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VOLUME H---PART 3
THE COMMUNICATIONS ACT OF 1979
-~ ~o~O2~32.
HEARINGS
BEFORE THE
SUBCOMMITTEE ON COMMUNICATIONS
OF TEE
COMMITTEE ON
INTERSTATE AND FOREIGN COMMERCE
HOUSE OF REPRESENTATIVES
NINETy~SIXTH CONGRESS
FIRST SESSION
ON
H.R. 3333
TITLE IV (PARTS A AND B)
SPECTRUM USE AND LICENSING-GENERAL PROVISIONS AND
LAND MOBILE AND OTHER RADIO SERVICES
MAY 14, 15, 16, 17, 22, 28, 24, JUNE 5, 6, AND 7, 1979
Serial No. 96-125
Printed for the use of the Committee on Interstate and Foreign Commerce
~0
U.S. GOVERNMENT PRINTING OFFICE
51-2530 WASHINGTON: 1980
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COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE
HARLEY 0. STAGGERS, West Virginia, Chairman
JOHN D DINGELL Michigan SAMUEL L DEVINE Ohio
LIONEL VAN DEERLIN, California JAMES T. BROYHILL, North Carolina
JOHN M. MURPHY, New York TIM LEE CARTER, Kentucky
DAVID E. SATTERFIELD III, Virginia CALRENCE J. BROWN, Ohio
BOB ECKHARDT, Texas JAMES M. COLLINS, Texas
RICHARDSON PREYER, North Carolina NORMAN F. LENT, New York
JAMES H. SCHEUER, New York EDWARD R. MADIGAN, Illinois
RICHARD L. OTTINGER, New York CARLOS J. MOORHEAD, California
HENRY A WAXMAN California MATTHEW J RINALDO New Jersey
TIMOTHY E WIRTH Colorado DAVE STOCKMAN Michigan
PHILIP R SHARP, Indiana MARC L. MARKS, Pennsylvania
JAMES J FLORIO New Jersey TOM CORCORAN Illinois
ANTHONY TOBY MOFFETT Connecticut GARY A LEE New York
JIM SANTINI, Nevada TOM LOEFFLER, Texas
ANDREW MAGUIRE, New Jersey WILLIAM E. DANNEMEYER, California
MARTY RUSSO Illinois
EDWARD J MARKEY Massachusetts
THOMAS A. LUKEN, Ohio
DOUG WALGREN, Pennsylvania
ALBERT GORE, JR., Tennessee
BARBARA A. MIKULSKI, Maryland
RONALD M MOTTL Ohio
PHIL GRAMM, Texas
AL SWIFT, Washington
MICKEY LELAND, Texas
RICHARD C. SHELBY, Alabama
W E WILLIAMSON Chief Clerk and Staff Director
KENNETH J PAINTER First Assistant Clerk
BRIAN R. MOIR, Professional Staff
BERNARD J. WUNDER, Jr., Associate Minority Counsel
SUBCOMMITTEE ON COMMUNICATI9NS
LIONEL VAN DEERLIN California Chairman
JOHN M MURPHY New York JAMES M COLLINS Texas
TIMOTHY E. WIRTH, Colorado JAMES T. BROYHILL, North Carolina
MARTY RUSSO, Illinois CARLOS J. MOORHEAD, California
EDWARD J. MARKEY, Massachusetts MARC L. MARKS, Pennsylvania
RONALD M. MOTTL, Ohio SAMUEL L. DEVINE, Ohio
AL SWIFT, Washington (Ex Officio)
THOMAS A. LUKEN, Ohio
ALBERT GORE, JR., Tennessee
HARLEY 0. STAGGERS, West Virginia
(Ex Officio)
HARRY M. SHOOSHAN III, Staff Director/Counsel
CHARLES L. JACKSON, Staff Engi neer
(II)
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CONTENTS
[Contents for Volume II, Part 1, will be found in Volume II, Part I
[Contents for Volume II, Part 2, will be found in Volume II, Part 2
PART 3
Hearings held on- Page
June 6, 1979 1469
June 7, 1979 ~. 1621.
Statement of-
Baker, James H., executive vice president, Forest Industries Telecommuni-
cations 1766
Booth, Robert M., Jr., general counsel, American Radio Relay League, Inc.. 1748
Bortz, Paul I., Deputy Assistant Secretary for Communications and Infor-
mation, National Telecommunications and Information Administration
Department of Commerce 1469, 1481
Cornell, Nina W., Chief, Office of Plans and Policy, Federal Communica-
tions Commission 1621, 1675
Crosby, Mark E., president and managing director, Special Industrial Radio
Service Association, Inc 1747
Franco, Don, president, Microband Corporation of America 1469, 1542
Gray, Richard E., regulator matters manager, General Telephone & Elec-
tronics Corp 1469, 1560
Landreville, Ernest J., executive director, Associated Public Safety Com-
munications 1577
McClure, Nathan D., III, president, Associated Public Safety Communica-
tions Officers, Inc 1577
Marshall, Travis, vice president, Motorola, Inc 1621, 1652
Massie, Herbert L., chairman, radio liaison committee, Association of
American Railroads 1598
Meehan, Charles M., on behalf of Land Mobile Communications Council
and Utilities Telecommunications Council 1469, 1519
Roberts, Carlos V., Chief, Safety and Special Radio Services Bureau,
Federal Communications Commission 1469
Steinman, Harold, Washington coordinator, American Radio Relay
League, Inc 1748
Strichartz, Harvey, technical director, American Radio Association, AFL-
ClO and on behalf of AFL-CIO Maritime Committee 1784
Weinberg, Louis M., director, business exchange and mobile communica-
tions services, American Telephone & Telegraph Co 1621
Wiley, Richard E., Washington, D.C 1621, 1672
Williams, Val J., president, National Association of Business and Educa-
tional Radio 1575
Wolf, Sherman M., on behalf of Telocator Networks of America 1621, 1676
Additional material submitted for the record by-
American Radio Association, AFL-CIO, attachments to Mr. Strichartz's
prepared statement:
Appendix A-ARA contract provisions 1794
Appendix B-Legislative history of title III, part II of the act 1799
Appendix C-Excerpt from IEEE Journal of Oceanic Engineering, July
1977, skilled radio officer; key resource for at-sea maintainability ... 1814
Forest industries Telecommunications, letter dated June 13, 1979, from Mr.
Baker to Chairman Van Deerlin re applicability of the Administrative
Procedures Act to the new National Telecommunications Agency pro-
posed in title VII of H.R. 3333 1782
Land Mobile Communications Council, attachment to Mr. Meehan's pre-
pared statements, Land Mobile Communications Council membership
list 1533
(III)
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IV
Additional material submitted for the record by-Continued
Microband Corporation of America:
Attachments to Mr. Franco's prepared statement:
Exhibit A-Typical MDS metropolitan area distribution pattern . 1557
Exhibit B-MDS operating stations 1558
Exhibit C-Insuring building access 1559
Exhibit D-Requiring interconnection by all carriers 1559
Letter dated June 12, 1979, from Mr. Franco to Chairman Van Deerlin
re issues raised at June 6, 1979, hearing and suggested language for
the bill 1573
Motorola, Inc., addendum to Mr. Marshall's prepared statement 1670
Telecator Network of America, attachments to Mr. Wolf s prepared state-
ment:
Massachusetts Department of Public Utilities:
18090, February 12, 1975 1678
18090, May 13, 1977 1684
18090 (supplemental order), June 14, 1977 1719
Statements submitted for the record by-
American Federation of Teachers AFL-CIO 1901
American Newspaper Publishers Association 1906
Citizens Media Task Force American Legal Advocates 1968
Cox Broadcasting Corp 1939
Electra Co division of the Masco Corp 1821
Group W, Westinghouse Broadcasting Co., Inc 1931
McGraw-Hill Broadcasting Co., Inc 1909
National Education Association 1848
New Jersey Office of Cable Television 1838
Quello James H FCC commissioner 1943
United States Catholic Conference 1950
United States Office of Consumer Affairs 1830
William M. Young & Associates 1828
Letters submitted for the record by-
Anti Defamation League Justin J Finger national civil rights director 1986
North American Soccer League 1982
Political Association, Inc., Ricardo A. Callejo, counsel 1980
ORGANIZATIONS REPRESENTED AT HEARINGS
American Federation of Labor-Congress of Industrial Organizations Maritime Com-
mittee see American Radio Association AFL-CIO
American Radio Association AFL-CIO Harvey Strichartz technical director
American Radio Relay League Inc
Booth, Robert M., Jr., general counsel.
Stemman Harold Washington coordinator
American Telephone & Telegraph Co Louis M Weinberg director business ex
change and mobile communications services.
Associated Public Safety Communications Officers Inc
Landreville, Ernest J., executive director.
McClure, Nathan D., III, president.
Association of American Railroads Herbert L Massie chairman radio liaison
committee.
Commerce Department, Paul I. Bortz, Deputy Assistant Secretary for Communica-
tions and Information, National Telecommunications and Information Administra-
tion.
Federal Communications Commission
Cornell, Nina W., Chief, Office of Plans and~Policy.
Roberts Carlos V Chief Safety and Special Radio Services Bureau
Forest Industries Telecommunications, James H. Baker, executive vice president.
General Telephone & Electronics Corp Richard E Gray regulator matters manager
Land Mobile Communications Council, Charles M. Meehan.
Microband Corporation of America Don Franco president
Motorola Inc Travis Marshall vice president
National Association of Business and Educational Radio Val J Williams president
Special Industrial Radio Service Association, Mark E. Crosby, president and manag-
ing director.
*Telelocator Network of America, Sherman M. Wolf.
Utilities Telecommunications Council, see Land Mobile Communications Council.
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THE COMMUNICATIONS ACT OF 1979
WEDNESDAY, JUNE 6, 1979
HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON COMMUNICATIONS,
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,
Washington, D.C.
The subcommittee met, pursuant to notice, at 2 p.m., in room
2123, Rayburn House Office Building, Hon. Ronald M. Mottl, pre-
siding (Hon. Lionel Van Deerlin, chairman).
Mr. MOTTL. The' subcommittee will now come to order. We are
very fortunate this afternoon to hear a distinguished panel com-
prised of Carlos Roberts, Bureau Chief, Private Radio Bureau, Fed-
eral Communications Commission; Mr. Paul Bortz, Deputy Assist-
ant~Secretary, National Telecommunications Information Adminis-
tration; Mr. Charles M. Meehan, Land Mobile~ Communications
Council; Mr. Don Franco, president, Microband Corp. of America;
and Mr. Richard E. Gray, regulatory matters manager, General
Telephone & Electronics Corp.
The hearings will basically be on the spectrum use, parts A and
B and the three questions posed to the panel to be discussed before
the subcommittee.
~The first question is, Are there current spectrum management
problems.which H.R. 3333 does not. solve?
Two, would the prop.osed spectrum use fee be workable and
would it improve spectrum management?
Three, can modern technology provide new approaches to spec-
trum management? If so, does H.R. 3~33 al~kw the Commission to
use such new approaches?
We will start with Mr. Carlos Roberts.
STATEMENTS OF CARLOS V. ROBERTS, CHIEF, SAFETY AND
SPECIAL RADIO SERVICES BUREAU, FEDERAL COMMUNICA-
TIONS COMMISSION; PAUL I. BORTZ, DEPUTY ASSISTANT SECRE-
TARY FOR COMMUNICATIONS AND INFORMATION, NATIONAL
TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION,
DEPARTMENT OF COMMERCE; CHARLES M. MEEHAN, ON BE-
HALF OF LAND MOffiLE COMMUNICATIONS COUNCIL AND UTIL-
ITIES TELECOMMUNICATIONS COUNCIL; DON FRANCO,
PRESIDENT, MICROBAND CORP. OF AMERICA; AND RICHARD E.
GRAY, REGULATORY MATTERS MANAGER, GENERAL TELE-
PHONE & ELECTRONICS CORP.
Mr. ROBERTS. Thank you.
Mr. Chairman and members of the subcommittee, it is a pleasure
to have the opportunity to appear before you and offer my
(1469)
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1470
thoughts on the spectrum management provisions of H.R. 3333. I
want to emphasize at the outset that I am speaking for myself and
not for the Commission. The views I express are my own.
The one proposal in H.R. 3333 that has generated the most
controversy and confusion and which also happens to be among the
most important and innovative aspects of the bill is the authoriza
tion of spectrum fees. Because of the important role that fees and
other economic tools can play in any scheme for improving the use
and management of the radio spectrum, I would like to focus my
oral comments today on the general subject of spectrum economics.
I will submit written comments on the other aspects of the bill at a
later date.
Let me begin by discussing why we need to apply economics in
our spectrum management processes. Our present regulatory struc-
ture is based substantially on decisions made on the basis of subjec-
tive judgment rather than on extensive factual information.
This is because it is extremely difficult to obtain accurate data
on an applicant's need for use of the spectrum, on the value of the
spectrum to present users, on the costs associated with reallocation,
on the costs of utilizing more efficient technology and many other
areas. Because of this lack of critical data, decisions made through
the political and regulatory processes sometimes do not result in
the most valuable use of the spectrum.
Some of the types of decisions I am referring to include: When
should reallocation occur within a general class of service? For
example, in the land mobile services, should railroads have more
frequencies than farmers? Should manufacturers have the same
number of channels as power companies?
When should reallocation occur between services? For example,
when does television broadcasting have too much spectrum and
land mobile not enough or vice versa? When should a totally new
class of radio service be given spectrum and where should it come
from?
What should be the required standard for technical efficiency in
spectrum consuming equipment? For example, when if at all,
should efficient spectrum usage techniques such as trunking and
single sideband be mandated?
These few examples illustrate some of the difficult decisions that
must continually be made in the process of spectrum management.
I believe the goal of spectrum management should be to put spec-
trum to its most valuable use and that use should be determined in
the same way we allocate most of our other scarce natural re-
sources, through the application of economics.
Let me now briefly explore two types of economic tools that hold
promise for improving th~ manner in which spectrum is utilized.
Spectrum use fees based on scarcity are one possible option for
achieving more efficient use of the spectrum. Unfortunately the fee
structure provided for land mobile users in H.B. 3333 suffers from
a serious structural deficiency. Since the maximum fee that a land
mobile user can be assessed is tied to the revenues of the smallest
local UHF TV broadcaster, there exists a critical relationship that
can limit the effectiveness of any fee for land mobile operations.
For example, using the formula proposed in the bill, the land
mobile fee caps based on spectrum scarcity for our three largest
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1471
cities would range from $0.48 to $4.42. Clearly fees at this level
would have little if any effect on improving spectrum management.
A possible solution the subcommittee may wish to consider would
be to sever the link between UHF television fees and land mobile
fees and have each category float separately. I personally do not
believe fees for land mobile would be very high even without a tie-
in to television fees but any such fears could be allayed through
the provision in the bill of an arbitrary dollar ceiling on the
maximum fee amount.
Another type of economic tool that can be effectively used to
improve spectrum management is the implementation of a market-
place where licenses to use the spectrum can be freely traded. To
function effectively this proposal would require the following: (a)
maximum loading limits would have to be set for shared land
mobile channels; (b) free transferability of licenses among users of
similar services would have to be assured; and (c) the elimination
of block allocations and restrictive eligibility rules would have to
be accomplished.
Fortunately, I believe that the provisions in H.R. 3333 are ade-
quate to enable the Commission to implement a system for the free
trading of licenses although obviously major changes in present
FCC rules would be required.
Such a spectrum market would have the advantage of largely
removing Government intervention in the frequency assignment
process, and the resulting price signals would give a clear indica-
tion to the spectrum allocation authority as to the need for spec-
trum reallocation.
Let me sum up this quick review of economic tools for spectrum
management by stating it is my firm conviction that only through
the applicaLion of economic based techniques, such as those dis-
cussed above, that significant improvements in spectrum manage-
ment can result. Unfortunately there does not appear to be any
one technique that can be optimally applied to all bands and all
radio services.
I would therefore recommend that H.R. 3333 be drafted in such a
manner as to provide the Commission with maximum regulatory
flexibility in implementing spectrum ecônomic~ approaches. Specifi-
cally, the use of fees, auctions and. marketplace mechanisms for
frequency assignment and allocation should be permitted and en-
couraged in the legislation.
Again, it is only through the use of economic tools that I believe
the goals of spectrum management can be achieved in our rapidly
changing communications environment.
Mr. Chairman, this concludes~my~testimony Thank you for the
opportunity to appear before the subcommittee.
[Testimony resumes on p. 1481.]
[Supplemental statement of Mr. Roberts follows:]
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1472
SUPPLEMENTARY STATEMENT OF CARLOS V. ROBERTS, CHIEF
PRIVATE RADIO BUREAU
FEDERAL COMMUNICATIONS COMMISSION
Carlos V. Roberts, Chief of the Private Radio Bureau of the Federal
Communications Commission, respectfully submits the following comments
on H.R. 3333. These are in addition to the testimony that Mr. Roberts
was privileged to present to the Subcommittee on June 6, 1979. As then,
these comments reflect the views of Mr. Roberts, and not necessarily
those of the Federal Communications Comission,
Title I -- General Provisions
Findings and Purpose
Sec. 101. 1 am in complete accord with the findings and purpose.
Sec. 102 (2). The definition of "broadcast' may be too vague. It
could be interpreted to include CB.
Title III -- Telecommunications Carrier Regulation
Part A -- General Provisions
Declaration of Purpose
Sec. 311 (b). Regulatton~ is limited to protection of consumers from
dominant carriers. Regulation authority may also be needed to assure
compliance with international services, (e.g., coastal stations in the
Maritime Mobile Service.)
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1473
Part B -~ General Authority of Cóñnlssion
Jurisdiction
Sec. 321 (b)(1). There Is some question In my mind as to what, If any,
jurisdiction the states should have over mobile radio. Any state
authority would be particularly troublesome in the multiple licensing
(community repeaters) and 800 MHz SMRS areas. An explicit statement
that all private mobile radio services are exempt from state regulation
would be preferable here.
Location of Service Carriers
Sec. 334. I heartily support this section permitting any carrier to
accept and deliver maritime and general telecommunications service for
international transmission at any point within the United States.
litle IV -- Spectrum Use and Licensing
Part A General Provisions
Powers and Duties of the Comission /
Sec. 413. I am in gene~ral agreement with the powers and duties of the
Commission specified by Sec. 413 but I wish to offer two suggestions.
In (a)(7), regarding conventions and treaties, it appears that this
section gives the Commission broader authority than is intended,
considering the duties and functions intended for NTA in Title VII.
As presently set out, I believe there exists the possibility of
unintentional and undesirable overlap of authority. The other is with
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( 1474
regard to the performance of television receiver characteristics. I
concur with the need to regulate TV receivers; this could eventually
make available more spectrum space for TV and other radio services
utilization. Sec. 413 is silent on the subject of other kinds of
receivers, however. Since the receiver is an essential part of any
radio system operating in the private services, comprehensive management
of the spectrum is made more difficult if there is no authority to
regulate receiver performance. This is so because it is less costly to
manufacture receivers that offer poor selectivity than those which are
extremely selective. As a result of the deployment of receivers with
poor selectivity, the Commission is often forced to assign transmitting
frequencies with larger spacings between adjacent channels than current
technology actually requires. This inefficient, indeed wasteful, use of
the spectrum can be directly related to the Commission's inability to
exercise control over receiver performance.. I believe public interests
would be better served if the Commission were given the authority to
develop and enforce minimum standards of receiver performance.
$pectrum Resource Fee
Sec. 414. Please refer~to my oral statement on this subject before the
Subcomittee on June 6, 1979.
Applications
Sec. 415 (b). Coastal stations of the Maritime Mobile Service should
be added to the list of stations requiring a public notice before being
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1475
granted a license.
Sec. 416 (c)(2). Since amateur stations are mentioned elsewhere in the
Bill (e.g., 549 (d)), it would be consistent to include "amateur radio
station" in Sec. 102.
Sec. 417. It would be expedient to have authority for the Commission
to designate certain licenses to be granted upon the mailing of an
application--for example; CB and non-compulsory fitted ship stations
(recreational boats).
Revocation of Licenses; Cease and Desist Orders
Sec. 418 (d)(1)(A). Amendment would permit an interested party to file
with the CRC "a petition to revoke any license granted by the
Commission, under this title". The CRC would have to take action on
such petitions expeditiously, even though in many instances hearings
would be required. Since there are approximately 15 million CB
licenses, and a substantial percentage of holders at sometime or other
probably have engaged in behavior warranting revocation, it may readily
be seen that the CRC could be inundated with Sec. 418 petitions. Sec.
418 should be amended to exclude most or all of the stations licensed by
the Private Radio Bureau.
Prohibition of Censo~p
Sec. 422 prohibits censorship or regulation of transmission content by
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1476
the Commission. It is presumed that the legislative intent isaimed
primarily at broadcasting, however land mobile and other radio services
are included. This effectively also exempts from regulation the
transmission of false distress or other improper messages. This is
clearly beyond the intent of Congress. While the First Amendment basis
for proposed Section 422 may be solid for the broadcast services, the
Subcommittee may want to review the language of this Section with the
Private Services in mind. Because these services presently depend
almost exclusively on time sharing, the Commission must adopt rules that
regulate the content of transmissions. Those that are considered non-
essential should not be transmitted; routine messages must give way to
emergency calls There are a number of rules which limit the content
of transmissions to matters directly related to the activity on which
the licensee's eligibility is based. The present language of Section
422 is so broad that we may find ourselves unable to require the
continued use of practices which result in the ability of multiple users
to share the same channel efficiently. This could be an unfortunate
development, and could impair the CRC's spectrum management capability.
Part B -- Land Mobile and Other Radio Services
Distr~ss Signals and Communications
Sec. 434 in essence states that ships, when in distress, may use their
radio equipment in any possible way to attract attention to receive
assistance. There is nothing, however, in H.R. 3333 regarding the
compulsory carrying of radio aboard ships. The Communications Act of
1934 contains a number of specific requirements for certain types of
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1477
passenger and cargo vessels to maintain radiotelephone/radiotelegraph
installations (Title III, Parts II and III). 1934 wisdom has, over the
years, insured the safety of life and property aboard marine vessels.
While a desire to minimize some of the detail contained in this section
is understandable, it is a very different thing to eliminate altogether
the requirement that ships be radio-equipped. I suggest the inclusion
of language mandating the compulsory installation aboard ships of radio
equipment capable of transmitting distress or emergency messages. The
Commission should be free to establish regulations to this effect, but I
think Congress should also establish the requirement in unequivocal
terms. Should, the Subcomittee feel that the requirement for safety
related equipment would be located inappropriately in the Communications
Act, then legislation should be drafted giving regulatory responsibility
and enforcement authority to the Department of TranspQrtation (U.S.
Coast Guard). This is a matter of vital importance and I recommend that
the intent of Congress be clearly stated, so that governmental
responsibilities with regard to marine radio will be apparent to all.
Title V -- Administrative and Judicial Procedures;
Penalties
Part ~ -- Administrative Procedures
General Procedures
Sec. 511. I support the goal of completing rule making within a one-
year and 90-day period but I do question the wisdom of the self-destruct
mechanism of any rule making not completed within this time limit. The
Administrative Procedures Act itself has built-in delays, and many
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1478
Commission rule making procedures, including frequency coordination,
require coordination with other federal agencies, often resulting in
delays for scheduled meetings. This means that much of the Commission
rule making process depends upon actions over which the Commission has
little or no control, and it therefore seems advisable to soften the
wording of Sec. 511 to allow a longer rule making period when complex
issues requiring coordination with other government agencies are
involved.
Part C -- Penalties and Enforcement
Unauthorized Publication, Interception, or
Use of Communications
Sec. 549. In paragraph (d), I suggest that the word "amateurs" be
deleted and the words "amateur radio station" substituted therefor, and
that a comma be inserted after the word "station." These amendments
would resolve the problem encountered under Section 605 of the 1934 Act
concerning the applicability of the privacy provisions in Section 605 to
amateur stations. Another suggestion here regards enforcement
monitoring. Commission enforcement monitoring capabilities most
probably will never be adequate to allow proper enforcement of short
range mobile communications. Therefore, third party monitoring by
Commission designated Government agencies or specified facilities for
use as evidence by the Commission, for enforcement purposes, should be
authorized. For example, the Coast Guard has an extensive VHF network
with which it monitors distress calls. Monitoring through this network
could be instrumental in reducing the misuse of the maritime VHF band,
PAGENO="0015"
1479
especially the distress frequency, Channel 16. Rule compliance could be
~signifiaantly.improved, with minimum additional costs, if the Congress
were to authorize the Comissiorrto utilize the products of monitoring
by other federal agencies.
Title VII -~ National Telecommunications Agency
I am in general agreement with the provisions of Title VII. Location of
the entire allocation function in the NTA, an executive branch agency,
does however cause some concern. I have given considerable thought to
this matter and recognize the difficulties in our present system,
wherein two agencies (FCC and NTIA) have allocation and assignment
responsibilities, protecting their respective government or non-
government all~ocations and each vying to get more from the other. The
IRAC has done its best to ameliorate this dichotomy but it has not been
enough. I believe that the entire allocation function should be located
within a single entity in order to be truly objective in making
allocations appropriate to both government and non-government uses. I
will not attempt to define the nature of such an entity but I do believe
it should not be a single-administrator type of agency, for the reasons
presented by Chairman Ferris in earlier testimony. I believe the
drawbacks of assigning the critical spectrum allocation function to a
single-head executive branch agency would outweigh the advantages that
would be gained by consolidating what is now a split responsibility. If
the spectrum allocation functions cannot be performed by some type of
collegial agency such as a commission, it would be preferable to
continue the status quo rather than to run the very high risks of
PAGENO="0016"
1480
misallocation and favoritism that would inure to a process controlled by
a single~head agency.
Additional Suggestions
I would like to offer two additional suggestions which I believe would
give the Commission desirable licensing flexibility along with better
service to the public at less cost. The first suggestion is to include
authority for the Commission to delegate station licensing authority to
appropriate designated persons or entities. An example of a possible
benefit under this suggested delegation is point-of--sale licensing.
This could permit the issuing of licenses by equipment distributors at
the time of purchase, thus avoiding current licensing delays.
A second suggestion would permit the Commission to issue blanket
authorizations for th~ operation of certain classes of stations, CR for
example, which, due to their low power and short range, remain entirely
domestic. Together with this authority the Commission would need
expedited revocation procedures. The advantage here, if we again
consider CR as an example, would be that blanket authority could be
given for operation in tj~e CB Service, and the Commission could then
concentrate action on abuses instead of licensing. Certainly, both of
these suggestions, if considered for legislation, would need to be
drafted carefully so as not to conflict with Article 18 of the ITU Radio
Regulations.
Conclusion
I would like to thank the Subcommittee for the opportunity to present
both oral and written statements for its consideration.
PAGENO="0017"
1481
Mr. MOTTL. Thank you very much, Mr. Roberts.
All statements of the succeeding speakers will be inserted into
the record without objection.
We will next hear from Mr. Paul Bortz, Deputy Assistant Secre-
tary, National Telecommunications Information Administration.
STATEMENT OF PAUL I. BORTZ
Mr. BORTZ. I appreciate this opportunity to testify on the spec-
trum fees and land mobile and other radio services portions of your
bill.
The executive branch still has this and other portions of the bill
under study, so the views I present today represent those of NTIA
and the Department of Commerce. I will submit the full testimony
for the record and I would like to summarize three major points.
[See p. 1484.]
The first Concerns spectrum fee for broadcasting. The term "fee"
has been used in a number of different ways. We look at it in
terms of four categories in which people have used the term "fee."
The first is fee to cover the cost of licensing which appears in much
of the legislation. The second is to recover some portion of the
scarcity value which is the principle your bill addresses. The third
is the use of fees as a spectrum management tool which again your
bill addresses and the fourth is the NTIA position that we have
described earlier, the use of a fee in lieu of the public trustee
concept.
Whenever we talk about "fee," I think we should look at it in
terms of those four functions and try to determine what it accom-
plishes and what it does not accomplish in terms of those functions.
As I mentioned, your proposal uses scarcity value as the basis.
NTIA has proposed that indeed the major reason for fee would be
in lieu of the public trustee obligation. As we have stated before,
we have noted that enforcement of the public trustee obligation
has been inefficient and has entailed substantial first amendment
costs.
As to the amount and the nature of the fee, I think only an
auction or some similar technique could really estimate scarcity
value. Clearly, this is infeasible because of the disruption it would
cause for the broadcasting services. I think the judgment as to
what fee is appropriate is basically a political judgment; that is,
you are trying to come up with a fee which is not too disruptive
and yet you want to make a significant contribution to the achieve-
ment of congressional goals in broadcasting which we now seek
through the public trustee concept. Whether it is 1 percent of
revenues or 2 percent or the sliding kind of scale which is em-
bodied in your bill, I think you have to look at it from a number of
different points regarding equity and disruption and we outline
that in our formal testimony.
We therefore support the concept of fee in your bill but we note
throughout the bill that it is based in large part on the use of a
scarce spectrum resource. To that extent, then, we believe you
should consider the form of the schedule' which appears in 5. 611.
Let me go on to spectrum fees for land mobile and other radio
services. We believe that in the regulation of land mobile and other
radio services that the proposed CRC should have maximum flexi-
51-253 0 - 80 - 2
PAGENO="0018"
1482
bthty to use economic techniques in spectrum assignment and allo
cation decisions, these views are very similar to those Carlos Rob
erts just expressed.
User charges, shadow pricing and auctions are all possible, but
we do not see immediate application of these at all These tech
niques are theoretical, and we do not know a lot about them in a
practical situation There would certainly have to be experimenta
tion and many of these might not turn out to be feasible
We suggest CRC be given the power to experiment, the authority
should be there, but we do not anticipate this happening immedi
ately
If some of these would work, I think a clear pattern of spectrum
value would emerge and any significant difference in value-for
example, in adjacent parts of the band-would then be an argu
ment, only one argument but an argument for reallocation among
services.
A multipornt distribution system is perhaps a good example of a
service in which really there are no noneconomic social concerns
Therefore it is one that would be quite suitable to the use of a
technique such as auction
In talking about MDS, we also commend your incorporation of
section 436(a), which essentially says the Commission should if at
all possible avoid the cieation of monopolies in the allocation of
services. The way MDS has been developed, has really created a
monopoly and I think cellular telephone systems would result in a
similar situation We think your caution and general direction
there is very important
Linking the land mobile fees to the broadcast fees as you have
done, I think, would preclude or might preclude any effective use
for spectrum management purposes of the fees derived from this
service We appreciate the thrust of the provision that you have-
that is, the payment of equivalent amounts per unit of spectrum
used-which is the basis on which the link is established However,
it might not be a linear relationship at all.
We think if you can acknowledge that the broadcast fee really is
imposed in lieu of the public trustee obligation, you will be able to
separate the two approaches as regards fees: fees imposed on land
mobile and other radio services would be for spectrum manage
ment purposes, while those derived from broadcast would be in lieu
of the public trusteeship
Our recommendation is that the relevant subsections of 414
which deals with the linkage be eliminated and that the Commis
sion be given a clearer charter for the uses of economic techniques
as presently given in section 436(b)(2) This essentially is a grand
fathering kind of approach We think this grandfathering approach
could lead to some very awkward situations out in the field.
Let me touch on my final key point, which deals with jurisdic
tional uncertainties in the land mobile area particularly Both the
regulated operators, radio common carriers, and wire line common
carriers, and the unregulated entities, such as shared private sys
tems, exist in these services Sometimes it is very hard to tell the
difference between those services
I think some systems require regulation I think cellular is a
system that has definite monopoly characteristics-high entry
PAGENO="0019"
1483
costs, significant economies of scale and limited availability of spec-
trum.
We believe all intraexchange services, where regulated, should
be under State regulation as opposed to the Federal preemption
which is in your bill.
We do share your concern of unnecessary State regulation in
these areas and we support the alternative put forth by Carlos
Roberts just a few weeks ago to have your bill give the Commission
the authority to determine whether, under certain conditions and
for certain types of radio common carriers' services, there is no
need for regulation.
We believe where regulation is appropriate, that regulation
should be at a single level for all services providing intraexchange
communications. I think, if not, we could get some real anomalies
in having two layers of regulation for what is basically the same
service using different technologies.
Let me just state two more points very briefly.
We believe the Commission should not regulate the performance
characteristics of receivers beyond the regulation of spurious omis-
sions. I described the last time I appeared in front of your commit-
tee on H.R. 13015 about the "tar baby" effect that can result from
receiver performance regulation. We think the wide latitude given
the Commission could be really disasterous and result in huge cost
to the consumer.
We also want to state our very strong support for section 549 of
your bill, which deals with unauthorized interception of communi-
cations. We suggest in the full testimony somewhat more rigorous
standards for governing interception than is currently in section
549. These more rigorous standards are based on recent NTIA
study of these particular issues.
I think in summary that this section of the bill is a clear im-
provement over what we have now and we look forward to its
enactment.
[Testimony resumes on p. 1520.]
[Mr. J3ortz~ prepared statement follows:]
PAGENO="0020"
1484
Statement of
Paul I. Bortz
Deputy Assistant Secretary
National Telecommunications and Information Administration
I Introduction
Mr Chairman I appreciate this opportunity to appear
before the Subcommittee and testify on H R 3333 The
subject of these hearings today spectrum use Lees land
mobile and other radio services focuses attention on the
critical need for effective management of the valuable
spectrum resource
The Executive Branch still has this and other portions
of the Bill under study, ana it has not been feasible to
coordinate with all the relevant agencies Consequently
I will only be able to give you the views of NTIA and the
Department of Commerce
Historically spectrum has been treated essentially
as a "free" good.. Whenever charges have been proposed
for its use, the proposals have sparked considerable controversy
as to what kinds of spectrum use fees the FCC can legally
charge users
We believe that it is time to face the important question
Can we afford to continue treating this valuable resource
PAGENO="0021"
1485
as a "free good or should we introduce economic principles
into management ofthe "scarce" spectrum resource?
The "scarcity" we hear of today is, to a great extent,
the result more of treating spectrum as a free good and
as NTIA will more fully develop in our testimony on Title VII,
the administrative procedures required by present law,
than of a genuine scarcity of spectrum. For example,
while block grant allocations are appropriate for certain
services, we should, whenever feasible or appropriate,
consider breaking down more rapidly the block allocation
procedures--by which frequency bands or "blocks" are reserved
exclusively for a specific service. A few improvements
are observed in this area, but more is required. Most
importantly, there are no particular financial incentives
to use~ the spectrum efficiently. In fact, there is a strong
counter-incentive to innovation in that a spectrum user
can usually substitute the use of "free" spectrum for much
of the complexity and cost of the more sophisticated efficient
communications equipment.
We suggest therefore a guiding principle for spectrum
management: to strive to allocate this valuable national
resource along lines that reflect maximum economic and
PAGENO="0022"
1486
technical efficiencies consistent with other national goals.
We think that H.R. 3333 would serve that end far better
than does the present statute.
II. Land Mobile and Other Radio Services
Land mobile and other radio services play a critical
but often little appreciated role in our modern society.
They include such important services as the various mobile
categories--land, aeronautical, and maritime mobile--as
well as the private microwave services, the Citizen's Band
and amateur services, and navigation systems, and even
radio astronomy, to name just a few.
These services are crucial to assuring the safety
of life and property, for economic well-being, for promoting
efficient transportation and management of resources and
for allowing public access to radio for personal use.
Many of those functions could not exist--or could only
be performed at a much higher cost or with greatly reduced
effectiveness--without the use of the radio spectrum.
Moreover, the amount of spectrum allocated to a particular
service is an important element in determining the cost
and the quality of the service to the user.
PAGENO="0023"
1487
We have already expressed our opinion that the use
fee concept would be a worthwhile option. But there has
been no experience in administering alternative economic
techniques, or combinations thereof. Without considerable
experience in using economic techniques in spectrum management
decisions, we doubt that the CRC will be. able to identify
the preferred techniques.. Congress should therefore give
the CRC maximum flexibility to develop economic techniques
for use in its spectrum assignment decisions. These techniques
might include user charges, shadow pricing, auctions, etc.
If Congress does allow the CRC to engage in spectrum management
with therecommended flexibility, we intend to participate
fully in the CRC's efforts to develop these economic techniques.
We believe that these efforts can improve spectrum
management in several ways. For example, a technique such
as auction may be appropriate in circumstances without
non-economic social concerns, and will allow for a determination
of the highest value of spectrum for particular uses.
This process would serve both the interests of economic
efficiency and equity. This, in turn, will foster more
effi'cient, future allocation and reallocation decisions.
For, if a clear pattern of spectrum value emerges, such
as might happen with a spectrum auction, any significant~
PAGENO="0024"
1488
difference in the value of the spectrum from one service
band to another would surely be an argument for reallocation
Present mechanisms to determine the relative needs of spectrum
users within a class--or even the relative needs of classes
of spectrum users--are demonstrably inadequate We are
not saying that the auction process for a fixed term assignment
is the most desirable technique under all circumstances--only
that its use in certain service should be thoroughly explored
and be within the CRC's discretion if found to be desirable
As another example there are certain aspects of relative
spectrum property rights that are best left to spectrum
users to resolve by private agreement subject of course
to the CRC's approval. One user might be able to improve
his or her system's performance if a second user agreed
to decrease transmitted power If no third parties are
adversely affected technically a private agreement here
would increase overall economic efficiency.
Another technique to be explored is subleasing. Here
a user might sublease part or all of his or her license--in
either the geographic frequency or time domains This
has precedent For example the office music suppliers
use portions of FM radio frequencies and pay the radio
station for carrying their signals.
PAGENO="0025"
1489
In sum, short of a full and open market in spectrum-which
we dannot advocate at this time-a number of possible approaches
with varying degrees of market involvement are available
to increase overall economic efficiency. A spectrum fee,
determined by some administrative process, might also be
a useful economic technique for making frequency assignment
decisions, but it is not the only or the most effective
marketplace force that might be applied to the management
of the spectrum (e.g., many would argue that auctions would
be more effective). The CRC thus should be allowed flexibility
to employ economic techniques,, such as described above,
both in making spectrum assignments and after such assignments
have been made. Thus, while we approve of Section 436(b) (2)
insofar as it would allow some flexibility to the CRC,
we believe that greater flexibility is needed (see page
10, infra).
III. Spectrum Fee for Broadcasting Services
In view of NTIA's prior testimony on commercial broadcasting,
no extendeddiscussion is needed. Whatever the merits
ofa fee for managing the spectrum in the broadcast area,
such a fee is called for, in our view, in lieu of the public
trustee obligation. As we have developed, enforcement
PAGENO="0026"
1490
of that obligation has been ineffectual and has entailed
Considerable First Amendment costs The revenue obtained
from the spectrum fee could be used by Congress to more
directly accomplish its goals in this area. We urged immediate
substitution of the fee for program content regulation
as to radio and its examination for television after a
10-year period in which the experience in radio and the
deregulatory experiments could be evaluated.
As to the amount and nature of the broadcast fee,
we pointed out that only an auction could establish value
in these circumstances, but that auction was infeasible
because of the great disruption that would occur It follows
that the judgment as to the appropriate fee is a political
one-that is to select a Lee that is not too disruptive
and yet also makes a significant c~ontribution to the achievement
of Congressional goals.
We therefore support the concept of the spectrum fee,
as reflected in H.L3333, assuming that~ the hearings do
not establish that the schedule in Section 414 fails to
meet the above guidelines We note that this schedule
is based in large part on the scarcity value of the
spectrum being assigned (Section 414(a)(2)) To that
extent, we believe that the schedule in S. 611 merits consideration.
PAGENO="0027"
1491
IV. ~ 3333
"Find inns and Purposes
Title I soundly sets forth a general Congressional
finding that regulation by the CRC is necessary "to the
extent marketplace forces are deficient," and that the
purpose of the Act is to regulate interstate and foreign
telecommunications "to the extent that marketplace forces
fail to protect the public interest" (Section 101 (a),(b)).
This finding is properly restated in Section 411, containing
the Congressional findings under Title IV--spectrum use
and licensing--so as to dispel any doubts that marketplace
forces are to be an essential tool in spectrum management,
and regulation is to be resorted to only when the marketplace
is proven insufficient.
Title IV recognizes that regulation of spectrum usage
has the additional purpose of resource conservation. Section
411 also provides the principle underlying spectrum fees,
to increase efficiency of spectrum usage. The Section
411 findings should be expanded to make it clear that the
same principle underlies the CRC's employment of other
economic techniques in its spectrum management decisions,
such as bidding, leasing and license modification agreements.
PAGENO="0028"
1492
trum Fee f or land Mobile Rad io Se r V
The fee schedules that are to be established for land
mobile radio services may well be inappropriate, if their
purpose is to promote efficient spectrum use The Bill
provides for spectrum fees in the land mobile radio services
that would be tied to spectrum fees for UHF television
broadcast licensees, with the latter fees based upon a
statutory formula. We can appreciate the thrust of this
provision--to have UHF broadcasters and land mobile radio
licensees pay equivalent amounts per Hertz of the spectrum
used This appears to be aimed at notions of equity among
various users. But there is another important purpose
that should be taken into account--to promote efficient
use of the spectrum The fees established for the UHF
spectrum might not necessarily be identical to those which
would efficiently allocate the land mobile spectrum The
CRC should also have the flexibility to adopt a fee schedule
that would promote the latter
This poses a choice--to opt for the equitable linkage
thu~ stressing scarcity value, or to eliminate subsections
(c) (1) (B) (ii) and (c) (2) of Section 414, so that the fee
will be established by the CRC based on the spectrum efficiency
standard We favor the latter but recognize the difficult
policy considerations in balance here
PAGENO="0029"
1493
Flexibility in Spectrum Management Techniq
We have set out the need for maximum flexibility to
be afforded the CRC to experiment with and employ various
economic techniques such as auctions and user charges in
assigning spectrum. We are concerned that the Bill will
not be construed to allow such maximum flexibility. Section
414(a) requires the CRC to assess spectrum fees on licensees
based in large part on the "scarcity value" of the spectrum
being assigned.1 Section 413 (a) (3) requires the CRC to
"study and provide for an efficient system for assignment
of the electromagnetic frequency spectrum," and section
436(b) (2) certainly allows flexibility but only with respect
to vacant frequencies in land mobile or other radio services.
This latter provision will lead to awkward situations where
land mobile licensees in the same area will be treated
1 Section 414 (a) (2) (C) states that the Commission shall
waive that portion of the fee representing the scarcity
value of the spectrum if it determines that the license
is required by a treaty or a provision of international
law. The ITU Radio Regulations, which have the status
of an international treaty, specifically require that all
transmitters of member nations be licensed by their governments
(Article 18, Provisions 725-734). An argument might be
made that this would exempt all systems which use ~transmitters
from the spectrum resource fee. We suggest that Section
4l4(a)(2)(C) or the legislative history be clarified to
eliminate this possibility.
PAGENO="0030"
1494
differentlY depending on whether they operate on new or
old frequencies Most important no provision expressly
authorizes the CRC to experiment with and employ a wide
range of economic techniques in all situations. We strongly
recommend that express authorization to do so be included
in Title IV Also section 417(d) (2) and 415(d) (1) ()2
should be revised to specifically note this express authorization
subject to the provision of Section
V Other SJ?eCi~c.. Areas of Co
over-regulat~~. Under the present Act, the FCC is
unsure whether it has the clear authority not to regulate
in many cases where the competitive marketplace might work
very well For example the FCC has had considerable difficulty
in the Land Mobile Radio (LMR) area in creating a new class
of service providers--Specialized Mobile Radio (SMR) systems
The CommissiOn'S construction of the broad mandate to regulate
common carrier activities along with its definition of
common carrier activities has made for wide regulation
in this area
2 We construe Section 436 (b) (2) (D)) as permitting the use
of an employee board, as discussed in our commercial broadcasting
testimony
PAGENO="0031"
1495
Section 322 of the Bill addresses the problem by providing
the proposed CRC with broad powers to classify common carriers
and thus to decide what carriers are subject to Title III
regulation. We believe this flexibility should be carried
over into the land mobile and other radio services, and
believe the Act does so, with the broad exemption provision
in Section 437. We strongly believe that competitive providers
of common carrier-like services should not be regulated
simply because of the definitional nature of the services
offered. The key factor to be considered is the economic
or social need for regulation. What purpose will it serve
in the particular circumstances of the market in question
and will a competitive marketplace, left to its own devices,
serve those purposes?
Optional "Blanket" Licensing. Generally, the FCC
believes it has a mandate to license all non-Federal users
of the spectrum. It has decided that it is reasonable
under this requirement not to regulate very low-powered
emitters such as walkie-talkies and garage door openers.
There is, however, some uneasiness by the Commission in
exercising this discretion.
