive Programs for Chains by FRANCIS L BURT in Washington The Federal Communications Commission in Washington this week was facing what Washington described as "the fight of its life," in the courts and in Congress, as a four-man FCC majority pressed ahead with its plan for eliminating "monopoly" in radio chain broadcasting. Basis of the fight was the FCC orders, issued last Saturday, increasing the license period of standard broadcasting stations from one to two years and providing for the elimination of chain-station contracts giving networks exclusive program and territorial rights. The new orders are to go into effect November 15th. The Commission suspended indefinitely its proposed order requiring the divorce of the NBC Red and Blue networks, expressing the opinion that separation was "so desirable that we believe a separation will soon occur without the spur of a legal mandate." Companies To Appeal Immediately upon receipt of the order, the Columbia Broadcasting System and the National Broadcasting Company announced they would immediately appeal to the Federal courts, and the National Association of Broadcasters issued a statement calling the "modified" rules "just as dangerous to broadcasting as the original regulations." A Supreme Court decision on the powers of the FCC as delineated by the Communications Act, long desired by the radio industry, was assured late last Saturday by the declarations of presidents of both major networks. Niles Trammell, of NBC, and William S. Paley, of CBS, declared that recourse to the courts would be taken immediately "to stay the usurpation of power" implicit in the amended network regulations issued late Saturday by the Commission. The Commission's action was a climax to a six-months' drive to eliminate "network monopoly." Regulations sharply revising the operation of networks and their relations with stations were issued by the FCC May 2nd last, but were approved in principal by the Mutual hearings and negotiations with the chain companies. The proposed rules have been subjects to the opposition of the National Broadcasting Company and Columbia Broadcasting System, but were approved in principal .by the Mutual Broadcasting System. In the adoption of the latest orders, the commission maintained the four-two split which has marked its entire consideration of the subject, Commissioners Paul S. Walker, George Henry Payne and Ray C. Wakefield joining with Chairman James Lawrence Fly in approving them, while Commissioners T. A. M. Craven and Norman S. Case issued a sharp dissent. In addition to extending the licensing period and suspending the NBC divorce order, the new rules extend the contract period between chains and stations from one to two" years; permit stations to option three hours out of each of four periods into which the broadcast day is RADIO OUTPUT BEHIND DEMAND While radio set production for 1941 is expected to run 10 to 15 per cent ahead of 1940, a record year in which approximately 12 million receivers were manufactured, output currently is 20 to 25 per cent behind ctistomer demand, according to figures published in the Wall Street Journal on Monday. Manufacturers have been able to continue producing largely because they had built up substantial inventories of raw materials, reduced the number of 1942 models introduced this year and developed substitute materials. RCA Laboratories, for example, has developed more than 40 alternate materials in tackling the problem of substitutes. Of these, 20 are being used in RCA's radio production and 12 more alternates have been approved and schedtded for early use. In addition, many others are reported available for production if the necessity should arise. divided, but on a non-exclusive basis ; require networks to give stations with which they have time option contracts 56 days' notice of intention to exercise the option, and permit stations to contract with networks for first call on chain programs. The regulations would eliminate the present exclusivity, under which a station affiliated with one chain may not carry another network's program; territorial exclusivity, under which a chain_ may not furnish a program to any station in an area served by an affiliate, and restrictions on the right of stations to reject chain programs. The Commission majority issued a lengthy report in which it stressed the advantages to be derived from its regulations which, it said, "will tend to decentralize the tremendous power over what the public may hear which is now lodged in the major network organizations, and will remove existing restraints upon competition without interfering unduly with the operations of the network organizations." Seeks "Stability" In an explanatory statement, Chairman Fly explained the purpose of the rules to be "to achieve a greater measure of stability throughout the broadcasting industry," which will be brought about through the extension of the licensing period and the limitation on network contracts, now generally for five years. "The Commission has engaged in long study of these matters and in extensive discussions with the heads of the networks," Mr. Fly said. "It will carefully observe the operations from month to month in the future and will always stand ready upon any appropriate showing to review the rules in light of actual operations. "It is our intention to foster wholesome competition and to provide the diversity in the control of the channels of information which is so essential to our democracy. At the same time, we recognize that there must be a con tinuance and indeed an extension of network operations and that those operations must be upon an efficient and profitable basis. Whenever it may be shown that in the course of actual operation these regulations fall short of any one of these basic objectives, the commission stands ready to meet with the parties in interest and to make such further modifications as will accomplish the basic purposes." Opposition to the regulations came immediately upon their publication, in the form of the dissenting opinion by Commissioners Case and Craven, who charged the majority of the Commission with having exceeded the power delegated the FCC in the Communications Act and asserted that the aggregate effect of the rules would not be a broadcasting system more in the public interest than that of today, but rather an impairment in the nation's radio service at a time when efficient service is most needed. "No Time for Revolution" "The present is no time to force revolu tionary reforms upon an industry which has served the public interest of the nation, particularly when such reforms bear no relation whatsoever to the national defense effort," the two commissioners declared. "These economic changes may cause vast readjustments in all industry as well as by the entire public. The cumulative effects of these basic national economic readjustments upon the radio industry cannot be determined with accuracy at this time ; therefore, it appears to us that to add to the instability of the radio industry by enforcing new Government regulations, which in themselves superimpose fundamental economic readjustments, is unwise." The dissenting commissioners contended that a three-year license period would be preferable to a two-year term. With respect to the limitations on options, they held absurd a regulation which permits an affiliate to contract for first call on a chain's programs, but does not permit the network to obtain first call on the station's time. Further, it was asserted, now is no time for the Government to force private enterprise to dispose of its property on an unsound busines basis. To Go to Court Immediate appeal to the courts for review of the regulations was assured by CBS in the statement issued simultaneously in New York and Washington. The "modified" regulations are no improvement over the original proposals, it was asserted by William S. Paley, president of the company, who charged that the commission "is stretching its loosely defined authority far beyond any area of regulation it has ever attempted to invade before." The new regulations, Mr. Paley said, are "unnecessary, unlawful, and definitely destructive of freedom of the air. "There is only one possible solution for the present unfortunate situation," he said, "a staying of the new regulations and the enactment of a new radio law which will definitely delimit the powers and duties of the Federal Communications Commission and which will embody such changes as the Congress may want to make in the light of modern developments in the art of broadcasting." CBS's challenge was quickly taken up by Chairman Fly, who contended that the new regulations contain "generous modifications not even discussed with Mr. Paley. "The public ought to know moreover, that CBS has always refused and continues to refuse to submit to any form of regulation, (Continued on following page)