PAGENO="0032"
1496
Licensing of spectrum Users or operators should serve
a useful purpose. There is, for example, considerable question
whether the licensing of CB users is necessary or desirable.
There are also questions in the operators field: Does
the Government need to license operators and maintenance
personnel? Couldn't the spectrum-using licensee be responsible
for the use of his telecommunications equipment? There
have been great strides made in new technology so that,
in most cases, constant "fiddling" with equipment is no
longer required; automatic alarm systems and/or periodic
checks should be sufficient.
The CRC should have the clear authority to not require
licensing if no useful purpose--such as a needed control
of interference--would be served in so doing. Rather,
the CRC should be given the express authority to employ
blanket licensing or similar approaches (e.g., a rule authorizing
specific uses). Relevant, efficient and flexible management
of the spectrum resource requires this. We again construe
Section 437 as providing such blanket or similar broad
exemption powers for the proposed CRC ("such exemption
is consistent with the purposes of this Act"). If there
is any doubt on this score, explicit language should be
added in Section 412 (a).
PAGENO="0033"
1497
Interconnection. Interconnection of private systems
with common carrier facilities may best be left to the
proposed CRC's discretion; its guideline could be whether
or not such interconnection would be in keeping with the
"purposes of this Act." Efficient use of the public's
spectrum resource has been, and should be, among the conside-
rations here.
Clearly, the proposed CRC should have the authority
to require interconnection in the absence of substantial
reasons to the contrary.
Jurisdictional Uncertainties. There are both regulated
and unregulated entities in the land mobile radio services.
The economically regulated carriers include both the wireline
common carriers, that is, the telephone companies which
provide radio telephone service, and the radio common carriers
(RCCs), which provide only radio services but no traditional
"hard-wire" telephone services.
Private systems of various kinds make up the unregulated
s'ystems. In order to avoid the costs of regulation but
to take advantage of the economics of larger radio systems,
several companies or individuals will often share a "private"
51-253 0 - 80 - 3
PAGENO="0034"
1498
systsem. These sharing arrangements are frequently made
with the help or at the instigation of a third party-often
a mobile equipment manufacturer or dealer. With third
party involvement, the wide eligibility for some of these
shared services, and the relative case of acquiring service
on a monthly fee basis, these shared arrangements can begin
to take on the appearance of a traditional common carrier
service. Moreover, With the development of repeaters which
allow large, service areas, and now with access to the public
telephone network at the repeater site, these shared systems
are becoming technically capable of providing service equivalent
to the common carrier services-both radio telephone and
paging. These so-called pseudo-common carriers often compete
directly with the radio common carriers.
The above raises a number of questions:
(I) are there meaningful distinctfbns between the
radio common carriers, the wireline common carriers, and
the shared special mobile radio systems; (2) which, if
any, of the land mobile radio systems require regulation
a~id who should make that determination; (3) is State or
* Federal regulation appropriate when regulation is required;
and (4) how should interconnection to the switched telephone
network be provided for?
PAGENO="0035"
1499
We believe that the distinction between the land mobile
radio systems is minor, and will become increasingly difficult
to maintain. Further, in our view, the cellular systems,
at least under current circumstances, would appear to require
regulation; they seem to have definite monopoly characteristics--
`high entry costs, significant economics of scale, and limited
availability of spectrum.
We believe that individuals and companies who need
mobile radio services should be free to acquire service
by installing a private system, by sharing a private system
with other users, or by acquiring the service from a common
carrier. Likewise, entrepreneurs should be free to offer
equipment either to users or to service providers and to
assist them' in making their system operable, whether that
system is designed for one company, for shared use by companies
and individuals, or as a subscriber system of a common
carrier service. Futhermore, there should be freedom to
interconnect with the wireline telephone network.
Many of these freedoms could be accomplished by deregulating
the radio and wireline common carriers, and by legislatively
requiring interconnection. However, in our previous testimony
we expressed our belief that all intraexchange telecommunications
PAGENO="0036"
1500
should be under State jurIsdiction. This approach constrasts
with that inH.R. 3333 which reserves to the States ortly
the regulation of "local exchange telephone service' (Section
321(b)) , but prohibits State regulation of any telecommunications
service provided under a license issued by the CRC (Section
424(a)). If the State has jurisdiction over all `local'
communications, the question of whether to rate deregulate
any service would be the decision of the State regulatory
authorities; there would be no Federal control, except
for spectrum licensing and management. Not only would
tate deregulation be out of Federal hands, but also questions
of interconnection, front a non-spectrum aspect, between
a local mobile radio entity and the local exchange telephone
network would be decided by the State regulatory commission.
Therefore, our desired scenario for (local) land mobile
radio would he at the discretion of the States, While
we thus cannot be sure that our preferences for policies
governing such "local' communications will be adopted by
the States, we believe that the States should have jurisdiction
over such"local" communications, In our view., the proper
distribution of jurisdictional authority in our Fedetal
system calls for this accommodation and trust,
PAGENO="0037"
1501
There is, however, an alternative to complete reliance
upon the States to determine the need for regul~ftion, which
does not entail regulation from Washington or a present
effort to determine definitively future policy in this
dynamic field. That alternative is to give the Commission
the authority to determine under what conditions regulation
is r~equired (as-suggested in Carlos A. Roberts' testimony
before this Subcommitte on May 1). This would not give
the Commission authority to determine the details of that
regulation, but would prevent any tendency on the part
of State regulators to regulate where regulation is not
necessary. For example, the Commission might determine
that- radio common carriers should he deregulated (except
for radio licensing at the Federal level). While it does
involve~some line-drawing difficulties for States (see
testimony on common carrier, pp. 11), it would present
a more flexible approach to the problem than that in H.R. 3333,
-permitting judgment on the basis of evolving conditions
in this dynamic~field. We believe, therefore, that it
should be given thorough examination by the Subcommittee.
If the States are only given the limited jurisdiction
specified by Sections 321(b) and Section 424(a), that is,
only ovet "local exchange telephone service", the question
PAGENO="0038"
1502
becomes one of determining whether this description fits
the land mobile radio services. Many systems today are
not switched in the way telephone messages are switched~
and paging systems could not properly be called telephone
However, the wireline radio common carriers are likely
to tall under this classification of local exchange telephone
and the technology is available for many more systems to
become both `telephone and switched." Indeed radio systems
form one important class of alternatives to the hard-wired
local telephone system. The States, therefore, would claim
jurisdictional control over land r~obile services but there
may be lengthy determinat ions to resolve whether or not
a particular system is or is not local exchange telephone
service." The approach in H.R.3333 thus presents the States
with some potentially difficult jurisdictional decisions.
Further it may allow for State jurisdiction over a mobile
telephone service, while retaining Federal jurisdiction
over the local paging service offered by the same company.
Most radio services, of course, are not regulated
on the State level; the deciding factor is whether the
service is a common carrier service. A local taxicab company,
for example, that uses radio for dispatching purposes will
not have its radio use regulated by state or local agencies.
PAGENO="0039"
1503
Often, however, it is not clear ~whether a particular radio
service is indeed common carrier in nature. In such cases,
the FCC may make the determination that the service is
not common carrier and, therefore, is not subject to state
jurisdiction. This occurred in the 900 MHz case3 decision,
Docket No. 18262, which established, a classification of
specialized mobile radio system (SMRs) for ~the provision
of dispatch services. The Commission's discretion to establish
this service as a non-common carrier service was affirmed
by the courts.4
Receiver Performance Regulation. Section 413 (a) (12)
gives the proposedCRC the authority to regulate the performance
charadteristics of television receivers. No other receivers
are mentioned. However, Section 413 (a)(6) provides that
the CRC would have the power to prescribe rules governing
the interference potential of equipment.
3An Inquiry Relative to the Future Use of `the Frequency
Band 806-960 MHz, 51 FCC 2d. 945 (1975).
4National Association of Radiotelephone Systems v. FCC,
525 F.2d 630 (D.C. Cir. 1975), cert. denied, 425 U.S. 992
(1976) (NARUC I).
PAGENO="0040"
1504
We believe that the proposed CRC should not regulate
performance characteristics of receivers. We think that
*manufacturers can do a better job of satisfying consumers
if they, instead of the Government, make the performance
tradeoffs many of which are very complicated
As an example of how complicated these issues can
get, consider the recent deliberations at the FCC concerning
mandated lower UHF-TV receiver noise figures. The FCC
has been the recipient of strong pressures to mandate lower
noise figures in. order to increase the technical comparability
of UHF and VHF TV broadcasting There are many ways in
which a designer could achieve the mandated result (lower
noise figures in this example), several of which are at
odds with what the consumer would like and, for that matter,
with what the Government would consider desirable from
the viewpoint of overall spectrum use.
In the above example, lower noise figures could likely
be achieved at the expense of other performance characteristics--
such as selectivity and other susceptibility to interference
characteristics. These other characteristics also influence
UHF/VHF TV technical performance comparability but they
also affect the efficient use of the spectrum in general.
PAGENO="0041"
1505
Thus, regulation could, easily turn into a "tar baby."
Each time an attempt is made to correct a give "problem,"
a whole host of new problems might surface. The "corrective
actions" taken to meet the new problems would in turn create
still newer problems. And so on.
Thus, we believe that while the all-channel law has
largely served a worthwhile purpose, we would not turn
to the expansive powers in 413(a) (12). Rather, Congress
should reserve that authority, only exercising it when
convinced that overriding considerations for so doing are
present. For example, while empowering the proposed CRC
to regulate consumer electronics may ultimately prove necessary
to alleviate interference problems, we believe that a thorough
economic analysis of alternatives should first be undertaken.
One alternative to regulation would be a consumer education
program alerting buyers of the need to consider interference
susceptibility as a purchase criterion (particularly in
the area of high radio transmitter usage) together with
the voluntary adoption by electronics manufacturers of
ptandards for grading their products according to their
general level of interference susceptibility. This alternative
offers the potential to equip consumers to make more informed
decisions in purchasing electronic devices. A proposed
PAGENO="0042"
1506
CRC should be empowered to regulate only if overriding
considerations for using a regulatory approach are present.
License Suspension (Section 432): We prefer the imposition
Of fines to suspension of licenses. Economics or other
harm suffered from not being allowed to operate the radio
service may be unnecessarily severe. Futhermore, as a
practical matter, it would be very difficult in many cases
to monitor whether the operations had indeed been suspended.
No such problems arise in the case of forfeitures. And
the latter, if substantial, can be as effective a deterrent
as suspension.
No Separate Construction Permits. We commend the
Subcommittee for doing away with the requirement of a separate
construction permit--a pre-condition to actual licensing.
This approach should ease somewhat the licensing burden
to spectrum users. Also, it represents a positive approach
in that it assumes the licensee will, in all good faith,
meet all conditions of the li~~~; on if proven otherwise
would the CRC need to intervene.
Distress Signals and Communications (SectiOn 434).
We suggest that these comments be broadened to include
"aircraft."
PAGENO="0043"
1507
Unauthorized Interception Provision (Section 549).
Let me now turn to Section 549, the provisions in H.R. 3333
which would strengthen the privacy protections for communications.
As you are aware, the President has recently announced
a broad initiative to ensure the privacy of the individual
in our evolving "information society," a society whose
hallmark is the ubiquity of computerized data banks and
sophisticated telecommunications systems. These new techmologies,
while facilitating the delivery of many goods and services
of society, have outstripped the ability of existing laws
to protect information from misuse and unauthorized access.
Existing communications privacy laws, intended to protect
information in transit, must be changed to account for
new forms of information transfer and increased sophistication
of interception technology not contemplated when these
laws were drafted.
For example, existing Section 605 specifies "divulgence"
or "use" of a communication before there is a violation.
Subsequent court cases have affirmed this requirement,
Bufalino V. Michigan Bell Telephone Co., 404 F.2d 1023
(8th Cir. 1968), cert. denied 394 U.S. 987 (1969). This
element arises, in part, because Section 605 was intended
PAGENO="0044"
1508
to apply to common Garner employees who, as part of their
en~ployinent, had to read (use) ~nd se-transmit (divulge)
messages in the communicationS, systems. The law was thus
drafted to focus on controlling divulgence and use'
(see phrases (l)-(6) of present Section 605) , but was silent
with re~ard to mere interception.
Interception alone may be used to collect a storehouse
* of information about an individual including banking, employment,
health and social h~its. It may be used to obtain sensitive
business economic data in a digital form so complete and
revealing that it would have astounded the `wiretapper
of the 1950's. But under the present law the interception
may lawfully Occur and the ~1ater use, triggering a violation,
may be so far removed or so difficult to link to the interception
that a prosecution becomes nearly impossible. Accordingly,
society's concept of privacy has matured to the point where
access to personal information through interception is
viewed as an invasion of one's pnivaoy~ Report of Privacy
Protection Study Commission, p.15 (July 1977). Thus, access
to a communication~which may contain information on one's
personal l~fe--withOUt the individual s consent is alone
sufficiently repugnant to our expectatipflS of privacy that
the law should b~ amended to prevent such access.
PAGENO="0045"
.1509
Section 605 was, in fact, amended in 1968 when the
Congress passed Title III of the Omnibus Crime Control
and. Safe Streets Act of 1968 (18 U.S.C. S2510 et
This new law did forbid the mere act of interception in
some circumstances, but the associated amendments to Section
605 actually cutback the scope of Section 605 from "radio
and wire" communications, to just "radio" (1968 USCCAAN
2196). In addition, 18 U.S.C. §2510(4) defines "interception"
of wire communications as "aural" acquisition of the contents.
An indirect (and I'm sure unintended) result of this was
to leave questionable whether any information in non-aural
form communicated over a wire, e.g., pictures, print, digital
computerdata, etc., may be intercepted, used., divulged,
etc., without prohibition by these laws.5
In addition Section 60.5's standards, by which law
enforcement agencies or others may lawfully receive intercepted
communications from carrier employees, are inappropriately
low for the volume and sensi.tivity of information carried
in today's communications systems. NTIA, consistent with
the thrust of the President's recent privacy message, believes
Miller, the Assault on Privacy 161-168 (1971); Metelski,
"Achieving Communications Privacy," Federal Communications
Law Journal 135 (UCLA 1978).
PAGENO="0046"
1510'
that the ex parte subpoena requirement of phrase (5) and
the `other lawful authority" catch-all of phrase (6) of
Section 605 are both inadequate for protection of information
carried on present communications systems. This standard
is inconsistently low with respect to court cases (see,
e.g., Merger v. New York, 388 U.S. 41 (1967) and Katz v.
United States,. 389 U.S. 347 (1967)) and the privacy provisions
enacted by Congress in Title III of. the Crime Control Act
of 1968 (18 U S C §2516 §2518) In this same vein interception
by carrier employees should also be limited to only that
necessary for provision of service.
NTIA SUPPQRTS THE COMPREHENSIVE
REVISIONS IN RE-WRITE SECTION 549
NTIA is firmly committed to strengthening communications
privacy laws in the light of new technologies. We believe
the revisions reflected by Section 549 will go far toward
insuring the privacy of many types of communications now
covered ineffectively (or not at all) by Section 605.
We therefore support the Subcommittee's.efforts in this
urder taking.
PAGENO="0047"
1511
Section 549 avoids the confusion of technological
disttnction's~-by app]~yingitself to all forms of "communications"
in a generic fashion through its comprehens~ive definition
of this term. We believe this is a fundamental necessity
for any sound communications privacy law, because whether
a particular communication is "wire," "radio," "oral,"
"optical" or other should not be the dispositive legal
issue in determining whether prinacy protections will apply.
The type of communication is only one of many factors
to be considered in determining whether a communication
is legally entitled to claims of privacy. Whether a communication
is entitled to privacy protections of law depends on the
"reasonable expectation" of the parties to the communication,
a standard including all circumstances of a particular
communication, see, Katz v. United States; Berger v. New
York, cited supra. This c~riterion is well established
in the law and one which, we believe, is the only test
workable given the ~variety of situations -in which different
forms of communications occur. Compare United States v.
Hall, 488 F.2d 193 (9th Cir. 1973); United States v. ~
226 F.2d 281 (9th Cir. 1955); State v. Cartwrj~, 418
P.2d 822 (Ore. 1966).
PAGENO="0048"
1512
Section 549~ correctly adopts this criterion, by Protecting
"private communications" and by incorporating a "reasonable
expectation" of privacy in its definition. This criterion
would require judicial scrutiny of *the facts and áircumstances
surrounding each communication for which an aggrieved party
claimed an expectation of privacy. The determination would
involve not only the individual's expectations, but an
assessment of whether that expectation is one that society
is prepared to recognize as reasonabale, United States
v. Fisch, 474 F.2d 1071, 1076 (9th Cir. 1973). Thus, we
would anticipate that many forms of communications such
as omni-directional public service radio, etc., for which
a large and established market of receiving/scanning devices.
exists, might not reasonably claim to be "private communications"
in contradiction of reality The Subcommittee may wish
to consider specifying in the legislation certain forms
of communication which would have no "expectations of privacy"
and thus no protections under the law. If communicants
were to employ protection devices in an affirmative effort
to obtain privacy, that would also be a consideration for
the court in determining whether an expectation of privacy
was "reasonable."
PAGENO="0049"
1513
Despite the flexibility that this case-by-case approach
would provide in determining whether a particular "expectation
of privacy" was reasonable, we note that the Congress and
the courts have found that certain types of communications
have an absolute expectation of privacy without a case-
by-case examination of the circumstances (i.e., "wire'
and "telephone" situations). As developed within, we would
amend Section 549 to reflect these findings. More to~51
on this point the latter portioos of this testimony.
Access to communications by government officials has
been a major privacy concern, (see, e.g., Interception
of Nonverbal Communications by Federal Intelligence Agencies:
Hearings on Government Operations (Project SHAMROCK), 94th
Cong., 1st and 2d Sess. (1975-76)). Following the lead
of the rewritten criminal code (S. 1; S. 1437), Section
549 permits government officials access to private communications
only to the extent authorized by other laws (para. (C)).
It also provides explicit exemption for activities authorized
under the "wiretap" and Foreign Intelligence Surveillance
Acts.
51-253 0 - 80 - 4
PAGENO="0050"
1514
PROPOSED NTIA MODIFICATIONS
Section 549 is a significant, major improvement over
existing laws intended to insure communications privacy
However NTIA believes that certain modificatiOn~' should
be made to ensure that the privacy of communications would
be comprehensively achieved now and in the future
As I noted previously the privacy standards of clauses
(5) and (6) of Section 605 are inadequate, permitting divulgence
of carrier `communications by an inconsistently low standard
in comparison to other laws For example Title III of
the Crime Control Act establishes a probable cause standard
for access by government or other third parties (18 U S C
S25l6 S2518) The' recently enacted Foreign Intelligence
Surveillance Act (P L 95-511) requires independent review
by a court before any surveillance directed at a particular
* individual may be conducted, and if that individual is
a U S citizen and not also a foreign power or agent
of a foreign power then the probable cause provisions
of Title III would apply
NTIA views this legislative activity by the Congress
and the recent legislative proposals by the Administration
PAGENO="0051"
1515
as reflecting the appropriateness of strengthening privacy
protections for communications. Therefore, clauses (5)
and (6) of Section 549(a), permitting divulgence of communications
by carrier employees in response to a subpoena or on demand
of "other lawful authority," should be deleted. Access
standards for "carrier communications" would then become,
appropriately, the same as for "private communications'
`in the bill, i.e., that of a warrant issued and executed
at the lawful direction of a court and implemented under
pare. (c) (2) of the bill.
As discussed previously, we believe that the determination
of what consitutes a reasonable expectation of privacy
is critical to the workability of this law. On the one
hand, the party's subjective expectation at the time of
communicating must be taken into account, but there also
must be an objective evaluation of the facts and circumstances
surrounding the communication to determine if the parties
expectations are ones which society is willing to accept
as reasonable, United States v. Fisch, cited~yp~. Thus,
NTIA believes the definitional language for "private communication"
in the bill should explicitly make clear that circumstances
surrounding -the communication must also be taken- into account,
as well as the reasonable expectations of the party (i.e.,
PAGENO="0052"
1516
by adding the phrase, "...under circumstances justifying
suc1i expectatdon,"with accompanying legislative history).
This expectation has been established for certain
commupicatiOnS and in these instances should be written
into the present law. There is an expectation of privacy
for "wire" communications established by Congress in its
~enactment of Title III of the Omnibus Crime Control and
Safes Streets Act of 1968 (18 U.S.C. §2510(1), 2511(a)),
and a consistently held "reasonable expectation of privacy"
in the telephone system, Katz v. United States, 389 U.S. 347,
352 (l9~7); United States v. Hall, 488 F.2d 193, 196 (9th
Cir. 1973).
However in the telephone network we are dealing with
a divarse mixture of media. Some of these, especially
those associated with mobile telephones, even though functionally
an extension of the telephone network, are such that technical
impracticalities of preventing~ifltercePtiOn militate against
adopting an absolute protection from interception. We
wo~ld thus. suggest that in such cases the protection against
in~erceptiOfl would be based on a "reasonableness" test
instead of being absolute. Yet, because we are still dealing
with telephone communications, we would, at the same time,
PAGENO="0053"
1517
extend to such servi~e protection from disclosure or use.
We think this would reflect present expectations of society,
and help ensure that those expe~ctations continue to exist
in the future through explicit legal protections.
With respect to authorizing interceptions by carrier
personnel, we rfcognize that employeeb of the carri~ providing
the service will, at times, be placed in a position which
might otherwise be technically considered as intercepting
~~communications. We therefore support the exemption
for this kind of common carrier activity. However, we
urge that some of the orig~in~limiting language discussed
in the legislative history of T~tle III of the~Omnibus
Crime Control Act of 1968 be inserted to make it clear
that such interceptions, besides being incidental to the
business of common carriage of communications, ought to
be necessary, and conducted under a controlled procedure
~nd in accordance with recognized minimization guidelines,
such as those incorporated into the Foreign Intelligence
Surveillance Act. That way we can be assured that the
common carrier operation will not be hampered and the cüstomer~s
pr~ivacy will be preserved.
PAGENO="0054"
1518
NTIA believes that the exemption dealing with theft
of service ought to be removed Our common basic objective
in restructuring this section is to tighten the processes
and conditions under which authorized interccpt~ions may
occur Yet the effect of this flat exemption is to ~ilow
warrantless interceptions for what is a relatively minor
crime of fraud. We believe that the implicit authorization
of non-federal employees to conduct criminal investigations
may set an undesirable precedent While we certainly share
the concern about abuse to the telephone sybtem we are
not convinced that the abuse incurs a sufficiently high
public cost to justify such extraordinary measures.
Another area of relatively major significance is the
perhaps inadvertent omission of the term letter from
the exclusionarY provisions of the last sentence of the
i~efinition of private communications para (f) (4)
NTIA believes that Congress has already spoken to the privacy
of corporeal postal matter in the postal privacy statutes
(see, e g 18 U S C SS 1701-1709) and that the Communications
Act should not duplicate this coverage We note that the
definition of telecommunications in H R 3333 section
102(21), would not include corporeal.4iOstal matter and
the commensurate exclusion in Section 549(f) (4) should
PAGENO="0055"
1519
be made. (NTIA is not expressing any opinion here whether
the privacy of "wire or radio' conirnunlcations under existing
definitions in the Communications Act, Section 153(a),
(b) would be provided by Section 605 or the portal. scatutes.
Finally, NT1A believes cert.ai.n minor changes i n the
text should he implemented in the interest of clarity arid
`p
eliminating redundancy. The reference in Section 549(a)
to Chapter 119, Title 18, as an exemption from pro~isions
of the bill should be expanded to include Chapter 36 of
Title 50 (the Foreign lntelligence Surveillance Act).
Also in Section 549(a), the terms existence" and `substance,
purport, dffect or meaning" should be eliminated because
they are included in the definition of the term `contents,"
para. (f) (2) . Section 549 (d) should be eliminated as essentially
addressed in the private communications" defin~ition of
Section (f) (4). Section 549(b) 2) should he re-worded
for grammatical corrections to read "(2) disclose t6 any
other person o~ use the ~ntents of any private communication,
with knowledge that...."
We hope these comments, both on general principles
regarding spectrum fees and regulation of land mobile and
other radio serv~ices, and on some specific elements within
the Bill, will be helpful to the Committee. We appreciate
this opportunity to appear before you.
PAGENO="0056"
1520
Mr MOTTL Thank you very much, Mr Bortz We will hear from
Mr Charles Meehan, Land Mobile Communications Council
STATEMENT OF CHARLES M MEEHAN
Mr MEEHAN On land mobile matters, I will be speaking for the
Land Mobile Communications Council (LMCC) which is a broad
based trade association representing private users, common carri
ers and equipment manufacturers.
I will also be touching on some microwave matters as well as
land mobile and on microwave I will be speaking for the Utilities
Telecommunications Council (UTC) on that area because the utili
ties it represents are probably the heaviest users of private micro
wave in the country
I do have authority to speak for both of these organizations and
the views I am expressing are not just my personal views
The area I am going to concentrate on, as I understand the
latitude from the letter, is "Would the proposed spectrum use fee
be workable and would it improve spectrum management9"
I will deal with the latter part first. In so far as land mobile and
presumably private and common carrier microwave is concerned, if
by "spectrum management" you mean the most efficient use of the
spectrum for the highest public interest purposes, we do not see
how a fee based on the profits of the least profitable UHF TV
broadcaster in a given community is going to provide any incentive
whatsoever for a land mobile or private or common carrier micro
wave users to use their land mobile or microwave spectrum any
more efficiently.
The fee basis has nothing to do with their use of the spectrum
Furthermore, it has no bearing whatsoever on what public interest
purpose, if that exists, they use the spectrum Even as the broad
casters, we question whether the spectrum use fee will improve
spectrum management
The operation of the fee is tied to the profits of the broadcaster
not to his use of the spectrum or the amount of spectrum he uses
or how he uses that spectrum
Section 413(d)(1), at least in our view, imposes no obligation
whatsoever on the CRC to reduce the fees even if the broadcasters
would make more efficient use of their spectrum In fact section
413 may deter more efficient use Let's assume new TV "Taboos"
are developed, resulting in a new TV assignment plan, making
more efficient use of that spectrum If the new spectrum were
allocated under the act, not by the CRC but by NTA say to public
television, that allocution could result in a substantial additional
number of public television stations which could have the result of
reducing the revenue of the commercial broadcasters
If the revenue of the broadcaster is reduced, even though it is by
more efficient spectrum, I wonder whether or not the CRC would
feel compelled to reduce the fees if their revenues from the fees
would be reduced I would venture to say if they see a substantial
drop in their revenue base from fees, the inclination of the regula
tor and in this case also the collector of the fees would be to
increase the fee basis.
It would seem to me that unless some blockage is put into the act
that it would be the natural tendency to pass the fees onto the
PAGENO="0057"
1521
ultimate consumer, whether that is in price of gas at the pump or
electric utility bills or telephone bills or for that matter advertising
rates on television or radio.
It may well be cheaper to pay the fee and pass it on rather than
spend the money on the new technology unless and until that fee
got greater than the new technology or the new technology brought
substantial benefits which could then be converted to money.
It would seem to us that where you do rely on the use of
spectrum to make revenues such as in broadcast, it might well be
in your best interests to continue paying the fee and not adopt new
technology which might let in competitors.
As far as a spectrum management tool, we have the same prob-
lem here that we had with the fee before, it simply is not universal
and it lets go probably one of the biggest users of the spectrum in
the country, namely the Federal Government. In a way I agree, it
is taking from Peter to pay Paul for the government to be required
to pay fees but nevertheless, if an agency head has to include that
in his budget, I would certainly think this would be an incentive
for him to consider alternate means of communications.
LMCC questions whether spectrum use fees, at least as proposed
and I think this would also apply to auctions and bids, is really
alone a spectrum management tool. It may result in only those
who can afford to pay the price being the ones to get the spectrum.
This may result only in fewer users.
To us it is not spectrum management just to reduce the number
of people who have access and are using the spectrum particularly
if it is reduced to only those with the deep pocket. We feel there
are no public interest considerations reflected in that method.
In essence, it is not spectrum management merely to assign
spectrum to those to whom it has the greatest value. To us it seems
the spectrum manager has two roles. First of all he has to deter-
mine what are the best uses and those should be consistent with
section 101 of your bill. Namely, those affecting large numbers of
the public, safety and national defense. Once he determines that,
he should use a variety of methods, not just economic methods, to
determine what is the most efficient use. It might be engineering.
It might be marketplace demands. It could be social, legal or politi-
cal considerations.
For example, in the early days in the 1960's, we had an emphasis
on engineering, channel splitting and this type of thing. That
worked. I do not see that we can say it did not work. Later on we
made a try at data processing and monitoring. I cannot say that
worked. I do not think we should put all of our eggs just in one
basket. I think the spectrum manager should be required to employ
a multitude of techniques to arrive at the most efficient use, once
he has made a decision, on the record, as to what is the best use.
Instead of relying only on spectrum use fees as spectrum man-
agement tools, we would suggest you have a new section dealing
specifically with spectrum management and allocation matters,
more or less along the lines of section 436 and establish statutory
criteria consistent with section 101 of your bill which the CRC
must follow in spectrum management and spectrum allocations
decisions. These would include such things as I have mentioned,
safety of life and property; promoting competition and reflecting
PAGENO="0058"
1522
market demands, and uses which benefit large numbers of the
public
Then you can give the CRC sufficient flexibility again consistent
with section 101, to employ various methods and techniques to
make the most efficient use of that spectrum it does allocate But
do not give the CRC unlimited authority to do what the CRC
considers to be consistent with the act as you have proposed in
sections 436(b)(1) and 436(b)(2)(D) Rather we would require that a
proper record in fact be established for the decision and let Con
gress and the courts determine if the action or the finding of the
Commission is consistent with the act
It just does not make sense to us to give the CRC or any regula
tory agency the kind of authority where it determines what is
consistent with the purposes of the act We feel that should always
be subject to the normal checks and balances of either congres
sional oversight or more likely user appeal to the Federal courts
If you are going to enact spectrum use fees particularly along the
lines of the bill, there are three or four areas that we feel need
clarification.
Section 414 speaks of land mobile Does this also include micro
wave systems? I have in mind a system which I licensed which
extends from Columbus, Ohio through West Virginia into the
Washington metropolitan area up into the Pittsburgh area and
into Delaware It goes through a multitude of communities Some
times the stations are in a community and sometimes they are on a
mountaintop out in the boondocks
How would we apply this fee to a microwave system such as
that?
How would we apply the fee proposal to a wide area mobile
systems? For example, I can think of a number of utilities which
operate in three or four States having communities as big as Chi
cago down to small towns of 1,000 and 2,000 people
As to land mobile, if you would have more sharing per channel
in an area than in another area, how would the fee vary?
In sum, we would say if you are going to use fees, let's recognize
it is either going to be a license fee to cover the costs or basically a
tax on the use of the spectrum But to base all of your spectrum
management on license fees or economic considerations, whether
they be auctions or bids, might make it easier for the regulator but
it certainly is not going to accomplish what we feel and what we
expect would be spectrum management.
Thank you
[Testimony resumes on p 1542]
[Mr Meehan's prepared statements and attachment follow]
PAGENO="0059"
1523
Before The
Subcommittee on Communications
of the
House Interstate and Foreign Commerce Committee
STATEMENT OF THE LAND MOBILE COMMUNICATIONS COUNCIL
ON
H'. R. 3333 ~- COMMUNICATIONS ACT OF 1979
The Land Mobile Communications Council (LMCC) appreci-
ates this opportunity to present Comments concerning those
provisions of H.R. 3333 which affect its membership.
LMCC is a non-profit association of users of land
mobile radio and providers of land mobile services and equip-
ment which is dedicated to securing and maintaining sufficient
allocation of radio frequencies for the Land Mobile Services
- both private and common carrier - to meet the immediate
and long term requirements of land mobile users. As will
be noted from a review of the attached LMCC roster, LMCC
represents a very broad base of land mobile interest.
LMCC's principal interest in this Bill is with,
respect to Title IV dealing, with the land mobile and other
radio services. We will also address, however, directly
related provisions of Title VII.
PAGENO="0060"
1524
TITLE IV CONSIDERATIOtiS
License Fee Proposal Will Be Neither an Effective Spectrum
Management Tool Nor Will It Be Workab~
LMCC does not believe that a fee based upon the
profits of UHF-TV braodcasters will provide any incentive
for land mobile users to utilize their spectrum more eff i-
ciently since the fee basis has nothing to do with land
mobile utilization of the spectrum
Even as to broadcasters, LMCC questions whether
the proposed spectrum use fee will improve broadcast spectrum
management since the operation of the fee is tied to the
broadcasters' profit, not to its use of the spectrum Addi-
tionally, Section 413(d) (1) imposes no obligation on the
Communications Regulatory Commission (CRC) to reduce fees
even though the broadcasters would begin utilizing the
spectrum allocated to them in a more efficient use such
as by reducing TV taboos and developing ~ new assignment
plan which would provide for additional spectrum for other
use In fact, more efficient use through the reduction
of taboos and the development of additional UHF~TV space
might mean that the commercial TV broadcasters would be
faced with more competition from public television, the
net result being a reduction in the profits by broadcasters
and thus, presumablY~ a reduction in the revenue which the
PAGENO="0061"
1525
CRC would collect from broadcast fees. LMCC questions whether
in such a situation, the CRC .would be likely to recommend
a reduction in the broadcast fee even though more efficient
utilization of the spectrum is being made by ~
Additionally, the requirement of Section 413(d) (1)
that any substa~iti~l ~hanges in broadcast assignments must
receive the concurrence of both houses of Congress before
they will be implemented, coupled with the fact tha~ the
CRC will not have any allocations authority, but rather,
any reallocation must be made by the proposed National Tele-
communications Administration (NTA) will tend, LMCC submits,
to deter better utilization of the broadcast spectrum and
may, in fact, have the net effect of freezing the existing
broadcast allocations.
Additionally, LMCC questions the usefulness of fees
as a spectrum management tool since, in most cases, they
will be passed on to the ultimate consumer in higher prices
for goods and services, including broadcast advertising
rates. Also, one very serious flaw in the proposed fee
arrangement is that it is not universal and does not apply
to one of the greatest consumers of spectrum, the Federal
government.
PAGENO="0062"
1526
LMCC is very concerned over the tendency in Govern-
ment to rely solely on economic considerations as the principal
spectrum management tool whether these economic considerations
be spectrum use fees, auctions or sealed bids LMCC is
concerned that all of these economic based tools may result
in only those who can afford to pay the most money securing
the spectrum Thus, the net effect of this so-called spectrum
management will be fewer users of the spectrum Complete
reliance on economic based approaches such as spectrum use
fees, auctions and sealed bids lacks any reflection of public
interest considerations
In fact, LMCC submits that it is not spectrum manage-
ment" to merely assign spectrum to those to whom it has
the greatest value Rather, the role of the spectrum
manager should be to first allocate and assign spectrum
to those who use the spectrum in the highest order of the
public interest Then, the spectrum managers should see
that the persons to whom the spectrum has been assigned
or allocated will use it in the most efficient manner.
Fees alone, LMCC submits, will not accomplish this The
only thing it accomplishes is to make the work of the spec-
trum manager or regulator easier since he can rely entirely
on market forces rather than attempting to develop the
information needed to make sound regulatory decisions
PAGENO="0063"
1527
LMCC believes that the spectrum manager should be
required to take a number of factors into consideration
in determining the most important and most efficient use
of the spectrum. These factors would include engineering,
social, legal and political considerations,
Thus, instead of permitting reliance only on spectrum
use fees as the prime spectrum management tool, it is suggested
that a new section of H.R. 3333 be developed dealing with
spectrum management which would establish the following
statutory criteria:
o the proposed use of the spectrum will assist
in the provision of services to large numbers
of the public;
o the proposed use of the spectrum will promote
safety of life and property;
o the proposed use of the spectrum will promote
competition.'
While LMCC believes that the CRC should be given
sufficient t~flexibility~ to employ ~`arious methods and tech-
niques to improve efficient use of the spectrum, LMCC does
not believe that the CRC should be given unlimited authority
to do what the CRC considers to be cor~sistent with the Act as
has been proposed in Section 436(b) (1) and Section 436(b) (2) (D).
PAGENO="0064"
1528
Rather, LMCC urges that the CRC be required to develop a
proper record and fact basis for its spectrum management
decisions and then let the Courts determine if the action
taken by the CRC is consistent with the Act Congressional
oversight would also assist in this area. LMCC believes
it is dangerous to give any regulatory agency the power
to adopt what it considers to~ consistent with its own
enabling act Rather, this judgement must be left in the
hands of the Courts and, ultimately, the Congress
During the June 6 panel presentation on spectrum
management for land mobile and other services, there was
considerable discussion concerning when `auctions should
be utilized as a spectrum management tool While auctions
may cut down the time and cost burden of comparative hearings,
such as in Broadcast licensing, LMCC does not see how the
concept of auctions could be applied to the private land
mobile services where a given frequency in a given geographic
area is already shared by a multitude of users Also, there
is very great concern that the use of auctions for land
mobile spectrum, even if they were only used as to new
land mobile spectrum with loading standards, will result
in only those with the deepest pocket securing authority
to use the spectrum, which is not necessarily in the public
interest Again, it would seem that the applicability of
PAGENO="0065"
1529
this "economic tool" merely makes the job of the regulator
easier in that the regulator does not have to develop the
facts, through hearings or otherwise, to determine which
among several contenders (services or individual applicants)
for spectrum has the best qualifications. All that auctions
do in this case is to let he who is able to pay the most
money secure the license and the use of the spectrum. It
does not necessarily follow that the highest bidder will
also be the one to put it to the best "public interest"
use or will spend the money to use the spectrum in the most
efficient manner. This is hardly "spectrum management."
Thus, at best, auctions should only be employed where there
has already been a determination that the contenders are
equally qualified from a public interest point of view and
where the person who ultimately receives the license will
have exclusive use of the spectrum. The most logical area
of application is in the broadcast area where assignments
are already fully exclusive. The fact that the broadcast
licensee does not control the receivers or that additional
receivers do not congest the channel does not mean that
auctions for broadcast channels will not eliminate the costs
and inefficiencies of broadcast comparative hearings. Also,
that argument overlooks the fact that it is additional
transmitters, broadcast or otherwise, not receivers that
impose additional costs on other users of the spectrum.
51-253 0 - 80 - S
PAGENO="0066"
1530
Thus, prospective broadcasters who wanted to enter the market
should be willing to absorb these costs as well as any other
user of spectrum. Ironically, however, proponents of auctions
and sealed bids have recently indicated this economic tool
should not be applied to broadcast assignments. Instead,
they now seek out only the private land mobile services
or the common carriers as the subject of "experimentation"
with suôh economic based methods.
Apart from LMCC's concerns over the validity of
spectrum use fees, auctions or sealed bids as a "spectrum
management" tool, there is also a serious concern over the
workability of the fee basis as proposed in H.R. 3333 as
it applies to land mobile. For example, in many situations
licensees are authorized to utilize the same frequency over
a wide geographic area, and in some cases, even on a "con-
tinental United States" basis. Thus, the licensees' utiliza-
tion of this particular frequency would be in a multitude
of different "communities with UHF-TV." Thus, a multitude
of UHF-TV profit pictures would have to be considered in
trying to arrive at the spectrum use fee for such a licensee.
Also, as to private land mobile, in most cases the
frequencies are shared by at least several users in a given
area. Does sharing of the same frequency by diffe.rent users
in the same area result in a reduction of the fee paid by
such licensees?
PAGENO="0067"
1531
TITLE VII CONSIDERATIONS
Vesting Exclusive Allocation Authority in NTA is Inappropriate
Absent Proper Procedural Safeguard
It is generally acknowledged that the establishment
of an agency within the Executive Branch (NTA) for the pur-
poses of studying telecommunications issues and developing
appropriate policies is a proper legislative goal. However,
LMCC is deeply disturbed that H.R. 3333 would also entrust
NTA with exclusive authority for the allocation of the entire
radio spectrum.
In LMCC's view, the present system of shared allocation
responsibility between the FCC and NTIA and its predecessors
has worked reasonably well over time. The active involvement
of the FCC in the overall allocation process, plus the necessary
tension which occasionally is generated by virtue of the
system of dual authority, provide some assurance that the
interests of non-government users of the spectrum will be
adequately represented. However, this valuable ,safeguard
would be eliminated by H.R. 3333. Pursuant to Section 704,
NTA would act as the primary spokesman for government agencies
on telecommunications matters and would assist in the develop-
ment and management of telecommunications systems operated
by various federal agencies. LMCC is not at all confident
that an agency with such a mandate could adequately and
fairly represent the interests of non~~government users in
PAGENO="0068"
1532
those situations where the competing demands for spectrum
and other concerns of government and non-government users
are in serious conflict.
Moreover, the problem is accentuated by the absence
in H.R. 3333 of any provisions concerning the procedures
by which NTA must conduct its allocation proceedings. LMCC
respectfully submits that if Congress vests NTA with any
allocation authority, the legislation must also explicitly
provide that NTA's decision making process be governed by
the Administrative Procedures Act, or like procedures
Only in this way can the interests of all users of the spec-
trum be adequately protected. LMCC understands that national
security considerations might require special attention,
but such situations should be considered to be the extra-
ordinary exception - and. specific procedures applicable
to such circumstances should be explicitly provided for.
Otherwise, the basic requirements of the APA should be
adhered to; all allocation proceedings should be open and
subject to public participation.
Respectfully submitted,
LAND MOBILE COMMUNICATIONS COUNCIL
Charles M. Meehan
Chairman
LMCC Drafting Committee
Suite 1000
1150 17th Street, N.W.
Washington, D.C. 20036
202/457-1138
June22, 1979
PAGENO="0069"
1533
LAND MOBILE COMMUNICATIONS COUNCIL MEMBERSHIP LIST
(LMCC)
AMERICAN ASSOCIATION OF STATE HIGHWAY & TRANSPORTATION OFFICIALS (AASHTO)
AMERICAN AUTOMOBILE ASSOCIATION (AAA)
AMERICAN PETROLEUM INSTITUTE (API)
AMERICAN TELEPHONE & TELEGRAPH COMPANY (AT&T)
AMERICAN TRUCKING ASSOCIATION (ATA)
ASSOCIATION OF AMERICAN RAILROADS (AAR)
ASSOCIATED PUBLIC-SAFETY COMMUNICATIONS OFFICERS, INC. (APCO)
EASTERN STATES PUBLIC-SAFETY RADIO LEAGUE (ESPRL)
ELECTRONIC INDUSTRIES ASSOCIATION (EIA)
FOREST INDUSTRIES TELECOMMUNICATIONS (FIT)
FORESTRY CONSERVATION COMMUNICATIONS ASSOCIATION (FCCA)
INTERNATIONAL ASSOCIATION OF CHIEFS OF POLICE, INC. (IACP)
INTERNATIONAL ASSOCIATION OF FIRE CHIEFS (IAFC)
INTERNATIONAL ASSOCIATION OF FISH & WILDLIFE AGENCIES (IAFWA)
INTERNATIONAL BRIDGE, TUNNEL & TURNPIKE ASSOCIATION, INC. (IBT&TA)
INTERNATIONAL MUNICIPAL SIGNAL ASSOCIATION (IMSA)
NATIONAL ASSOCIATION OF BUSINESS & EDUCATIONAL RADIO, INC. (NABER)
NATIONAL ASSOCIATION OF MANUFACTURERS (NAM)
NATIONAL ASSOCIATION OF STATE FORESTERS (NASF)
SPECIAL INDUSTRIAL RADIO SERVICE ASSOCIATION, INC. (SIRSA)
TELOCATOR NETWORA OF AMERICA, INC. (TNA)
UNITED STATES INDEPENDENT TELEPHONE ASSOCIATION (USITA)
UTILITIES TELECOMMUNICATIONS COUNCIL (UTC)
PAGENO="0070"
1534
Before The
Subcommittee on Communications
of the
House Interstate and Foreign Commerce Committee
STATEMENT OF THE
UTILITIES TELECOMMUNICATIONS COUNCIL
CONCERNING H.R. 3333; TITLE IV, SPECTRUM MANAGEMEW!~L
PRIVATE LAND MOBILE AND MICROWAVE SERVICES
The Utilities Telecommunications Council (UTC)1'
respectfully submits this Statement in response to the
request made by the Subcommittee Staff during the June 6,
1979 panel discussion concerning spectrum management in
the land mobile and other services, to expand upon the role
of *auôtions, sealed bids and license transferring as spectrum
management tools.
Before discussing the usefulness of these economic
approaches as spectrum management tools, let us first examine
the alleged need to place such heavy reliance on these economic
tools. The primary justification given during the June
6 panel discussion by the proponent of such heavy reliance
1/ UTC is the national representative on telecommunications
matters of the nation's electric, gas, water and steam
utilities (Energy Utilities). The Energy Utilities repre-
sented by UTC include in excess of 3000 investor-owned,
cooperatively-owned and public-owned utilities. They
range in size from large, urban utilities, each serving
several million, consumers to many small urban utilities
and rural electric cooperatives, each serving several
thousand consumers.
PAGENO="0071"
1535
on economic considerations as the major spectrum management
tool is that it is "extremely difficult to obtain accurate
data on an applicant's need for spectrum, on the value of
the spectrum to pr-esent users, on the costs associated with
reallocation, on the costs of utilizing more efficent technology
and many other areas."~' More recently, the reason given
for the shift to these economic tools for spectrum management
was because in order to meet the public interest requirements
of Section 1 of the 1934 Act or those of Section 101 of
S. 611, "far more complex and detailed information is required
than can, in fact, be gathered and processed centrally.
First of all, as I indicated in the panel discussion on
June 6, these "cannot do" reasons given by the proponents
of the use of economic tools for spectrum managment are
simply not valid. These arguments for the need for economic
tools only reflect the inability or perhaps unwillingness
of the current spectrum managers within the Federal Conuiiunica-
tions Commission to make the effort to meet the admittedly
hard chal]~enge tof compiling sufficient and reliable facts
upon which sound regulatory decisions can be made as to
allocation or frequency assignment matters. Instead, the
2/ See statemen of Carlos V. Roberts, June 6, 1979 re
H.R. 3333 before the House Communications Subcommittee,
page 1.
3/ See statement of Nina W. Cornell and Stephen J. Lukasik
re S. 611 and S. 622, dated June 18, 1979 before the
Senate Communications Subcommittee, page 7.
PAGENO="0072"
1536
current spectrum managers of the Federal Communications
Commission choose to take what appears to be the easier
road of relying entirely on "market forces.'!
The fact is, that other spectrum managers in the
United States, namely those responsible for management of
the spectrum used by the Federal government have found an
effective method to gather and process centrally the more
complex and detailed information required to make current
spectrum management decisions. As was pointed out at page
25 of the Statement of Stanley I. Cohn, representing the
National Telecommunications and Information Administration
(NTIA), which was presented to this Subcommittee on June
12, 1979, the Federal government's spectrum regulators have
already implemented two programs to enhance spectrum manage-
ment through the use of analysis techniques. Under NTIA's
"Spectrum Resource Assessments," an analysis is made of
present and projected use of various allocated bands, deter-
~mining the potential compatibility problems and corrective
actions to mitigate interference between systems, determining
::~inter~and intra- service sharing opportunities and providing
recommendations on improving the efficiency and effectiveness
of spectrum use in the bands studied. Similarly, NTIA's
"System Review Procedure" performs an examination at the
conceptual, experimental, developmental and pre-operational
PAGENO="0073"
1537
stages of proposed Federal communications systems. Both
of these programs, according to the NTIA witness, have proved
to be very useful in Federal spectrum management and in
the NTIA's spectrum planning efforts. If these spectrum
management approaches can solve the "difficult" allocation
and assignment problems of NTIA, why will they not solve
similar "difficult" allocation problems .of the Commission?
It is significant to note, UTC submits, that the
Federal government's spectrum managers are still relying
on more classical spectrum management approaches, rather
than applying "economic tools" to solve their spectrum
management problems. While the reluctance on the part of
the Federal government users to even experiment in the use
of economic tools may be due to legal restraints in the
1934 Act, which apply to both government and non-government
users, nevertheless, the fact remains that the Federal govern-
ment is not even suggesting the application of economic
tools to Federal government spectrum management problems.
If spectrum management programs such as those developed
for NTIA for Federal government spectrum users have, in
fact, proved to work for the Federal government spectrum,
perhaps these same proven methods should be applied to non-
government spectrum management problems, at least before
PAGENO="0074"
1538
Congress subjects non-government users to the hazards of
large scale "experimentation" with what are, essentially,
classroom economic theories which have not been tested in
the real world.
Insofar as to the applicability of auctions, or,
for that matter sealed bids, the only place where UTC can
see such a system working is in situations such as Broadcast
or Common Carrier where there are a number of contenders
for anexclusive channel. Even here, however, there should
first be a determination by the regulatory agency, by rule
making, hearing or otherwise, that the various contenders
or participants in the auction have equivalent qualifications
and that the intended use of the spectrum by all contenders
is essentially the same from a public interest point of
view. The only real purpose the auction serves is to elimin-
ate the cost and time of any further comparative hearings
which would otherwise be required to determine which of
the relatively equal contenders should be given the assignment.
The previous testimony of the panelist from the
Commissions" confirms that the concept of the auction was
4/ See testimony of Carlos V. Roberts on applicability of
auctions as a spectrum management tool, pages 76-77 of
Transcript of Hearings before the House Communications
Subcommittee re H.R. 13015, September 21, 1978.
PAGENO="0075"
1539
not intended for widespread use in the land mobile services
and that there are only a limited number of circumstances
in which an auction could be usable. First of all, as he
pointed out in his previous testimony, one of the conditions
for use of ~the~ auction would have to be that the frequency
is not shared with more than one licensee buf is assigned
exclusively to one entity.~1' Typically, this does not occur
in most of the land mobile services. It would occur, how-
ever, he noted, with the mobile telephone service provided
by radio common carriers an.d other common carriers. It
occurs also with public coast stations in the Maritime
Service. He also confirmed in that previous testimony that
the motivation behind proposing the auction is that in many
cases in these services where the Commission can only license
one individual on a channel and its exclusive use for one
licensee, the Commission gets into very long, expensive
and protracted hearings and essentially ~the auction will
provide an easier method of resolving the assignment decisions,
~J This would seem to preclude the use of auctions even as
to land mobile spectrum which was subject to loading
standards since it is still possible to have more than one
licensee on the channel. See page 21 of Dr. Cornell's
June 18, 1979 Statement re S. 611 and S. 622.
PAGENO="0076"
1540
It would not seem appropriate, therefore,, to apply
auctions to existing Power Radio Service spectrum since
that is shared. Even as to any "new and exclusive" allocations
which might be available to Power Radio Service licensees,
or at least available to be accessed by the Energy Utilities,
auctions may not be in the public interest since, presumably,
Energy Utilities would be competing for the same spectrum
with other types of users and it is entirely possible that
another contender, with more funds to spend in the auction,
would be the "winner." It does not follow that the applicant
with the largest amount of money to spend at an auction
is necessarily the best recipient of the spectrum, from
a public interest point of view.
Thus, for these, reasons, UTC submits that auctions
(as wellas sealed bids or lotteries) would probably have
very little, if any, positive role to play in the spectrum
management of the frequencies used by the Energy Utilities
or other private land mobile users. The only place where
auctions would serve any useful purpose would be in Services
such as Common Carrier or Broadcast where there is an exclu-
sive assignment made and the recipient of that assignment
is able to generate revenue as a result of winning in
the auction In the Power Radio Service there is no such
"revenue generating" incentive, since the use of radio is
PAGENO="0077"
1541
a tool to improve the efficiency and safety of Energy Utility
operations and to enhance the provision of vital utility
services to the general public. Similar considerations
apply to other private land mobile services.
UTC submits that it would be much more in the public
interest to use procedures such as those found in NTIA's
"Spectrum Resource Assessments" to make the determination
as to which of many contenders for spectrum would be the
best recipient, in terms of the basic goals of H.R. 3333,
namely, service to large~nuxabers of the'~public, the promotion
of safety of life and property and the promotion of competition.
As to the concept of transferring licenses, while
this might conceivably be practical on a small scale in
a specific given and relatively confined geographic area,
it does not seem to have any practical applicability to
Energy Utility operations or other wide area or ribbon opera-
tions where it would be necessary for a utility operating over
aeveral states to buy up" all of the licenses on a given
frequency or set of frequencies in the multiple state area
so that a utility would have a compatible system-wide communi-
cations net.
It is for these reasons that during the panel presentation
UTC's witness urged that the "economics only" approach be
abandoned in H.R. 3333 and that instead, a new section on
spectrum management be developed which would require the
re~gulatory agency to take into consideration a number of
factors such as engineering, legal, social and even political
considerations as well as, of course, what is the market
demand. This seems to be the type of approach being used
in NTIA's "Spectrum Resource Assessments."
Respectfully submitted,
TILITIES TELECOMMUNICATIONS COUNCIL
Charles M. Neehan
Attorney for
Utilities Telecommunications Council
Suite 1000
1150 17th Street, N.W.
Washington, D.C. 20036
202/457-1138
June 22, 1979
PAGENO="0078"
1542
Mr. MOTTL. Thank you very much, Mr. Meehan. We will next
hear from Mr. Don Franco.
STATEMENT OF DON FRANCO
Mr. FRANCO. Mr. Chairman, members of the committee and staff,
my name is Don Franco. I am president of Microband Corp. of
America.
I suspect most of you have not heard of Microband or have any
knowledge of what we do. I think it would be worthwhile to say a
couple of sentences on that point before I address the comments.
We are in an industry called multipoint distribution service
which has been in existence for about 8 or 9 years. It was created
by the FCC to provide broadband distribution within metropolitan
areas of video and data signals. We operate using the radio fre-
quencies and thereby provide a very low cost method of distribu-
tion.
Today the industry is operating in approximately 68 major mar
kets and we expect by the end of this year that number would
increase to about 100 major markets.
We generally support the main thrust of the legislation namely
that the marketplace is a better regulator than the Government.
We wish to make one or two points which we think will strengthen
the overall thrust of the bill.
We agree that the Commission's management of the spectrum
should be guided by two overriding principles. First that the spec-
trum is a limited resource and second that competition rather than
Government regulation is a more efficient and effective regulator
of prices and services. Consistent with these principles we believe
that the legislation should make it clear that before frequencies
are allocated for a given purpose, the CRC must determine that
those frequencies already allocated and which could provide such
service are being substantially utilized.
The only exception to such a requirement would be where a
service is a necessity and where additional spectrum should be
allocated so as to foster competition.
In addition we believe that if spectrum has been licensed for a
given purpose but is in fact not being used and there is no evidence
of its future development along those lines, that the CRC should be
fully empowered and encouraged to revoke whatever authority has
been granted and reallocate such spectrum.
We are aware of at least one allocation of frequency comprising
over 100 megahertz of spectrum which in its dozen year history has
seen limited use and there presently exists no trend towards its
further development. At the same time, a party has called for the
reallocation of over 100 megahertz of other frequency for a service
it intends to provide while existing frequencies available for its
intended purpose are not yet fully utilized.
Both cases present spectrum management problems which
should be addressed in this legislation.
We believe the bill should be amended to require interconnection
among all carriers and not just intraexchange carriers. Such a
requirement, we believe, will tend to preserve limited spectrum
space.
PAGENO="0079"
1543
We believe the spectrum fee provided in the bill unreasonably
discriminates against small business as well as against carriers and
will thereby discourage the provision of new common carrier serv-
ice. This provision appears to be inconsistent with the remainder of
the bill for dominant carriers by definition will be allowed only a
reasonable return on their investment and nondominant carriers
presumably will have their profits regulated by competition.
In either case there will be no windfall profits and accordingly
no reason to provide a disincentive for investment, On the other
hand we support a provision which is designed to reimburse the
Commission for the cost of regulation provided this is not interpret-
ed by the Commission as a mandate for ever bigger budgets.
We also believe the statutory scheme for spectrum fees to be
unworkable with respect to new and innovative offerings. How do
you determine the value of something `before it is fully developed?
Moreover, the unintended result of such a provision would be to
concentrate radio "frequencies in the hands of a few large compa-
nies. It `would tend to prevent the small entrepreneur from taking
his risk.
We also believe that a provision which provides a cap on scarcity
value fork certain licensees and not for others is an unreasonable
discrimination especially when it is those licensees who are making
the most unreasonable profits.
The legislation should also provide that all carriers should have
equal and ~nondiscriminatory access *to buildings. Carriers who
transmit signals by radio must have access to buildings in order to
install internal wiring to bring signals from the rooftops to the
customers' premises. New internal distribution technologies are
necessary to take advantage of the new high speed distribution
systems which will come onstream in the next few years.
We would like all carriers to be assured access and rights of way
similar to those other utilities have. Unless this is done the imple-
mentation of new technologies will be substantially delayed. We
suggest the legislation make it illegal to refuse FCC licensed carri-
ers access to' buildings on a reasonably compensatory and nondis-
criminatory basis.
The provision concerning unauthorized interception of private
communications should also be strengthened. Although section 549
provides, some `protection against illegal interception, our experi-
ence has been. authorities are loath to enforce these provisions
because of overburdened caseloads. We suggest the establishment
of an enforcement unit at the Commission and/or Justice Depart-
ment whose specific ~responsibilities will be to enforce the criminal
sanctions provided `in the law.
individuals should be authorized to commence civil injunctive
and damage actions.
The Commission should be authorized to prevent manufacturers
from selling or distributing equipment to unauthorized users which
could clearly `be used only for that purpose.
I thank you.
[Testimony resumes on p. 1560.]
[Mr.,Franco's prepared statement and attachments follow:]
PAGENO="0080"
1544
TESTIMONY OF
DON FRANCO, PRESIDENT
MICROBAND CORPORATION OF AMERICA
Mr. Chairman, Members of the Committee, Staff, Ladies and Gentlemen:
We welcome the opportunity to appear before you today to outline the views
of Microband Corporation of America on HR 3333 - a bill to rewrite the Communi-
cations Act of 1934.
We agree that advances in telecommunications technology require a fresh
legislative approach to communications regulations. We applaud the main thrust
of the legislation, namely that~open competition is a far better regulator of
charges and services than is the government. The legislation you are today con-
sidering will, if passed into law, have far-reaching effects on America and on
every American. We believe it is one of the most significant legislative
initiatives Congress has recently considered.
We support legislation which seeksto eliminate cross-subsidization and
encourages fair competition and deregulation. We support unfettered intercon-
nection among carriers in order to foster the rapid growth of efficient and
economical telecommunications services. We support the attempt to solve a
present, real and very serious problem - that of overlapping state and federal
regulations. We believe your efforts will result in the creation of a more
efficient interconnected national communications service. This is not to say,
however, that the legislation cannot be strengthened. -
To this end, in the few moments allocated to us, we would like to point
out those instances where we believe the proposed legislation could, if adopted,
have an opposite effect from that which is intended. In a few other cases, we
believe additional provisions are necessaryto achieve the worthy goals of the
legislation. Our comments will be limited for the most part to those portions
of HR 3333 which deal with domestic carrier operations, our area of expertise. -
In order that you may gain perspective on our views, however, permit me
first to provide a brief background on the Multipoint Distribution Service
PAGENO="0081"
1545
(`MDS") industry and Microband Corporation of America. We believe that MDS is
able to distribute broadband video, data, and facsimile within metropolitan
areas more efficiently and at lower cost than other existing media. Among
other things, we would like to call your attention to certain problems which
may prevent these efficiencies from being realized.
BACKGROUND ON MDS
MDS was created by the FCC in 1963 when it set aside spectrum for the use
of common carriers to provide local distribution services to the public.
However, due to a typgraphical error in the rules which restricted the
maximum bandwidth of any channel to 3.5 MHz (thus effectively ruling out
video transmission), no construction permit applications were made until some
seven years later (after the Commission had corrected this oversight). There-
after the Commission adopted operating rules and began issuing construction
permits. The first MDS station (Microband's Washington, D.C. facility) was
licensed and commenced commercial operations in August of 1973.
A typical MDS system is depicted in Exhibit A. It consists of a fixed
station transmitting omni-directional~y in the 2150 MHz range to unlimited
numbers of fixed receivers located around a metropolitan area. The intelligence
t~ansmitted is supplied by the customer and may consist of private television,
high speed computer data, facsimile, teletext videodata, slow-scan or freeze-
frame video, control infonnation, or any other communication adaptable to analog
or digital radio transmission. Generally, it is delivered to the MDS station
via satellite and/or by point to point microwave (although it may also be
originated directly at the MDS station).
The MDS signal is intercepted by directional receiving antennas, down-
converted from the microwave frequency to a lower frequency, and then fed (on
-2-
51-253 0 - 80 - 6
PAGENO="0082"
1546
an unused channel) to a standard television set or to a data terminal or
facsimile device The range of the transmission is usually 25 30 miles
depending on the power and elevation of the transmitter the size and character
istics of the receiving antennas and the existence of a long of sight path
between transmitter and receiver.
Two 6 MHz channels have been allocated for MDS in the top 50 markets,
although no second channel has yet gone on the air. In smaller markets, a 6
MHz and a 4 MHz channel have been authorized. Through these channels, MDS
operators are able to locally distribute information at very low cost.
Microband's original market research determined that non-video business
communications would be the principal source of revenue for the MDS industry.
We have found, as others have since confirmed, that there exists a market for
the interstate transmission of various kinds of data communications. Only
recently, however, has our industry been in a position to serve that demand.
There are now sufficient MOS stations built or under construction many of
which are interconnected via satellite - to make an interstata data corn-
municatiofls service network feasible.
At the present time, the MOS industry is licensed to p~ovide service in
at least 68 of the largest markets in the United States See Exhibit B
In addition, i~e expect some 40 additional stations to be operational in 1979.
By the end of the year we believe that MOS stations will be operational in most
of the nation's top 100 markets. With this network substantially in place
(only the digitizing, switching and control equipment must be installed), MOS
can now serve the business communications market which is just about to explode.
The MDS industry is presently distributing pay TV programs in most of
the markets in which it is licensed In the vast majority of these markets
(we are aware of only one or two exceptions),. ~ay-TV p~9grams_are transmitted
-3-
PAGENO="0083"
1547
only during evening hours (slightly earlier on weekends); late night, early
morning and daytime hours have been set aside and are available for business
communications. In addition, a subcarrier frequency is available for digital
data communications 24 hours per day, 7 days per week and, further, MDS Channel
2 is completely unused.
While most uses to date have involved televiston, MDS has also been
used for data communications for more than three years at the MDS station
near the University of Illinois in connection with the Plato computer-
based education program developed by the University's Computer Based
Education Research Laboratory and Control Data Corporation. Because the
downstream channel from the central processing computer and Plato data base
to the individual terminal requires high speed wideband capacity, the MDS'
transmission capability has been found to be ideal. The recipient terminal
responds upstream to the computer via ~the local telephone system.
Reuters has also contracted to use MDS for the distribution of its
financial and commodity news service. Reuters' system will feed continuously
updated information from New York via satellite to a ground station in
Chicago where it will be microwaved to the MDS transmission site atop the
Hancock Building. The entire data base, with millions of bits of information,
will be constantly transmitted via the lIDS station to all of Reuters'
subscribers who will access the data base by means of "row grabber" decoders.
The Reuters information is displayed on television monitors or transcribed
by high speed printers.
-4-
PAGENO="0084"
1548
* Another use of MDS has been in the area of teletext information. The MDS
licensee in Philadelphia has been conducting tests for some time using the
British developed teletext system called CEEFAX Recently Microband initiated
tests using an improved French system called Antiope That system is able to
use digital and microprocessor technology to deliver a large volume of infor
mation which can be printed or displayed on a television set.
These are just some of the needs MDS has and can serve at lower cost to
the consumer. Many others can be envisioned. Based on our experience, we know
that MDS is able to distribute broadband video data and facsimile within
metropolitan areas nore efficiently and at lower prices than can other
existing media As such we have developed and nurtured an important national
resource one which should be rapidly expanded in order that all of the possible
benefits many of which Microband has pioneered can become generally available
to the public
We built our network the hard way - with relativel.y limited privately-
supplied capital and a very small staff In all candor we probably survived
only because at a time when our shareholders were willing to accept significant
capital risks few others wished to enter an untested business Now that our
network is substantially in place far larger companies than ourselves are
seeking to enter the data distribution business. We welcome fair competition,
the mainstay of American business We believe that HR 3333 contains many pro-
posals which will foster that competition and thereby increase consumer demand.
However several aspects of the proposed legisl~ation and some additional matters
should be considered by the Committee as it seeks to make available to the public
affordable telecommunications services which are diverse reliable and efficient
SUMMARY
We agree that the need is now to rewrite the Communications Act and that
such revisions should facilitate the expansion of services by diverse entities
-5-
PAGENO="0085"
1549
to the American public and encourage competition wherever feasible. To achieve
* these stated objectives, we believe the legislation should;
* provide all federally licensed carriers with equal and nondiscrimi-
natory access to local reception points;
* provide additional safeguards against cross-subsidization and price
abuse engaged in by large carriers affiliated with manufacturing
and software entities;
* strengthen the law and enforcement safeguards against unauthorized
interception of private communications;
* require interconnection of all carriers;
* not contain disincentives to investment in the form of spectrum
use fees.
BUILDING ACCESS
Section 311(a) declares that a major purpose of the proposed legislation
is to assure the availability of efficient and diverse communications at reason-
able rates so that the public will benefit from the continued improvement in
telecommunications services.
There is a major obstacle which must be surmounted if these objectives are
to be realized - an obstacle that is not sufficiently addressed in the legislation.
It is an issue which, is perhaps the most difficult and expensive problem faced
by any non-telephone company. What we are speaking about is the ability of that
Carrier to gain access to buildings for the purpose installing, maintaining,
connecting and disconnecting telecommunications equipment.
While Section 333 of the Bill, relating to `Pole Attachments," does address
the access problem, it is primarily oriented toward telephone service and
regulation by the states. Reasonable access to existing poles, ducts, conduits
and rights of way are to be afforded carriers if these are not regulated by
the states. No provisions are made for ri~eans of interconnection which advanced
telecommunications service may require (not inolving Pole Attachments) or
-6-
PAGENO="0086"
1550
for guaranteeing building access when state regulation is found to be deficient
Success of any electronic message service will depend on the carrier's
ability to serve a sufficient number of inter and intracity locations In
order to distribute communications to the ultimate user it is necessary to
gain access to the building in which the potential user is located either to
install antennas on the roof or install internal wiring or both. The costs of
constructing internal distribution systems are enormous and may be conceivably
the biggest cost element any carrier will bear in its entire system
Gaining access and installing internal distribution facilities has been a
constant problem for the MDS industry during the last half dozen years
Often a landlord has said I 11 give you access but I want a piece of your
action While this has usually been in the context of pay TV it no doubt
will happen even more frequently with large-scale business communications
Other obstacles also can reasonably be expected to arise if one carrier in a
given market obtains exclusive rights to the roofs or ducts of major business
centers thereby preventing other carriers access or making the provision of
service more expensive
We believe that it is in the interest of all non-telephone carriers as
well as the consumer, for the legislation to deal with this problem. The Com-
mission should be specifically empowered when it finds state regulation
deficient, to require building access and internal distribution on a reasonable,
compensatory and nondiscriminatory basis so that all carriers will be better
able to serve the public Such a requirement while spurring competition in
the provision of local distribution services can also be expected to spur
the Bell System in its own marketing and sei-~ice developments. An analogy
can be drawn to the Carter Phone decision which opened the flood gates to
technological and service innovations and spurred AT & I to become more
-7-
PAGENO="0087"
1551
and more efficient in its marketing and service efforts.
We strongly beli~ve that the legislation, at the minimum, should provide
that all carriers shall be afforded the same rights of access to buildings and
other locations as the local telephone companies. The EMS network of the very
near future will constitute a vital pipeline in the nation's business and
commerce. The maintenance of that pipeline, free from arbitrary or anticompetitive
blockages, is clearly of national concern. It is an end to end service of
unquestionably national interest. Just as the legislation places regulation
of terminal equipment and devices at the federal level, there is a federal
interest in assuring access to buildings to install such devices. Unless
access is afforded all carriers, the implementation of new technologies will
be substantially delayed. As mammoth as it is, even the Bell System does not
possess the resources, to say nothing of the incentives, to rewire all the
buildings in a metropolitan area to provide the capability of transmitting and
receiving high speed, broadband communications. Other carriers should be
given the opportunity to provide these facilities.
Such legislation can solve th~ access problem by making it, illegal to deny
building access to any FCC-licensed carrier. Suggested statutory language to
that effect is contained in Exhibit C. In any case, this is an area which
bears close scrutiny because the Bell System, which alone enjoys unrestricted
building access, could use, and we expect will use, the status quo unfairly to
its advantage.
ANTITRUST ISSUES AND THE RELATIONSHIP BETWEEN TELECOMMUNICATIONS CARRIERS AND
AFFILIATED MANUFACTURING ENTITIES
The proposed legislation provides that'~dominant carriers" must deal with
-8-
PAGENO="0088"
1552
affiliated entities in an "arms length" fashion and provide to others in a
in a non-discriminatory fashion products or services provided by the affiliate
to the dominant carrier. We are concerned that this approach does not go far
enough of the dominant carrier - The Bell System - the historical record of
pricing abuse merits a more effective structure than merely requiring an arms
length fair access approach. The legislation should provide, in our view,
that the Communications Regulatory Commission be empowered and encouraged to
adopt additional and different requirements to insure against cross-subsidization
by carriers affiliated with manufacturing entities. One such approach would
empower the Commission to require that a certain percentage of the outstanding
shares of the non-carrier entity be held directly by the public or an in-
dependent third party (preferably publicly owned). By establishing such a fidu-
ciary relationship, the chances that parent and subsidiary would, in fact, deal
with each other at arms length would be greatly increased. If they did not,
they would be subject to shareholder litigation. This is one approach. There
are doubtless others. The legislative mandate to the CRC should clearly provide
that, If traditiohal arms length mechanisms do not accomplish their objectives,
the Commission shall have broad latitude to fashion. others.
Perhaps more importantly, however, HR 3333 does not go far~ enough in
guaranteeing fair competition between big "nondominant" carriers related to
equipment manufacturers or software producers and small carrier-only companies
like ourselves. We are all aware that several major computer and office supply
companies will soon enter the telecommunications carrier business. We have
read the public statements of at least one corporate head who has repeatedly
stated that the entry of his $5 billion companj' into the communications carrier
business is motivated primarily by a desire to maintain dominence in the
manufacturing end of the business. If its telec~mmunications entity were to
-9-
PAGENO="0089"
1553
be considered a nondominant carrier it will be permitted to cross-subsidize
and bundle its total offering without violating any CRC regulations This
will give it a big advantage over small companies like ourselves The result
will be that big will triumph over small to the ultimate detriment of the con-
sumer.
We recognize that the new giants entering the telecommunications carrier
business will not possess a statutory monopoly Because of this the incentives
to cross-subsidize between the carrier and manufacturing arms of these entities
will, therefore, be even more pronounced. The dominant positions which these
corporations enjoy in their equipment supply business will be used as a wedge
to drive out competition by companies not similarly affiliated or possessing
the resources to engage in large scale equipment development This carrier-
manufacturing combination could well insure the elimination from the market of
small carriers like ourselves as well as small equipment manufacturers Thus
the public will be left with only a few carrier equipment manufacturing giants
providing EMS-type services
We recognize that if market dominence were achieved bya carrier the
Commission might reclassify that carrier as dominant and subject it to a full
panoply of common carrier regulation It is also conceivable that an antitrust
action might be instituted against such a carrier-manufacturer engaging in
anticonpetitive pricing practices These possibilities will be of small conso-
lation however to those driven out of business during the lengthy course of
regulatory administrative and judicial deliberations
Failure to anticipate these problems in your legislation will most cer-
tainly lead to a repetition of the mistakes of the past There will be a
closed club of a few giant corporations only partially competitive with one
another It will also reverse the trend in service and facility innovation
started by the Carterphone decision If we have learned anything in
-10-
PAGENO="0090"
1554
the last ten years, it is that technological and service innovation is not
within the exclusive province of the corporate giants. Jhis lesson should be
carried over in your legislation.
The incentives for cross_subsidization are so palpably clear, we believe,
that if legislatively mandated separations are not appropriate, the CRC should,
at the very least, be given from the outset broad authority to regulate any
carrier in its relations with affiliated equipment or software companies which
are themselves dominant in their fields. This authority should specifically
include, in addition to requiring traditional arms length dealings, the power
to order full separation of carrier and manufacturing activities
THEuNAuTHpzEouBC~uo~,J!i~Rc~?POii,, OR USE OF coMMuNIç~TIp~
An additional area where we believe' the legislation should be strengthened
concerns the unauthorized interception of private communications. Problems
surrounding the illegal interception of protected communications are with us
today and may be expected to grow geometrically as the level of private com-
munications, MOS, and satellite services continue to expand in the years ahead.
Section 549 of the proposed legislation carries over many of the provisions
of Section 605 of the present Communications Act. While the FCC has speci-
fically found that MDS and private satellite transmissions are communications
which *are protected under Section 605, our experience has been that federal
officials have been loathe to enforce these provisions because of over-burdened
case loads
We believe, therefore, that the legisi~tion should be revised to provide
more meaningful and effective safeguards for private communications A new
Subsection 549(g) should be added authorizing persons injured by violators of
-11-
PAGENO="0091"
1555
Section 549 to commence civil injunctive and damage actions against the
violators. A provision should also be added authorizing the CRC to prevent
manufacturers from distributing equipment to unauthorized users. A separate
unit at the CPC and/or the Justice Department should be established and funded
whose specific responsibility would be to enforce the criminal sanctions of
Section 549.
I emphasize again, while this is a growing problem for the MDS
industry today, it will be a far larger problem as EMS and private satellite
communications expand. As more and more business communications are sent over
telecommunications facilities, both the dollars involved and the incentives
to engage in unauthorized reception and use of protected communications will
multiply. Your legislation should address the problem by providing clear and
enforceable safeguards against theft of protected communications.
INTERCONNECTION
Section 323(b) provides that intraexchange carriers must provide inter-
connection to interexchange carriers upon reasonable request and may not
discriminate with respect to rates, terms and conditions of service. We fully
support those requirements and believe they should be extended to'other carriers.
A revised Subsection 323(b) to that effect is found in Exhibit D.
By requiring interconnection by al1 carriers, the public will benefit from
the lower costs obtained from fair competition among diverse service offerings.
This will allow the benefits of new business communications services to be
provided to the public as soon as they have been developed by innovative
carriers and not be delayed or denied by carriers whose facilities are needed
for interconnection. Small companies likeMicroband will be no better off if
four big companies refuse reasonable interconnection Instead of one. In.
order to make this requirement meaningful, the CRC should be authorized to
-12-
PAGENO="0092"
1556
require carriers to unbundle their charges.*
SPECTRUM FEE
Microband does not object to the payment of a fee which is designed to
reimburse the CRC for the costs of necessary regulation Pursuant to the
proposed legislation, the CRC will perform a very limited regulatory function
with respect to MDS carriers Accordingly the costs of regulation should
be reasonable.
We are opposed, however, to a separate `spectrum resource fee" which, we
believe, provides a disincentive to investment in and development of innovative
communications services. Microband is a licensee of the spectrum. An MDS
station occupies 6 MHz of bandwidth the same as a UHF television station Yet
unlike commercial television our business is still in its infancy The entire
MOS industry has been in operation for less than 10 years Our company has only
recently become marginally profitable Other smaller carriers within the MDS
industry have yet to achieve that status It must be remembered that a carrier
with gross revenues of $3 million is, in reality, a small business. With respect
to MDS carriers the demand for our services is by no means certain The
imposition of a fee on MDS carriers analogous to that proposed for broadcasters
would have substantially delayed the time in which Microband became profitable
and virtually eliminated the profitability of other MDS carriers
Should the legislation nevertheless incorporate this ill-conceived approach
we urge that more extensive reduction in fees be legislatively established
*There appears to be an inadvertent error in a related section, Section 324(a),
which, if uncorrected, could unravel the statutory scheme intended by the bill.
While Section 324 appears to be primarily addressed to telephone companies,
Section 324(a) grants authority to state commissions to establish charges for
telecommunications service This is contrary to Sections 321(b) and 424(a)
which prohibit state regulation of the rates and terms of telecommunications
service Accordingly the words telecommunications service appearing on line
1 page 53 of the bill should be revised to read local exchange telephone
service."
-13-
PAGENO="0093"
1557
EXHIBIT A
2I5OMI-Iz MULTIPOINT DISTRIBUTION
SERVICE SYSTEMS
TYPICAL MDS METROPOLITAN AREA
PAGENO="0094"
OPERATING STATIONS
C?'
C?'
St.
PAGENO="0095"
1559
EXHIBIT C
~NSUEING BUIWING A~ESS
Tha following language gbarànteeing building access shauld be inserted
after the present sentence in Section 321Cc):
"In order that carriers may install, maintain, connect and
disconnect facilities or equipnent for persons requesting
telecorrrnunications services, carriers shall be afforded the sana
rights of access to buildings and other locations as persons
providing local exchange telephane services. Any person denying
such access to carriers shall be in violation of this section."
EXHIBITD
REQUIRING IN1TEIODNNECTI(X~ BY ALL C~Z½RRIERS
In order to assure interconnection anong all carriers, Section 323 (b)
shauld be revised to read as follows:
"(b) Every carrier shall establish interconnection with any
other carrier upon reasonable request. Carriers may not
discriminate anong carriers with respect to the rates, terms,
or conditions of interconnection."
PAGENO="0096"
1560
Mr. MOTTL. Thank you very much, Mr. Franco. We will now hear
from Mr. Richard Gray.
STATEMENT OF RICHARD E. GRAY
Mr. GRAY. Today I am offering the views of the telephone operat-
ing subsidiaries of General Telephone & Electronics Corp. GTE
telephone companies utilize the electromagnetic frequency spec-
trum for provision of intercity private line and message telephone
service, mobile telephone service, public air-to-ground service and
maritime mobile service. Accordingly, GTE welcomes the opportu-
nity to present its observations on title IV of H.R. 3333.
The effort you are making to reduce Government regulation is a
step in the right direction. For instance, the current two step FCC
procedure for construction and licensing of most nonbroadcast
radio stations is a burdensome and unnecessary process. The one
step process set out in sections 412 and 415 should reduce the
unnecessary delays arising from procedures under the present act.
Any attempt to ease these regulatory burdens should provide for
a practical and efficient process for administration of the frequency
spectrum so as to maximize service to the public, but should also
avoid the kind of interference problems which gave rise to Federal
radio regulation in the 1920's.
In this connection we are concerned that H.R. 3333 gives no
opportunity for an interested party to petition for denial of an
application for spectrum use even on grounds of interference or
potential interference. Provision for a denial procedure is necessary
to prevent interruption or degradation of common carriers' services
to their customers.
The GTE telephone companies as providers of common carrier
services are vitally concerned with the reliability of the facilities
utilizing the electromagnetic spectrum.
Thousands of telephone calls, broadcast programs, Defense De-
partment services, among~others, may be carried on a single radio
facility. There must be a provision for these facilities to be protect-
ed from interference.
Additional administrative burdens could be lifted by increasing
to 60 days the length of time of operation under special temporary
authority where no application is to be filed and 90 days where an
application is to be filed for regular operation.
Our experience is that the current 30- and 60-day allowances are
not sufficient to permit the completion of Commission processing
and public notice requirements. A lengthening of these periods will
substantially reduce the need for requests for extensions of time
and subsequent STA's.
Another area of concern to GTE as a user of the spectrum is the
proposed section 415(d)(l)(A), which would establish in certain in-
stances a system of random selection for frequency assignment.
Although possible alternatives to this random selection procedure
are found in section 436, these provisions do not specifically take
into consideration the qualifications of the potential licensee or the
benefits to the public of the service to be provided.
We believe that the best alternative for assignment of such dis-
puted frequencies to qualified applicants is a process based on the
importance of the service to be provided to the public. Only
PAGENO="0097"
1561
through such a process of careful selection among competing appli-
cants can the maximum benefit to the recipients of telecommunica-
tions services be achieved.
Certain language of H.R. 3333 which appears to apply to all
users of the spectrum should be restricted at most to broadcast
users only. For example, portions of section 413 deal with assign-
ment of specific frequencies, power and location of stations, and
zones to be served by stations.
As mentioned earlier, section 415 proposes a lottery for award of
unassigned frequencies for which there are multiple applicants. In
our view, none of these provisions are necessary or appropriate for
common carrier operations.
My comments on proposed section 414, the spectrum resource
fee, will be limited principally to the fee's application to common
carriers. In a current FCC proceeding, GTE commented that a
spectrum resource or scarcity fee for use of electromagnetic spec-
trum by common carriers is not in the public interest. The basis for
this in part is that the public and not the carrier is the trtie
beneficiary of the use of spectrum by a common carrier.
The current allocation/assignment procedures have served the
public satisfactorily. A radically different environment resulting
from a complete restructuring of the industry could make reexa-
mination of these procedures appropriate.
In our view it is premature to implement a scarcity fee concept
prior to the determination of a long-run industry structure. While
a spectrum resource fee might prove to be a workable means of
spectrum management, there are many areas of uncertainty which
must be resolved before it can be fully evaluated.
Thank you.
Mr. MOTTL. Thank you very much, Mr. Gray.
You have heard your colleagues address themselves to these
various issues.
Mr. Meehan, do you have any coibments?
Mr. MEEHAN. I would like to address a couple of the points which
Mr. Roberts raised. First of all, the problems he has posed I would
agree are difficult but I do not know that they are insoluable by
methods other than auctions or speçtru4n management fees. -)
It would seem to me that in a normal rulemaking process, for
example, we could determine if manufacturers or utilities needed
spectrum in the same area and really who had the best case.
Probably it would be taking and splitting it down the middle. All of
the problems he has suggested, it seems to me, can be solved by
means other than a spectrum management fee or an auction. Al-
though, I would agree if, for example, we had Con Ed and IBM
bidding on frequencies in New York, 1somebody with the deeper
pocket is going to solve that problem-' for the regulator. I do n~5t
know that is going to be the best solution.
The other example of whether we sliould implement single side-
band or trunking,. they both may offer efficiencies for some types of
licensees and for others they may b~e terrible. I think the key is the
word that Paul used,. before you in~plethent these things they have
to be "practical". Before you go ahead and say we are going to have
trunking or you will use single ~id~and, I think it has to be
51-2530-80-7 /
PAGENO="0098"
1562
demonstrated again through rulemaking, testing and any number
of things like that, that these are practical solutions.
One suggestion that I think does have merit for some situations
is the trading of licenses. I have a couple of clients right now who
would give their eye teeth to trade some licenses in the New York
area. They were going to go to 800 MHz conventional systems but
they cannot do it now. They are not big enough to go trunked.
They only want to have 400 or 500 units per channel or 400 or 500
units. They are now negotiating with our brothers in the railroads
for some of their high band frequencies. I suppose it would facili-
tate if we could buy those licenses or buy those frequencies if
somebody was in fact holding them.
I really do not know that would be practical for wide area
licensees, but for in a given community, I think that is a good idea.
If somebody is sitting with the license and somebody else needs it
worse, then he can buy it.
I also do not think it would be practical for industry-wide appli-
cations. For example, right now the utilities are seeking on a
nationwide basis frequencies for load management, management of
the utility loads. To go and buy up frequencies in every community
in the Nation where they wanted to do this would not be practical.
I think you would have to have a reallocation situation presumably
based on need and band width and these types of things.
I think auctions will be very helpful to the regulator in those
situations where he has people of equal qualifications, say two
common carriers or two broadcasters, where you know both of
them will use the spectrum substantially the same in the public
interest and instead of giving the money to the lawyers or to the
hearing examiners, have an auction.
In a lot of other areas, I do not know. For example, if you had a
police department and a large wealthy manufacturer bidding for
the spectrum, would the public interest really be served if he with
the deeper pocket would get it. Again, auctions should be applied
where they are helpful but, again, I am wondering if we are
talking about easing the burden of the regulator or his hearing
examiner staff or are we talking about spectrum management?
It seems to me it is relieving the burden of the regulator
The only other question is, and I did not realize we were going to
get into section 549, we were initially somewhat concerned why we
had a complete revision of what is now section 605. No. 1, in light
of the fact that nothing was done in the last bill and also in 1968
the whole subject was addressed in detail in revision of the crimi-
nal code.
The only thing we were concerned with is when you get into
including language such as "expectations of privacy," we get into a
whole new area of litigation and an area that has been litigated ad
nauseum. What is the personal privacy expectation?
If you call me on a telephone, I do not expect you would not be
recording my telephone conversation. Why not? Perhaps it would
be in your interests and perhaps in the public interest that you are
recording my telephone conversation.
We have a number of industries where this is particularly criti-
cal. For example, again in the utility industry where people have
trouble calls coming in, such as wires down, people being electro
PAGENO="0099"
1563
cuted, gas mains exploding, all these t~1ephone calls are recorded
because a lot of times the people will blurt out what happens and
hang up. The normal human being on the other end cannot take
everything down. This is recorded normally with a beep tone or in
fact all of the time with a beep tone.
They want the people to know it is being recorded.
To put any provision in where ~he utility or the police or the
ambulance or whatever have to go~through notification like, "is it
all right if we record" and back and fofth such as the Commission
had suggested in docket 20840, it would really place a burden on
the utility or police or emergency type operator who is required to
recQrd telephone conversations.
I would hope if we get into this substantive area of expectations
of privacy, whatever that is, that we would be very careful that we
do not prevent some ver~p~racticaJ uses of telephone recording or
complicate them any further than they are now.
Mr. MOTTL. Thank you, Mr. Meehan. Mr. Franco, would you like
to respond?
Mr: FRANCO. On another point an~d I do not recall whether it was
Mr. Bortz or Mr. Roberts who made the comment that he disagreed
with the Federal preemption of th~regi~tlation of the local portion
of an interexchange communicatior4. _I
I would like to suggest in terms ,of our experience that we sup-
port the present measure. I do not think we as a small company
would be here today testifying at a~ll if we were subject to regula-
tion in 50 States on what is in essence ii~iterstate commerce. We do
not have the staff to mount the various lobbying and legal require-
ments in 50 State PUC's. ~Even if w~e did, the cost of providing our
service to the public would be so astronomically increased. We
think it is not in the public interes~t to create unnecessary regula-
tion at the local level of what is i~i essence interstate or interex-
change communications.
Mr. JACKSON. Mr. Chairman, may I follow up on this question?
Mr. MOTTL. Certainly.
Mr~ JACKSON. Mr. Gray, does G.T~ &~ E.' have any position on this
issue, the issue of Federal versus State ji.~risdiction over local use of
radio services? -
Mr. GRAY. I am really not prepared to get into that today.
Mr. MOTTL. Excuse me. We with allow counsel to proffer ques-
tions to the ~panel. Mr. Van DeerI~n will be back any minute. I
have to make a vote so please excuse~ me.
Mr. JACKSON. I am sorry. Please continue.
Mr. GRAY. There was earlier testimony. I am not prepared to get
into that today. I believe there is~ earlier testimony before this
panel on the local versus State versus Federal jurisdiction.
Mr. JACKSON. Mr. Bortz?
Mr. EORTZ. On Mr. Meehan's cOmment about expectations of
privacy, in our full testimony we ad~lressed that in some detail. W~-
share his concern about the issue relating to expectation of privacy
and have made some suggestions that we believe could meet many
of those objections. It should not bq just a personal expectation of
privacy. It should be a "reasonable expectation," requiring judicial
scrutiny of the circumstances in which the service is delivered,
involving not only the individual's ~expectation, but whether such
PAGENO="0100"
1564
expectation is one that society is prepared to recognize as reason-
able.
We are also supportive of section 549 because it is much more
broadly drawn than, for example, the 1968 act which I believe
addressed wire communications only. Section 549 addresses data
and nonoral communications as well.
With respect to the jurisdictional issue, this is a very difficult
issue as to whether there ought to be Federal preemption or State
regulation of these services. We see that when you start drawing
lines by technology within a given area, and you divide the regula-
tion is that fashion you can get substantial differences in treat-
ment of services that are really pretty much the same services.
Mr. JACKSON. Would NTIA be in favor of State and local regula-
tion of television broadcasters?
Mr. BORTZ. No. We do not believe that is substitutable for in-
traexchange telephone service
Mr. JACKSON. How do you distinguish a pay UHF channel from
an MDS firm, they provide analogous services.
Mr. BORTZ. I think this raises issues of the use of MDS. The
concept that I think was originally behind MDS was not pay televi-
sion delivery, but data communications If we are talking about
data communications within a given area, there might be some
substitutability for intraexchange services.
Mr. JACKSON. We have in several communities today the use of
subcarriers of FM broadcast stations for distribution of digital sig-
nals similar to the way such use is proposed for MDS Would you
then turn over to the States the regulation of that function of a
broadcast station?
Mr. BORTZ. No. What we are proposing is that you have in the
bill some flexibility to address each of these as they come along.
When you begin to draw rigid lines-and I believe you have rigid
lines either with the approach that you have suggested in your bill
or with the approach really we have put forward earlier-which
said all intraexchange communications would be regulated at the
State level-j-hybrids are going to form and they are not hybrids
that you can now anticipate That is why we are very supportive of
Carlos Roberts' suggestion that the Commission take a look at
these services and determine essentially the bounds of regulation
which would be appropriate if there is to be any regulation at all.
Then that regulation would occur at the State level.
If it were not appropriate and if for example MDS were strictly
pay TV services or some of the other examples you have cited, you
could look at each of those cases and then I think you could draw a
conclusion as to the extent of State regulation But by being very
rigid at this point, you are going to have services whose very
configuration will be designed to take full advantage of this separa
tion of regulatOry jurisdiction in terms of intraexchange services.
I think you want to avoid that You do not want to have services
designed to fit that By having the flexibility of Mr Roberts' sug
gestion, I think you will avoid that.
Mr. JACKSON. Mr. Meehan, do you want to comment on this
issue?
Mr. MEEHAN. As you might imagine with the membership of
LMCC encompassing the American Telephone & Telegraph Co., the
PAGENO="0101"
1565~
independents, the RCC's and a multitude of private users, it has no
position as such on preexemption.
Some of the members and primarily many of the users concur
with the appnoach in the bill. Others such as carrier-oriented mem-
bers feel that in some areas State regulation is required.
As far as LMCC is concerned, I really would not be in a position
to do it. I will say the utilities wh9leheartedly support the inter-
city-interexchange approach and placing Federal preemption on
all intercity service.
One interesting twist, I noted in your section 549, you stuck with
the old language of interstate versus intrastate, unlike what hap-
pened. in the Senate where I presume they intend to apply section
605 to intercity. There is an interesting complication in the Senate
bill with respect to those exchange areas which encompass more
than one State. -
Does this mean that the Federal Government in section 605
rather than the State laws would govern in those areas? This is
something you may want to consider in section 549. There is a
multitude of State treatment of so-called right to privacy or tele-
phone recording.
As long as you are examining this, you might want to determine,
do we want to preempt from the Federal point of view this tele-
phone recording.
Mr. JACKSON. Mr. Roberts?
Mr. ROBERTS. If I could comment~ for a minute, I would like to
address some of Mr. Meehan's earlier remarks. I certainly agree
with him that we do not want to put all of our eggs in any one
basket of spectrum management techniques, whether they be eco-
nomic or otherwise.
I think my point was that we do have some tools in the basket
now and those tools have in some instances proven less than ade-
quate, and it would be very desir~ble to add some more tools to
that arsenal.
I certainly am. glad he agrees on the desirability of the transfera-
bility of licenses and in turn I agree with his point on fees for
Government users. I think it would require a little tighter justifica-
lion on the part of Government agencies of their usage of spectrum
if they had to pay a fee or purchase frequencies on the open
market.
I differ with him a little bit when~we get to actual assignment of
channels. The repeated illusion to people with the deep pockets I
think is a little bit misleading, because certainly somebody that
has deep pockets is not necessarily going to buy up everything they
come- near. Willingness to buy and the amount of dollars in the
bank account are two separate things. Certainly before a purchase
is made, you have to have the money in the bank account, but
having the money in the bank account does not imply that you are
going to buy up all the frequencies that are around.
I think perhaps there may hav~ been some misunderstanding
also on the question of reallocation of frequencies between major
services. I do not anticipate here that Land Mobile is going to come
in and buy. up broadcast channels or for that matter that the
reverse situation would take place, but rather that the price sig-
nals that the broadcasters or Land Mobile interests would send up
PAGENO="0102"
1566
as to how much they are willing to pay for channels within their
own bands would give the regulatory authority a pretty good clue
as to the need for reallocation, if that need should exist I think it
is important to bear those differences in mind
Mr JACKSON Mr Roberts, there was extensive discussion of
section 549 and discussion of what the reasonable expectation of
privacy meant and would refer to Have you looked at that section
and do you have any thoughts about what the reasonable expecta
tion of privacy is in mobile communications?
Mr. ROBERTS. Yes, I have looked at it. It is an extremely difficult
question to answer and to try to draw a line It is one of these
issues which I think is really a matter of judgment
My personal opinion viewed from the perspective of someone
who works in an agency that might have to enforce these provi
sions is the final answer to this thing is if you want privacy, you
ought to take the technical steps necessary to assure yourself of
that privacy As technology develops it becomes easier and easier
and cheaper and cheaper to implement scramblers and other sorts
of privacy assurance devices and cost is no longer, in my opinion, a
valid reason for not availing yourself of those. Simultaneously as
technology develops and scanner receivers and other general cover
age receivers become more available, it becomes almost an enforce
ment nightmare to try to keep those devices off the market or
prevent people who have them from tuning in certain frequencies
while they are able to tune in others
Mr JACKSON Mr Bortz?
Mr BORTZ Partly in response to questions you asked the previ
ous time we were up here and discussed this, we have looked at
some of the services in this area and at the FCC rules that apply to
those services Basically in talking about expectation of privacy, it
would seem to me, as to a particular link, if you go to the point of
scrambling the signal that there is an expectation of privacy That
would be precluded only in two services from what we can see in
terms of analog scrambling That would be in personal radio and
amateur radio services where essentially* there have to be clear
voice transmission
In the other services, analog scrambling is allowed If somebody
goes to that point of scrambling, then I think there is an expecta
tion of privacy. Digital scrambling is allowed apparently only in
public safety services, and we believe digital scrambling may be
allowed in the private operational fixed microwave There is no
digital scrambling in the other areas
I think that whether or not a signal is scrambled in clearly part
of the expectation
Mr JACKSON Mr Franco7
Mr FRANCO In the area of pay television, I think we have a
slightly different situation than we are discussing here No 1, I
think there is an expectation in a person that when he does not
pay for the pay television programs he is receiving, he is intercept-
ing these programs illegally. You cannot say otherwise I do not
believe.
One of the problems we have faced in this area is that there is a
real cost of implementing scrambling and other protective cures.
The cost is you have to go out and retrofit everything that has
PAGENO="0103"
1567
been done before. It is not as in a point-to-point service where you
today can decide tomorrow to go into a scrambled mode. When you
have thousands of receivers out in the field, it is almost an impossi-
bility to decide tomorrow to switch over to a scrambled mode. How
do you do it?
The cost is a cost that would be passed onto the public. It is a
very real cost.
What we have faced as an industr~y-and I do not know that the
STV broadcasters have yet but I suspect they probably will-is
there are people that go around selling the equipment so that
others can get the programs for nothing. When we go to the var-
ious administrative agencies which are charged with enforcing the
law, no one. from the FCC to the Justice Department really wants
to do it.
One of~our customers caught a person manufacturing and install-
ing an illegal box. He caught him by having a detective order the
service. The man came to his home and installed the equipment.
All of this was presented in evidence to the court and the court
basically because as I believe because the agencies of the Govern-
ment did not give it full support for very good reasons, because of
caseloads and other more pressing things, it really did not come to
anything.
What happens is you encourage more and more of this. I think
there is a real expectation when somebody is stealing a pay televi-
sion signal that he knows what he is doing and he should be
punished to the full extent of the law for it.
Mr. MEERAN. Again we are dealing with practicalities and I
think this is the proof of the pudding to support what Carlos has
suggested, that if you have a problem with interception and you
have a reasonable expectation normally based on money or other
considerations, you take technical means. For example, in the pe-
troleum industry all your drilling logs when transmitted are
scrambled. That is highly proprietary information. Paul mentioned
digital. Up to ~now utilities have not used digital. As a result of
some recent events involving electric utility generation facilities
and concern that two-way radio transmissions were monitored, I
think you will see the Power Radio Service coming in very rapidly
to have the rules change to apply digital to that service.
You have a need that may not have existed 10 years ago. In
today's world with different values and different outlooks on what
is best for this country and access to equipment that can monitor,
you are going to have a changing thing but I think everybody has
to row his own boat. If you have a problem instead of running to
the Government for a solution, have a little bit of self-help and go
the technical route.
Mr. JACKSON. What I hear you and Mr. Bortz and Mr. Roberts
saying is that it is so hard to police and control the use of intercep-
tion equipment, it is so cheap and easy to make such equipment
and all the components of such equipment have legitimate uses
elsewhere in the economy, and you can buy the parts at places like
Radio Shack or electronic parts distributors, radio amateur supply
stores, the enforcement burden is overwhelming, and therefore it is
better just to let people know ~what the rules are and to tell them
that there is other technology to protect their privacy.
PAGENO="0104"
1568
Is that a fair statement of your positions?
Mr. MEEHAN. I would personally concur with that.
Mr BORTZ I concur
Mr ROBERTS Yes
Mr. VAN DEERLIN. When you were talking about the pay televi-
sion signals, were you talking about both over the air subscription
and pay cable?
Mr. FRANCO. I was talking about MDS pay. I suppose the same
problem will apply to the other services as well, pay cable as well
as STV. I had reference specifically to the provision of pay televi-
sion via MDS which is in an unscrambled mode.
The point I was trying to make was MDS receivers are tuned to
a particular channel, a particular frequency, 2150 megahertz.
There is no other use for this particular equipment other than to
receive a signal from our station or from another licensee's station.
To permit the manufacture and distribution of this equipment
for the purpose of committing an illegal act, it seems to me it
should be addressed.
Mr. VAN DEERLIN. Somewhat comparable to gasoline siphoning
equipment?
Mr. FRANC0. Yes.
Mr. MEEHAN. Am I permitted one point of surrebuttal? I certain-
ly do not want to tangle with Mr Roberts on anything, but in our
discussion of auctions and their uses and so forth, what I am
concerned about if you apply auctions say in the spectrum alloca
tion or spectrum management area, is not that somebody may not
have the willingness and a deep pocket, I am concerned that I have
somebody with less than a deep pocket who has a real legitimate
need for spectrum bidding against somebody who has a deep pocket
who might have an equally legitimate concern.
It just does not seem to me to be fair just because somebody has
more bucks than the other fellow that he should get the spectrum.
I think auctions are a nice way to eliminate lawyer fees in cases
where you have people where they have equal public interest
rights and uses It is just the matter of mox nix who gets it Use an
auction there.
I am concerned and in talking with user groups they are saying,
who has all the money in the telecommunications business, the
dominent carrier or I certainly do not want to go up against IBM
or something like that. Then they say, look at all those little pizza
guys down there, they do not have the bucks that I do and maybe
that is not such a bad idea.
This utility I was mentioning, for example, it could go and outbid
someone and that would be a lot easier than the agony they are
going through right now, although I must say the railroad people
are very accommodating.
I am concerned that the auction will bring about a lot of rnjus
i~ ices and I do not think you can dismiss it by saying just because
~somebody has a lot of money does not mean they are going to go up
and buy spectrum. I am not concerned about that. I am concerned
~wKere you have two or three people all contending and maybe that
~littie police department and maybe it is a big police department in
New York, they only have a certain budget and maybe they need
that spectrum just as well as IBM or whatever the corporation
PAGENO="0105"
1569i~
might be. They certainly do not have the economic wherewithal to
compete in an auction or sealed bids or what have you.
Mr. VAN DEERLIN. It was never envisioned that the spectrum fee
would be used to exclude public and social uses of the spectrum.
Mr. MEEHAN. I know that. I am not talking of the fees. I am
talking of the use of auctions to determine who gets a specific
frequency. I realize the public safet~r people are exempted from. fees
in your bill. I am not clear they would be exempted from any
auction program~ that the Commission might implement.
Mr. BORTZ. They certainly could be exempted.
Mr. JACKSON. I think it is very clear in the language of H.R. 3333
that the Commission could choose to exempt them and to treat
them differently. I read H.R. 3333 as allowing auctions to be used
and encouraging auctions to be used exactly in the situation you
described as being desirable, where you have three applicants alike
and there is no point in wasting money or delaying the delivery of
service through a comparative hearing.
When they are different and they serve different public interest
values, the Commission has discretion under H.R. 3333.
Mr. BORTZ. This would not be a free-for-all in terms of the fees.
There are allocations. I assume auctions, if they were to be held,
would be so within an allocation, which is defined for a particular
service. You would have a homogeneous group of bidders, so you
could use the values obtained from those auctions as one piece of
information in reallocation decisions, in which case you might shift
from one industrial use to another or from one service to another
but I do not think it would be wide open to any service that wanted
that frequency.
Mr. MEEHAN. I would hope not. I do think it is a concern and it
was a concern of the people we represent and we think it should be
addressed. Clearly we do not intend the bad result to come by, but
I do think it should be addressed and if not in the language of the
Act, at least in the report.
Mr. JACKSON. Would you be willing to supply the subcommittee
with language which would articulate both the values and the
constraints that are needed to make sure that they do not bring
harm?
Mr. MEEHAN. Yes, sir. We will file within the time limit provided
in the written statement addressing that point.
Mr. VAN DEERLIN. Mr. Moir, full committee counsel?
Mr. M0IR. Thank you, Mr. Chairman.
I have a few quick questions. Mr. Gray, in your testimony at
pages 2 and 8, you talk about longer periods of time for an STA. Is
it not pretty much a matter of course that valid STA requests are
granted extension and the actual work effort of the Commission's
staff is actually milliseconds and yet the value of not giving carte
blanche long periods of time in the initial grant is that STA's are
for only special purposes. If you need a CP, you go ahead and apply
for a CP; and many longer time requests have actually been an
abuse of the construction permit process or license process?
Mr. GRAY. In our experience as to the purposes to which an STA
is used, as you say, they are special purposes, emergency situations
and whatnot. In most cases we have found the necessity for an STA
extends beyond the 30-day period.
PAGENO="0106"
1570
I think the problem comes in those cases where an application is
to be filed. To get an STA for say 60 days and file an application
and have that meet the preliminary processing, public noticing and
whatnot, and expect to get a system up to speed in that length of
time is very difficult. The main problem comes in knowing when
an application is to be filed.
Mr. MOIR. In that situation, an STA is not used as a vehicle to
initiate a speedy process for a new project at the Commission?
Mr. GRAY. No, it is not.
Mr. Morn. Mr. Bortz, in your testimony, you discuss the proposed
section 549 or the existing section 605. I note and well understand,
that on page 1 you talk about your statement merely being an
expression of NTIA's views and not the executive branch's views.
In your circulation of this testimony did you receive any comments
back or were there comments made by the Justice Department on
this portion in your testimony?
Mr~ BORTZ. We have not received any comments in the circula-
tion of this that have not been taken into account in the editing of
the testimony.
Mr. Morn. None were received?
Mr. BORTZ. There were comments from some agencies.
Mr. M0IR. Not the Justice Department?
Mr. BORTZ. We had no comment from Justice.
Mr. M0IR. Thank you.
One further question. For any of the witnesses here today who
might not have an opportunity later, the bill before you in section
3331(d) addresses a prohibition basically on the entry of dominant
carriers into cellular communications. There has been some men-
tion of this in the testimony. So any of you have any comments on
how the subcommittee should address the monopolistic aspects of
cellular communication; some people have said the mere prohibi-
tion of an A.T. & T. type of license is sufficient; and other people
have talked about splitting up the licensing of the radio spectrum.
Other people have discussed the possibility of allowing one individ-
ual, or one entity, to be the licensee and sell service time to other
carriers.
Are there any comments from any of the panelists here? We will
be getting some testimony, possibly tomorrow, on this matter, but
it might be helpful to get your views.
Mr BORTZ I think the provisions of section 436(a) which suggest
when at all possible that there be at least three businesses partici-
pating in delivery of the services is the best way to avoid monopo-
listic endeavors. Then, you do not have to prohibit the participation
of a dominant carrier from competition. There might be some
significant service advantages in that case but there would be
competition.
I think this kind of guidance to the Commission will be very
important in cellular, MDS, and other services.
Mr. M0IR. Would you include in that the present proposal for
cellular as proposed by the Commission in docket 18262? It would
have one entity be the licensee of the 40 MHz; from your com-
ments, I assume it would not be desirable to have that, but in one
example, split it in thirds.
PAGENO="0107"
1571
Mr. BORTZ. This has to be considered. There are a number of
spectrum issues too, and I am not really prepared at this point to
comment specifically on the particular proposals before the Com-
mission. Requiring at least three operators, though, is a feasible
way.
I think to give consideration to avoidance of monopoly situations
is important.
Mr. FRANCO. I would like to make one additional point. We
believe in order to create competition to the dominant carrier in
that area of communications, namely the local distribution of sig-
nals, that it is necessary to keep the dominant carrier out of that
business for a period of time, at least until there can be a foothold
gained by some other entities.
I think it is especially so in respect to the point I made earlier in
the day concerning the access to buildings. We are talking about
broadband communications and right now the dominant carrier
really is the only entity that can get into customers' premises
easily.
If you allow the dominant carrier to add on to that so-called
monopoly which is the unlimited access to customers' premises
which the rest of us do not have and give it the ability to bring in
these cellular systems at the same time, I think you are going to
find in the long run, you are going to be eliminating the possibility
of really having a competitive atmosphere. You are going to enable
it through its monopoly of those premises to drive out the competi-
tion.
Mr. MOIR. The reason I raised the point is that the Commission,
in its docket, had as a premise the concept that cellular service had
to be offered as a monopoly service because of spectrum efficiency
reasons. There has been considerable discussion since that pro-
nouncement as to whether that is in fact valid reasoning.
It is basically that cellular concept that I am mentioning, and
maybe Mr. Roberts could comment on that cornerstone of the
docket 18262 proposal.
Mr. ROBERTS. I think the Commission decision, made in light of
the prevailing philosophies and policy perspective of that time, is
probably correct, but I would hazard a guess that if that decision
were to be made today, it might come out a little differently.
I am somewhat concerned that we not waste just about a decade
of effort and tens of millions of dollars that have been poured into
the cellular development and have to start all over simply to
introduce competition.
My position is somewhat in the middle. I would say let's in the
future look, as the provisions of H.R. 3333 specify, to having compe-
tition in the provision of these services but we are so far down the
road in cellular that I think we probably ought to consider some
other solutions that might not exclude the monopoly, at least as a
base on which perhaps some minimal competition could be added
on.
I think to start over now would involve too much delay in the
provision of this valuable service.
Mr. MOrE. Some of the proposals we have heard would not in-
volve the scrapping of that docket, but allow for the actual provi-
sion of service to be spread over a multiplicity of individuals.
PAGENO="0108"
1572
Mr. ROBERTS. I think those deserve very careful scrutiny and we
are certainly doing that at the Commission as well
Mr. Morn. In your later comments you mentioned you would be
filing, will you address this issue?
Mr. ROBERTS. I believe the panelists from the Commission who
will be here tomorrow are probably going to concentrate more on
that area.
Mr. Morn. Thank you. Mr. Bortz?
Mr. BORTZ. I just wanted to express some concern, if I under-
stand Mr. Franco's proposal correctly, about access to buildings;
this is going to make pole attachment look like playing in a sand-
box. It is a very different situation. Regarding access to buildings, I
would assume you can arrange to have access with building
owners. I hear there is a flourishing business in New York City
and other urban locations where business managers apparently
make a tidy profit in terms of access to buildings.
I just do not think it is an area of Federal regulation and unlike
poles, it is not controlled by someone who can be viewed as a
competitor but rather by a multiplicity of private owners. I think
that should be a private agreement between the supplier of the
service and the building owner.
Mr. FRANCO. On the other hand the statute I think contemplates
regulating the terminal and regulating the local aspects of inter-
state communications. The only thing we are not regulating is that
little piece of wire or optical fiber or whatever that comes down
from the roof that attaches to the terminal.
I am saying if the intent in this legislation is to bring to the
public the great benefits of a new broadband technology, how are
you going to get those technologies down to the terminal?
Right now the buildings in this country are wired for narrow
band services. If we and other carriers like ourselves who want to
bring these broadband technologies into the building and are
thwarted by the dominant carrier because only it has the ability to
create the State laws that give it the monopoly in the building so
to speak, how do we bring in these technologies?
To me there is no difference between having the ability to regu-
late the terminal and the ability to regulate the wire that connects
to the terminal.
Mr BORTZ I think substantial freedom for on premises' wiring is
contemplated and it is not going to be an area of detailed State
regulation.
Mr. FRANCO. I think even in the pole attachment language that
is in the bill, I think you can read some of that language as saying
the phone company must provide, if it has a conduit in the build-
ing, it must provide an attachment to that conduit. I am not sure
that goes as far as we would like it to go. We would like it to say
that anyone who forbids access to federally licensed carriers would
be in violation of the act
Mr. BORTZ. I would be concerned about getting into regulation of
MATV systems which would be included under that. I think the
line has to be drawn somewhat substantially on the other side of
that.
Mr. M0IR. Thank you, Mr. Chairman.
Mr. VAN DEERLIN. I thank all of you for this very helpful panel
discussion.
[The following letter was subsequently received for the record:]
PAGENO="0109"
1573
MICROBANO
June 12, 1979
Congressman Lionel VanDeerlin
Chairman
House Communications Sub-Committee
B333 Rayburn House Ofice Building
Washington, D.C. 20510
Dear Chairman VanDeerlin:
I wish to thank your committee for the opportunity afforded our company
on June 6, 1979 to present its views with respect to certain aspects of the
proposed new Communications Act.
The overriding purpose of your legislative initiative, as we see it, is to
spur competition so as to bring to the marketplace technological innovation and
to eliminate regulation wherever possible. We agree that these are worthwhile
goals. We believe, however, that an issue we raised in our testimony is not
fully addressed in the legislation and we are concerned that failure to solve
this problem could tend to defeat these worthy purposes. We would like to take
this opportunity to amplify on that point here.
Whether provided by us or by others, communications services of the future
will tend to be increasingly broadband in order to satisfy the public demand
for high speed data distribution. The number of broadband `pipes" available to
the public today is growing quite rapidly and the rate of growth will increase
dramatically in the years ahead. A great deal of "rewiring" is involved with
respect to these broadband pipes because the existing plant (including the
interstate and local portions as well as the internal building distribution
systems) is not sufficiently wideband to accommodate these new services.
It is with respect to the internal building distribution systems that we
perceive the problem to lie. In most cases today, internal building wiring is
not adequate for broadband signals. Therefore, unless this wiring is changed,
introduction of new broadband services to the buildings in question will be
prevented or delayed. In order to make these installations, carriers such as
ourselves need to obtain access to buildings. At the present time, only local
telephone companies have the unrestricted right to obtain access to all buildings.
We believe that this fact will delay the introduction of new and competitive
services to the ultimate detriment of the American public. In short, the purpose
of the legislation - the introduction of competitive and new technology - will be
thwarted.
We believe that it is in the interest of all non-telephone carriers, as well
as the consumer, for the legislation to deal with this problem. The law should
specifically permit all federally-licensed carriers to obtain access to buildings
for the purpose of installing internal distribution systems. Such a requirement,
while spurring competition in the provision of local distribution services, can
M~CROBAND .655 T HIRO AVENUE, `NEW YOF~K N.Y 10Q17. (212) 867.9580
PAGENO="0110"
1574
also be expected to spur the Bell System in its own marketing and service
developments. An analogy can be drawn to the Carter Phone decision which opened
the flood gates to technological and service fiiñövations, and spurred AT & T
to become more efficient in its marketing and service efforts. Forthis reason
the legislation, at a minimum, should provide that all carriers shall be
afforded the same rights of access to buildings and other locations as the
local telephone companies now enjoy.
When we presented these views to you at the hearings, a point was raised
that while access may be an important issue, it is one that should be addressed
at the state and local level. We strongly disagree with this approach.
Your legislation preempts for federal regulation the local portion of
interexchange communications as well as the terminals themselves. It seems
logical that it should also preempt the wiring to the terminal. In point of
fact, there would appear to be an overriding federal interest in seeing to it that
the Carrier could gain access for the purpose of installing the equipment. Just
as the Congress has seen fit to require mandatory access to pole attachments
in the cable television industry, carriers must be granted access to buildings
where such is absolutely vital for the provision of their services.
Clearly, the EMS type networks of the near future propose end to end systems
provided by communications carriers on a national basis. They are of overwhelming
national interest. Moreover, the costs, delays and uncertainties of pursuing
a remedy in fifty local jurisdictions - fighting the telephone company at every
turn - will substantially delay the provision of new services by all carriers,
including Bell.
The result of allowing Bell to maintain the sanctioned status it now has,
will be a reduction in competition which is totally inconsistent with the
purpose of the legislation. Unless this problem is remedied in your legislation,
we are most certainly bound to repeat the mistakes of the past. It requires
no stretch of the imagination to believe that the Bell System will use its
governmentally sanctioned monoply with respect to building access to frustrate
the efforts of its competitors.
Attached hereto is our suggestion of the type of language which we believe
is necessary to be included in the bill. We wish to have this letter and attach-
ment included in the record of your hearings. More importantly, we respect-
fully request that you favorably consider our views when reevaluating the
proposed legislation.
Thank you for your interest in our industry. If we can ever be of assistance
to you or your staff please do not hesitate to call upon us.
Respectfully 5 mitted,
Don Franco, Presiden
Microband Corporation of America
cc: Dr. Chuck Jackson
Staff Engineer
MICROBAND.655 THIRD AVENUE, NEW YORK, N.Y 10017.(212) 867.9580
BUILDING ACCESS
The following language guaranteeing building access should be inserted
after the present sentence in Section 321(c):
"In order that carriers may install, maintain, connect and
disconnect facilities or equipment for persons requesting
telecommunications services, carriers shall be afforded the
same rights of access to buildings and other locations as
persons providing local exchange telephone services. Any
person denying such access to carriers shall be in violation
of this section."
PAGENO="0111"
1575
Mr. VAN DEERLIN. Our first of the individual general witnesses
will be Mr. Val J. Williams, president of the National Association
of Business and Educational Radio.
STATEMENT OP VAL J. WILLIAMS, PRESIDENT, NATIONAL
ASSOCIATION OF BUSINESS AND EDUCATIONAL RADIO
Mr. WILLIAMS. My name is Val J. Williams, president of the
National Association of Business and Educational Radio, better
known as NABER. NABER represents the more than 125,000 busi-
ness radio users licensed by the FCC and also and very important
for this discussion the thousands of two way mobile radio dealers
and service stations which sell and provide maintenance for land
mobile radio systems.
On their behalf, each of these two elements, I am grateful for the
opportunity to testify briefly on a couple of issues in H.R. 3333 that
are of keen interest to our members.
Generally speaking, NABER's membership consists of small busi-
nessmen who face competition every day. They thrive on the chal-
lenge. In an era of regulatory redtape, it is encouraging that this
bill advocates marketplace. forces as the basic regulator instead of
Government intervention. Therefore NABER supports the pro-com-
petition thrust of H.R. 3333.
Awhile later I am going to discuss this aspect in conjunction with
recent Commission action.
We are also pleased that the bill recognizes, at least in the. land
mobile area, that to be effective competition must genuinely exist.
It is our belief that if the dominant carrier, A.T. & T., were allowed
in the land mobile marketplace, it would capture the lion's share of
the market and the inevitable result would be no competition
rather than the intensely competitive environment that exists
today.
We support the exclusion provision set forth in section 331(d).
Let me explain the adverse impact that would befall our members
if this section were deleted and this primarily applies to the service
stations and independent dealers.
A.T. & T. as it has done historically, undoubtedly would provide
its own in-house service and maintenance of its radio equipment.
Since we believe that because of its very bigness, A.T. & T. would
acquire a dominant share of the land mobile market, a substantial
portion of the maintenance business would be no longer available
to our members.
We are talking about small businessmen who can ill afford to be
shut out from a substantial portion of the market they service
today. Even if for some unknown reason A.T. & T. were to contract
out service/maintenance business, its leverage would allow it to
obtain such service at low, noncompetitive prices.
Similarly some of our members who have elected to become
licensees of the third party for hire SMR systems would have a
rocky road to say the least, trying to survive against identical
systems owned and operated by an A.T. & T. subsidiary. As an
investment for the small businessman, these systems represent a
substantial risk and for A.T. & T., the amount of money involved
would be petty cash.
PAGENO="0112"
1576
To summarize, it seems to us that this bill endeavors to establish
the ground rules for fair competition and where this is not attain
able as in the land mobile field, the bill wisely has elected to retain
the highly competitive environment that now exists.
Briefly, we also congratulate the authors of H.R. 3333 for pre-
empting interexchange services and land mobile from State juris
diction. May I say parenthetically you have saved me about 50
trips a year around the country fighting with these State regula-
tory commissions.
If the goal of competition as the regulatory yardstick is to be
obtained, it is essential to prevent States from imposing their own
form of regulation Even under today's regulatory framework, all
too often these local entities establish rules contrary to FCC find-
ing It is appropriate for Congress to end that practice once and for
all.
Finally, I must raise the possibility of another problem that may
frustrate the marketplace goals of H R 3333 from being realized
That is the FCC or the CRC itself.
As the subcommittee knows, the concept of competition and de-
regulation is not new. The White House has ordered all adminis-
trative agencies to follow this policy. Yet recently the FCC has
made decisions and initiated proceedings that will without question
reduce the system choices available to the land mobile user and
particularly to the small business user even though and again
parenthetically the FCC in the 18262 proceedings in the early
1970's and in the middle 1970's said options to users was the
primary thrust of 18262.
The FCC uses all the right language about how it intends to
promote competition and let marketplace forces be dominent. In
reality, what the Commission is doing is changing the marketplace
to fit what the FCC thinks it ought to be. In our opinion the FCC is
wrong.
Less rather than more competition will result at a higher cost to
the user. Right or wrong is not the issue. The point is that if an
administrative agency can on its own decide that the marketplace
is not working then we will end up with just as much regulation
and Government intervention and the only difference will be the
words the FCC will use to rationalize its actions
I hope the Congress and this committee will address this situa-
tion and somehow compel the FCC to follow the mandates of H.R.
3333 Regulation is necessary only to the extent marketplace forces
are deficient I added the word "only" and perhaps section 101(a)
needs that word added also
Thank you very much, Mr. Chairman, for allowing me to speak.
Mr VAN DEERLIN Thank you
Mr. JACKSON. I have one question, Mr. Williams. In the third of
your three points, you referred to current FCC activities that you
felt created problems for users Could you be a little more specific9
I know it puts you in a difficult spot since your organization has to
work with the FCC but as diplomatically as you can, could you try
to explain what this problem is that you are referring to?
Mr. WILLIAMS. I am really not delicate about it, Mr. Jackson, and
I do not have any problem with being at odds with them because I
PAGENO="0113"
1577
have been for years on many issues. We are very good friends
incidently.
The specific that I am referring to of course is the most recent
action by the staff and the Commission, not all of the Commission-
ers, I might add, in which they in effect closed off private systems
applications in the 800 MHz band by denying any further release
of the reserve pool frequencies for private systems and insisting
that trunk systems be developed before any more private consider-
ations would be made.
This is arbitrary and capricious because first of all there is a
tremendous amount of spectrum available for private systems by
the very action of 18262. Second, to force everybody to go to a one
offering when the whole thrust of the issue of the proceeding was
choice of services is just really going out of the context of what I
think a regulatory commission is allowed to do.
What they have done is impose more regulation than less.
Mr. JACKSON. Thank you.
Mr. VAN DEERLIN. Thank you very much, Mr. Williams.
Our next witness is Mr. Nathan B. McClure, president of Associ-
ated Public Safety Communications Officers.
STATEMENT OF NATHAN D. McCLURE III, PRESIDENT, ASSOCI-
ATED PUBLIC SAFETY COMMUNICATIONS OFFICERS, INC.,
ACCOMPANIED BY ERNEST J. LANDREVILLE, EXECUTIVE DI-
RECTOR
Mr. MCCLURE. Thank you, Mr. Chairman and members of the
subcommittee and members of the staff.
My name is Nathan B. McClure III. I am the coordinator of the
Winnebago County Emergency Services and Disaster Agency in
Rockford, Ill. I am the president of the Associated Public Safety
Communications Officers, Inc., APCO, on whose behalf I am ap-
pearing before you today to discuss H.R. 3333, the Communications
Act of 1979.
I am accompanied today by Mr. Ernest J. Landreville, APCO's
executive director.
Last September I had the honor and the privilege of appearing
before this committee to discuss APCO's views on H.R. 13015, the
proposed Communications Act of 1978. Mr. Chairman, you can be
assured that in reporting to APCO's membership on my appear-
ance, I stressed your stated concern and support for public safety
use of radio, in suggesting that APCO members maintain their
active involvement in this historic legislative process. My appear-
ance today is representative of that continuing commitment to
your committee's efforts by the APCO membership.
I might add, Mr. Chairman, that we are particularly pleased you
have accepted our invitation to be our keynote speaker at our
annual conference in Sacramento next August. We expect that
public safety communications organizations from all across the
country will be present to benefit from your statement.
One will quickly recognize on even a cursory reading of H.R.
3333 that substantial modifications and, in APCO's view, improve-
ments have been made to the provisions of the bill which will
govern the use of the radio spectrum by land mobile and other
radio service licensees. On the other hand, despite your express
51-253 0 - 80 - 8
PAGENO="0114"
1578
concerns for the public safety radio services sector, APCO must
regretably note the lack of any clear and specific directive to the
Commission to recognize and provide for and assure that public
safety needs for effective, reliable, and economical telecommumca
tions services will be met
Underlying my previous testimony to this committee and
APCO's general position on any communications legislation, is our
concern that the standards for access to and use of the radio
spectrum and other telecommunications services applied generally
to all other users should not be applied to State and local govern
ment agencies and other public safety service organizations There
is nothing in the bill which would assure that channels reserved
for emergency use would be continually available even when other
licensees might desire their use to meet such contingencies There
is also no direction in this new legislation which assures that the
authority allocating or assigning the spectrum will take into ac
count the planning and budgeting delays generally encountered by
public safety service users in determining which of several compet
ing services will be provided with spectrum
In our submitted written statement APCO has suggested appro
priate language which could be used in section 101 in the bill as a
clear statement of direction by the Congress with regard to the
public safety communications services APCO strongly urges that
the committee consider the use of this additional language for
inclusion in the legislation which is finally adopted Such language
would govern not only the proposed Communications Regulatory
Commission but also the National Telecommunications Admrnistra
tion
APCO would also urge the committee to consider the need for
additional language in section 436, which contains the primary
provisions dealing with the spectrum management standards of the
new Commission Requiring the Commission to encourage competi
tion in the provision of public safety radio service systems would
wreak havoc, on an interjurisdictional and intrajurisdictional basis,
among the providers of public safety services Requiring public
safety services providers to compete on an economic basis for avail
able channels or subjecting the availability of channels for public
safety services to the uncertainty of a lottery or other random
selection basis would obviously be totally unacceptable To cure
this problem APCO urges the addition of pertinent language to
section 436 SO that the congressional recognition of and concern for
the differences in use of the radio spectrum by the public safety
radio services will be clearly reflected in the bill
APCO is pleased to note that the provisions of section 414 deal
ing with the spectrum resource fee have been changed in line with
our earlier testimony so that the Commission must waive the scar
city value factor of any spectrum resource fee if the user is a State
or political subdivision of a State This is certainly an improvement
over the earlier provisions
This modification has not resolved other serious concerns raised
in our earlier testimony APCO is greatly concerned that the
waiver of the spectrum resource fee mandated in the bill extends
only to State and local government licensees Many licensees in the
public safety radio services would not qualify as subdivisions of
PAGENO="0115"
1579
State or local governments. They are often quasigovernmental or
voluntary nonprofit organizations which supplement or substitute
for the Government in providing safety services.
The imposition of such fees could significantly impact the ability
of such volunteer organizations to provide public safety services to
their local communities. A modification to the exemption contained
in section 414(a)(2)(A) can and should be made which would limit
the availability of the waiver to those providers of public safety
services who act on a nonprofit, noncommercial basis.
APCO also believes that it is inappropriate to charge a license
fee to licensees who gain no personal benefit from their use of the
radio, that is, those whose use of the radio license is for the public
benefit in providing public safety services, even a fee based only on
the processing costs. You, Mr. Chairman, have recognized in a
letter to one of APCO's members that "there seems to be little
value and much loss if such agencies were to be included among
those who must pay a spectrum license fee and essentially the
Government would have been taking money out of one pocket and
putting it into another." We would hope that the committee would
exempt public safety radio service licensees from all spectrum re-
source fees.
Mr. Chairman and members of the subcommittee, the value of
radio systems in providing public safety services cannot be meas-
ured in dollars. Local governments must be assured that the re-
sources necessary to provide services to their communities will be
available as needed. This is an historic opportunity for this com-
mittee to assure that the radio spectrum will be used in the public
interest. On behalf of APCO I urge that you consider such provi-
sions in the final legislation.
Mr. Chairman, to perhaps answer a question before it is asked,
we feel the exemption in section 436 from the economic factors is
not clear enough. We are asking that Congress direct the Commis-
sion to exempt public safety from economic based considerations.
Mr. Chairman, I thank you for the opportunity to appear before
you today. APCO looks forward to continuing to work with you and
the subcommittee, and with Congress, in the continuing efforts to
review and update the Communications Act.
[Testimony resumes on p. 1598.]
[Mr. McClure's prepared statement follows:]
PAGENO="0116"
1580
STATEMENT
OF
ASSOCIATED PUBLIC SAFETY COMMUNICATIONS OFFICERS, INC.
ON H.R. 3333
BY
NATHAN D. McCLURE, III
Mr. Chairman, members of the Subcommittee, and members
of the staff, my name is Nathan D. McClure, III. I am the
Co-ordinatOr for Winnebago County Emergency Services and
Disaster Agency in Rockford, Illinois. During the past
year, I have had the pleasure of serving as the President
of the Associated Public Safety Communications Officers,
Inc. -- APCO -- on whose behalf I am appearing before you
today to discuss H.R. 3333, the Communications Act of 1979.
Last September, I had the honor of appearing before
this Committee to discuss APCO's views on, and suggested
changes to, H.R. 13015, the proposed Communications Act of
1979. Mr. Chairman, I was truly gratified by your stated
concern and support for the public safety sector's use of
the radio spectrum. You can be assured that in reporting
to APCO's membership on my appearance, I stressed this sup-
port in suggesting that APCO members maintain their active
involvement in this historic legislative process. My
appearance today, and this written statement, are repre-
sentative of that continuing commitment to and support of
your Committee's efforts by the APCO membership.
PAGENO="0117"
1581
One will quickly recognize, on even a cursory reading
of H.R. 3333, that substantial modifications and, in APCO's
view, improvements have been made to the provisions of the
Bill which will govern the use of the radio spectrum by Land
Mobile and other radio service licensees. Certainly, by
creating a distinct section of the Bill with separate
provisions to govern Land Mobile Radio Services, many of
the problems which arose from the provisions of H.R. 13015
which were relevant to the broadcasting services, but which
were also nad~ applicable to Land Mobile radio services,
have been cured. On the other hand, despite your express concerns
that radio spectrum should be available for use by the pub-
lic safety radio services sector, APCO must regrettably note
the lack of any clear and specific directive to the Commission
to recognize, provide for, and assure that the needs of
public safety radio service users for effective, reliable,
and economical telecommunications services will be met.
APCO has made an in-depth review of H.R. 3333. In the
pages that follow, I would like to discuss with you APCO's
proposals for revising those areas where modifications are
necessary beyond those already included in this rewrite of
the earlier legislation.
PAGENO="0118"
1582
The Communications Act Must
Recognize the Requirements of Public
Safety Licensees for 1~iIiable
Telecommunications Services
Underlying my previous testimony to this Committee,
and APCO s general position on any communications legis-
lation, is our concern that the standards for access to
use of the radio spectrum and other teleco'nmunica~iorb
~ ~ices anplied generally to all other i~er~ ~no~i~ n t
be applied to state and local government agencies and
other public safety service organizations. Unlike most
other radio services, where full channel occupancy is a
sign of full utilization APCO has noted that some channels
allocated to the public safety radio services are fullj
utilized with very low occupancy being reserved for use in
emergency situations, during civil disorder/natural disasters.
No one would suggest that these channels he available on a
competitive basis with other licensees when they are needed
durinq an emergenc~ -- yet there is nothing in the Bill
which would assure that such channels would be continually
available even when other licensees might desire their use
to meet such contingencies.
Public Safetj radio users also face significant planning
and budgeting delays in attemoting to implement new or
improved system designs No group should understand the
delays inherent in funding government projects better than
PAGENO="0119"
1583
Congress Yet no direction is included in this new legis-
lation which assures that the authority allocating or
assigning the spectruip will account for such delays in deter-
minincr which of several competing services will be provided
with spectrum
Pwo oertinent examples of these unique problems can
readily illustrate APCO s concern for the need for further
direction in the Bill Recent events have brought to bear
the unpredictability of the need for emergency communications.
Snoi storms in the North floods in the South and civil
ciisorder in a major cty on the TA7est Coast all increased
the requirement for immediately available communications
channels The near-catastrophe at t-xe mhree Mile Island
nuclear facility focused this need onto a four-state area,
as contingent plans for evacuating hundreds of thousands of
residents were being formulated by responsible governmental
authorities Channels allocated for such uses might not be
utilized for days weeks or even months in between actual or
potential disasters yet the need to have such area-wide
coordination channels availab]e to governmental public safety
agencies cannot be seriously questioned
The problems of lono-term planning are graphically
demonstrated by the Commission s experience in creating
pool rather than block allocations for frequencies allocated
to Land Mobile services in the 800 MHz Band APCO stated
PAGENO="0120"
1584
the concerns of the public safety sector that channels would
be quickly gobbled up by other services, particularly in
those urban areas where funds night be more readily available
to take advantage of the new technology. Thus few, if
any, public safety organizations would be able to move their
operations to 800 MHz The Commission nevertheless decided
to abandon its block allocation process and make channels
available on a first-come/first-served basis The results
are, not unexpectedly, that a significantly smaller percentage
of those channels have been assigned to public safety service
licensees, than to other radio services.
APCO has contributed to the development of a trunked communi-
cations system for use by public safety agencies at 800 MHz
Yet it is not unlikely that public safety organizations in wany
cities which could benefit from use of this new technology
will be foreclosed for lack of available channels at the time
that the planning, design and budgeting stages of the imple-
mentation process are sufficiently complete to allow appli-
cation for station authorization In fact without assurances
that channels will be available few jurisdictions will under-
take even the initial stages of development of such a system
The Commission s Private Radio Bureau recoonizing this
problem has recently announced its intention to recommend
to the Commission the initiation of a proceeding designed to finally
PAGENO="0121"
1585
set aside some frequencies at 800 MHz as a block allocation
solely for the use of public safety services.
As we have continually noted, public safety operations
entail a responsibility for the protection of life and
Dropertv, a public responsibility provided on a governmental
or quasi-governmental basis. Such operations simply cannot
he likened to commercial, nongovernmental user operations
for purposes of regulations. A different motivation for
using the spectrum is inherent in the public safety sector,
and local governments are entitled to assurances that the
resources necessary to provide services to their citizenry
will be available to meet documented needs.
Congress apparently intends that the spectrum will be
regulated to provide for public safety services. It is
stated in Section 101 of the Act that Congress finds that
the regulation of interstate and foreign telecommunications
is necessary in order to "advance. . .the safety of life
and property. ` Yet, as APCO has previously recognized, while
the Bill contains this statement of purpose in providing
for spectrum regulation, there is nothing in the balance of
the Bill which expressly recognizes the need, or otherwise
provides, for a regulatory approach which would assure the
availability of necessary radio services for use in advancing
the safety of life and property. This lack of clear direction
in the new regulatory scheme is of major concern to the public
safety community.
PAGENO="0122"
1586
In APCO s earlier testimony and bub~equent correspondence
regarding H R 13015 APCO suggested appropriate language
which could be used in the Bill as a clear statement of
direction by the Congress with regard to the public safety
communications services kPCO suggested that the additional
language should be added as a third finding under Section 101
which would read as follows
3 Promote the advancement of public
safety communications services and
in this connection assure the
availability of radio spectrum
necessary for public safety services
used in protecting life and property
in accordance with their unique needs
APCO strongly urges that the Committee consider the use of
this additional language for inclusion in the legislation
which is finally adopted Such language would govern not
only the proposed Communications gegulatory commissior but
also the National Telecommunications Administration
To the extent that the Committee believes that inclusion
of such language at that part of the Bill is not acceptable
then Z~PCO would urge the Committee to consider the need for
such additional lanquage in Section 436 which provides the
new Commission with statutory guidance as to spectrum allo-
cation standaras and management for the land mobile radio
services As presently written Sectiom 436 is particularly
troublesome to the public safety community It provides that
PAGENO="0123"
1587
the Commission, in any rulemaking dealing with spectrum
allocation standards and management, shall give substantial
weight to the preservation and furtherance of competition in
interstate commerce. The Section also provides that in
1/
developing rules and technical standards for radio systems,~
the Commission must prescribe rules and standards which are
designed to ensure that at least three business organizations
will be in competition for the provision of radio systems
services in each relevant market. Section 436 also requires
that if there is more than one applicant for a newly available
frequency, the Commission must establish rules for selection
among applicants, including selection systems based on the
use of frequency coordinating committees, the use of economic-
based methods of selection, random selection methods, or any
other method or procedure which the Commission considers to
2/
be in furtherance of the Act.
1/ The term radio systems has general usage in the land mobile
services to connote systems of private or common carrier
licensees which include base, mobile and relay stations.
However, the Committee's explanation of this section only
discusses proposed new common carrier systems. The use
of this term in the Bill should be clarified by adding
the words common carrier' or `commercial" before the
term "radio system'.
2/ This section presents an apparent conflict with the general
provisions of Part IV, Section 415 (d) (1) (a). Both Sections
would appear to govern the standards for granting new
licenses; 415(d) (1) (a), however, limits the Commission's
authority to using only a system of random selection, while
Section 436(b) gives the Commission broader latitude.
Section 415 (ci) (1) (a) should be clarified to indicate that
it does not apply to the land mobile and other radio services.
PAGENO="0124"
1588
It is easily apparent that this Sectirn whic~i contains
the primctry provisions dealinc with the spectrum management
standards of the new Commission contain'~ no directions to
or provisions for the Commission to deal with the distinct,
noncommercial and noncompetitive needs of the public
safety radio services for radio spectrum Requiring the
Commission to encourage competition in the provision of
public safety radio service systems would wreak havoc on
an inter-jurisdictional and intra-jurisdictional basis among
the providers of public safety services Requiring public
safety services providers to compete on an economic basis for
available channels or subjecting the availability of channels
for public safety services to the uncertainty of a lottery
or other random selection basis would obviously be totally
unacceotable
APCO believes that an additional sentence must be added
to Section 436 so that the Congressional concern for the use
of the radio spectrum by the public safety radio services
will be reflected in the Bill A phrase must be added to
Section 436(a) at the end of the first sentence so that the
sentence reads as follows
The Commission shall give sub-
stantial weight to the oreservation
and furtherance of competition in
interstate commerce and to assuring
the availability of radio spectrum
necessary for use by public safety
communications services in the
protection of life and property
PAGENO="0125"
1589
With this addition, other provisions of Section 436 are
acceptable, since the Commission's discretion to implement
particular selection methods must be exercised within this
directive. Additionally, since spectrum allocation authority
is placed in the Bill under the NTA, similar language
should be included under Part VII of the Bill to the extent
that allocations would extend to particular radio services
rather than to land mobile services generally.
Only by providing such specific direction can Congress
be assured that the needs of the public safety radio services
will be met. APCO believes that unless this or similar pro-
vision which mandates recognition of the different treatment
necessary in spectrum allocation and management standards
between public safety and other radio service licensees
is included in this Section, the quality and availability
of public safety services which utilize the radio spectrum
will be significantly impaired.
The Scope of the Exemption from
Spectrum License Fees for Public
Safety Service Users Should
be ~xpanded and Clarified.
In our earlier testimony, APCO noted what we considered
to be two problems with the spectrum license fee suggested
by H.R. 13015. First, we were concerned by the imposition on
PAGENO="0126"
1590
public safety licenses of fees based on the cost of processing
licenses Second and of no less importance we were con-
cerned that the Commission was only permitted rather than
required to waive the spectrum value portion of the proposed
fee for state and local government licensees We also noted
at that time that suc~' a waiver would not necessarily apply
to all public safety radio service u'~ers and could therefore
impact to a substantial degree the use of radio services by
other public safety licensees
APCO is pleased to note that the provisions of Section
414 dealing with the spectrum resource fee have been changed
so that the Commission must waive the scarcity value factor
of any spectrum resource fee if the user is a state or
political subdivision of a state This is certainly an
improvement over the earlier provisions However this modi-
fication has not resolved other serious concerns raised in our
earlier testimony.
APCO is greatly concerned that the waiver of the spectrum
resource fee mandatel in the Bill extends only to state and
local government licensees As APCO has previously explained
many licensees in the public safety radio services would not
qualify as subdivisions of state or local governments Rather
they are often ouasi-governmental or voluntary non-profit
organizations which supolement or substitute for the government
in provid~ng safety services For example it is not unusual
PAGENO="0127"
1591
for the fire-ficThting unit in some areas to be a voluntary
non-profit organization which receives part of its funding
from a local government and part from outside contributions.
Similarly, in many areas of the country, the local emergency
medical services organization is a voluntary, non-profit
group which is only partly supported from tax funds. Under
the provisions of the Bill these licensees, upon whom the
payment of spectrum fees could fall hardest due to their
limited sources of funding, would be required to pay a
spectrum resource fee. We do not overestimate the problem
when we state that the imposition of such fees could signifi-
cantly impact the ability of such volunteer organizations to
provide public safety services to their local communities.
In attempting to manage the spectrum through economic"
incentives then, the Bill may instead result in a contraction
of public safety services available to many communities.
APCO believes that a modification to the exemption
contained in Section 414 (a) (2) (A) can be made which would
limit the availability of the waiver to those providers of
public safety services who act on a non-profit, noncommercial
basis. APCO would urge that the Committee revise this
exemption to read as follows:
(A) the user is engaged in a governmental,
quasi-governmental, or nonprofit public
safety activity.
PAGENO="0128"
1592
A~CO also believes that the FCC's findings with regard
to imposing fees, based on the cost of processing a license,
on public safety licenses are noteworthy. Notwithstanding
the apparent authority to impose such fees t]~e Commission
has consistently found that collection of fees from
licensees in the police fire local government and other
public safety radio services would be inappropriate. The
Commission has determined that requiring licensees to pay
a fee for the right to u~e radio to engage in public safety
radio services woLld discourage participation in these
worthwhile activit~es on this basis the fees have always
been waived. You, Mr. Chairman, have recognized in a letter
to one of APCO's members, that there seems to be little
value and much loss if such agencies were to be included
among those who must pay [a spectrum license fee], and
essentially the government would have been taking money out
of one pocket and putting it into another
APCO appreciates the Committee s determination to
require parties who may obtain a service from the government
in the form of processing of a license to pay for the value
of that service. However, APCO believes that it is inappro-
priate to charge a license fee to licensees who gain no
personal benefit from their use of the radio license ie
those whose use of the radio license is for the public
benefit in providing public safety services even a fee based
PAGENO="0129"
1593
only on the processing costs. Any monies which are taken to
pay license fees will necessarily reduce the amount available
to public safety agencies to implement and enhance their
radio systems. APCO simply does not find any justification
for inposing such a fee. We would hope that the Committee
would recognize the validity of the FCC's earlier findings,
and exempt public safety radio service licensees from all
3/
spectrum resource fees.
Provisions Should Be Modified In
Order That the Bill Fully Meets
~
There are three sections of the bill which, APCO
believes, can with minor modification be improved to more
closely reflect Congressional intent as to spectrum use and
3/ APCO gains no consolation from the well-intended limitations
imposed under the Act on the spectrum resource fee applicable
to land mobile radio service licensees. ~ifee, regardless
of its size, drains resources from the limited amount avail--
able under budgetary constraints well-known to this Committee
for use in public safety radio systems. Such imposition of
fees would fall particularly hard on those public safety
organizations who have already begun the long, and often
arduous process of planning, desi~niiig and budgeting a
public safety radio system, since such design and budgeting
would not have accounted for the imposition of fees, based
on the present exemption which has been granted by the
Federal Communications Commission. It is not unlikely that
fees for large area-wide systems could significantly
impact the ability of such systems to implement their
proposed designs as scheduled.
51-253 0 - 80 - 9
PAGENO="0130"
1594
spectrum management. The first is Section 422, which
generally prohibits the Commission from censuring or
otherwise regulating the content of any transmission by any
person using or operating any equipment in the broadcast or
land mobile or other radio services. The only exceptions. to
this broad prohibition relate to certain broadcasting
practices.
As pointed Qut by APCO in its earlier testimony, the
Commission must have the power to regulate the content of
transmissions in the land mobile radio services in two
regards First the Commission rnu~t be able to regulate obscene
or annoying and harassing transmissions in the land mobile
services area. This is particularly important in the case of
shared radio services, where the length and/or types of trans--
missions could greatly influence the ability of different
licensees to use the shared channel.
Perhaps more importantly, however, in making assignments
and allocations among radio services, the Commission limits
certain channels to certain types of uses. Thus, for example,
the Commission may reserve certain channels in the public
safety radio services solely for dispatch; other channels nay
be reserved solely for telemetry, and. still others for low
powered command/control operations. To the extent that this
broad prohibition on censorship and regulation of content..
PAGENO="0131"
1595
could he read to prohibit the Commission from limiting a
licensees use of an assigned channel in this manner, the
ability of the Commission to properly regulate the radio
spectrum would be significantly abrogated. it is arguable
that Section 413(a) (9) gives the Commission the authority
to continue to manage the spectrum on a service-by-service
basis by providing the Commission with the power to classify
stations and prescribe the nature of service to be rendered
by each class and by each station within a class. APCO
believes that Section 422 should he clarified to ensure that
the power granted in Section 413(a) (9) ~is not so severely
restricted by Section 422 as to be meaningless.
The next section of concern is Section 453 (a) (1). This
Section is generally a restatement of the first phrase of
Section 325(a) of the 1934 Act. However, Section 325
applies to all radio licensees, while Section 453(a) (1),
found under Part C of the new Act, would appear to govern
only broadcast services, in view of the importance of this
provision, APCO believes it should be moved into the general
section of Part iv of the Bill.
Finally, APCO notes with interest the extension of the
license term for land mobile and other radio services to a
term not longer than ten years (Section 432(a)). APCO does
not object to the expansion of the license terms to ten years.
Our concern, however, is that the CRC will not be able to
PAGENO="0132"
1596
maintain an adequate and accurate data base on the state of
use of stations in any particular service if the license
term is extended for such a lengthy period. During a ten-
year license term, many licensees may change their mode of
operation1 or simply cease doing business. However, unless
the Commission is notified of such changes, which will not
necessarily be the case, the Commission's data base will not
be accurate, and the potential availability of new assignments
would not be known.
Under present regulations ~ licensee is required to
apply via postcard for renewal of his license, generally
every five years ,~hile postcard renewals are not totally
acceptable to APCO, since they often deter licensees from
reviewing and improving their systems to include the latest
available technology, they at least maintain a more current
data base than the Commission could possibly be expected to
attain with a ten-year license period. APCO would urge the
Committee's consideration of this problem in determining the
license term which will be allowed in the land mobile radio
services.
Conclusion.
Mr. Chairman and members of the Subcommittee, the value
of radio systems in providing public safety services cannot
PAGENO="0133"
1597
be measured in dollars. Local governments must be assured
that the resources necessary to provide services to their
communities will be available as needed. Requiring public
safety service users to compete for, or justify their use
of, channels on the same basis as a commercial business
radio service user ultimately must result in the overcrowding
or unavailability of channels to the police, fire or local
government organization and the inability of these organi-
zations to meet their public responsibilities. Rather than
encouraging the use of radio in advancing the safety of life
and property, the provisions governing land mobile radio
services could, in fact, result in the unavailability of
the radio siDectrum for such advancement.
Unless, and until, the provisions of the Bill are
amended to ensure that the different and distinct needs of
the public safety radio communityare considered in any
spectrum assignment and allocation procedures, Congress'
intent in providing for regulation will not be met. This is
an historic opportunity for this Committee to assure that the
radio spectrum will be used in the public interest. On
behalf of APCO, I urge that you consider such provisions, in
the final legislation.
Mr. Chairman, I thank you for the opportunity to appear
before you today. APCO looks forward to continuing to work
with you and the Subcommittee, and with Congress, in the
continuing efforts to review, and update, the Communications
Act.
PAGENO="0134"
1598
Mr. VAN DEERLIN. Thank you for a very skillful abstracting of a
report or statement that will be included in full in the record.
Mr. Jackson?
Mr. JACKSON. I have no questions, Mr. Chairman.
Mr. VAN DEERLIN. Mr. Wunder?
Mr. WUNDER. On page 11 where you talk about the breadth of
the exemption and certain public safety users may not be included
because of the fact that they would not be State or Governmental
licensees, what type of activity do you have reference to? Volunteer
fire departments?
Mr. MCCLURE. In many cases the volunteer fire departments or,
probably more commonly, the emergency medical services, the
local ambulance service is a voluntary, not-for-profit corporation
that has no tax base. They exist solely on contributions from the
public and in some cases charges but the charges, certainly for the
service does not cover the cost of providing the service. These are
the types of organizations that would flLOt be exempted the way the
bill is currently written.
We suggest on page 12 the language that would correct that.
Mr. WUNDER. Thank you, Mr. Chairman.
Mr. VAN DEERLIN. Thank you. I will see you in Sacramento with
a completed legislative package I trust.
The final witness for today is Mr. Herbert L. Massie, superin-
tendent of communications of the Atchison, Topeka, & Santa Fe
and chairman of the Radio Liaison Committee of the Association of
American Railroads. Welcome to the subcommittee.
STATEMENT OF HERBERT L. MASSIE, CHAIRMAN, RADIO
LIAISON COMMFfl'EE, ASSOCIATION OF AMERICAN RAILROADS
Mr. MASSIE. Thank you, Mr. Chairman.
I presume it was a coincidence that the railroad industry be
given the caboose position today.
My name is Herbert L. Massie, superintendent of communica-
tions system, Atchison, Topeka & Santa Fe Railroad Co. appearing
today on behalf of the Association of American Railroads.
I have submitted for the record a comprehensive statement of
the railroad industry on H.R. 3333.
While H.R. 3333 has more nearly brought into focus the private
land mobile/microwave segment needs than did H.R. 13015, there
are still some concerns which I am glad. to have this opportunity to
briefly express.
Allocation and assignment of radio frequencies are important
issues. While title IV of H.R. 3333 would have CRC responsible for
assignments, title VII places the prime responsibility for alloca-
tions with NTA. As there appears to be no avenue for user public
input to the NTA allocation process, it is recommended H.R. 3333
provide that input perhaps by bringing NTA under the Administra-
tive Procedures Act.
The impact of an assessment of annual spectrum resource fees on
a national/international scoped industry is unclear.
License application process fees are reasonable. Incorporation
into these fees of scarcity value charges is worrisome. Access to
spectrum, now used for railroad land mobile and fixed microwave
operations through payment of added fee charges of unknown and
PAGENO="0135"
1599
possibly exorbitant amounts based on scarcity value would be of
dubious public benefit.
While H.R. 3333 ~does provide a degree of gradiency in its commu-
nity~ land mobile fee criteria one should consider that radios used
for terminal and en route train communications employing a single
radio frequency will operate in congested~urban yard areas, smaller
*cities and towns as well as vast uninhabited and rural areas.
Likewise parallel microwave systems are used in these same
areas. In view of the foregoing and because railroad land mobile
frequencies are coordinated nationwide with Canada and are
shared by multiple users in the same geographical area, the con-
cept of resource fees appear to the AAR as being extremely compli-
cated if not impossible to apply equitably.
Private radio microwave systems are now basic tools for enhanc-
ing the safety and efficiency of railroads. The railroads role in our
Nation's economic health and welfare in these times of energy
crisis should not be overlooked. Ultimately these resource fees
would have to be passed onto the public in increased costs for goods
and services as the railroads are a transportation common carrier.
AAR questions as a matter of public policy the use of monetary
criteria in deciding private radio spectrum matters or the use of
economic strength for deciding by whom radio frequencies will be
used.
Section 413(d)(1) by requiring congressional concurrent resolu-
tion, could have the effect of freezing the broadcast spectrum in
place. To AAR, this would favor one user excessively. As there are
many other users of the spectrum whose interests are vital, we
recommend this section be deleted.
AAR recommends H.R. 3333 be amended to provide for the Com-
mission to make greater use of coordinating ~committees. This could
reduce time required by Commission staff for processing applica-
tions and would fit in with the general theme of deregulation.
S. 622 provision for industry coordinators might be studied for
inclusion in H.R. 3333.
Mr. JACKsoN. Excuse me, Mr. Chairman, if I may interrupt, how
could the Commission use frequency coordinators more than is
allowed under H.R. 3333?
Mr. MASSIE. How could the industry coordinators be used more
than they are today?
Mr. JACKSON. No, more than is allowed for in H.R. 3333.
Mr. MASSIE. Basically H.R. 3333 merely touches o~ the use of it
but it really does not give them any particular status as to how
they can be used in the process of licensing or how they can be
used in the culmination of the licensing process.
Mr. JACKSON. It leaves to the discretion of the Commission the
role of the industry coordinating committees, is that correct?
Mr. MASSIE. What we are looking for is a little more positive
direction toward the use of the industry coordinators, a little more
definitive back-up to the Commission for their use.
Mr. JACKSON. You are saying the bill mandates their use rather
than permits their use?
Mr. MASSIE. Maybe "mandate" is a little strong but at least
provide for a broader use and a little more incentive for them to
use these coordinators more broadly.
PAGENO="0136"
1600
Mr. JACKSON. Would the Commission as H.R. 3333 is written, be
able to use industry, coordinating committees in the fashion you
feel is desirable?
Mr. MASSIE. It is unclear as to how much they could use them.
That is our concern. We feel S. 622 has a little more definitive
language as to just how they will be used.
Mr. JACKSON. Thank you and excuse me for interrupting.
Mr. MASSIE. AAR is concerned with section 422 of H.R. 3333
dealing with prohibition of censorship and that it is so sweeping
that there is a possibility that essential radio operating require-
ments could be barred.
Mr. Chairman, thank you for the opportunity to appear before
your subcommittee.
[Testimony resumes on p. 1619.]
[Mr. Massie's prepared statement follows:]
PAGENO="0137"
1601
STATEMENT OF HERBERT L. MASSIE, CHAIRMAN, RADIO LIAISON COMMITTEE,
ASSOCIATION OF AMERICAN RAILROADS
My name is Herbert L. Massie. I am Superintendent of
Communications, System, of The Atchison, Topeka and Santa Fe
Railway Company and, in addition, I am Chairman of the Radio
Liaison Committee of the Association of American Railroads
(AAR). The AAR is a non-profit organization recognized by the
Federal Communications Commission (FCC) as the national radio
frequency coordinator for the Railroad Radio Service. This
includes (1) the line haul railroads, such as the Santa Fe,
Union Pacific, Southern Pacific, and CONRAIL, (2) the short
line railroads, such as the Northwest Pacific and the Central
of Vermont, and (3) the urban rail mass transit and commuter
systems, such as the Long Island Railroad, Chicago Regional
Transit Authority, the METRO in Washington, D.C., and BART in
the San Francisco area. I am glad to submit this Statement as
a contribution to the Subcommittee's deliberations on H.R.
3333.
The AAR was privileged to appear before this Subcommittee
to contribute to the discussions that eventually led to draf t-
irig H.R. 13015 and again privileged to appear to testify on
H.R. 13015. Since those earlier views and recommendations
of AAR are already on record with the Subcommittee, I propose
not to repeat them in their entirety in the interest of saving
time.
However, I would reiterate that the interest of the rail-
road industry in telecommunications is extensive. The over
PAGENO="0138"
1602
400 separate Class I, II and II railroads in the U.S., operat-
ing on 324,000' miles of track, virtually interlace and blanket
the entire nation with their private telecommunication net-
works. Together, railroads operate many, many thousands of
locomotives cabooses on-track and off-track units of work
equipment and other types of vehicles, virtually all of which
are radio equipped. A number of urban rail rapid transit
systems, e.g., `New York City and Washington, D.C. subway
systems, are also radio equipped under the Railroad Radio
Service portion of' the FCC Rules and Regulations. Addition-
ally, tens of thousands of portable and hand-held radio units
are provided to railroad and rail rapid transit personnel to
carry on tasks incident to safe and efficient operations.
It probably would be of interest to the Subcommittee
that, as the railroads of the U.S. and Canada are operation-
ally integrated, there is extensive shared use of VHF radio
communications spectrum by the two countries to facilitate
traIn "run-through" operations and coordination of train move-
ments along the border. VHF radio frequencies shared by the
U.S. and Canadian railroads are assigned from a common block
allocation. Specific assignments in the border areas are
coordinated by the Communications and Signal Section of the
AAR, which serves as frequency coordinator for the railroads
of both countries.
-2-
PAGENO="0139"
1603
Management of radio frequency spectrum resources is, I
believe, a large and important task. As a part of its
continuing overview of telecommunications, and in its delib-
erations on H.R. 3333, the Subcommittee should, in the view of
the railroad industry, assure itself that the Commission
always has the necessary statutory authority and resources to
do high quality spectrum management. The use of industry
radio frequency coordinators can be of significant assistance
and the Commission should be provided with the authority to
use those coordinators. In this regard, AAR recommends that
appropriate parts of Section 336 Senate Bill S.622 be consid-
ered for inclusion in H.R. 3333.
There has been in the past much discussion of the proper
applications of "block allocations" of spectrum. Certainly
block allocations cannot be justified in all cases, but there
are some where it remains essential. This would appear to be
the case of the public safety services and is definitely the
case of the railroads. Because the latter industry is made up
of a nationwide network of railroads, a group of closely re-
lated frequencies must be available on a national basis and
this is best achievable certainly through a block allocation.
Very much involved in current radio frequency issues are
the proposals of the United States for the 1979 World Admini-
strative Radio Conference (WARC). The railroads have a unique
-3-
PAGENO="0140"
1604
interest in the 1979 WARC because the continued availability
of one-third of the spectrum used for their mobile communica-
tions is tied to Footnote 287 of the International Radio
Regulations. The continued availability of spectrum for fixed
microwave communications, on which the railroads are so depen-
dent, is likewise involved in the 1979 WARC actions.
Having made these general observations and incorporated
by reference the AAR views already on file with the Subcom-
mittee, the following commentary on H.R. 3333 is submitted in
the spirit of helpfulness.
CONCEPT OF REGULATION "TO THE EXTENT MARKETPLACE FORCES ARE
DEFICIENT" SHOULD NOT BE EXTENDED TO THE PRIVATE
~
The railroad industry depends heavily upon the intercon-
nection with the common carriers f Or much of its communica-
tions and upon the manufacturers for its telecommunications
equipments. Therefore, in these areas the AAR concurs with
the concept of Section 101 that regulation is necessary "to
the extent marketplace forces are deficient."
However, the extension of "marketplace forces" or
"market" concept to land mobile and private microwave communi-
cation spectrum is, as a regulatory tool, questioned. When it
-4-
PAGENO="0141"
1605
comes to spectrum for private land mobile and private micro-P
wave telecommunications, "marketplace" criteria should not
prevail. In the case of the railroads, spectrum is u~sed for
safety and efficiency in their operations. Both are very much
in the public interest. It is not considered prudent in.the
view of AAR, that the Congress should permit railroad
telecommunications to become embroiled in the proposed
"marketplace forces" concept.
Telec~mmunicatjons is a complex technical field in which
technology is frequently the crucial issue in matters coming
before the Commission for decision. Yet there seldom has been
a Commissioner with a telecommunications and/or electrical
engineering background. It is recommended that specific pro~
vision be made in H.R. 3333 that at all times there be at
least one "engineering" Commissioner serving on the new Corn.
munications Regulatory Commission (CRC). Section 212(e) paves
the way for this by calling for "balance among professional
backgrounds." Because engineering is such an important
ingredient to telecommunications, Section 212(e) should, in
the view of AAR, be specific on the point.
Section 212(c) provides that Commissioners shall serve
only one term of ten years. This provision has two disadvant.~
ages in that the CRC can be burdened with a poorly performing
-.5..
PAGENO="0142"
1606
Commissioner for ten years and at the same time a star per-
former cannot be retained. The present tenure of seven years
with potential fori reappointment seems to be the best compro-
mise It would permit new blood to come on to the CRC and
concurrently permit reward for outstanding achievement.
AUTHORITY FOR ALLOCATION AND ASSIGNMENT OF RADIO
FREQUENCIES NEEDS CLARIFICATION
With access to the frequency spectrum being essential to
radio communications, authority for the allocation and assign-
ment of that resource is a substantive matter. The language
of Title IV refers to "assignments" as a function of the CRC,
but that under Title VII, the NTA is responsible for "alloca-
tions." This division of authority has been carried over from
H.R. 13015 and is still viewed with alarm. As drafted, H. R.
3333 provides in Section 413(a)(8) that the CRC will "assign"
radio frequencies with no reference as to its input to the
"allocation" process under the purview of NTA. Last year AAR
and others expressed their concern for the lack of provision
for public input to the NTA allocation process. However,
since H.R. 3333 contains essentially the same provisions, as
did H R 13015 AAR concludes that there is an overriding
interest in concentrating the allocation authority in one
office. Assuming this is the case, AAR then would urge that
the spectrum allocation actions of NTA be subject to the
-6--
PAGENO="0143"
1607
Administrative Procedure Act so all interests, public and
/ private, could be heard.
SPECTRUM RESOURCE FEE
Section 414(a) states that "The Commission shall assess
an annual spectrum resource fee in accordance with this sec.
tion for all users of the electromagnetic frequency spectrum
licensed by the Commission under the Act. Such fee shall take
into account -- (1) the cost to the Commission of processing
the license; and (2) the scarcity value of the spectrum being
assigned -~---." The Commission is authorized to waive
the fees under certain specific circumstances. Section 414
goes on to provide a formula for assessing land mobile fees
based on the fees assessed to television broadcast stations.
As stated last year. the AAR has never opposed paying a
fee for processing its applications. There is, therefore, no
objection to the fee schedule proposed in Section 4l4(a)(1).
However, the introduction of a fee based on "scarcity value"
is a cause for concern as it would require payment of fees of
an unknown and possibly exorbitant amount based on the scar..
city value of spectrum now used for hundreds of thousands of
land mobile and fixed microwave radio operations. How "scar~-
city value" will be applied to all these railroad radio
operations is not understood because the criteria used in H.R.
-.7-
PAGENO="0144"
1608
3333 is related to communities. Radios used for enroute train
communications employ the same frequencies when they depart
from a congested urban yard area, pass through smaller cities
and towns, cross uninhabited and rural mountain areas and then
arrive in a distant congested urban area. Likewise, microwave
frequencies are used in areas where there is no scarcity at
all in some cases and in urban areas where there is great
spectrum congestion. The concept is further complicated
because land mobile frequencies are often shared by multiple
users in the same geographic area. The application of
resource fees appears to AAR as being unrealistic from a
practical implementation standpoint. Certainly the intertwin-
ing of railroad land mobile operations with multiple UHF
television economies would render the computation of annual
resource fees an onerous task. In any event, the resource fee
assessed would have to be passed ultimately on to the public
because the railroads are a transportation common carrier.
AAR QUESTIONS CONCEPT OF TREATING SPECTRUM AS A
RESOURCE TO WHICH AN ECONOMIC VALUE CAN BE ASSIGNED
The introduction of the concept of basing fees upon eco-
nomic considerations such as `!scarcjty value" or "fair market
value of the benefit conferred" raises several questions of a
legal and practical nature. There seems to bea tendency by
some to compare radio frequencies with natural resources such
-8-
PAGENO="0145"
1609
as oil, gas or coal. This would be an attempt to compare tang-
ible and measurable resources with an intangible that does
not even exist until a transmitter is switched on. The radio
frequencies have so many variables that comparison should not
be made with a fixed asset. Oil can be measured in barrels,
coal in tons and gas in cubic feet, but frequency usage in-
volves many technical considerations, e.g., (a) the order of
frequency -- different parts of the spectrum have different
characteristics; (b) location and type of antenna -- whether
on a tall building or at ground level and whether beamed or
omnidirectional; (c) emissions -- pulsed emissions differ from
voice. These technical considerations alone indicate how
unrealistic it would be to identify frequency usages into
individual, neatly defined units such as tons, barrels or
cubic feet.
To railroad users, radio/microwave systems are tools for
enhancing the safety and efficiency of their activities. The
spectrum they use is heavily shared. Private land mobile us-
ers range from small businesses to large corporations. Even
among railroads, use ranges from the small short-line rail-
roads of only a few miles to large railroad corporations
having thousands of miles of track. Under a "scarcity value"
situation, the large railroad corporations could possibly pay
what is necessary to obtain radio frequencies. What if the
small short-line railroads lose out and the "benefit" they
-9-
51-253 0 - 80 - 10
PAGENO="0146"
1610
could have from the use of radio spectrum was lost? How about
the well-known situation of the bankrupt railroads that the
government is tt~ing so hard to keep going?
`SCARCIfY VALUE' APPROACH AS BASIS FOR ESTABLISHING A
FEE PROGRAM IS UNSOUND AS A SPECTRUM MANAGEMENT TOOL
The railroads h~ve unique situatiofls that preclude fixing
a scarcity value on the frequencies they use The railroads
are one of several industries whose rates charges and activi-
ties are regulated by the Federal Government At times these
regulatory bodies require the use of radio. In the case of
the railroads the Federal Railroad Administration has promul-
gated radio rules and has funded a study of the industry's use
of radio frequencies.
The railroads of the U S and Canada share the same radio
frequency spectrum. Spectrum usages are very carefully co-
ordinated because of the extensive interface of the U S and
Canadian railroads throughout the border areas As one
example the Canadian railroads ~iave ri~,hts-of-way across the
State of Maine to reach the Fastern Provinces of Canada These
cross-border spectrumsharing arrangements are based on proce-
dural agreements between the U S and Canadian governments
Injection of "scarcity values" into the ne~tiation and
coordination of frequencies on an international basis is
-10-
PAGENO="0147"
1611
unrealistic. While the railroads are not involved as much as
other telecommunications interests, in the same vein, the
Subcommittee should not disregard effects of international
agreements and treaty obligations upon spectrum usage. The
International Table of Frequency Allocations is subject to
review and updating from time to time, such as will be done by
the 1979 WARC. National frequency usages then must be brought
into accord with the international agreements. Such spectrum
adjustments must be made regardless of "scarcity value." In
summary, international considerations mitigate against re-
source fees and should be taken into account in deliberations
on the use of a "scarcity value" concept.
As can be seen from the discussion just above, "spectrum
management" is affected by certain considerations that apply
regardless of economic considerations. AAI~ questions, as a
matter of basic public policy, whether a monetary criteria in
deciding spectrum matters is in the best interest of the pub-
lic, particularly where the private radio services are in-
volved. The use of economic strength for deciding by whom
radio will be used can be self-defeating from the standpoint
of benefit to the public.
In the view of AAR, new technology that enhances effi-
ciency in the use of radio frequencies should be encouraged.
The opportunity to use radio through improved technology
-11-
PAGENO="0148"
1612
should be available In the case of the Railroad Radio
Seri~ice, frequency channels were split on three different oc-
casions with a resulting benefit to the industry and to the
public.
If Section 414 is retained in H R 3333 another category
should be added to the list of exceptions in Section 414(a)(2)
that would read:
(d) Where the licensee is engaged in an activity
serving the public pursuant to rates subject
to approval or to being established by the
Federal Government.~'
OTHER SPECTRUM MANAGEMENT MATTERS
Before leaving the subject of radio frequencies there
are some other provisions in H R 3333 that I would like to
address.
Section 413(d)(1) proposes that any substantial change in
the assignment of spectrum used by broadcast stations must be
referred to the Congress and rules to effect such a change are
not to take effect unless approved by concurrent resolution
To AAR this appears as overkill in favor of one user of the
spectrum. There are many other users of the spectrum than
broadcasting whose interests are vital too The disadvantage
of Section 413(d) (1) is that it has the effect of freezing the
-12-
PAGENO="0149"
1613
broadcast spectrum in place regardless of changing require-
ments and technology. Accordingly, deletion of Section 413(d)
(1) is recommended,
Reference is made to the use of "random selection" sys-
tems in the granting of licenses in Section 415(d)(1)(A)(ij)
and Section 436. While the use of "random selection" is
optional in Section 436, it appears to be required in Section
415(d)(1)(A)(ii). From the standpoint of AAR, an industry-
arranged solution is preferable to "random selection." AAR,
as the frequency coordinator for the railroad industry, could
handle railroad matters. Furthermore, it is felt the ef-
fective use of industry radio frequency coordinators would
preclude the need for "random selection" in the private radio
services.
The term "newly assigned frequency" is used at least in
Section 415(d) and in Section 436. Apparently, the term is
intended to have a special meaning in regard to coordination
and licensing. A more meaningful term should be used or a de-
finition provided.
Section 436(b) (2) makes reference to the use of frequency
coordinating committees. AAR believes this is a step in the
right direction and recommends further that H.R. 3333 provide
greater status to the industry coordinating committees. The
-13-
PAGENO="0150"
1614
provisions in Senate Bill S 622 for industry coordinators
could be used as a guide for amending H R 3333 The coordi-
nating committees could. do much to decrease the burdens upon
the Commission staff and if used properly could cut down the
long delays that now exist in processing private land mobile
and fixed microwave applications
PROHIBITION OF CENSORSHIP
Section 422 of H R 3333 provides that `- - - - nothing
in this Act shall be construed to give the Commission the
power to censor or otherwwise regulate the content of any
transmission by any person using or operating any equipment
for the provision of broadcast services or land mobile or
other radio services ` Essentially the same provision was
included in H.R. 13015, to which AAR had expressed its con-
cern. While the AAR understands the worthy motives of the
Subcommittee in drafting Section 422 its language is so
sweeping that it excludes essential radio operating regula-
tions the use of call signs and the types of transmissions
permissible in land mobile radio Such regulations assure
good communications and they should be retained
Section 326 of the Communication Act of 1934 contains
wording that the Commission shall not interfere with the .right
of free speech AAR recommends that the Subcommittee carry
-14-
PAGENO="0151"
1615
forward the language of the present Section 326. It appears
to the AAH that the drafters of Section 422 in H.R. 3333 inad-
vertently curtailed an essential provision when the language
was changed. The present Section 326 appears to accomplish
the purposes of the proposed Section 422.
N~IONAL TELECOMMUNICATIONS AGENCY
AAR concurs with the concept of Title VII of H.R. 3333
that an independent establishment to be known as the National
Telecommunication Agency should be established. There are
three points in Title VII that we would, address, i.e., (1)
allocation of electromagnetic spectrum, (2) preparation for
U.S. participation in international telecommunications confer-
ences and (3) public input to the development of policy.
The role of NTA in the allocation of spectrum was a mat-
ter of concern when AAR commented last year on H.R. 13015.
Those concerns appear to be alleviated somewhat in the text of
H.R. 3333 if, through the linking of Sections 704(4), 707(a)
(3) and 435(a)(1) the scope of NTA is limited to the Federal
Government. However, this is not clear. If this interpreta-
tion is incorrect, then the AAR concern remains that NTA is to
have virtually total or overriding authority in spectrum
allocation matters without direct public input.
-15-
PAGENO="0152"
1616
AAR concurs with Section 704(5) which provides that NTA
shall "manage" the preparation for U S participation in in-
ternational telecommunication meetings This is a substantial
improvement over H R 13015 which provided for NTA to pre-
pare and manage' the aforementioned U S participation
U S participation in international telecommunications
conferences is important to industry as well as to government
AAR notes that in Senate Bill S 622 a provision is made for
U S industry participation on U S Delegations to interna-
tional telecommunications conferences A parallel provision
in H R 3333 is suggested and Section 704(5) would appear to
be the appropriate place
The railroad industry is an example of direct U S
industry interest in an international telecommunications
conference The railroads are probably effected more modestly
than some other U S interests with big international telecom-
munications operations - - yet the railroad interest is great
in for example the forthcoming 1979 WARC and in telecommuni-
cations agreements worked out by the U S with the Canadian
and Mexican governments This interest is primarily in the
radio frequency area and is substantial because use of VHF
radio on the U S (and Canadian) railroads rests to a substan-
tial degree on authority contained in Footnote 287 of the
International Radio Regulations agreed on at the 1959 WARC
-16-
PAGENO="0153"
1617
Retention of Footnote 287 by the 1979 WARC is an important
issue for the railroads, as well as certain other land mobile
users.
The situation of Footnote 287 is a good example of why
some means of public participation in international conference
preparatory work, such as the 1979 WARC, is essential. The
AAR would like to develop this further for the Record. The
VHF frequencies now in use by the railroads were included
originally in a band of frequencies that was available for
"mobile" communications. At the 1959 WARC three bands were
carved out of that mobile band for international maritime
mobile use. Included in those bands are 33 of the 91 railroad
channels. However, a special footnote (Footnote No. 287) in
the 1959 WARC agreement makes it possible for the railroads of
the U.S. (and Canada) to continue to use all of their assigned
channels. Consistent with Footnote 287, both the FCC and the
Canadian government have licensed a quantum growth of railroad
VHF communications during the 1960's and early 1970's. In the
meantime, however, maritime interests, including the U.S.
maritime interests, would like to see the provisions of Foot-
note 287 withdrawn to release the frequencies involved for
maritime use.
The foregoing is cited an an example of an issue involved
in international conference preparation that is important to a
-17-
PAGENO="0154"
1618
significant segment of the American public. Another good
example is the treatment of spectrum for private fixed
microwave operations The railroads along with many others
utilize literally thousands of miles of fixed microwave
circuits derived from fixed microwave bands that are essen-
tially saturated in a number of urban areas So far the U S
proposals for the 1979 WARC have not only not proposed in-
creased spectrum allocations for the important private
microwave service but in fact have eroded those allocations
There are ominous indications of even further erosion to those
allocations. As indicated, the foregoing cites two examples
of how international telecommunication conferences can have an
ultimate impact on the American public.
Section 706(b) (7) of H R 3333 provides that the Director
shall assure appropriate consumer representation in connec-
tion with the development of policy by the agency." While the
AAR understands the objective of consumer representation,
telecommunications policy has broader ramifications than
"consumer" interest. Accordingly, AAR would recommend that
Section 706(b)(,) be expanded to include other interests from
the general public and industry
* * * * *
On behalf of the MR and the railroad industry, I thank
you for the opportunity to make this Statement for the Record
on this most important proposed legislation
-18-
PAGENO="0155"
1619
Mr. VAN DEERLIN. Thank you. Your prepared statement will be
inserted into the record.
The subcommittee will resume at 9:30 a.m. tomorrow in the
Rayburn Building.
[Whereupon, at 3:55 p.m., the subcommittee adjourned to recon-
vene on Thursday, June 7, 1979, at 9:30 a.m., room to be an-
nounced.]
PAGENO="0156"
PAGENO="0157"
THE COMMUNICATIONS ACT OF 1979
THURSDAY, JUNE 7, 1979
HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON COMMUNICATIONS,
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,
Washington, D.C.
The committee met, pursuant to notice, at 9:30 a.m., in room
2322, Rayburn House Office Building, Hon. Lionel Van Deerlin,
chairman, presiding.
Mr. VAN DEERLIN. Good morning.
We will start today's session with a panel of experts who will
make up, I am certain, in the expertise they bring to bear any lack
in the little signs that are in front of them, which look as if I had
hand-printed them.
We will be privileged to hear, in order, from Mr. Louis M.
Weinberg, who directs business exchange and mobile communica-
tions services for A.T. & T.; Mr. Travis Marshall, vice president of
Motorola; Mr. Richard Wiley, former FCC chairman, now engaged
in private practice; Ms. Nina W. Cornell, Chief of Office of Plans
and Policy for the FCC; and Mr. Sherman M. Wolf, President of
Zip-Call in Boston, appearing on behalf of the Telocator Network of
America.
They have been asked to address themselves to such questions as:
Do new technologies and services get adequate access to needed
spectrum today? Does H.R. 3333 provide any improvement for spec-
trum access for new technology?
Should H.R. 3333 treat radio operations of dominant carriers
different from radio operations of other business organizations?
Would the proposed spectrum fee be workable? Would it improve
spectrum management?
Mr. Weinberg, would you care to lead off?
STATEMENTS OF LOUIS M. WEINBERG, DIRECTOR, BUSINESS
EXCHANGE AND MOBILE COMMUNICATIONS SERVICES,
AMERICAN TELEPHONE & TELEGRAPH CO.; TRAVIS MAR-
SHALL, VICE PRESIDENT, MOTOROLA, INC.; RICHARD E.
WILEY, WASHINGTON, D.C.; NINA W. CORNELL, CHIEF,
OFFICE OF PLANS AND POLICY, FEDERAL COMMUNICATIONS
COMMISSION; AND SHERMAN M. WOLF, ON BEHALF OF
TELOCATOR NETWORK OF AMERICA
Mr. WEINBERG. Thank you, Mr. Chairman.
Members of the subcommittee, my name is Louis Weinberg. I am
employed by A.T. & T. as director of business exchange and mobile
communications services. In that capacity 1 am responsible for the
(1621)
PAGENO="0158"
1622
land mobile services provided by the Bell System to the general
public, including the Advanced Mobile Phone Service, or AMPS,
presently in developmental operation in the Chicago metropolitan
area
I would like to begin by thanking the subcommittee for this
opportunity to be here today I have filed a rather complete state
ment with the subcommittee and I ask it be put in the record.
Mr VAN DEERLIN Of course it will be
Mr WEINBERG With that in mind, I would like to spend the brief
time allotted to me in describing an exciting advancement in tele-
communications technology Since the end of World War II, futur
ists have envisioned a communications system that would release
one from his or her home or office Dick Tracy, of course, has had
his wristwatch communicator for many, many years, and as far
back as the early fifties, Bell asked for a spectrum allocation to
provide a high capacity mobile telephone system
But it was not until 1968 that a chunk of spectrum was returned
from Government use to the private spectrum and we could sen
ously begin to think about meeting the needs of the public on the
move Bell Laboratories scientists at that time came up with a new
spectrally efficient approach called cellular communications
I have outlined a brief history of the ensuing years in my filed
statement, but the punch line is, "we now have an actual system
under developmental trial in Chicago and it will meet the needs of
the public on the move" Frankly, it is great The quality ap
proaches that of your home or office
When I am using it, people I call usually do not recognize that I
am in a car User reaction has surpassed even our great expecta
tions, and after spending the time and money to meet this pressing
need, you can imagine our surprise and disappointment at the
provisions of section 331(d)
That provision prohibits the Bell companies from offering the
service we pioneered, developed, and are prepared to implement
With the long list of waiting customers, it makes little sense to
exclude the supplier who has developed the most promising tech
nology to fulfill the public's needs
Furthermore, the continued presence of the Bell System in the
market for new radio services will encourage, not discourage, corn
petition
Last, I believe that if the goal of section 331(d) is to achieve
competition in the cellular market, better alternatives are availa
ble
Let me explain When Jim Olson, our A T & T vice chairman of
the board, appeared before this subcommittee, Mr Moir requested
us to comment on two possible alternatives First, whether the
cellular carrier selected for each market area could serve as a
system manager, providing cellular facilities to multiple competing
carriers who would offer the service to the public, and second,
whether the existing 40 megahertz allocation for cellular service
could be subdivided in each market area to allow for multiple
competing supplies of both facilities and services
My written testimony briefly discusses each of Mr Moir's alter
natives, with the conclusion that they may be feasible to imple
PAGENO="0159"
1623
ment and that we are willing to consider them as well as the many
possibilities which may be suggested by others.
I would like to emphasize, however, that this is a matter which
involves many complex technical and economic tradeoffs and many
diverse interests, and all of these diverse interests must be consid-
ered. Those interests can best be accommodated, we think, through
the regulatory process where there is full opportunity for the par-
ties to exchange and discuss their views and proposals.
Certainly the FCC could, without any additional statutory au-
thority, undertake an inquiry in this regard, and we pledge our-
selves to be as helpful as possible in assuring that such an inquiry
would result in a solution acceptable to all parties.
The question remains, nonetheless, what should this subcommit-
tee do in terms of legislative effort to achieve this goal. Certainly,
section 331(d) is not the best approach. Instead, we suggest that a
clear statement of legislative intent to foster competition, such as
is found in section 436(a), would provide ample assurance that the
subcommittee's goals are realized.
In addition, I would urge the subcommitttee to encourage the
parties to discuss alternatives under the auspices of the FCC and to
arrive at an approach which permits competition in the provision
of cellular service while keeping the cost to the public as low as
possible.
I would be happy to try to respond to any questions, and I did
bring with me today an exhibit that we had put together for the
users in Chicago to demonstrate how the system would be used.
That is the system under developmental tests now.
There is a 8-minute canned spiel which sort of explains what a
cellular system is, with a car running around showing how i~
would be used. I would invite the subcommittee to either see it now
before this discussion or at your convenience afterward. I have
someone here who could turn it on for you.
Mr. VAN DEERLIN. Well, that seems fortuitous. Sure. Shall we
identify the voice for the record?
Mr. WEINBERG. John Nicholas. I think you will have to walk over
here, Mr. Chairman, to see it. There is a little car running around
down here [indicating].
[There was a demonstration.]
Mr. WEINBERG. Thank you, Mr. Chairman.
Mr. VAN DEERLIN. Would it work in Cleveland?
Mr. WEINBERG. Yes; we think it will work in Cleveland and in
almost any location in the country.
[Testimony resumes on p. 1652.]
[Mr. Weinberg's prepared statement follows:]
PAGENO="0160"
1624
STATEMENT OF LOUIS M WEINBERG,
AT&T DIRECTOR OF BUSINESS EXCHANGE AND
MOBILE COMMUNICATIONS SERVICES
Re House Bill 3333 - Subcommittee
panel on Land Mobil
General Sum~a~y
The purpose of my testimony is to provide the
Subcommittee with the Bell System s comments on those
portions of House Bill 3333 which concern land mobile
services, spectrum resource fees and spectrum allocation
In my testimony, I will respond, first, to the possible
alternate market structures for cellular service which
Mr Moir, of the Staff of the Committee on Interstate and
Foreign Commerce asked AT&T to comment on during the
testimony, on May 8, 1979, of James E Olson, AT&T Vice
Chairman of the Board of Directors In addition, I will
comment on:
(1) Section 331(d) which would, in effect, prohibit
Bell System companies from holding licenses for new
radio systems involving the distribution of
signals directly to customers
(2) Section 414 which would authorize annual spectrum
resource fees
3
(3) Section 424 which would deregulate land mobile
services except apparently, for those offered by a
dominant carrier and
~/ Included in my discussion of this Section will be
certain comments on Section 436(a) which requires the
Communications Regulatory Commission (CRC) to
prescribe rules and standards which are designed to
ensure that at least three business organizations may
be in competition in the provision of radio system
services in each relevant market. . .
PAGENO="0161"
1625
(4) Title VII which, among other things, concerns
spectrum allocation.
Cellular Service: Market Structure
We recognize that the existing monopoly market
structure for cellular services could be viewed as
inconsistent with the competitive principles underlying
House Bill 3333. Moreover, even under the 1934 Act and the
existing FCC rules, the process of selecting a monopoly
supplier through comparative hearings could unreasonably
delay implementation of the service. Thus, we are willing
to work toward alternative market structures, and we believe
that those suggested by Mr. Moir may be feasible. We
suggest, however, that.such an alternative structure could
be best accomplished through the regulatory process and we
encourage the Subcommittee to use its good offices to
promote such a process.
Sections 331(d) and 436(a):
Competition in Land Mobile
We oppose Section 331(d) because the exclusion of
the Bell System from providing new mobile services through
technology that we have developed would delay and in some
cases preclude customers from receiving the benefits of
urgently needed service. Moreover, we believe that the
continued presence of the Bell System in the market for new
land mobile services is necessary to promote competition and
technological innovation. Further, we suggest that the goal
of insuring continued competition in land mobile, and the
goal of achieving a competitive market structure for
cellular service, can be achieved under the FCC's existing
powers and that the only needed legislative action is a
statement of intent to foster competition such as in Section
436(a). We believe, however, that the statement c~f intent
should not include a fixed minimum number of competitors
because such limits tend to be applied arbitrarily even when
not in the best interests of the consuming public.
51-253 0 - 80 - 11
PAGENO="0162"
1626
Section 414: Spectrum Resource Fees
We oppose the spectrum resource fees proposed in
Section 414 of th~ House Bill. Such fees are not needed for
spectrum efficiency. They could add substantial costs to
the provision of common carrier services and tend to promote
further litigation. Instead we suggest a cost~-based
approach to fees, or if there are to be fees based on
factors other than cost, the fee limit for land mobile
should also be made applicable to other nonbroadcast
licensees with each such licensee paying the same fee on a
per transmitter basis.
Section 424: Deregulation of Land Mobile Services
We have no objection to the provisions of Section
424 which would deregulate common carrier land mobile
services. We believe, however, that deregulation should be
applied to all land mobile carriers.
Title VII: Spectrum Allocation
In general, we do not object to the provisions of
Title vii. We do, however., suggest that in order to insure
that all interested parties have an opportunity to present
their views on spectrum allocations, the NTA's allocation
powers under Section 707 should be made subject to the
rulemaking procedural requirements of the Administrative
Procedures Act.
PAGENO="0163"
1627
Introduction
Mr. Chairman, Members of the Subcommittee, my name
is Louis M. Weinberg. I am employed by American Telephone
and Telegraph Company (AT&T) as Director of Business
Exchange and Mobile Communications Services. In that
capacity, I am responsible for the land mobile services
provided by the Bell System to the general public, including
the Advanced Mobile Phone Service (AMPS) system presently in
developmental operation in the Chicago metropolitan area.
I want to begin by thanking the Subcommittee for
this opportunity to appear before it and present the Bell
System's comments on those portions of House Bill 3333 which
concern land mobile services, spectrum resource fees and
spectrum allocation.
In my testimony, I will respond, first, to the
possible alternalive market structures for cellular mobile
telephone service which' Mr. Moir, of the Staff of the
Committee on Interstate and Foreign Commerce, asked AT&T to
comment on during the testimony, on May 8, 1979, of James E.
Olson, AT&T Vice Chairman of the Board of Directors. In
addition, I will comment On: (1) the provisions of Section
331(d) which would, in effect, prohibit Bell System
companies from eligibility to hold radio licenses for new
PAGENO="0164"
1628
*radio systems involving the "distribution of signals
directly to customers";1" (2) Section 414 which would
authorize the CRC to impose annual spectrum resource fees;
(3) Section 424 which would deregulate land mobile services
except, apparently, those offered by a "dominant carrier";
and (4) Title VII which, among other things, concerns
spectrum allocation decisions by the National*
Telecommunications Agency (1'~TA).
Cellular Service: Market Structure
Regulatory Background and Existing Rules:
At least since 1949, the Federal Communications
Commission (~FCC) has sought to respond to a growing public
need for land mobile services. These services, such as
radiotelephone service to and from persons in automobiles,
have been offered to the public for many years by many
firms, including Bell System operating telephone companies,
independent telephone companies and Radio Common Carriers
(RCCs). In recent years, however, limited spectrum
1/ Included in my discussion of this Section will be
certain comments on Section 436(a) which requires the
Communications Regulatory Commission (CRC) to
"prescribe rules and standards which are designed to
ensure that at least three business organizations may
be in competition in the provision of radio system
services in each relevant market. . .
PAGENO="0165"
1629
space and other problems have prevented the accommodation of
all those who desire such service, resulted in inadequate
service quality, prevented the .completion of calls, and
created other difficulties.
As early as 1958, the FCC described such services
as suffering from spectrum "congestion"; by 1962 it found
that there was "extreme congestion"; and in 1964 it
concluded that there was "acute frequency shortage."V As
a result of these problems, many members of the public who
desire land mobile services have been unable to obtain
them. For example, in most metropolitan areas there are
long waiting lists of customers who cannot be served on
existing systems and the. Bell System alone has a. waiting
list of over 25,000 potential land mobile customers. In
addition, there have been increasingly frequent instances of
poor service quality and servibe blockages. Despite these
substantial problems, the FCC was, until the appearance of
cellular technology, unable to find a solution which it
regarded as suitable..V
The FCC's current efforts to respond to the
"widely-voiced"i" concern about the deficienci~es of land
V Final Report of the President's Task Force on
Communications Policy, Chap. 8 at p. 8 (1968).
V Notice of Inquiry and Notice of Proposed Rule Making,
14 F.C.C.2d 311, 313-314 (1968).
.i/ Final Report of the President's Task Force on
Communications Policy, ~ Chap. 8 at p. 40.
PAGENO="0166"
1630
mobile radio began in 1968, when it issued a Notice of
Inquiry and Notice of Proposed Rule Making to consider the
allocation of additional frequency spectrum to satisfy the
"burgeoning needs" for such services.~ The FCC
reiterated that there was already "serious congestion" in
such services in major metropolitan areas, and stated that
even greater congestion would develop before 1980. It
particularly emphasized the importance of developing new
systems that could utilize more efficiently the limited
spectrum space that could be made available.
On May 21, 1970, after considering extensive
comments from AT&T and other interested parties, the FCC
issued a First Report and Order and Second Notice of Inquiry
that tentatively allocated additional spectrum space f~r
land mobile services, including an allocation for the
development and operation of cellular systems.~~' The FCC
repeated its earlier request that all interested parties
undertake detailed studies to determine the most desirable
usage of the available spectrum space to meet the increased
public need for improved and additional land mobile services
f~J 14 F.C.C.2d 311, 313-315 (1968).
!/ 19 Pike & Fisher R.R.2d 1663 (1970).
PAGENO="0167"
1631
to and beyond 1980. It again encouraged the design of new
systems that could more efficiently use. the limited spectrum
space that could be made available.
In response to the Second Notice of Inquiry, AT&T
and other parties urged the FCC to confirm its tentative
allocation of spectrum space for the continued development
of cellular technology. AT&T and Motorola indicated that
they had already completed substantial studies regarding the
technical feasibility of ce1lular~ systems, and submitted
detailed proposals for further developmental programs. AT&T
emphasized that cellular systems could make high quality and
low cost land mobile service available to a wider variety of
potential users than is possible through existing systems.
The new systems could be constructed in various sizes. They
would offer sign~ficant advantages of quality, cost and
spectrum efficiency over conventional mobile telephone
systems. Compared to existing conventional systems, they
would greatly reduce the possibility that a customer might
be unable to complete a call because all of the channels are
in use. Transmission would be clearer and more intelligible
than in existing systems. Economical service could be
provided to segments of'the public which are not now served.
In a cellular system the mobile service area is
divided into geographical units called cells. Each cell is
served by its own radio and control equipment and is
PAGENO="0168"
1632
assigned a set of frequencies, with neighboring cells
assigned different frequencies to avoid interference. Cells
sufficiently far apart, however, can simultaneously use the
same frequencies, allowing reuse of each channel for -
different conversations many times in a given service area.
Further, as the number of customers increases and there is a
need for the system to handle more calls, the size of the
cells can be reduced to allow for more frequency reuse.
The cellular approach eliminates the need for
high-powered radio transmission by carrying the conversation
over regular telephone lines from, or to, the cell site
nearest the mobile customer. Using low power, the cell site
completes the call by radio transmission covering only the
small area where the vehicle is traveling. As a vehicle
moves from cell to cell, sophisticated electronic switching
equipment will transfer the call to the cell site into which
the vehicle is moving. This automatic sequence maintains
service quality throughout the conversation without
interruption.
On May 1, 1974 the FCC issued a Second Report and
Order which, among other things, allocated 40 megahertz of
spectrum space for the proposed new cellular systems.2"
Further, to allay any possible fears regarding
anticompetitive conduct in connection with the new cellular
systems, the FCC imposed a series of stringent restrictions
2/ 46 F.C.C.2d 752 (1974).
PAGENO="0169"
1633
upon their development and operation by telephone
companies. Among other things, the FCC placed limitations
upon the manufacture of mobile units and cell site radios by
such companies and required them to create separate
subsidiaries for the operation of cellular systems.
On March 20, 1975, the FCC released a Memorandum
Opinion and Order!" in which it ruled on various petitions
for reconsideration in connection with its May 1, 1974
Report and Order. In this Memorandum Opinion the FCC
reiterated that cellular systems are "the best way to meet
the potentially large future requirements" for land mobile
services. Nonetheless, it stated that "considerable
additional" developmental work is necessary before it would
prescribe standards for such systems "on a regular basis,"
and announced that "until further order, only developmental
cellular systems . . . `twill) be authorized."
Further, although only developmental systems were
to be initially authorized, the FCC's 1975 Memorandum
Opinion established the fundamental ground rules governing
the market structure for futtite commercial service.
Originally, the FCC had determined that only the telephone
companies had the resources and technology to implement the
service. Thus when the allocation was made in 1974, it was
allocated solely for use by the telephone company to provide
cellular service. In the 1975 Memorandum Opinion, however,
Si F.C.C.2d 945 (1975), aff'd sub nom., NARUC v. FCC,
525 F.2d 630 (D.C. Cir., 1976), cert. den. sub nom.,
NARS v. FCC, 445 U.S. 992 (1976).
PAGENO="0170"
1634
the FCC responded to the interest shown by RCCs in providing
cellular service. It determined that "any qualified
entity," including RCC5, could apply for cellular licenses.
The FCC, nonetheless, continued to find that the service
should be provided on a monopoly basis. In other words,
although "any qualified entity" could apply for a cellular
license, the~ FCC determined that only one carrier would be
granted a license in each market area and that, in the event
of more than one qualified applicant for a. given area, the
ultimate licensee is to be selected by a comparative hearing.
Finally, on March 10, 1977, after extensive
proceedings, the FCC granted the Application of Illinois
Bell Telephone Company to construct the AMPS developmental
cellular system which is now in operation in Chicago.!"
Together with technical work that is being conducted by Bell
Laboratories in Newark, New Jersey, the Chicago trial is an
essential ingredient of the developmental program as it has
evolved from the Bell System's initial proposals for the
evaluation of cellular technology. Likewise, the RCC
industry has clearly shown that it intends to be a vital
part of the cellular market. For example, an RCC is
presently constructing a developmental cellular system in
the Washington, D.C. area using technical advice and
equipment provided by Motorola, Inc. Similarly, during the
* testimony before this Subcommittee on May 4, 1979, George M.
!/ See, In Re Illinois Bell Telephone Company, 63
F.C.C.2d 655 (1977), aff'd sub mom., Rogers Radio
Communication Services, Inc. v. FCC, 593 F.2d 1225
(D.C. Cir., 1978).
PAGENO="0171"
1635
Perrin, President of the RCC's national council, Telocator
Network of America, stated that the RCC industry was
desirous of obtaining licenses to offer cellular
service.L~"
Possible Alternative Market Structures:
Notwithstanding the foregoing, the Bell System
recognizes that although a monopoly structure for cellular
service may be appropriate under the Communications Act of
1934, as amended, such a structure could be viewed as
inconsistent withthe competitive principles of House Bill
3333. Moreover, even under the existing Act and FCC rules,
we can see that the process of selecting a monopoly supplier
for cellular service in each market area may be injurious to
the public because of the lengthy litigation delays inherent
in the adversary comparative hearing process. For example,
in the air/ground service, which is provided on a monopoly
basis with the suppli~r selected through comparative
hearings,fl~ the FCC allocation occurred in 1970 and the
comparative hearing processing is still not completed in
some locations. Thus, the Bell System is willing to work
toward possible alternative competitive market structures
which are Consistent with the goal of a nationwide
high-capacity system, provided that such structures would
allow for expedited implementation of service to the public.
12/ Transcript of Proceedings at 92.
fl/ See, Report and Order, 18 Pike & Fischer R.R.2d 1501
(1970)
PAGENO="0172"
1636
In this regard, when James E. Olson, AT&T Vice
Chairman of the Board of Directors, appeared before this
Subcommittee, Mr. Moir of your Staff requested AT&T to
comment on two possible alternatives: first, whether the
cellular carrier selected for each market area could serve
as a "system manager" providing cellular facilities to
multiple competing carriers who would offer the service to
the publicia" and, second, whether the existing 40
megahertz allocation for cellular service could be
subdivided in each market area to allow for multiple
competing suppliers of both facilities and service)~'
I will begin by commenting on the second
alternative. With respect to conventional land mobile
services, the FCC has followed a policy of encouraging
competition by assigning two separate blocks of frequency in
each market area, one to the RCCs and the other to the
telephone company. In 1949, when it made its first
permanent allocation of land mobile frequencies, the FCC
expressly stated that it was assigning separate radio
frequencies to RCCs and telephone companies in order to
encourage "the development of competing systems, techniques,
~/ See Transcript of Proceedings at 100.
U, Ibid.
PAGENO="0173"
1637
and equipment.4-i" The FCC Continued to follow this
policy in subsequent proceedings for the assignment of
additional frequencies for conventional mobile
systems.i.~' Moreover, in General Tel~~one Co. of
California, the FCC reviewed its policy of licensing both
RCCs and telephone companies and concluded that its policy
had "proved, to be salutary. . . .
We do not, however, believe that it would be
feasible to implement a similar allocation and licensing
policy for cellular service by merely subdividing the
existing 40 megahertz cellular allocation among two or more
competing carriers in each market area. Such a subdivision
would greatly increase the cost to the customer, reduce the
potential markets and make it virtually impossible to
achieve the goal of nationwide availability of high-capacity
service. Because of the substantial investment needed to
construct and operate a cellular system, the system must
have a broad band of spectrum, such as that allocated by the
FCC, in order to provide service at a reasonable cost. With
less spectrum, cell sizes must be smaller and reduction
14/ In Re General Mobile Radio Service, 13 F.C.C. 1190,
1218 (1949)
L~/ See, ~ Second Report and Order on Channel
Splitting, 16 Pike & Fischer R.R.2d 957, 963 (1963)
21 Pike & Fischer R.R.2d 957, 963 (1963).
PAGENO="0174"
1638
in cell size occurs earlier, thus substantially increasing
the equipment and other costs for a system. Further,
although these costs ca~ have less effect on an individual
customer if there is a large enough base of customers over
which to spread the costs, a reduced allocation tends to
restrict the carrier to those markets which have such a
large base, thus substantially reducing the areas in which
service can be made available.
Nonetheless, we note that under the FCC's existing
rules there is a 45 megahertz allocation in reserve for land
mobile. Further, our experience to date with the Chicago
AMPS trial indicates that it may be possible for a cellular
system to provide economically viable service with an
allocation in the range of 30 megahertz, albeit at a
somewhat higher cost to the public. Thus, it may be
feasible, by removing 20 megahertz from the land mobile
reserve and increasing the 40 megahertz cellular allocation
to 60 megahertz, to have a competitive cellular market
structure consistent with the FCC's allocation and licensing
policies for conventional systems, ~ 30 megahertz for a
RCC cellular system in each market area and 30 megahertz for
the telephone company cellular system in that area.
Furthermore, in order to enhance the economic
viability of such a market structure and to foster free
PAGENO="0175"
1639
entry into, the ~mazketing and distribution of cellular
service, we believe that it may be technically feasible to
meld the first ~alternative suggested by Mr. Moir into this
structure. In other words, the telephone company's cellular
system could, in addition to providing service directly to
customers, offer ~faciiities to RCCs who do not choose to
participate in the ownership of the RCC system..LY Such
facilities would of course be offered to such carriers at a
price which reflects the reduced cost to the telephone
company's cellular operations brought about by the other
carriers undertaking the marketing and distribution of the
service to its customers.
In such an arrangement it would, of course, be
necessary for telephone company cellular operations to be
allowed to serve customers as well as other carriers.
First, the customer should be given the option of being
served by a carrier who has total end-to-end responsibility
for the facilities and service. Second, the investment
needed for a cellular system is such that carriers are
flI Similarly, the RCC's system could, in addition to
providing service to customers, offer facilities to
RCCs who do not choose to participate in the
ownership of that system or to obtain facilities from
the telephone company system.
PAGENO="0176"
1640
unlikely to undertake it if they are required to depend
totally on others for marketing and distribution. Third,
the dangers of cross subsidy and anticompetitive conduct
that are perceived when a carrier offers both service to the
public arid facilities to competing carriers, can be avoided
by requiring that carrier to offer facilities to other
carriers on the same terms and conditions as provided to its
own marketing and distribu~tiOfl division. Further, it could
be required to separate its marketing and distribution
functions with an appropriate accounting system or separate
subsidiary, if such subsidiary is necessary, economically
viable and able to operate as an integral part of an overall
telecommunications operatiOn)~
Thus, we suggest that it may be feasible to
implement the alternative market structures suggested by
Mr. Moir and we are willing to work toward those
alternatives as well as any others which may be suggested.
We want to emphasize, however, that this is a matter which
involves many complex technical and economic issues and many
diverse interests. There may also be other possible
alternative structures which deserve consideration. Thus,
2!/ See the Testimony of Edward Goldstein on May 2,1979
before the Senate Subcommittee on Communications of
the Committee on Commerce,, Science and
Transportation. Transcript of proceedings at 906.
PAGENO="0177"
1641
we do not want, at this time, to prejudge the issues by
endorsing any particular alternative market structure.
We suggest, instead, that this matter, and the
diverse interests involved, can best be resolved through the
regulatory process where there is a full opportunity for the
parties to exchange and discuss their views and proposals.
Certainly, the FCC could, without any additional statutory
authority, undertake an inquiry in this regard and we are
hopeful that such an inquiry would result in a solution
acceptable to all parties, including this Subcommittee.
Accordingly, we support such an approach and encourage this
Subcommittee to use its good offices to encourage the
various interests involved to discuss possible alternatives
under the auspices of the FCC and to arrive at a market
structure which introduces competition in the cellular field
while at the same time keeping the cost to the public as low
as possible.
Sections 331(d) and 436(a):
Competition in Land Mobile
I have shown earlier that there is, at present, an
established public need for new and improved land mobile
services. Moreover, we are confident that technology will
51-253 0 - 80 - 12
PAGENO="0178"
1642
soon make it possible for mobile service to include not only
vehicular telephones but also the largely untapped market
for portable telephony, a telephone in your pocket for
example. Nonetheless, because of the severely limited
amount of spectrum allocated for existing land mobile
systems and the limited capacity of those systems, the
public's present and future landmobile service needs cannot
be met without the implementation of new, spectrally
efficient technology.
We in the Bell System have developed such a
technology in the form of the AMPS cellular system which the
FCC has found to be ". . . the only proposal now before us
which offers the service compatibility and spectral
efficiency needed to achieve out objective of a nationwide,
high capacity radiotelephone service Further, the
Bell System AMPS developmental trial is now in operation in
Chicago and has proven that the cellular system is
technically feasible and responsive to a large public demand
for mobile service Thus we believe that the system is the
harbinger of a truly exciting and dynamic future for land
mobile Indeed, cellular systems may someday become
competitive with basic exchange service. Certainly,
cellular service could free the consumer from his dependency
12/ In Re Illinois Bell Telephone Company, 63 F.C.C.2d
655, 657 (1977).
PAGENO="0179"
1643
on a stationary telephone location, and through the
evolution of portable telephony, would enable him to carry
his personal telephone wherever he goes.
In view of the foregoing, we in the Bell System are
puzzled, and indeed disappointed, by Section 331(d). which
would, in effect, prohibit our operating companies from
offering new land mobile services such as AMPS. We oppose
the Section because, first, the exclusion of tF~e Bell System
from offering new radio services would delay an~ perhaps in
some cases preclude the public from receiving the benefits
of improved land mobile service. Certainly, where there are
presently long lists of waiting customers, it makes little
sense to exclude the supplier who has developed the most
promising technology to fulfill the public's needs. Second,.
the Sectiori is not needed to promote competition in the
conventional, i.e., non-ôellular, land mobile market. In
that market, which has been in existence for 30 years, RCCs
have, if anything, proliferated, to wit: they have over 50
percent of the two-way mobiletelephone market and
approximately 80 percent of the one-way paging market.
Third, the continued presence of the Bell System in the
conventional and cellular land mobile markets is necessary
in order to insure continued competition and technological
innovation. As Charles A. Zielinski, Chairman of the
PAGENO="0180"
1644
New York State Public Service Commission, stated in his
Testimony before this Subcommittee on May 4, 1979
"Our whole effort with the radio common
carriers recently, therefore, has been one of
trying to make them compete more. The entrance
of a telephone company into a market that is
characterized by that kind of attitude may be
quite healthy. The telephone company may turn
out to be the real competitor and the one who
helps drive rates down towards marginaL costs in
that kind of a situation And from my position I
wouldn't want to give that kind of opportunity up
lightly 2~/
Thus, we do not believe that Section 331(d) is the
best approach to insuring competition in land mobile
services Indeed, if it is enacted, it may actually have
the opposite result, and it would certainly delay
implementation of new and improved services and technology
We suggest, instead, that a clear statement of legislative
intent - such as is found in Section 436(a) would provide
ample assurances that regulatory policies would continue to
promote competition in land mobile and that efforts would be
made by the appropriate regulatory agency to develop a
competitive market structure for cellular services We do,
however, suggest that such a statement of intent should not
include a minimum number of competitors, such as is
presently in Section 436(a) Such fixed limits are
2~/ Transcript of Proceedings at 46
PAGENO="0181"
1645
arbitrary and tend to create artificial market structures
despite the fact that their application may not be in the
best interests of the consuming public, or, indeed, not even
attainable in many markets.
Section 414: Spectrum Resource Fees
Section 414 would authorize the CRC to impose an
annual spectrum resource fee on certain licensees who
utilize the spectrum. Th~ fee is to be based on: (1) the
cost to the Commission of processing the license; and (2)
the "scarcity value" of the spectrum assigned under the
license. Further, in the case of broadcast and land mobile
licenses, the Section includes specific formulas for
establishing a limit on license fees. The Section, however,
contains no such formula for the fee which would be
applicable to other licenses such as common carrier
point-to-poir~t microwave authorizations which are used for,
among other things, message toll and private line telephone
service.
The concept of a fee schedule based in part on
"scarcity value" appears to create many more problems than
it can solve. First, it is proposed only for certain users
of the electromagnetic spectrum thereby suggesting that
PAGENO="0182"
1646
spectrum efficiency is not the driving force involved In
fact scarcity in a given frequency band is not a simple
marketplace phenomenon but rather one that is a function of
frequency allocation, technology, location, and other
variables
Second, the fees are unnecessary to achieve
spectrum efficiencies Such efficiencies can and have been
achieved by carriers who have voluntarily developed
technology to optimize their investments in communications
equipment and to compensate for the natural limitations of
spectrum resources Further, the FCC's existing rulemaking
powers have been utilized effectively to impose spectrum
efficiencies through rigorous technical and operational
standards.
Third, the proposed fees would add costs to the
provision of common carrier services and eventually be
reflected in the rates paid by the public No benefit will
have been rendered to the public by this, especially in view
of the fact that the effect of fees on spectrum efficiency
is, at best, problematic. Finally, the regulatory history
of spectzum license fees is filled with extensive litigation
concerning "value to the recipient"~~' and we foresee more
of the same should scarcity value become a basis for fees
21/ See, NCTA v. FCC, 415 U.S. 336 (1976), EIA v. FCC,
554 F.2d 1109 (D.C. Cir., 1976) and NAB v. FCC, 554
F 2d 1118 (D C Cir , 1976)
PAGENO="0183"
1647
Instead of spectrum resource fees, the Bell System
suggests frequency license fees based solely on the
regulatory costs incurred by the FCC in the licensing
process. Such fees should be clearly easier to determine
and implement and less subject to controversy. If, however,
the Subcommittee believes, albeit we think it erroneously,
that fees should be based on "scarcity value" as well as
cost, we suggest that the fee limit defined for a land
mobile transmitter be extended to' microwave and other
nonbroadcast licensees with each such licensee paying the
same fee on a per transmitter basis. Such a limit per
transmitter would insure against any abuse of the
legislation such as the imposition of excessive fees on some
users of the spectrum.
Section 424: Deregulation of Land Mobile Services
The provisions of Section 424 of House Bill 3333
appear intended to accomplish a twofold purpose: first, to
preempt all state regulation of common carrier land mobile
service and, second, to al]~ow the CRC to regulate such
services only if such regulation is consiLtent with "the
limitations on regulatory authority" imposed in the other
portions of House Bill 3333. Presi~mably, the latter purpose
PAGENO="0184"
1648
is designed to limit the CRC's regulatory authority to the
powers conferred over `dominant carriers" under Section 322
et seq. of the Bill.
We believe that rate and tariff deregulation of
common carrier land mobile services may be appropriate
provided that corresponding changes are made to the 1956
Consent Decree so as to allow Bell System land mobile
services to be offered in a deregulated mode. In most
significant markets there are numerous RCC5 competing with
each other and with the telephone company s land mobile
services. Further, the competition has, as we have already
shown, been vigorous and effective. Thus, marketplace
forces can be relied on in lieu of regulation in the land
mobile market.
It is our position, however, that deregulation
should be applied to all carriers who provide the services,
and not applied selectively on one carrier or on a
particular class of carriers The provisions of Section 424
which apparently allow for regulation only of dominant
carriers appear to be intended to protect other carriers
from cross-subsidy or predatory pricing We suggest,
however, that the result achieved by this Section ie
selective regulation is unfair and inequitable It would
impose heavy burdens on the ability of the regulated
PAGENO="0185"
1649
entity to compete effectively against unregulated entities
For example, while the unregulated entity could offer new
services at its unrestricted option, the regulated entity
would have to await the lengthy proceedings often incident
to tariff approval
Moreover, selective regulation is unnecessary to
protect against misuse of monopoly power and anticompetitive
conduct. The provision of House Bill 3333 which guarantee
fair interconnection, together with an appropriate
accounting system or separate subsidiary, will, we believe,
more than adequately protect against cross subsidy and
predatory pricing Thus we suqgest that deregulation of
land mobile services should be made applicable to all
carriers and that the CRC should not be given the power to
impose regulation selectively on one or a particular class
of carriers
Title vii Spectrum Allocation
Under Title VII the power to allocate spectrum
which has heretofore been exercised by the FCC is
transferred to the NTA We have no objection to such
transfer, although we do believe that the FCC has exercised
its allocations powers effectively and that such powers
could continue to be exercised by the FCC or CRC
PAGENO="0186"
1650
In any event however, we want to emphasize that
spectrum allocation is a matter that has a direct and vital
impact on users of the spectrum. Thus, they have a
legitimate right to have their views heard and considered by
the allocation authority. Moreover, users often have
important technical information that can benefit the
allocation agency. Thus, regardless of which agency has the
power to allocate spectrum, its~decision-making process
should be made subject to the notice and comment rulemaking
provisions of the Administrative Procedures
Conclusion
Although the Bell System believes that all of the
comments in this testimony ~deserve consideration, I want to
conclude by emphasizing, once again, the urgent need for the
Subcommittee to reconsider its proposed exclusion of the
Bell System fromoffering new radio services. We have shown
that if enacted, the exclusionary provisions of Section
331(d) will ha~~ adverse consequences to the public. In
parti~cular, it will delay and perhaps in some cases preclude
customers from obtaining new and improved services.
Moreover., instead of promoting competition in land mobile,
.~/ 5USCA § 551 et~q
PAGENO="0187"
1651
the enactment of the Section may have the opposite result,
i.e., less competition and technical innovation in this
field.
We understand, and indeed support, the
Subcommittee's goal of fostering competition in the
conventional and the cellular land mobile markets. We
believe that there are feasible alternatives to the present
monopoly structure for cellular service, but neither these
alternatives, nor increased competition, will result from
Section 331(d). Instead, we suggest that, through the
regulatory process, such alternatives, and the continued
existence of vigorous competition in land mobile services,
can be accomplished without exclusion of the Bell System
from this market.
PAGENO="0188"
1652
Mr VAN DEERLIN Thank you, Mr Weinberg
Next Mr. Marshall.
STATEMENT BY TRAVIS MARSHALL
Mr MARSHALL Thank you, Mr Chairman
I want to apologize. I have a bit of an allergy and my voice is not
what I would like it to be
My name is Travis Marshall and I am vice president of Motorola
Motorola is pleased to have the opportunity to present its views on
H.R. 3333 and to participate in this panel.
Since our written testimony discusses in some detail our position
on many of the specific sections of H R 3333, I shall comment
briefly on those areas of vital concern to Motorola and the land
mobile community
We support the concept of relying on marketplace forces to pro
vide the telecommunications needs of the citizens of the United
States, invoking regulation only when marketplace forces are defi-
cient. The thrust of H.R. 3333 is that competition vying to serve
the market will with certain exceptions serve these needs and that
competition will regulate itself to insure proper pricing and will be
more dynamically responsive to the public than Government regu
lation can be.
Implict in the pro-competitive thrust of H.R. 3333 is that compe-
tition must be fair and that it must be real In the land mobile
radio market, there will be three types of systems Individual,
private dispatch systems operated by the user himself~ third-party
for hire dispatch systems, called specialized mobile radio systems,
which will usually be trunked; and for the general public there will
be cellular systems, which were just described by Mr. Weinberg.
They will offer mobile radio telephone service interconnected into
the wire line network.
The committee recognized that to permit entry by the dominant
carrier into any facet of this market would, in fact, result in no
competition. The individual private land mobile systems, which
comprise more than 97 percent of today's mobile radio users, are
well served by a host of competitive suppliers Their service and
maintenance needs are handled by thousands of independent serv-
ice stations. Many of these would not survive if the dominant
carrier were allowed access.
The potential for domination also exists in the newly established
specialized mobile radio systems called SMR's. These SMR's are
operated by third party for hire licensees who in turn serve eligible
licensees in the private land mobile services.
SMR's were construed by the Commission and affirmed by the
courts to be non common carriers Thus, today SMR's could not be
licensed to A.T. & T. or its subsidiaries because they are nontariff
services Without section 331(d), which excludes the dominant car
rier, small entrepreneurs who attempt to operate such systems
could certainly be swept away.
A third area of potential domination exists in the 40-megahertz
set aside for nationwide compatible common carrier mobile radio
telephone systems utilizing a cellular system configuration The
suballocation increases common carrier spectrum by 1,000 percent,
or tenfold The lure of a 40 megahertz allocation which could be
PAGENO="0189"
1653
dominated by A.T. & T. because of its vast resources could surely
emasculate the small radio common carriers.
Section 331(d) properly assures this continued competitive ënvi-
ronment for land mobile by excluding the dominant carrier. In our
opinion, this is the only viable remedy. The various other safe-
guards the bill proposes to protect against such abuses as cross-
subsidy will not be effective to prevent the incursion into and
inevitable domination of a heretofore highly competitive market.
This provision of H.R. 3333 will make it possible for thousands of
small businesses to compete in rendering communications and pro-
viding equipment maintenance fully responsive to the needs of all
land mobile users.
We also believe that for competition by deregulation to be effec-
tive in the land mobile market, there must be preemption to ex-
clude States from enacting legislation or issuing decisions that will
thwart the purposes of H.R. 3333. Certainly in the past these
jurisdictions have acted contrary to FCC rules and policies, fre-
quently for the purposes of bringing under regulation land mobile
systems which the Commission has determined ought to be free
from regulation.
It would be regrettable if competition, the cornerstone of H.R.
3333, were allowed to be undermined by individual local decision.
We believe that H.R. 3333 properly preempts, leaving only to the
States jurisdiction over local exchange rates.
We must point out that the Commission, whether it be the FCC
or the CRC, has a basic responsibility to let marketplace forces
control, intervening only when those forces are shown to be defi-
cient. While espousing competition and deregulation, the Commis-
sion has recently embarked on rulemaking that could restructure
the marketplace, creating competition not as it is contemplated in
H.R. 3333 but rather as the FCC deems it ought to be.
H.R. 3333 implicitly assumes that in general, a competitive mar-
ketplace exists and thereby puts the burden of proof on those who
allege that these forces are deficient.
We believe this approach is valid and in the public interest. As
evidenced by these recent FCC actions, however, there is a danger
that a commission might constantly tinker with existing market-
place forces to produce regulation that reflects its own view of how
the marketplace should be structured.
We hope the committee will reexamine this bill in light of this
problem and will endeavor to place appropriate constraints on the
agency.
A spectrum access fee could be acceptable under appropriate
conditions. If, for example, such a fee were applied to all users in a
manner that could cause unused or inefficiently used spectrum to
be reallocated to growing services such as land mobile, then the fee
would have a meaning and purpose through improved spectrum
efficiency.
It is clear that spectrum efficiency has not been accomplished in
major portions of the spectrum. If a fee structure could accomplish
this, it would, I believe, be in the public interest. It would appear
that H.R. 3333 leads in this direction.
That concludes my prepared remarks, Mr. Chairman.
[Testimony resumes on p. 1672.]
[Mr. Marshall's prepared statement and attachment follow:]
PAGENO="0190"
1654
TESTIMONY OF
TRAVIS MARSHALL
VICE PRESIDENT
MOTOROLA INC
GENERAL
Motorola Inc is a leading systems designer and manufacturer
of land nobile radio equipment for both private users and conmon
carriers In the common carrier narket we serve both wireline
and radio common carriers In addition our conpany manufac-
tures CB equipment AM-FM radios for autonobiles systems for
the Federal Governnent and seniconductor devices used in a broad
variety of electronic and telecommunications systems One of our
subsidiaries is actively engaged in providing data processing
and communications equipment Thus our ~nterest in the ramifica-
tions of H R 3333 is substantial
Motorola strongly supports the avowed purpose of H R 3333 to
protect the public interest by government regulation only when
marketplace forces are demonstrably incapable ~f performing this
function (Section 101 (b)) The Bill is a welcome step toward
an era of greater reliance on competition and the marketplace in
determining the development of our nation s telecommunication
policy Competition has already proved to be an effective and
cost-efficient regulator in those portions of the communications
industry where government intervention has been minimal and in
other sectors of the economy such as the recently deregulated
airline industry Where true competition exists and is allowed
to operate without government imposed restrictions both the public
and business benefit from the resulting variety of choices in terms
of superior quality of products and lower prices Additionally
we feel that this provision as modified is superior to the equivalent
section in H.R. 13015 as it properly recognizes protection of the
PAGENO="0191"
1655
public interest as the primary goal of this legislative reform.
We anticipate that the CRC and the communications industry, acting
within the framework of H.R. 3333, will create an environment in
which full and fair competition among equals will prevail with
concomitant rewards to the public.
RECOGNITION OF PRIVATE LAND MOBILE
Motorola is especially pleased to note the Bill's explicit
recognition of private land mobile as distinct from the common
carrier land mobile service as an integral segment of the tele-
communications industry. This delineation is both overdue and
necessary. Private land mobile systems, which provide internal
communication among employees of a business or organization now
comprise approximately 97% (over 7 million) .of the total of
licensed land mobile transmitters. This is an area where compet-
ition, rather than regulation, has served the public interest well.
Each individual user is a licensee who has control over his own
system; each purchases or leases equipment from one of dozens of
highly competitive suppliers; his assigned frequencies are shared
by other similar licensed users. This situation pertains even
when more than one licensee shares common equipment and facilities.
Thus, the FCC has imposed virtually none o~ the restrictions
on private land mobile which haveheretofrjre been required in the
common carrier services such as closed entry or tariff regulations.
One of Motorola's primary concerns with H.R. 13015 was its lack
of distinction between private and common carrier land mobile, a
PAGENO="0192"
1656
fear which has been substantially alleviated by the language of
the Bill before us. There remain, however, a few areas in
which this delineation must still be made or clarified.
Section 412 (b) (1) requires a granted CRC license
before an applicant to provide broadcast, land
mobile or other radio services may construct his
facility This prohibition has been inapplicable
to private land mobile users for many years FCC
clearance, if necessary, is the sole requirement
before construction may commence Imposing a
construction permit rule would serve no discernible
purpose
2 Section 413 (a) (8) ,~ (10) and (11) are also inappro-
priate for private land mobile licensees The
user, generally with the assistance of a frequency
coordinator, determines the frequency, location and
area of operation to be served We doubt that the
public, the Commission, or the licensee would profit
from increased Commission involvement in this area
3 Sections 415(d) and 436(b) create an apparent discre-
pancy The first is a general provision applicable
to all services including private land mobile It
requires mutually exclusive applications for a single
frequency to be disposed of on the basis of random
selection Section 436(b) on the other hand only
applies to mutually exclusive applications in the
land mobile or other radio services (excluding
PAGENO="0193"
1657
broadcast) and allows the Commission substantially
greater leeway in selecting among competing applicants.
We suggest, therefore,that section 415(d) be specif-
ically limited to applications in the broadcast
service.
4. A final concern in this area is Section 422 which pro-
hibits the Commission from regulating the content of
any transmission. Congress is understandably sensitive
when dealing with First Amendment rights, yet the
block allocations on which the private land mobile
service is premised necessitate limitations on trans-
mission content, Without such requirements, the
private land mobile radio services will inevitably
lose their unique identities to the ultimate detriment
of the radio user and the public.
ROLE OF DOMINANT CARRIERS
The primary thrust of H.R. 3333 is toward deregulation of
the telecommunications industry whenever competition is sufficient
to protect the public interest. Motorola agrees that this phil-
osophy can and should be applicable to the common carrier land
mobile service. When carriers are permitted to vie for a share
of the market, the public reaps the benefit of the resulting lower
costs and better quality of service. An entirely different sit-
uation pertains when one of the carriers is AT&T. An entity which
for years has been insulated from competition because of virtual
monopoly power granted by the Government must not be unleashed on
51-253 0 - 80 - 13
PAGENO="0194"
1658
an unregulated market without stringent, enforceable safeguards.
While we would have preferred a Bill prohibiting this communica-
tions giant from engaging in ~ unregulated, competitive segment
of telecommunications we believe that H R 3333 takes important
steps toward ensuring viable competition in both common carrier
and private land mobile services without denying AT&T opportunity
for continued growth. For example, AT&T will still be a principal
supplier to cellular systems even if it does not operate them.
Section 31(d) is the key section of this Bill for the land
mobile industry. Absent this provision, AT&T would be free to
penetrate and inevitably dominate this market because it would no
longer be bound by the terms of the Consent Decree, (Section 331(b)).
It may be well to clarify further today's land mobile structure.
We have already described the individually-licensed system that
characterizes the private land mobile market. This situation,
however, may undergo marked modification if trunked s~stejns designed
for private land mobile use became ascendant. Certainly1, this
is the direction that the FCC is endeavoring to force o~i the private
land mobile community in the 800 MHz band. According to the Com-
mission's decision in Docket No. 18262, these trunked systems, when
utilized to serve a multip]icity of eligibles, will be operated by
a third-party licensee (these systems are titled "Special Mobile
Radio Systems" or SMRS). This third party, the SMRS operator, is
permitted to charge for rendering service, but under FCC regula-
tions, affirmed by the Circuit Court of Appeals, is not subject
PAGENO="0195"
1659
to common carrier regulation.
Today, AT&T is not permitted to enter non-tarjf fed markets, and
is effectively precluded from operating SMRS. We should point
out that manufacturers such as Motorola are also effectively
foreclosed, under FCC rules, from entering this market as SMRS
licensees.
While trunked systems are in the embryonic \stage, hundreds
of applications for SMRS authorizations have been filed by
entrepreneurs, mostly from individual businessmen and small
companies. If H.R. 3333 were to be enacted without Section 331 (d),
AT&T would be free to dominate this potentially large private land
mobile market. Ironically, AT&T would then have more freedom than
the competitive equipment suppliers, yet its assets exceed by a
wide margin their combined total.
The result would be that private land mobile manufacturers
will find themselves with drastically fewer potential customers.
The monopoly power of AT&T will inexorably wither away competition.
The small manufacutrers will be the first to fail; diminution of
competition will, of course, adversely affect all suppliers.
The consequences of such an incursion will also fall heavily
on the small entrepreneur licensee of an SMRS system. He is
investing high-risk capital on the hope that not only will private
dispatch trunked systems prove to be technically feasible but
that they will attract sufficient customers at affordable rates
to be economically viable. It is difficult to be salutary about
the prospects for survival of most of them if in addition to the
present substantial risks, they must also combat the might of AT&T.
PAGENO="0196"
1660
Another group that would suffer greatly' because of AT&Vs
presence would be those small radio dealers who service and main-
tain private land mobile equipment. The individual SMRS entrepreneur
will lack the wherewithal to have his own' service facility and
will turn t.c~'the small independent to keep his system and the equip-
ment of his customers' properly functioning. AT&T, on the other
hand, will undoubtedly have its own service and maintenance capability.
If it dominates this market as it surely could do absent Section 331(d)
these service shops cannot survive.
The current situation in the common carrier land mobile radio
market is somewhat different although it demonstrates equally
the need for Sedtion 331(d). First, today's market is quite small -
serving only about 250,000 mobile telephone subscribers. Secondly,
the radio common carriers and the wireline" carriers compete for
this bi~tsiness in most areas but on a regulated, certificated basis
whereby only enough entrants sufficient to serve market demand are
authorized. Thirdly, prior to Docket No. 18262 there was scant
spectrum available for common carrier mobile radio service, an
amount inadequate to warrant more than token attention from AT&T.
Docket No. 18262, however, has provided the spectrum and
calls for the establishment of highly-sophisticated cellular systems
to provide radio-telephone serivce tothe public Motorola is both
a believer in and developer of cellular technology; however, we
recognize that such systems will be expensive, and considerable
time will be needed before a sufficient base of customers will
become subscribers so that the systems will be economically sound.
PAGENO="0197"
1661
Although the Commission's Rules allow any qualified common
carrier to apply for a cellular system, it is plain that the
typical radio common carrier is at such a marked disadvantage
vis a vis AT&T that competition cannot be real. Lest one fear
that AT&T's growth would be stunted in this area, Motorola's
projections on the Costs of operating a cellular system indicate
that the largest expense will be to the telephone company to pay
for the needed wireline interconnections and network switching.
The telephone company will, of course, realize substantial
revenues as well for toll calls emanating from or into the system.
It shoul~be noted that prohibitions against cross-subsidi-
zation or other limitations proposed to be imposed on the dominate
carrier will not make the land mobile mark~ts described above
competitive. Dominance by AT&T will occur, whether it be in
providing equipment, gathering subscribers or ser4icing the
equipment, the prospects for real competition are bleak. The
only viable alternative is the enactment ~f Section' 331(d).
CROSS-SUBSIDIZATION
Because we believe that markets other than land mobile will
be similarly dominated by AT&T, we testified previously that
the dominate carrier should be excluded from all "competitive",
non-regulated areas. We questioned whether fair competition
would be achieved if a monopoly-based enterprise were permitted
to penetrate markets served by competition. Since `the authors
of H.R. 3333, apart from Section 331(d), opted otherwise, the
prohibitions against cross-subsidization take on increased
significance.
PAGENO="0198"
1662
H.R. 3333 does not require divestiture of either Western
Electric or the Bell operating companies. Other provisions of
the Bill, however, give assurances that cross-subsidization will
not be permitted and that, if discovered, will trigger severe
penalties.
Under H.R. 3333, only dominant carriers are required to
file tariffs for inter-exchange telecommunications services
(Section 325). Section 326(b) (1) authorizes the Commission to
require a dominant carrier to maintain separate accounts for
amounts received under any rate filed. Thus, the Commission
will be able to determine whether the funds received originated
from appropriate sources. This section also impowers the CRC
to determine whether the rate involved is just and reasonable.
This determination will vary depending upon the degree of com-
petition in the market involved. Obviously, cross-subsidization
is a greater concern when a dominant carrier is operating in a
competitive market and could utilize revenues accrued from monopoly
activities to subsidize its rates and therefore under-price those
without such a base. This possibility is substantially minimized
by the stringent penalties of Section 326(e) (2) which allows
for awards of treble damages to a complaining carrier if a rate
is determined to be less than just and reasonable.
The CRC is required, under Section 326 (b) (2) to conclude
hearings on tariffs within one year. We would hope that the
Commission views this deadline, not as the norm, but as a maximum
period which should be shortened whenever possible. Suits by
PAGENO="0199"
1663
competitors to enjoin these illegal cross-subsidizies and/or
co1]-ect~damages historically drag on for several years. Plaintiffs
who ultimately are awarded compensatory judgments often find that
it is too late to resume their attempts to be competitive. Such
a result could obtain in spite of a one-year deadline since the
administrative process is frequently followed by judicial review.
Sections 325 and 326 protect against cross-subsidization in
inter-exchange telecommunications services. Protection against
this sane practice in other unregulated telecommunications
activities must be established under Section 331(c). Here,
H.R. 3333 mandates arms-lengths dealings between a dominant carrier
and its affiliates, and among affiliates. It also requires
products, services or facilities which are offered to othér~
affiliated organizations, to be offered to all other persons on a
non-discriminatory basis at comparable rates and on comparable
terms. Motorola hopes that this provision, in conjunction with
Sections 325 and 326, amd the severe criminal sanctions set forth
in Section 545 for violation of any of these provisions, will
guard against the~ anti-competitive practice of cross/subsidization~
We also anticipate that, should those restrictions ~prove ineffective,
the Commission will take further appropriate actions such as
requiring divestiture as authorized under Section 331(d) (3).
AGENCY INTERVENTION
As the Subcommittee is aware, the present Administration
has espoused a policy of deregulation which it has urged Admin-
istrative Agencies to follow. In a positive sense, this would
PAGENO="0200"
1664
seem to be a forerunner of H.R. 3333 as far as the FCC is
concerned and would seem, thereby, to ease any transition for
the FCC (or the CRC as the successor organization proposed in
this legislation).
Recent actions by the FCC, however, under the guise of
letting competition govern give rise to a concern that the agency
will all too quickly conclude that marketplace forces are
deficient unless the market conforms to the Commission's precon-
ception. For example, in Docket No. 18262, a reserve of 300
channels was set aside to be authorized for ~ither conventional or
trunked operations to be ". . .drawn upon to meet demands as
they arise." (Memorandum, Opinion, rand Order, `M~rch 19, 1975).
In fact, in Los Angeles, Chicago, and New York, the supply of
conventional channels has proven to be inadequate to satisfy the
demand. Yet, attempts to draw as few as 50 channels from this
reserve to satisfy the market need for conventional systems were
rebuffed because the current Commission (only three Commissioners
remain who participated in the 1975 decision) concluded " .
that it would be unwise to do so now because the frequencies in
reserve could better be used for the more efficient trunked
systems." (Docket No. 79-106, Notice os Rulenakin9,.
Nay 3, 1979). Leaving aside serious questions as to the factual
accuracy of the Commission's conclusion, it is plain that the
Commission has substituted its own rationale for the demonstrated
preference of the marketplace.
PAGENO="0201"
1665
In reality, the Commission has gone further. It has
restructured the marketplace by, de facto, forcing some private
land mobile users to employ trunked systems, usually operated
by SMRS entrepreneurs on a for-hire basis. Whatever the
ultimate efficacy of these systems, it is incontrovertible
that today they are more expensive than conventional systems;
their applicability for private dispatch uses is untried, and
their hoped-for spectral efficiency awaits real-world proof.
This action appears to be the antithesis of permitting competition
to be the regulator: a competitive environment in which conven-
tional and trunked systems would compete for users has been
superceded by Government intervention. Thus, while we - and,
we would assume, this Subcommittee, - would not expect similar
action if H.R. 3333 were enacted, we are concerned since the
Commission appears to be unconcerned about flouting the mandate
of the Chief Executive. We would hope, therefore, that to the
extent possible in the statutory language itself - and certainly
in the accompanying legislative report - it will be set forth
in no uncertain terms that in the absence of clear proof to the
contrary, marketplace forces should be deemed to be working
satisfactorily.
PRE-EMPTION
In spite of our misgivings about potential Federal Agency
tinkering to structure the market to suit its own concepts, we
believe that competition as the regulator can succeed only if
PAGENO="0202"
1666
there is Federal pre-emption. Thus, Motorola is pleased to
note that no ambiguity exists in H.R. 3333's position on
pre-emption. Both SMctions 321(b) (1) and 424(a) clearly prohibit
the states from stepping in and regulating the void created by
a federal policy of deregulation for inter-exchange telecommuni-
cation services. Such a step was mandatory, as we testified
last summer before this Subcommittee, if competition is to
flourish. Government constraints at the state level on use of
the radio spectrum by non-common carriers have proved in the
past to be often more onerous than those imposed by the Federal
Government. They have also, on occasion, created an untenable
situation whereby the freedom to operate certain types of private
land mobile systems was circumscribed on a state by state basis.
We feel, that H.R. 3333 establishes once .and fo~t all the `appro-
priate paraneters.for federal and state regulation of the electro-
magnetic spectrum. This is essential if the objeátive of competition
is to succeed.
SPECTRUM FEES
Another area which will directly affect Motorola and its
customers is the spectrum resource fee proposed in Section 414
We are still reluctant to endorse any scheme whigh would place a
value on use of the spectrum by private land mobile licensees
as they, unlike broadcasters or common carriers, derive no direct
financial benefit from the use of radio However! assuming that
such a fee will be minimal for these users so tha/t potential
licensees are `not priced out of the speOtrum "ma~két"., we much `
prefer the method proposed in H R 3333 to that Set out in either
5 611 or Docket No 78-316
PAGENO="0203"
1667
Section 414 states that private land mobile licensees
would be assessed a fee based on the cost of the Commission of
processing the license and the scarcity (fair market) value of
the spectrum being assigned. The first factor is certainly
an appropriately recoverable cost. The second, although we
maintain some reservations both about its feasibility and legality,
is preferable I to earlier proposals for several reasons. First,
while an undetermined scarcity value coula be assigned to private
land mobile frequencies, it could not exceed a specified per-
centage of the fee charged for UHF-TV broadcast spectrum. This
should ensure that the private land mobile industry will not
provide a disproportionate share of the revenues collected by
the Commission. This method of pegging private land mobile fees
to broadcast fees also eliminates the complicated, convoluted
spectrum value analysis that would have been required in several
of the other proposals. We also concur with the Subcommittee's
decision to eliminate indirect costs to the Commission from the
fee formula. Such an approach would have been an open invitation
to the CRC to seek additional budget, secure in the knowledge
that fees could be raised to match such increases. Cost efficiency
could be ignored, contracts for unneeded studies might have
proliferated, because licensees would inevitably have paid the
tab, no matter how high.
A further concern peripherally related to the spectrum
resource fee is Section 413(d) which requires the CommissiQn to
obtain Congressional approval before making any substantial change
in the assignment of broadcast spectrum. We are unclear whether
PAGENO="0204"
1668
such a re-allocation would appropriately fall under the
auspices of NTA or the CRC. In any event, we suggest that this
passage be clarified to eliminate any possibility that spectrun
allocations are made dependent on spectrum fees, rather than the
reverse. The Coxnmisèiofl is obligated under this Section, not
only to explain the rationale for the proposed change, but to
analyze its inpact on the operation of the spectrum resource
fee provisions for Section 414. We urge the Subcommittee to
clearly indicate that any re-allocation proposal would be evaluated
*on its own.merits, irrespective of its potential impact on the
fee provisionS
NATIONAL TELECOMMUNCIATIONS AGENCY
A final area we wish to address is Title VII which established
the National Telecommunications Agency (NTA) and sets out the
duties with which it is charged. As this Title is virtually
identical to that proposed in H.R. 13015, the position that. Motorola
took before this Subcommittee last summer has not changed. The
Bill entrusts NTA with all spectrum allocations, both Government
and non-Government. While Motorola recognized that this is an
attempt to increase the efficiency of the spectrum allocation
process, we feel the approacih outlined would deal, a serious blow
to all users of the radio spectrum.
It would appear on the surface that holding one agency
responsible for all spectrum allocations would make it more
responsive to the full gamut of prospective users. However, to
empower NTA with both the functions of allocating Government
PAGENO="0205"
1669
spectrum needs and then arbitrating when those needs conflict
with civilian spectrum demands would create an imbalance. The
FCC has developed an expertise over the years in dealing not
only with non-Government allocations, but also in representing
this sector in disputes between civilian and Government spectrum
demands. The FCC now provides a forum when Government and non-
Government demands are at issue; this arrangement should continue
to exist to ensure fairness for all. To transfer this task to
the NTA, when the expertise on the needs of the non-Government
services will reside in the CRC, is not in the public interest.
In addition, the Bill fails to specify the procedures which
NTA would employ to perform its spectrum allocation function.
Whether the Administrative Procedures Act applies here is yet
to be determined. A possible result could be the creation of a
"spectrum-czar", wherein the director would have final authority
in allocation decisions. Further, even assuming the applicability
of the APA, certain Government allocations, relating to national
security, will not be subject to public proceedings, even though
they may seriously affect non-Government allocations to the
possible detriment of the civilian user. Entrusting the CRC with
civilian spectrum allocations would obviate the need for any
coordinating body between the two agencies while maintaining the
efficiency of one governmental agency executing these responsibilities.
PAGENO="0206"
1670
ADDENDUM
TO THE
TESTIMONY OF
TRAVIS MARSHALL
VICE PRESIDENT
MOTOROLA INC.
The spectrum fee proposed for land mobile is in part based
on a numeric ratio of 360. This ratio appears to reflect that
the assignment of a UHF TV channel in a given area precludes
the use of spectrum beyond that needed for the TV channel itself,
i-e. 6 MHz. This additional spectrum is the result of the impact
of what are popularly known as the TV receiver taboos. These
include: Adjacent Channel
Oscillator
Picture Image
Sound Image
Intermodulation
IF Beat.
Thei.r quantitative impact in terms of causing idle unassignable
spectrum in a given community is dependent on the number of
assigned channels and their numeric relationship in the community.
For example, if only a single assignment were made, then 18
channels would be idled and unusable for from 20 to 65 miles out-
side the community with the specific mileage limitation based
on the type of taboo. These 18 idle channels correspon.d to
108 MHz of spectrum in addition to the 6 MHz for the assigned
channel. At the other extreme, if all assignable channels were
placed in a community, up to 11 channels could be implemented
c'r 66 MHz of spectrum out of a total of 336 MHz of spectrum
(806-470)~ On this basis each TV assignment would idle 24.5 MHz
beyond that needed for the channel.
A further factor in the fee ratio that should be considered
is that for each 1 MHz of spectrum in the UHF region 20 `two-way
)and mobile channels can be establishet. With this as amultip~ier,
PAGENO="0207"
1671
the fee ratio could vary between (108 + 6) x 20 down to
(24.5 + 6) x 20 or 2,280 to 610 as opposed to the figure of
360 proposed in H.R. 3333.
Based on the above and the future possibility that these
taboo impacts could be reduced by improved TV receiver design,
it is recommended that any fee ratio reflect accurately the
actual idled spectrum resulting from TV receiver taboos as well
as the 6 MHz corresponding to the TV channel assignment.
In addition to the consideration of TV receiver taboos is
the substantial co-channel mileage protection afforded a UHF TV
station. Depending upon the specific area of operation of a
UHF TV station, the co-channel protection to another station is
155 to 205 miles. Private land mobile stations on the other hand
ht'u no equivalent protection from other land mobile stations,
~ven in the same community. Time and geographic sharing of a
channel is widespread. In those cases where a licensee is
protected, such as a common carrier, the typical protection is
70 miles.
Thus a fee based on spectrum use should also reflect the
amount of geographic area and tine availability of a channel
available to a licensee. This would act to assure greater
equity between disparate licensees.
PAGENO="0208"
1672
Mr. MARSHALL. I would like to point out that I have a portable
telephone which will be part of a cell system, and I would like to
have the committee see this at your convenience, whether that be
now or afterward. That would be totally up to you. I would be glad
to show it to you now. You can sit where you are and I will bring it
to you.
Mr. VAN DEERLIN. It is not in a car?
Mr. MARSHALL. It is not in the car. It is in the hand.
Mr. VAN DEERLIN. You better have a demonstration, Dick, when
we get to you.
Mr. WILEY. I am going to flash my cards.
Mr. MARSHALL. This is the unit I would like to show you. This
particular unit can be operated in an automobile or as you walk
down the street, or anyplace where you might need a telephone. If
you call a number on it-what is your number, 5672?
Mr. VAN DEERLIN. Well, we can see if there is anyone up there.
Mr. MARSHALL. You first have to be accurate in your dialing.
I got a recorded message which says that the number you have
reached--
Mr. MARKS. His number is up.
Mr. MARSHALL. It has got to be 5-5672.
Mr. MARKS. If you would like to try an office that is open--
Mr. MARSHALL. Just one moment. I believe I have someone who
would like to speak with you.
Mr. VAN DEERLIN. We are just testing. Thank you. Go back to
work.
Mr. MARSHALL. This unit will be part of a cellular system. It will
definitely be a part of the cellular system that is being installed in
the Baltimore-Washington area. It will have both portables and
mobiles in it, and I believe it will be used in the Chicago system
also.
Mr. WEINBERG. If we can get them, Travis, I will take them.
Mr. MARSHALL. Thank you. If you want to give me an order right
now, Lou--
Mr. WEINBERG. Where is your contract?
Mr. VAN DEERLIN. Mr. Wiley. We turn now to a noncommercial
source.
STATEMENT OF RICHARD E. WILEY
Mr. WILEY. My name is Richard Wiley and I am a partner in the
law firm of Kirkland & Ellis. Thank you for inviting me to partici-
pate in this panel discussion concerning management of the non-
broadcast portions of the radio spectrum.
While spectrum management problems have attracted relatively
little attention, they represent an important part of the overall
rewrite of the Communications Act. The comments and opinions
which I express here today are my own, formed by my experience
of the FCC. However, a spirit of candor requires me to point out
that I have now been engaged in the private practice of law for
nearly 2 years and that some of my present clients have tetified
before this subcommittee.
Indeed, Motorola has long been a client of my firm, Kirkland &
Ellis, and accordingly, let me say that I found Mr. Marshall's
comments to be particularly compelling and logical.
At the outset, Mr. Chairman, let me commend you and your
cosponsors for dealing with a number of highly important and
PAGENO="0209"
1673
difficult issues in H.R. 3333. In responding today to the specific
questions posed for this hearing, I `want to raise some areas of
uncertainty concerning the bill's provisions. I hope that my com-
ments will be of assistance to the subcommittee in concluding its
significant lesislative efforts.
The first question you have asked is whether new technologies
and new services receive adequate access to radio spectrum under
the Communications Act of 1934, and in addition, whether adoption
of your bill would improve upon past performance in this regard.
A related question asks whether the proposed spectrum fee
would bring about an improvement in frequency management.
In addressing issues of spectrum management, I believe that two
separate functions must be considered: First, the allocation of spec-
trum to general services such as satellite, land mobile or in aero-
nautical; and second, the method of assigning licenses to individual
users within these services.
With regard to the allocation of spectrum to general services, my
view is that the present act in most instances has been sufficiently
flexible to accommodate new services and technologies. Generally,
such developments come within one of the preexisting categories
and no allocation is necessary.
However, in those cases where a new spectrum allocation must
precede introduction of an innovative service or technology, the
regulatory delay associated with the rulemaking will be encoun-
tered.
While H.R. 3333 could provide some improvement by directing
the head of the National Telecommunications Agency to perform
continuing analyses and monitoring of radio spectrum usage, it
would not substantially alter the procedural mechanisms employed
in the allocation and rulemaking proceedings.
Thus, even if your bill became law, substantial delay in the
rulemaking process can still be anticipated, unfortunately.
Even beyond the question of regulatory delay, it must be recog-
nized that certain substantive problems are inherent in the use of
Government policymaking to allocate economic resources. Under
any such system, political factors will result in situations in which
valuable spectrum is allocated to less efficient uses, or even al-
lowed to lie fallow for some period of time.
In this regard, a substantial portion of the valuable spectrum is
already allocated to established services, and regulatory inertia,
combined with a reluctance to obsolete existing equipment, will
often make reallocation a practical impossibility. /
I do not pretend to have an answer to this difficult problem.
However, we should all recognize that it will continue to be with us
unless some market base method is developec~' to reallocate spec-
trum from lightly usec~ services to those where demand is greater,
as Mr. Marshall has st~ggested.
Turning now to the related question of the potential for im-
proved spectrum management as a result of the institution of
spectrum fees, certain problems again may remain after enactment
of a new law. First, it could be argued that such fees are undesira-
ble as a revenue raising measure because they increase the costs of
doing business for all radio users, in the same manner as would a
tax. As such, the increased costs simply will be passed on to the
consuming public without any apparent comcomitant public
benefit.
51-2530-80.14
PAGENO="0210"
1674
While the fees for narrow beam point-to-point operation may be
nominal, fees for omnidirectional services like land mobile or MDS
could be substantial. In addition, spectrum fees would lessen the
publicly beneficial incentive to use radio in innovative ways by
artificially decreasing the cost effectiveness of radio in comparison
to wire lines.
Thus, if we are to find a public interest value in fees, it must be
based on the assumption that they will increase the efficiency of
spectrum management.
In this regard it has been suggested that an auction or lottery
would eliminate the expense and delay inherent in the present
comparative licensing process. Moreover, in the case of auctions,
such a system would tend to assign licenses to those companies
which would utilize the frequencies in the most economically effi-
cient manner.
While this suggestion has considerable appeal, particularly to
those of us who have long been critical of the comparative hearing
process, it should be recognized that the cost of a newly allocated
channel may be artificially inflated by limits which the Commis-
sion places on the number of channels allocated to that particular
service.
This artificial increase in the price of channels could cause some
new uses of radio technology to be less attractive and thus discour-
age their development. For this reason, the utility of an auction
scheme would be dependent upon the soundness of an underlying
allocation decision. As we have noted, this decision is made in the
political process rather than in the marketplace.
The other question presented today concerns a prohibition or
delay in the entry of A.T. & T. into new radio services for direct
local distribution. Committee members, aware of the problems
caused by the Bell System's dominant position in wire line local
distribution, are certainly justified in their concern that A. T. & T.
not be allowed to extend this monopoly into the relative competi-
tive field of local radio distribution.
While there may be other methods and measures which could
solve this problem in some radio services, the question of a tempo-
rary or permanent ban is certainly worthy of serious consideration.
Finally, I would like to make one additional comment on the bill.
Under H.R. 3333, the States would be divested of all authority over
interexchange local distribution facilities not also used for local
exchange telephone service-section 321(a)(2)-as well as authority
over rates and terms for local services provided under a license
issued by the Communications Regulatory Commission-section
424. As I read those provisions, the States would have no authority
to regulate use of intraexchange networks for local origination or
termination of nontelephone interexchange communications. Simi-
larly, they would have no power over rates or terms for intraex-
change communications where such service is provided by radio
and does not include local exchange telephone service. If that
result is the intent of the bill, I believe it would be helpful to
clarify section 324_intraexchange access charges-to reflect that
intent. Without such a clarification, some confusion may arise
concerning State jurisdiction over the rates and terms for radio
local distribution and intraexchange communications. In addition,
section 424 should be clarified to indicate explicitly whether it
permits State regulation of market entry.
PAGENO="0211"
1675
This concludes my oral testimony. Once again, thank you again
for permitting me to appear before the subcommittee.
Mr. VAN DEERLIN. I thank you, Mr. Wiley.
We will hear next from Ms. Cornell.
STATEMENT OF NINA W. CORNELL
Ms. CORNELL. Thank you, Mr. Chairman. I am Nina W. Cornell,
Chief of the Office of Plans and Policies of the Federal Communica-
tions Commission. I appreciate this opportunity to appear.
I wish to say I am speaking for myself alone and not for the
Commission, and unlike the people who have preceded me, I did
not make a prepared statement. As I said to Mr. Jackson, I would
not have time from the time I was invited, but I have the letter
and am prepared to address briefly at this time the three questions
you asked.
In some senses, it is an anticlimax. Everyone has said a bit of
what I want to say already. I think, as Mr. Wiley says, that new
technologies and new services do have trouble getting access to
needed spectrum under the present system. The problem arises
from the fact that we are using administrative procedures to make
economic allocations. Improved information that would come from
monitoring as called for by H.R. 3333 would help, but it probably
will not solve the problem.
Changing the location of where that activity takes place may or
may not temporarily improve things, but basically the problem
stems from doing it administratively rather than where it is being
done.
The second question of should H.R. 3333 treat radio operations of
dominant carriers differently than radio operations of other busi-
ness organizations, I approach that tentatively saying it seems to
me that may be a good idea~ There is still a lot that needs to be
learned about the public benefits of the dominant carrier being
involved in radio operations. But there are two concerns that get
raised. One is that of dominant carriers being involved in radio
operations that are potentially competitive with their other serv-
ices, and second, getting involved in acquiring radio licenses in
ways that might serve to further cross subsidize. Both of those
situations need to be taken into account in allowing dominant
carriers access to radio licenses like other businesses.
The third is the spectrum fee question. Would the proposed
spectrum fee be workable and would it improve spectrum manage-
ment? The spectrum fee as written in the bill does have some
workability problems. It is difficult. We have done some quick
calculations as to how hard it would be to administer the fee as
actually proposed in the bill, and there are problems with it.
I would like to say, however, in my opinion a spectrum fee could
be devised and it would help spectrum management. It would
improve it. It would improve the way spectrum gets used both by
changing the way people make decisions about when to apply and
how to use it, and it ought to help improve the management
process by the Commission, whichever Commission. As information
is garnered about how fees are moving, if they are truly based
upon scarcity, it ought to help send signals for the need to reallo-
cate; signals that are more concrete than signals we get from
today's purely administrative process.
PAGENO="0212"
1676
That, Mr. Chairman, concludes my opening statement. I would
be happy to answer any questions the subcommittee has.
Mr. VAN DEERLIN. Thank you, Ms. Cornell.
Mr. Wolf.
STATEMENT OF SHERMAN M. WOLF
Mr. WOLF. Thank you, Mr. Chairman and members of the sub-
committee.
I am Sherman Wolf, president and principal owner of Zip-Call, a
radio common carrier based in Boston, Mass. and providing pocket
paging services to more than 15,000 subscribers throughout eastern
Massachusetts and portions of Connecticut, New Hampshire, and
Rhode Island.
I am also chairman of the Landline Liaison Committee of the
Telocator Network of America, the national council of the RCC
industry, on whose behalf I am appearing today. The Landline
Liaison committee is responsible for all Telocator activities relating
to the interconnection of RCC facilities with the telephone net-
work.
I have had personal involvement, both on behalf of Telocator and
on behalf of my own company, in the continuing struggle of the
RCC industry to obtain interconnection with the telephone net-
work, to obtain it on reasonable and equitable terms and condi-
tions, and to combat the predatory and other anticompetitive prac-
tices of the telephone companies in operating their own mobile
services.
As a result, I would like to use my time this morning comment-
ing on the second question posed by the subcommittee in its invita-
tion to testify: "Should H.R. 3333 treat radio operations of domi-
nant carriers differently than radio operations of other business
organizations?"
Our answer to this question is an emphatic "Yes", and we be-
lieve that the approach taken by H.R. 3333 in section 331(d) is
precisely the right one.
My statement essentially focuses in the problem areas I have
experienced over the past years as a businessman in attempting to
provide innovative services to the public, and the problems that I
have had in being stifled by Bell's unwillingness to provide those
types of interconnection arrangements.
We believe it is important to clarify for the record what section
331(d) does and what it does not do. Contrary to what some wit-
nesses would have the subcommittee believe, section 331(d) does not
exclude Bell from participating substantially in the mobile radio
services. Rather, it channels the way in which Bell can participate
so as to minimize the possibility of a conflict of interest by Bell and
of the pressure for anticompetitive conduct against RCC's which
such a conflict necessarily creates.
The telephone company is one of the largest, if not the largest,
suppliers of equipment and facilities to every RCC radio network.
In the case of my own company in Boston, for example, we lease
some 230 local loops, 77 voice grade private line circuits as well as
a substantial block of central office outpulsing facilities which tie
our network together internally and to the telephone network, and
which enable our computer terminals to determine which of our
subscribers is being paged at any given time. In all Zip-Call's
PAGENO="0213"
1677
telephone bill is more than $28,000 per month, one of its largest
single operating costs.
So long as the telephone company's role is that of a monopoly
supplier of these facilities, its incentive toward the RCC's is the
same as any normal business person-for example, to be responsive
to the RCC's facility requirements, to provide good service, and to
earn a fair profit on the facilities and services provided.
But when the telephone company is also a direct competitor of
the RCC in the retail or radio portion of the business, it has every
incentive to abuse its role as a monopoly supplier of facilities for
anticompetitive purposes.
I assure you that I speak with some authority on this subject
because of my personal experience.
I do not have time today to catalog what Zip-Call has been
through, but insight to one aspect of its struggles can be gleaned
from the orders of the Massachusetts Department of Public Utili-
ties which I have attached to my testimony. In that case the
department of public utilities found that Bell's paging rates were
noncompensatory and ordered them to be raised by 40 percent over
the level Bell originally established. I ask that the attached orders
be printed in the record with my statement. [See p. 1678.]
My company alone has spent more than $200,000 over the last
few years for legal fees and related expenses fighting Bell's preda-
tory conduct. Bell's outlays on the other side have to be equally
great, if not greater, and this does not count any of the costs
directly paid by monopoly telephone ratepayers in the form of
cross-subsidies.
It is an enormous burden for a small company like mine to have
to shoulder in order to stay in business, and it is equally an
onerous and unnecessary burden on the monopoly telephone rate-
paying public.
Bell profits handsomely on the telephone facilities it supplies as
a wholesaler to my company and other RCC's but it is still losing
money on its competitive paging services in Boston. I suspect that
system wide, Bell's radio services also lose money and must be
subsidized by the public ratepayers at large.
The fact is that if Bell's efforts in the mobile radio services were
channeled into doing what it does best, that is, being a telephone
company, everyone would profit, the public, Bell, and the RCC's.
But so long as Bell clings to its "all things to all people" philosophy
which dictates its current actions, the extensive and costly fights
that have been necessary in the past will continue unabated in the
future, regardless of any techniques like separate subsidiaries or
accounting systems which the Congress and the regulators may
mandate.
Section 331(d) would require Bell not to withdraw from the
mobile service market but properly to channel its participation in
that market until such time it could be a normal competitor in the
ordinary course of events. Telocator believes that this provision
poses precisely the right solution, and we strongly support and
urge its adoption.
Thank you for allowing Telocator Network of America this op-
portunity to express its views on H.R. 3333.
[Testimony resumes on p. 1727.]
[Attachment to Mr. Wolf s prepared statement follows:]
PAGENO="0214"
1678
-com VMS. 205.313-075374
~ ~rt~ ~a~ft11 ~f ~ad~uze1t~
DEPARTMENT OF PUBLIC UTILITIES
February 12 1975
DPU 3.8090
Investigation by the Department on its own motion as to the pro-
priety of the rates and charges set forth in M.D.P.U. No. 13 -
Mobile Supplement No 2 - Title Page - Page 1 - Original filed
with the Department by the New England Telephone & Telegraph
Company On July 2 1974 to become effective on August 1 1974
Appearances C Duane Aldrich Esq and Robert D Bruce Esq
185 Franklin Street Boston Massachusetts for
the New England Telephone & TelegI~aph Company
Hei~be~rt Baer, Esq One Boston- Place Boston
Massachusetts,~iOr D.P.R.S.,. Inc.., Cplgan
Communications-, lnc. ,~ Ram of Massachusetts,
Inc
Charles P Amyot Esq 100 Cambridge Street
Boston, Massachusetts, for the Department of
Public Utilities
On ~July 2 1974 New England Telephone `Company (herein nailed
company ) filed with-the Department rates and charges for Bell. Boy_
to become effective August 1 1974 These were suspended until
June 1 1975 Hearings have been held on the entitled matter on
August 20, 1974; September 24, 1974; October 7, 1974; October 11,
1974 January 27 1975 January 28 1975 January 30 1975 and
February 3 1975 Intervention was allowed by Colgan Communications
Inc and others Rulings have been made by the Commission as to the
proprietary status of certain marketing data and non-proprietary
status of other information
There was presentation and cross-examination of some of New
England Telephone s cost study data at the beginning of the pro-
PAGENO="0215"
1679
ceedings, but due to requests from the Commission and the Intervenors,
New England Telephone agreed to do a new cost study. This was done
and filed with the Commission and Intervenors and a presentation by
the Company was made, but only some cross-examination has occurred on
this. By agreement of the Commission and the parties, this cross-
examination was interrupted and a presentation by New England Telephone
of marketing data, study and projections was made. There has been some
cross-examination of this data but it has not been concluded. The
Intervenors. have expressed their Intention to produce their own
witness-e3:.and evidence, along-i~,jth. further, cross-examination of New
Engiapd. T~elephone.s witnesses~and -data.
Severa1~conferences-.-have -been~hel-d- between the- Commission,
Intervenors, New England Telephone, the Department of Public Utilities'
consultant and its Chief Accountant.
Several issue.s -remain yet to be finally determined; however., there
was. & ban: imposed -on New England `Telephone, first -voluntarily by *New
England *Telephone.:and `later by the"Commi~sion's Order., which *ban
- (one of the ititervenors)
prohibits both New England Telephone -and ZipCall/from selling their
2-signal units. There was also a further ban imposed on New England
Telephone from actively marketing Bell Boy at the filed tariff of
$18.00. Continuation of the ban does not seem to be in the best
interest of the ratepayers of New England Telephone due to the
investment "in plant" made by New England Telephone on Bell Boy. How-
ever, from the evidence received thus far, it appears that the second
cost study produced by New England Telephone could justify a $3.00
additional cost over that evidence presented when the tariff for
$18.00 was filed on July 2, 1974. Furthermore, the market survey
relied upon by New England Telephone for projections of sales were
PAGENO="0216"
1680
/~
based on studies that were conducted approximately 3½ years ago in
areas of the United States in the west and mid~west where there was
no competition and where the penetration of the potential market
was markedly different from the situation presented here in Massachu
setts The Intervenors here have greatly penetrated what appears to
be the potential market Without having heard all the evidence this
Commission is going to attribute an additional 75~ at this time to
allow for a differential in the Company s projections and what appears
to~be..a weakness.in.the data and projections due to New England
Telephone"S 1ack~.of~actual.exPer4eflCe 4n-a simUar.~market situation as
presents Itself in Massachusetts The Commission beli-eves that an
interim ardev~ of $21 `75 ~ou~d1enab1ë New England Telephone to recover
its costs sooner than it would by an $18 00 tariff
This Order is conditional upon a further order being issued by
this:Commi~ssiOfl~after receiptof~:.monthlY~reports~frOmNeW~En9lafld
~
Information
Month1~ Reports Required from New England Telephone & Telegraph Co
~ of Sales
I of Customers Listed by SIC Code
I of Units Sold
~~pair Data
I of Units
Type of Repair
Cosmetic
Mechani cal
Removal Data
I Units Removed
Date Returned
Date Sold
I of Bell Boy Calls to Base Unit by Hour and Date
Average Length of Call to Base Unit
PAGENO="0217"
1681
Time Sheets - for all employees Servicing or maintaining
Pager Units or Base and Transmitter Units.
Separate and Complete Figures for Official Units.
The data obtainted from these monthly reports is to be used along
with information to be obtained from a continuation of these proceedings
so as to make It possible for the Commission to make a final order on
the rates and charges to be set for Bell Boy.
The Commission in setting those final rates shall not be bound by
the tariffs that will be filed in conformity with this interim order but
should consider all options in determining the rates it deems proper,
including the -review, of -the proprie.ty~~if ~the original tariff filing
in M.D.P1J. No.-.l3 MobileS-up'pl-ement--~. -~Titi'el~age~.-Page I --
Original-filed ~n ~July2, 1974.~.: If t4e.&om,njssrjom.fail.s to order final
rates by an extended deadline of September 24, 1976, then the Company's
original tariff referred to herein, which is further suspended by this
deci3~on,::shai]~go into eff.ectas -ori.gina-ll~y f,ileTi.:.The C~ommissiiyn
shall recommence hearings on -this matter -during the week of March 29, 1976,
in order to continue.Jo receive more infbrmatio~ on the record. Evidence
shall be received fron'botfr-the -Company--and the -Intervenors---t,kn1'ess-.t~e
parties themselves decide to do otherwise. It is deemed not to be in
the best interest of the public for the Commission to fell to act
affirmatively in this case.
This order is further conditioned by New England Telephone's
agreement to extend the deadline for a decision in this matter to
September 24, 1976 SO as to allow for sufficient time to gather relevant
marketing data on which the Commission can base its final order.
In addition, this interim order shall apply to quantity sales
wherein the monthly charges shall be:
PAGENO="0218"
1682
#Recei vers Rate & Service Comb nedd
- 3 $21.75
4 - 9 $20.25
10 or more $18.00
There shall also be an added charge of $2.50 for an additional
number, per receiver, as well as any appropriate non-recurring charges.
We determine that this order will have no environmental impact.
Accordingly, after due notice, public hearing and consideration,
It is,
ORDERED: That the rates filed in M.D.P.U. No. 13 Mobile Supple-
ment No. 2 - Tie Page - Page 1 filed July 2, 1974 to become effective
August 1, 1974 b~ Li L5U5PCfl,,cA~.~ in accordance with the terms of this'
---decision, and' 1t-4~s~ ~--- - - `
FURTHER ORDERED: That rates and charges be filed in conformity
with this order, if an agreement is also filed by New England Telephone
to extend the dea'd-llneto Septemb-er24, 1976, and itis,
FURTHER ORDE D'~-~That the-~i'ates filed in compliance with the
decision hereifl~ all ~TéiLfeUJii. no less than two days after filin9
with the Department, and ltls, -
FURTHER ORDERED: That the New England Telephone file monthly
reports as provided for herein, and it is,
PAGENO="0219"
1683
FURTHER ORDERED: That upon the taking effect of the new rates,
this Investigation shall continue In compliance with the decision herein,
and It Is,
FURTHER ORDERED: That this investigation shall be terminated as
of September 24, 1976 and rates will go into effect in compliance with
the decision herein, unless otherwise ordered by further order of this
Commission.
By Order of the Department,
/s/ FRANCIS J. HICKEY, Jr.
Franc-lsJ. Hlokey,-Jr.
Sec~retary
A true copy
ATTEST:
Sec reta-ry
Appeal as to matters of law from any final decision, orderor ruling
of the Commission may. be taken to the. Supreme Judicial Court by an
aggrieved party In interest by the filing of a written petition pray-
ing that the order of the Commission be modified or set aside in whole
or in part.
Such petition for appeal shall be filed with the Secretary of the
Commission within twenty days after the date of service of the
decision, order or ruling of the Commission, or within such further
time as the Commission may allow upon request filed prior to the
expiration of the twenty days after the date of service of said
decision, order or ruling. (Section 5, Chapter 25, G.L. , Ter. Ed.
as most recently amended by Chapter 485 of the Acts of 1971).
PAGENO="0220"
1684
tOM 03 SM 055 MAY 1 8 1977
~` Z~I1Ie mnfut~aliti d ~
DEPARTMENT OF PUBLIC UTILITIES
~I~9 May 13 1977
DPU 18090
Investigation by the Department on its own motion as to the
propriety of rates and charges set forth in schedule M D P U
No 13 - Mobile - filed by the New England Telephone and
Telegraph Company
APPEARANCES Robert D Bruce Fsquire
Christopher H Bennett Esquire and
C Duane Aldrich Esquire
185 Franklin Street
Boston I~1assachusetts
FOR New rngland Telephone and
Telegraph Comoany
Maloney Williams & Baer
(By Herbert Baer Esquire)
One Boston Place
Boston, Massachusetts
FOP D P R S Inc Colgan
Communications, Inc., and
R A N of MaesachuSettS
PAGENO="0221"
1685
I. BACKGROUND
On July 2, 1974, New England Telephone and Telegraph
Company ("NET" or "the Company") filed with the Department an
amendment.to its tariff for the Bellboy radio paging service
("Bellboy" or "the service") to become effective August 1,
1974. By Order dated July 22, 1974, the Commission suspended
these rates and charges until June 1, 1975. The Company's
motion for reconsideration of the suspension order was filed
on August 8, 1974 and was denied by the Commission on August 14,
1974. Because of the unforeseen intricacies of the matters
under consideration, the Company has agreed to further
extension of the suspension period until May 15, 1977.
The Order of July 22, 1974, also gave notice of a
public hearing to be held in this matter on August 8, 1974.
At the request of the Company, the first hearing was postponed
until August 20, 1974. Intervention was granted to Colgan
Communications, Inc., D.P.R.S., Inc., trading as Zip-Call, and
R.A.M. of Massachusetts, Inc., ("Intervenors").
Subsequent hearings in the first phase of these pro-
ceedings ("Phase I") were held on September 24, October 7 and 11,
1974, January 27, 28, 30, 31, and February 3, 1975. The
Commission issued an Interim Order on February 12, 1975. The
proceedings were reconvened in a hearing on April 8, 1976.
Additional hearings in the second phase of the investigation
("Phase II") were held on October 13, 22, 26 and 29, November 2,
December 17, 21 and 22, 1976, and January 6, 1977.
-1-
PAGENO="0222"
1686
This service offered by NET involves a portable
paging device called Bellboy The Bellboy receiver is small,
lightweight and rectangular and may be clipped to a belt or
pocket By carrying this device, a customer within the service
area may be paged by radio signal The service is used pre-
dominantly in the course of business by persons who remain
mobile and need a medium by which they may be contacted
quickly For instance many radio paging service customers
are doctors who must receive emergency messages while away
from the office or hospital
Each customer is assigned a telephone number through
which his receiver can be activated In order to signal the
receiver someone dials the assigned number The call pro-
gresses through the telephone network to a control terminal
which identifies the number and causes a radio signal to be
transmitted to the corresponding customer receiver Upon
receiving the signal the receiver emits a tone The customer
knows by prearrangement, what action to take upon being
signalled
For fourteen years from the time of its inception in
1960, Bellboy service utilized the 35MHz-AM portion of the
frequency spectrum The system was expanded in 1970 to double
its subscriber capacity, but it soon experienced serious service
limitations and lost many of its customers The existing
receivers could not be modified to resist the increasing
interference in the 35MHz-AM band, and they were technologically
PAGENO="0223"
1687
outmoded by lighter, more compact and more reliable models
In response to these problems NET obtained authorization
from the FCC to build a 150MHZ-FM system Considerable changes
in plant and equipment were made The old transmission facilities
were replaced by transmission equipment located and designed to
meet the needs of a 150MHZ-FM system The new system included a
control terminal which could be programmed to resnond to either
one or two telephone numbers for a single receiver.
New receivers with a corresponding capacity to receive
two distinct paging signals as well as other technological
improvements were purchased by the Company to replace the old
35MHz-AM receivers A customer who reccived important messages
from two separate locations in the course of his business c~uld
now receive two distinguishable paging tones. For instance,
doctor could arrange to have his office signal him through one
number and his hospital through the other. If the customer di
not choose the second signal option only one telephone number
would be assigned and only one signal transmitted All customers
would, however carry the new receivers with the two-signal
capability
It was with respect to the optional second signal feature
that NET filed the amendment to its rates and charges for the~~
Bellboy service The proposed change was to add a $3 00 second
number charge to the existing basic rate of $18 00 which had been
filed in 1972 under the old 35MHZ-AM system Because of the
system-wide revisions and extensive additional investment in
-3-.
PAGENO="0224"
1688
plant in the Bellboy service the Intervenors urged the Commission
not to confine its investigation to the second signdl charge
According to the Intervenors the existing tariff and the amendment
taken together constituted the Company s rates and charges for an
entirely new service offering and must therefore be reviewed as a
whole They contended that a continuation of the basic rate from the
discarded AM system would not compensate the Company for the costs
associated with the current offering
In answer to the Intervenors suqgestion that the scope of
the investigation be expanded the Company asserted that there was no
material change in the Bellboy offering, with the exception of the
two number service feature and that the current rates were
reasonable and compensatory It further contended that the
IntervenorS who held a ninety percent share of the paging market
because of their own more modern equipment, were seeking to
frustrate NET s efforts to modernize its own system Finally NET
argued that a broadening of the investigation to include other
Bellboy charges, along with the probable suspension of the second
signal offering until resolution would unreasonably burden the
Company and would allow competitors to continue to grow at its
expense The Company suggested that if NET were to be restrainted
from offering the new feature competitors should be similarly
restrained
Because of the serious question raised as to the possibility
that cross-subsidization from the general body of ratepayers would
result if non-compensatory pricing of the new competitive Bellboy
-4-
PAGENO="0225"
1689
service were allowed to exist, the Commission found it appropriate
to expand the investigation. The Commission directed NET to
demonstrate that all the costs attributable to the new Bellboy
service would be recovered at the existing $18.00 rate.
In the course of these hearings, the examination of the
two cost studies offered by the Company in support of the then
proposed $18.00 tariff failed to produce a satisfactory indication
of the actual costs under investigation. To allow time for the
Company to gather actual data in support of its cost and marketing
projections, the Commission temporarily interrupted the pro-
ceedings.
In its Interim Order issued on February 12, 1975, the
Commission rejected the proposed $18.00 rate for the new Bellboy
system. The Commission noted that it was not in the best
interests of the ratepayers to preclude the Company entirely from
marketing Bellboy, because this could render the large investment
in new plant non-revenue producing. Based on the evidence in
Phase I, the Co~nmission set a temporary rate of $21.75 at which
the Company could market Bellboy pending final disposition of
the investigation. To assist it in determining the proper rate,
the Company was ordered to file monthly reports, incorporating
actual sales, repair and removal data, and other specific
information relating to cost of service.
Hearings were resumed the week of March 29, 1976.
-5-
51-253 0 - 80 - 15
PAGENO="0226"
1690
II. PHASE II
The proposed NET tariff for Bellboy is based upon a
monthly rate of $22.75, an increase of one dollar over the rate
set in the Interim Order. For this amount, a customer requiring
one to three receivers would get the basic Bellboy service,
including the use of the receiver and the initial telephone
number. A declining rate scale is provided for customers pur-
chasing service for larger numbers of receivers. Since the
evidence and arguments presented by the parties have been
predominantly addressed to the charge for the first rate step,
we will focus on that figure in summarizing the arguments and
stating the essential issues of this case.
NET contends that in adopting its most recent tariff
it has made every effort to propose a rate which will result
in the greatest possible contribution to the overall revenue
needs of the Company. In support of this approach, the Company
relies substantially on the contribution analysis developed by
Mr. Arthur Silyia, NET Marketing Staff Supervisor-Pricing. In
his contribution analysis, Mr. Silvia compared the projected
annual revenues and levelized annual costs over a ten year
period for the interim rate and for hypothetical monthly charges.
within two dollars in either direction. For each rate, the
comparison was made twice, once assuming that competitor's rates
would be adjusted in parity with changes in the Bellboy tariff and
a second time assuming no such corresponding change. Conceding,
however, that he could not predict the response of the competitors
PAGENO="0227"
1691
or of the Commission which must approve their tariffs, Mr. Silvia
testified that his recommendations would not depend on either
assumption as to parity. He then went on to conclude that the
Company could expect the greatest improvement in the contribution
from Bellboy at a rate of $22.75.
While relying heavily on the contribution analysis, the
Company acknowledges that the positive contribution to common
overhead costs shown in that analysis is not sufficient to establish
that the proposed rate is compensatory. It insists, however, that
it is a strong indication of a compensatory price level. The
contribution analysis employed by the Company does not necessarily
mean that revenues generated by the service are sufficient to
recover all necessary costs and expenses.
In both phases of the proceeding, NET has offered cost of
service studies in support of its proposed tariff. The basic
format has been to divide the costs reflected in the rate into
two parts. The first element is a monthly carrying charge per
receiver in service, which is independent of the number of units
1n service ("unit cost"). As developed by the Company, this
amount includes the various expenses of putting the unit in service,
retrieving it upon termination of service by the customer,
maintaining it during its service life and salvaging the unit at
the end of that tine. The second element comes from the common
costs, primarily the carrying costs of the fixed plant equipment
which is common to all receivers ("common cost"). Also included
-7-
PAGENO="0228"
1692
are miscellaneous common expenses)' This component of the
charge is originally determined for the service as a whole and
then divided by the projected number of receivers in service.
It is clear that the share of common costs assigned to each
unit depends significantly on the number of units over which
these costs can be spread. This means that the market forecast
for sales is very significant in the allocation of common costs.
The Company used a study of this type in support of
the initial $18.00 rate proposal. In Phase II, Mr. Paul Keane,
Planning Engineer, introduced a new cost study with the same
general format, but using updated actual cost figures obtained
in the interim period. These are the costs which Mr. Silvia
used in his contribution analysis and which NET claims form the
basis for a conpensatory rate of $22.75.
The InterveflOrs continued to conduct extensive cross-
examination of the Company's case throughout Phase II. For
purposes of controverting the Company's studies, the Intervenors
introduced their own cost exhibits. For the nost part, the
Interveflors parallelled the Company's cost study format in their
evidentiary presentationa' but Intervenors cost study purported
to show a rate of $26.50. In this manner, they purported to
show the effect of the specific cost adjustmentS~ for which they
argued, on the Company's development of its rate. Finally, the
Intervenors produced two witnesses, Mr. Arthur Peters and Dr.
~JMarketiflg-promOtiOfl, sales, service order and miscellaneous
labor expenses.
PAGENO="0229"
1698
Myron Scholes., for their direct case. The Contentions of these
witnesses will be addressed in connection with the ~ of
the~substantjve issues in this case.
III. DISCUSSION
This record is indeed heavy with `studies" which purport
to support various positions and conclusions. The validity of the
conclusions hinge on the accuracy of the underlying assumptions.
The difference between the position advanced by the Intervenors
and that advanced by the Company centers in three areas: unit
costs, common costs and market forecast.
The Interv~nors conclude that unit costs are at least
$13.28, while the Company concludes that they are $11.27. The
difference is attributable to a number of proposed adjustments
for costs which the Intervenors, contend were not adequately
accounted for by the Company.
-9-
PAGENO="0230"
1694
Common costs, according to the Company are $23,394 but
according to the Intervenors they are $27,135. Receiver cost
per unit according to the Company is $11 27 but according to
the Intervenors it is $13.28. If the Company's common cost
is spread over the Company's projections of units in service
in the fifth year,a' initially projected at 3,291 and revised
to 3,997, the resulting cost would be $18.38, or $17.12:
(($23,394 + 3,291) + $11.27]; (($23,394 ~ 3,997) + $11.27].
If common costs are spread according to the Intervenors fifth
year projection of 2,943 units, the result is a cost of $22.50
(($27,135 , 2,943) + $13.28], without considering official
units or the time value of money. If the calculation is
repeated at respective fourth year unit in service projections,
the result is a cost of either $18.83, or $17.83 from the
Company's projections: (($23,394 + 3,095) + $11.27]; (($23,394
+ 3,564) + $11.27]. The Intervenors' fourth year projections,
show a cost of $23.49 (($27,135 + 2,657) + $13.28], without
considering official units or the time value of money.
Thus, the Company would argue that the $22.75 proposed
rate is compensatory1 while the Intervenors would argue that,
even without considering inter alia, official units (discussed
infra) or the time value of money, the $22.75 rate is not
compensatory. Recognizing these and other items discussed infra
shows, according to the Intervenors, that a rate of $26.50 must
be charged.
~4rhe Company also proposed a ten year contribution analysis,
but as is discussed elsewhere in this Order, five years may be
overlong.
PAGENO="0231"
1695
In reviewing the evidence presented in this extensive
record, the Commission feels compelled to once again reiterate
certain policies and guidelines which have been established
repeatedly by previous decisions. Simply stated, the Commission
has endorsed the concept of fully distributed costs as a basis
for pricing telephone services. That is, ratesinust cover costs
so as not to require cross-subsidization from other classes of
service.Y Accordingly, all arguments advanced by the Company
that the Bellboy service here in question should somehow be
excused from the costs incidental to its service must be rejected.
The Company has variously argued that Dimension ~nx case,
D.P.U. 18403, ~ is not applicable in this case and that
Bellboy service should be priced without regard to unit costs.
In our view, the Dimension PBX decision is directly applicable
to this case. This case involves a competitive service offering
and, as the Comar.issjon said in Dimension PBX,
In setting rates for the competitive service offering
of the Company, the Department does not seek to set
rates at excessively high levels so as to overcharge
customers of these conpetitive services. Excessive
rates would artificially encourage the entrance of
~"See: Dimension PBX, New En land Telephone & Tele ra h Co.,
D.P.U. 18403 (1976); DATAPHONE 209A, NewEn91andTee~hone&Te~,h
Comp~~, D.P.U. 18463 (1976); Public Announcement Service, New E~g~and
Telephone & Telegraph Company, D.P.U. 18713 (1977); DATAPHONE
RESTRUCTURING, New England Telephone & Telegraph Conp~y, D.P.U. 18766
TI~1~).
-11-
PAGENO="0232"
1696
additional vendors....
[Wihen revenue requirements for an individual
equipment item such as Dimension PBX are deter-
mined in such fashion as to leave a revenue
deficiency, the deficiency is recouped through
rates earned from other services and service
classifications. It is precisely this question
which confronts the Department in the present
proceeding.
NET has a positive incentive to engage in anti-
competitive and cross-subsidy pricing practices.
This incentive arises as a result of the
traditional revenue requirement method of
regulation followed by the Department. Such a
method is oriented toward an overall rate of
return for all NET services. It is possible
under present regulatory methods for NET to
engage in cross-subsidy practices without
suffering any loss in its overall level of return.
That reasoning is directly applicable in the present case.
Bellboy is a competitive service offering. The Company has a
positive incentive to engage in anti-competitive cross-subsidy
pricing practices because it can recoup any revenue difficiency
on Bellboy services from other ratepayers under the existing
ratemaking methodology.
The Company's posture with respect to Bellboy service does
~differfrom its position with fespect to Dimension PBX service
in one significant aspect In the PBX market the Company is the
:t ttdominant market supplier, commanding approximately 95% of the
market. In the radio pocket paging market, the Company is
comparable to the market entrant, striving to obtain a greater
share of the market dominated by the Intervenors.
Thus, in evaluating the arguments advanced by the Company
~in support of the proposed Bellboy rates, it is important to
recognize that the Company's incentives for anti-competitive
/ -12-
PAGENO="0233"
1697
(under) pricing this service are greater than the Dimension PBX
case because the Company is here striving to build a share in a
market dominated by competitors. In that light, any argument
that the Company be allowed to price a service without regard to
unit costs, so that the Company can meet competition, does not
stand regulatory scrutiny. If the costs of a competitive service
are not covered by rates for that service, some other class of
ratepayers is required to pick up the difference. Those other
ratepayers are monopoly service ratepayers who have no alter-
native supplier. The Commission's position is that monopoly
service ratepayers ought not be required to pay the piper for
the music enjoyed by others.
As an alternative to their argument that Bellboy should
be priced irrespective of the unit costs, the Company advances
extensive cost data which it contends shows that the proposed
rate adequately covers costs and makes the so-called "optimal"
contrjbution to Company revenue. The Intervenors have
challenged that data on a number of bases which are discussed
below.
1. Premature Obsolescence
In 1973, the Company replaced a 35MHz-AM system with a
150MHz-FM system. A question has been raised as to whether the
undepreciated balance of the obsolete 35MHz-AM system was
accounted for properly. The Company argues that retired and
junked plant cannot be considered as plant investment for the
PAGENO="0234"
/ 1698
pricing of an existing service. It contei~ds further that the
accounting for the 35MHz plant was entirely consistent with
the Uniform System of Accounts, and that alternative accounting
treatments such as an extraordinary retirements' or a direct
charge to surplus~' (shareholders) are not appropriate. In short,
the Company's position is that any such undepreciated balance
should not be assigned to the current Bellboy service.
The Dimension PBX decision, ~pra, spoke extensively to
the question of premature obsolesence, recognizing that the life-
shortening effect of technological advancement is a cost of
doing business. In the Dimension PBX decision, the Commission
ordered that the Company's cost of service study be adjusted to
reflect premature obsolescence of existing PBX equipment
resulting from the introduction of Dimension PBX. The Company
argues that this procedure is not applicable to the Bellboy case
because there is no cross-elasticity between different types of
Bellboy service.
Introduction of Dimension PBX, a technologically advanced
PBX, rendered prematurely obsolete some existing PBX services.
The Company's argument, that the Dimension PBX reasoning is not
here applicable, is wrong. The replacement of plant rendered
~`ExtraordiflarY retirements are appropriate under FCC
Rule ~ 31.02-83 when such retirement would unduly deplete the
depreciation reserve. In such instance, the item is set up
in a separate reserve and amortized over an appropriate period
of time.
~"The Company says that this harsh result could be imposed
by the Commission if the Commission found that this loss resulted
from "poor management or could have been reasonably anticipated
by management."
PAGENO="0235"
1699
obsolete by technological advancement in order to continue
to provide that type of service is a cost of doing b~iness
irrespective of whether there exists cross-elasticity
between types of that service. Accordingly, the un-
depreciated balance of Bellboy plant rendered obsolete by
technological changes is attributable to the plant invest-
ment of the existing service.
Accounting consistent with the Uniform System of
Accounts does not foreclose other treatment for regulatory
purposes. Once again, as we pointed out in Dimension PBX,
Id., at 26
While all of [Western Electric Company's]
contentions with respect to its cost
accounting methodology may be correct,
the fact is that costing and pricing are
distinct functions. Such distinction is
made all the more pronounced by the
monopoly/competitive dichotomy present in
this case. Hence, cost information
accumulated in a manner which is consistent
with generally accepted accounting
principles and industry practice nay still
generate costs which are an inadequate
-~ foundation for pricing in accordance with
the regulator~r standards discussed above.
(Footnotes omitted)
When pressed for numerical data on this question, the
Company presented evidence which purports to show that the
investment in receivers was overdepreciated by $35, 640 while
the investment in transmitters and control terminal equipment
was underdepreciated by $46,853; therefore according to the
Company, the net undepreciated balance of the 35MHz-AM system,
-15-
PAGENO="0236"
1700
if any, was only $11,213, (corrected addition shows $ll,223).Y
A large proportion of investment in receivers was under-
taken shortly prior to the abandonment of the 35MHz system
operation and its replacement by the 150MHz system. Recovery
of this investment through depreciation charges hardly appears
tenable. Notwithstanding group accounting accruals, the
Commission finds that it is highly unlikely that prematurely
obsoleted plant would be overdepreci.ated. Accordingly, we
find that the net undepreciated plant investment for the 35MHz-
AM system of $11,213 has not been adequately documented. The
common costs of Bellboy service must be adjusted to reflect
the undepreciated balance. On the basis of the current record,
the Commission finds that the undepreciated balance is at
least $46,853.
2. Market Growth
The forecasted market growth for Bellboy is a critical
factor in determining the base over which to spread commo*n costs,
so that each unit bears a fair proportionate share of such costs.
Transmitters & Control
Receivers Terminal Equipment
Investment $798,993 $275,657
Reserve (834,633) (228,794)
Balance ( 35~4~) ~46, 86~
NET UNDEPRECIATED
Balance $11,223
PAGENO="0237"
1701
Here again, the record is heavy with market forecast data. As
might be expected the data advanced by the Company purport to
show tremendous growth while those advanced by the Intervenors
purport to show more moderate growth. Each challenges the
reliability and credibility of the other.
What becomes evident upon scrutiny of the differing data
is the threshold assumption advanced by each party. The Company
contends that future growth in the radio pocket paging
market will be shared on a fifty-fifty basis between the Company
and the Intervenors. That is, according to the Company's premise,
if 10 pocket paging devices are sold, 5 will be Bellboy units and
5 will be competitors' units. To the contrary, the Intervenors
~contend that future growth in the radio pocket paging market
will be shared according to current market share, on a ninety-ten
basis. This means 9 of 10 new units sold will be competitors'
units and I will be a Bellboy unit.
Both premises appear to be unwarranted. Questions of
market saturation, sales effort, referral sales, technological
advancement, and service quality all bear on market growth and
its disposition. Clearly, the dominant market supplier will
enjoy some marketing benefits which would render unlikely, at
least initially, a fifty-fifty split of future growth. Further,
such a split would not be indicated by the Company's experience
even when selling the Bellboy at the pre-Interjm order rate of
On the other hand, Intervenors' assumption that their
21Bellboy's market share increased 4% in a 12 month period.
The Intervenors attribute such increase to the low, $18.00 price.
-17-
PAGENO="0238"
1702
market share will continue at present level fails to recognize
the competitive dynamics of the radio pocket paging business.
Accordingly, it is our finding that the market forecasts of both
parties represent the opposite extreneS for projected sales.
Forecasts of competitive sales are subject to more than the
usual vagaries and uncertainties of projections because they
are not an extrapolation from historically verifiable trends,
but rather the product of a dynamic industry and marketing effort.
In rendering a judgment, we view the parties opposing proposals
as defining the range of reasonably forecasted sales. On the
basis of the current record, we find that for purposes of
developing a proper rate for Bellboy service a sales base must be
determined over which to spread common costs. On balance,
considering the relative market strength of Intervenors in
the radio pocket paging business as compared with the relative
overall marketing strength of the Company, we find that
foreseeable market growth for this service depends on many
factors. The longer the period used for forecasting such
growth the more speculative the forecast becomes. Accordingly,
as discussed elsewhere in thisOrder,a period of less than
five years seems more appropriate in deriving a sales base over
which to spread common costs. Further, we find that such
market growth is more likely to be shared on an approximately
seventy-thirty basis than either a fifty-fifty or a ninety-ten
basis. The market forecast should be adjusted accordingly.
-18-
PAGENO="0239"
1703
3. Cost of
The Company employs a novel concept in developing its
~cost of money for Bellboy service. A twelve percent factor
is applied to the investment in customer receivers; an eleven
percent factor is applied to the common equipment. This
differential, says NET, is "to reflect the fact that the common
equipment was built a few years ago and does not require
additional capital at today's cost." The objective rate of
return should reflect economic risk. The risk applies to the
service, not the equipment or the vintage thereof.
The Company's position is basically that the proposed
Bellboy rate is compensatory and reasonable notwithstanding
the use of eleven and twelve percent as costs of money in
developing cost data. The Company contends further that under
the fully distributed cost methodology endorsed by the
Commission, use of the lower overall rate of return would be
appropriate. To the contrary, the Intervenors contend that to
the extent that an eleven percent return~" is applied to a
certain portion of plant, there is a cross-subsidization from
other classes of ratepayers.
In the Commission's view, the vintage of plant employed
in the service is not a factor which contributes to variation
in capital costs; the risk of the service is, however, such a
factor. The risk criteria with respect to Bellboy service are
separate and apart from the fact that a substantial portion of
return factor which is less than the current cost of
money.
PAGENO="0240"
1704
common equipment was newly installed with the changeover to
150MHz-FM system.
While NET is not a new entrant to mobile radio service,
it clearly is, and has for several years, been supplying 10
percent or less of the market for radio paging The Commission
views this service as one of high economic risk; and therefore,
it should earn a return of at least 12 percent on net investment.
This is consistent with the Company's and Commission's
treatment of Cost of Money with respect to Dimension PBX. In
that case, the Company voluntarily applied a twelve percent cost
of money to average net investment, and we said,
The Department approves an objective level of
return for competitive products, despite its
departure from the overall return prescribed in
D.P.U. 18210. Differential earnings appear to
us to be proper in view of the higher degree of
business risk, the pressure of market competition
and the potential technological obsolescence in
the competitive PBX market. D.P.U. 18402, ~
at 16.
Cost of money and the associated income taxes for Bellboy
service should be adjusted accordingly.
4. Location Life
The Company has assumed an average location life of 2 years.
A review of the Company's monthly reports to the Department for
the period October, 1975 to September, 1976, shows that the.
average location life of units removed during that period was
approximately six months. Extrapolation from this shows that in
order to achieve an overall 2 year average location life, the
-20-
PAGENO="0241"
1705
receivers not removed during this illustrative time period
would have to remain in service for more than five and a
half years.
The number of units in service as of October, 1975 and
October, 1976 was 1,216 and 1,800 respectively. The average
number of units in service for that period was 1,508. The total
number of units removed from service during this period was
1,073. These removed units showed a cumulative in-service period
of 6,700 months or an average in-service period of 6.2 months
per unit.
If we assume that the overall average location life of
units is 2 years (24 months), then the above data would indicate
that the average location life of the units remaining in service
would have to be 5.7 years to compensate for the shorter in-
service experience of those units removed from service.2' Such
an extended life for those receivers seems unlikely in view of
the technologically advancing pace of this industry, as well as
the contentions advanced in support of a more limited revenue
producing life as discussed elsewhere in this Order.
Accordingly, a two year location life would appear to be
unsubstantiated by the actual outward movement demonstrated by
the data reported to the Department.
21This may be calculated as follows: let x the average
location life of unreturned units.
(1073) (6.2) + (lSO8-l073)x = (1508) (24)
x ~ 68 months or 5.7 years
-21-
51-253 0 - 80 - 16
PAGENO="0242"
1706
The location lire attributable to a service is important
in determining the recovery of the non-recoverable costs incident
to initiation of service with a particular subscriber.~' The
Commission has recognized that there are costs incident to service
initiation which should properly be recovered from that subscriber.
In this connection, we have articulated a policy that at least one-
half of the cost of non-recoverables be recovered in a one-time
non-recurring charge. The Commission has further recognized that
it may be appropriate to impose a termination charge in order to
reduce the adverse effect of premature discontinuation of service.
See: Public Announcement Service, New En9land Teiepçe ~
_______ D.P.U. 18713 (1977) p. 7.
The Intervenors contend that the Company's failure to require
a security deposit or minimum service period ignores costs of pro-
viding Bellboy service. The Intervenors point out that they require
a three-month security deposit. The Company says that it requires a
minimum thirty-day subscription period.
There is no evidence presented which indicates that a
minimum thirty-day subscription period assures the Company recovery
of the costs incident to placing a Bellboy unit in service. The
Company ~5, therefore, directed to amend and/or supplement its
filing to reflect the recovery of such costs together with supporting
documentation.
~"The Commission has defined non-recoverable costs to
include non-reusable material, total labor and engineering incident
to installation of equipment, cost of removal, salvage, and the
Western Electric tax deferral.
-22-
PAGENO="0243"
1707
5. Revenue Producing Life
The Company has assumed a revenue producing life for its
receivers of at least five years. Intervenors' witness Peters
characterized the use of a five year revenue producing life as
"highly risky," and testified that a reasonable estimate of the
revenue producing life of the Bellboy receiver would be no more
than 4.5 years, without considering lost units.11'
In support of his conclusion, Mr. Peters set forth the
principal factors which he considered to affect the revenue pro-
ducing life of paging receivers in general and of the current
Bellboy receiver in particular. Mr. Peters divided his analysis
into consideration of:
(1) economic life (the period during which the
receiver can continue economically to be
repaired and refurbished),
(2) regulatory factors (the potential effect of
regulatory agency decisions on technology and
competition within the industry),
(3) historic and current practices in the radio
common carrier industry (particularly the
tendency to rapidly adopt improvements in
receiver technology); and
(4) competition and changing technologies (including
dangers of technological obsolescence and the
system-wide costs of adopting major technological
changes).
The Company insists that in deriving his estimate of revenue
producing life, Mr. Peters did not consider anything which NET's
own depreciation engineers did not also consider. Each party
challenges the other's expertise in the paging receiver field.
111Lost units are Bellboy receivers placed in service but
lost by a subscriber. See discussion infra.
-23-
PAGENO="0244"
1708
The IntervenOrs argue that NET s depreciation engineers are
expert only with respect to telephones and not with respect to
competitive non-telephone equipment In response the Company
characterizes Mr Peters testimony as speculative and vague
It asserts that the factors mentioned by Mr Peters would apply
to any piece of electronic equipment
In our view Mr Peters does have the requisite expertise
to give an opinion in this field Although we observe incon-
sistencies in Mr Peters~ testimony which go to the weight of
his analysis we are not convinced that his testimony should be
discounted to the degree urged by the Company We note that
many of the primary factors enunciated by Mr Peters as con-
tributing to the shortened revenue producing life of a receiver actually
occurred with the old 35MHz-1~M Bellboy system Based on the evidence presented,
it appears that the Ccmpany s use of a five year revenue producing life is excessive
6 Lost Units
The foregoing discussion of revenue producing life does
not take into consideration the impact of lost units Mr
Peters would reduce the revenue producing life by 1 8 years to
reflect lost units Mr Peters overall revenue producing life
of Bellboy receivers would be 2 7 years nearly half the service
life assumed by the Company NET has not attempted to explain
or demonstrate the magnitude of its adjustment for lost units
~~NET also suggested that Mr Peters examined the wrong
receiver in the course of his investigation
-24-
PAGENO="0245"
1709
it simply asserts that its depreciation engineers took this cost
into account in deriving a five year life for the receiver.
The Intervenors contend further that the expense of lost
units should be a current cost. In the alternative, they argue
that the Company has not seriously considered the impact of lost
units in its depreciation rate. The Intervenors point to sub-
stantial losses experienced by the Company during the interim
period.
NET contends that the rate of losses is not as great as it
appears because the collection of cash from the subscribers
responsible for the lost units has lagged behind the reported
losses. It does not appear in the data reported to the Depart-
ment that cash recoveries have had any significant offsetting
effect on the loss rate. Absent increased collection efforts,
for which the Company would also incur an expense, it can be
reasonably assumed that the reimbursement pattern for such losses
is representative of the cost of lost units.
The Company's monthly reports to the Department during the
interim period do show a considerable cost from lost units for
which the Company was not reimbursed. This is clearly a cost of
doing business for which the Company must account)2! We do not
~~The reports show that between March, 1975 and September,
1976, there was an unreimbused expense of $36,654. Using the
Phase I receiver cost of $216 for 146 receivers lost, divided by
the average receivers in service during that period (1,551), there
is a cost per receiver of $20.33, or about $.34 per month over the
60 month life which the Company has used [(146 x $216) + 1,551) +
60.
By the outset of Phase II, the receiver cost being used by
the Company has increased to $267. If this higher cost per receiver
were to be substituted in the forcoing example, the monthly cost
would be about $.42 per month. [(146 x $267) ~ 1,551] * 60.
-25-
PAGENO="0246"
1710
adopt the Intervenors argument that the cost of receiver losses
should be expressed as a current expense; nor do we adopt the
proposed reduction of 1 8 years in the revenue producing life of
4 5 years On the other hand we believe that the Company has
not adequately reflected its lost units experience The costs
of lost units should be borne by revenues from the service We
leave to the Company's discretion the mechanism for recovering
these costs Tariff language should be adopted which affirms
customer liability for return of the paging units
7 Official Unit~
In addition to offering Bellboy service to the public
NET provides certain Company employees with Bellboy units so-
called official units The Company has 475 official units
in service and anticipates that the number will remain constant
In its studies the Company treats the official units as generating
revenues at a rate equal to the average price of all public units
in service As the Company $ monthly reports show the vast
majority of the units sold to the public fall into the first step
(one to three units) Therefore the average public price would
tend toward the single unit rate
The Intervenors object to this treatment of official units
They contend that the attribution of revenues to officia] units
should be not exceed the price per month that a customer demanding
such a large number of units would pay Although the Intervenors
~`These units are aside from the ones used for Bellboy
purposes such as sales or replacement
-26-
PAGENO="0247"
1711
suggest that the lowest fair price for 475 units would be that
established by competitive public bidding, they do not press
for this treatment. Instead, they ask that the Company be made
to account for the official units at the same step that would
apply to a large outside customer. The result would be that
most of the 475 official units would fall into the lowest rate
step. The Intervenors have attempted to show the impact on the
NET studies of accounting for official units at the proper steps,
using the interim three step rates. They point out that by using
a five step structure, the revenues attributable to official
receivers would be further reduced.
The Commission believes that the Intervenors' objection
with regard to the treatment of official units is valid. It is
inappropriate for the Company to treat its own units as generating
revenues in excess of those which would result from a comparable
large public customer. In the absence of sales, marketing and
commercial expenses applicable to official units, the third rate
step should apply.
8. Other Adjustments
a. Spare Parts Inventory
Mr. Peters testified that, in light of the current repair
experience for Bellboy receivers, a three months' spare parts
inveatory is required to maintain adequate service levels. The
cost of maintaining a spare parts inventory was not considered
by the Company in the development of its proposed rates. In
response, NET's witness, Mr. Silvia, testified that all defective
PAGENO="0248"
1712
parts or components are sent back to the manufacturer Motorola
for repairs The Company asserts that its practice of maintain-
ing an inventory of complete receivers to replace the defective
ones during repairs obviates the need to keep a stock of spare
parts
The Intervenors respond that the costs of a spare parts
inventory cannot be avoided notwithstanding NET's practice of
sending out all units for repairs They note the considerable
expense involved in avoiding all local repairs including the
costs of storing defective receivers and the administrative and
handling expense connected with the incoming and outgoing
component parts The IntervenorS claim that the costs associated
with NET 5 large start-up inventory of unused receivers will be
continued if a large stock of excess receivers must be retained
for repair purposes
Whether NET chooses to do its own repairs in-house or opts
for the return and replacement method there are expenses incident
to the repair and replacement of defective receiver parts which
NET has failed to include In order to insure the service is not
underpriced, the Company must make adjustments in its cost data
to reflect the cost of a spare parts inventory or the alternative
large "start-up" inventory.
b Telephone Number Inventp~
In order to provide radio pocket paging service telephoae
numbers must be assigned to the receiver/subscriber The ImtervemOrs
-28-
PAGENO="0249"
1713
must reserve a block of such numbers, an inventory, for pro-
spective sales. Bellboy, because of its position as a NET
service, has immediate access to telephone numbers and need
not make a specific reservation. However, for intra-
Company purposes, a block of numbers has been reserved for
Bellboy service. This inventory of Bellboy telephone numbers
represents a cost of doing business which the Company
recognizes and admits it has inadvertently omitted. The cost
data should be adjusted to reflect this item.
c. !~~Costs
In the cost study for the five year period beginning
March 1, 1975, Mr. Keane used actual costs incurred for the
time that had passed (approximately one and a half years) and
costs currently being experienced for the balance of the
period, some three and a half years into the future. The
Company contends that it is proper to use current wage costs
unadjusted for future wage increases in setting the Bellboy
rates. The Company's approach assumes that future rate
increases will offset future wage increases, and that it is
inappropriate to estimate the effect of future inflatjon.]~'
In past cases the Company had sought and the Commission
has allowed adjustments for so-called "known changes." Such
a wage adjustment would reflect the fixed and determinable
increases in the wage rate. If, in one context, the Company
~1Compare the Company's position here with that which
it took In New En land Tele hone & Tele ra h Corn an v. De art-
9 6 Mass. Mv. Sh. 2 46.
PAGENO="0250"
1714
can benefit from the inclusion of expected wage increases for
~atemaking purposes in a general rate proceeding, consistency
requires that the Company recognize such cost in the pricing
of a competitive service.
d. Other
In their Brief, the Intervenors summarize a number of
other cost adjustments which they ask the Commission to con-
sider. Most of these items are raised for the first time
in the Brief and are characterized by the Intervenors themselves
as back-up arguments in the event that the Commission should be
inclined to discount or. rej~ect any of their principal adjustments.
The largest of the adjustments is the proposed attribution
of $125,000 for theoretically foregone revenues. The IntervenOrs
argue that these revenues were "lost" by the Company between
August, 1974 and February, 1975 when Bellboy service was priced
at $18.00.
The IntervenorS also variously propose adjustments for
increased repair labor,.cOlleCtiOn and administration expenses,
as well as an adjustment to the Company's so-called "PHI"
factor. On the basis of the evidence, we are unable to evaluate
these items and accordingly order no such adjustments at this
time.
-30-
PAGENO="0251"
1715
9. Variable and/or 5-Step Rate
In its Brief, the Company requests that the Commission
authorize a range in which the approved rates for Bellboy
service might vary in order to be responsive to the sensitive
competitive environment in which Bellboy exists. The Company
further requests that the Commission approve a 5-step rate
for large users instead of the 3-step rate approved in the
Interim Order. The Intervenors have a 5-step rate with a
declining monthly rate based on number of units in service.l&/
The Commission views refinements of the tariff structure
as progressive, and encourages the Company to pursue such
detail. See: ~~phone Restruct~, ~~~ngland Telephone and
~a~flçoma~, D.P.U. 18766 (1977). However, the Commission
is constrained to point out that this record is barren of cost
data which would support either a variable rate range or a 5-
step discount rate. In the absence of such data, the Commission
cannot evaluate the Company's proposals, and hence the proposals
cannot be approved.
10. ~l~o~s
In response to the directive of the Interim Order, the
Company has been filing monthly reports with the Department.
The Company has requested that the n~nthly reporting be reduced
~"The Zipcall rates effective October 25, 1975 exclusive
of batteries,show: $21.75 (1-3 receivers); $20.25 (4-9 receivers);
$18.00 (10-49 receivers); $15.25 (50-99 receivers); $13.25 (100 or
more receivers).
-31-
PAGENO="0252"
1716
or eliminated. The Intervenors contend that the Company should
be required to account separately for Bellboy service, and
periodically report: official units in service, public units in
service, inward and outward movement, and lost units experienced.
The reporting suggested by the Intervenors is less extensive
than that currently required by the Commission.
The Commission is concerned that meaningful data be
accumulated tracking the experience of competitive services.
The current reporting criteria were established to accumulate
an information base on which to evaluate Bellboy experience.
Information has been accumulated. Therefore, the extensive
monthly reports are no longer required. However, quarterly
reports setting forth the items mentioned above will be required
for the next twelve month period, through and including May,
U/A similar reporting requirement will be considered for
other companies subject to the Cornmiss~On'S regulat3.Ofl.
PAGENO="0253"
1717
IV. CONCLUSION
After reviewing and analyzing the evidence presented in
this case, the Commission is confronted with a dilemma. The
existing rate for Bellboy, $21.75, is unacceptable. The Company
proposed rate, $22.75, is also unacceptable. The Commission
could disallow the existing tariff pending compliance with this
Order. Such action would temporarily preclude the Company from
marketing Bellboy at all. However, considering the economic
consequences which would follow from such action, the Commission
determines that the Company may continue to market Bellboy at a
rate of $25.00 per month until such time as the Company files
new rate schedules witI~ appropriate supporting documentation
which fully comply with this Order.
-33..
PAGENO="0254"
1718
V ORDER
Accordingly after notice public hearing and consideration
it is
ORDERED That the rates and tariffs filed in this case with
respect to Bellboy service be and hereby are disallowed and it is
FURTHER ORDERED That the Company nay file new rates and
charges for Bellboy service in accordance with this Order together
with the supporting data for such filing such rates and charges
shall not becone effective earlier than thirty days after the date
of their filing and it is
FURTHER ORDERED That within seven days of the date of this
Order the Company shall file new rates and charges for Bellboy
service set at not less than $25.00 per month. Such rates and
charges shall become effective not earlier than seven days after the
filing thereof and shall remain in effect pending further com-
pliance of the Company with this Order
By Order of the Department
/s/ HAROLD 1 KEOHA~E
Har~Id 3 Keohane
Chairman
/s/ EUNICE P HOWE
Eunice P~Howe
A true copy Commissioner
attest
/s/ REGINALD C LINDSAY
Chairman ñ~inald CLiñdsay -_______________
Commissioner
Appeal as to matters of law from any final decision order or ruling of the
Commission may be taken to the Supreme Judicial Court by an aggrieved
party in interest by the filing of a written petition praying that the order
of the Commissiom be modified or set aside in whole or in part
Such petition for appeal shall be filed with the Secretary of the Commission
within twenty days after the date of service of the decision order or
ruling of the commission or within such further time as the commission
will allow upon request filed prior to the expiration of the twenty days
after the date of service of said decision order or ruling (Sec 5
Chapter 25, G. L., Ter. Ed. as most recently amended by Chapter 485
of the Acts of 1971
PAGENO="0255"
1719
00cm tiM 03, 0cM 373 073074
~i~e mmtntftica1t1~ iif xøøad1u~eit~
DEPA1ITMENT OF PUBLIC UTILITIES
~ 1.4 1.9.7.7
D.P.U. 18090 (Supplemental Order)
Investigation by the Department On its own motion as to
the propriety of rates and charges set forth in schedule
M.D.P.U. No. 13 - Mobile filed by the New England
Telephone and Telegraph Company.
APPEARANCES: Robert D. Bruce, Esquire
Christopher M. Bennet, Esquire; and
C. Duane Aldrich, Esquire
185 Franklin Street
Boston, Massachusetts
FOR: . New England Telephone and
Telegraph Company
Maloney, Williams & Baer
(By: Herbert Baer, Esquire)
One Boston Place
Boston, Massachusetts
FOR: D.P.R.S., Inc., Colgan
Communications, Inc., and
R.A.M. of Massachusetts
On May 13, 1977, the Department iss~iecl its Opinion
and Order ("Order") concerning the tariff proposed by New
England Telephone and Telegraph Company ("NET' or "Company")
for its Bellboy radio paging service (`Bellboy" or "the
service"). That Order disallowed both the existing ($21.75)
and the Company proposed ($22.75) rate for Bellboy service,
and fixed a rate of $25.00 until such time as the Company
filed new rates in compliance with the findings and rulings
therein.
PAGENO="0256"
1720
On May 19, 1977, the Company filed a petition for
appeal and moved that the Supreme Judicial Court ( Court
stay the effect of the Order pending the Court's review
Argument was heard from all parties on the Company's Motion
for Stay. On May 20, 1977, a Single Justice of the Court
denied the Company's motion without prejudice to its renewal
as provided in the Single Justice's accompanying Memorandum
Memorandum
The Memorandum addresses the question of whether the
rate of $25 00 provided in the Order was set purbuant
the statutory provisions of section 14 or section 20 of
General Laws Chapter 159. As the Single Justice found, the
Department has not purported to fix a rate under 8 20 It
merely exercised its authority to permit an interim tariff
to be used while NET presents a new tariff If the Depart-
ment had not followed this course of action, the Single
Justice observed that the consequence ~ould be that NET
would have no interim rates and would be obliged to cease
its Bellboy service MemOrandum p 4
In responding to the Company's current motion before
us the Depar ment will also respond to the Single Justice's
concern about the absence of explicit analysis of the impact
PAGENO="0257"
1721
of the Order on NET.~' The following discussion is intended
to supplement the Order and clarify the Department's findings.
The Department found an interim rate of at least $25.00 to be
appropriate after considering the economic ramifications of
the available alternatives. Order p. 33. Implicit in that
finding was the Department's conclusion that the $25.00 rate
would not unduly handicap the Company in the competitive
market.
In reaching the conclusion that the $25.00 rate was
appropriate, the Department considered many factors and
attempted to assess the interests of the monopoly ser:ice
ratepayers in the light of competitive market dynamics. In that
analysis, the Department considered price as but one factor
bearing on competitive achievement in the market place.
A~ter analyzing the relative overall market power of the
Company, the Department concluded that a split of f1uture~
growth was more likely to be shared on a seventy-thirty
basis than either the fifty-fifty or ninety-ten proposed by
the Company and Intervenors respectively.a' Order, p. 18.
111n the course of argument on~this motion, the Company
made a further motion, orally, that the Department reconsider
its Order. That motion was untimely made but the issues it raised
are in any\event treated in this Supplemental Order.
~The Intervenors' proposed ninety-ten split of future
growth of paging service was based upon a rate of $26.50 for
Bellboy service.
51-253 0 - 80 - 17
PAGENO="0258"
1722
The Order recognizes that there are many variables which
bear on market performance. Many of those factors, other.
than price, are within the control of the Company. The
Company alone determines the degree of sales effort and
promotion devoted to the service as well as the continuing
level of service quality and customer service.~'1
The Court has recognized that price is not the
single determinant of demand curta~ilment. See: New
England Telephon~_Telegraph Con~pany vs. Department of
Public Utilities, 1976 Mass. Adv. Sh. 2246, 2257.
In our view, variables other than the $25.00
will control the future success or failure of Bellboy in
the paging rm~irket. The Company suffered an erosion of
customer base and confidence because of deficient service
qtiality under its 35MHz-AM system. Such confidence must be
regained. At this juncture it is important to note that
even when the Company enjoyed the unduly preferential (low)
rate of $18.00, its market share did not climb dramatically.
See: Order, p. 17, footnote 7. The Department cannot and
does not seek to guarantee Bellboy a competitive share cf
the market. Rather, after review and consideration, the
~"The Court has explicitly stated that advertising
expenditures are, in the first instarice,within the discretion
of management. New Ensiland Telephone and Telearaph Company~
vs. Department of Public Utili~ie~, 360 Mass. 443 (1971)
PAGENO="0259"
1'723
Department has concluded that Bellboy service has the
present potential to claim a 30 percent share of future
growth considering its relative overall market position.
Whether Bellboy achieves that degree of market penetra-
tion depends on many factors, only on~ of which is price.
It is our view that the. $25.00 rate is not so
high as to be an absolute deterrent to subscription
relative to competitive services. As has been argued at
length, Bellboy service is not exactly the same service as
that offered by the competitors. There are distinctions
between the services. This is not a case of identical
services offered for different prices.
Notwithstanding all of the foregoing, it is
important that the Department's criteria for setting
the rate be reiterated. If no rate had been set, the
service could not be offered at all. That would preclude
the Company entirely from the market. The rate proposed
by the Department was proposed to obviate that harsh
result, As we discussed in the Dimension PBX, D.P.U.
18403 (1976), recently affirmed by the Court in 1977 Mass.
Adv. Sh. 1195, our regulatory purpose with respect to
evaluatinç~ the prices proposed for competitive services
is at least two-fold: to avoid cross-subsidization from
the general monopoly service ratepayers, and not to unduly
PAGENO="0260"
1724
handicap the Company in the competitive market. That is
our purpose with respect to Bellboy.
We have specifically found in this case that at a
rate of less than $25.00 per month, cross-subsidization
from other ratepayers has and will continue to occur. We
have further found that a rate of $25.00 per month will
not unduly handicap the Company in the competitive market.
While the Department cannot guarantee the Company success
in the competitive market because of the numerous other
variables, it is our view that our responsibility requires
that we protect the monopoly service ratepayers from a
continuing financial burden which the Company admits existS
and is on-going.
The Company has argued that at the interim price
we have established aggregate revenues may, in fact,
decline and thereby increase the possibility of cross-
subsidization of this service. This argument again
assumes that pricing is the only determinant of market-
place acceptance of Bellhoy--~i proposition which we have,
both in our original Order. and here, rejected. Dut even
if we were to assume that at the $25.00 price net revenues
will decline we think it preferable that cross-subsidization
occur because of elasticity of demand than that it occur
because of articifical pricing which fails to recover
PAGENO="0261"
1725
costs.~'
It is our view that the service should be priced
properly on the basis of sound regulatory principles which
have been upheld by the Court in Dimension PBX, su~~
Thus, we cannot adopt the Company's pricing system which
is premised upon price parity amongst competitors
irrespective of cost and other factors.
It is clear that the competitive viability of Bell-.
boy is the crux of the arguments advanced by the Company
in support of its Motion for a Stay. The Department's
Order requires continued monitoring of Bellboy perfor~a~:e.
If such monitoring indicates increasing losses, the
Department will then addressthe question of minimizing
the losses and eliminating Bellboy service. In the meantime,
th~ Department will not compromise the pricing principles
of the Dimension ~i~x decision by allowing a stay of its
Order concerning Bellboy.
After hearing, consideration and deliberation, it
is
4"Artificial pricing along the lines propos~J by
the Company ~ cross-subsidization. There is
only a ~4bili~y that cost-based pricing may result in
cross-subsidization depending upon, among other things, the
product and how it is marketed.
PAGENO="0262"
1726
ORDERED: That the Motion of New England Telephone
and Telegraph Company to Stay the Department's Order of May 13,
By Order of the Department,
is! HAROLD J. KEOHANE
._. ~ _. .._* ---- ---
Harold J. Keohane
Chairman
Is! EUNICE P. HOWE
Eunice P. Howe
commissioner
/s/ REGINALD C. LINDSAY
~
Reginald C. Lindsay
Chairman Commissioner
* Appeal as to matters of law from any final decie ton,
order of ruling of the Commis eton may be taken to
the Supreme Judicial Court by an aggrieved party In
interest by the filing of a written petition praying
that the order of the Commission be modified or set
aside in whole or in part.
Such petition for appeal shall be filed with the
Secretary of the Commission within twenty days
after the date of service of the decision, order or
ruling of the Commis ston or within such furt'ier
time as the Commission will allow upon requcet filed
prior to the expiration of the twenty days after the
date of service of said decis ion, order or ruling.
(Sec. 5, C)iapter 25, C. L., Ter. Ed. as most
recently amended by Chapter 485 of the Acts of 1971.
1977, be and hereby is denied.
A true copy;
Attest:
PAGENO="0263"
1727
Mr. VAN DEERLIN. Thank you, Mr. Wolf.
Before we go into any subcommittee questioning, what do you
have to say to one another on the basis of what you have heard?
Mr. Weinberg.
Mr. WEINBERG. I would just like to comment, Mr. Chairman, on
Mr. Wolf's last statement. For the record, the facts belie somewhat
the statement. There is full and free competition today. I am
responsible for Bell mobile operations and I am not saying this
with any great pride, but the radio common carrier industry does
have over a 50 percent share of that two-way mobile business today
and has over an 80 percent share of the one-way paging business.
So we are really not the dominant carrier in the radio business
today. As I say, I am not saying that with any great pride, but
those are the facts. And I would also deny any allegation of any
cross-subsidy that Mr. Wolf alleged.
Mr. WOLF. I would just respond to Lou's comments in the sense
`that what exists' in the marketplace today has been created by a
restricted allocation of spectrum. Bell has been stifled from aggres-
sively expanding its mobile services because the resources are so
limited there has been no economic incentive for them to do it,
whereas the RCC's have taken a very small resource and by inno-
vation and novel services has significantly expanded them to the
benefit of the public.
For that reason, it has outpaced Bell in that particular market-
place. But it is a bias and distortion which has been created for a
~constraint of Bell of significant radio resources which will be over-
come totally by the cellular allocation.
Mr. WEINBERG. Again, I would say that past witnesses, before the
Senate, anyhow, have remarked that the RCC's are interested in
the cellular allocation, and I feel they will enter that business and
it will be highly competitive, just as today's are.
Mr. VAN DEERLIN. Do the rest of you have, anything additional to
offer?
[No response.]
Mr. VAN DEERLIN. Mr. Marks.
Mr. MARKS. Thank you, Mr. Chairman.
Perhaps, Mr. Wiley, you might answer this question first, fol-
lowed by the other members of the panel. I suspect, however, that I
have a pretty good idea what the answer will be.
Under section 331(d), which would restrict the ability of A.T. &
T. to operate new radio systems, the question I have is whether or
not an order should be promulgated to protect competition, and
whether or not this ban or this restriction should be temporary or
permanent. I am curious, particularly in light of your comments on
page 5, toward the end of the second to the last paragraph, if your
feeling is that the restriction should be a permanent one or a
temporary one, and if a temporary one, for how long. The question
of a temporary or permanent ban is certainly worthy of serious
consideration.
Mr. WILEY. Mr. Marks, from a philosophical standpoint, I sup-
pose I am always troubled by the idea of banning anyone from any
market in a free enterprise society. However, if the record demon-
strates predatory practices or a strong potential for predatory prac-
PAGENO="0264"
1728
tices-and I am not here to express an opinion on that specifical-
ly-I think some remedies are required.
Now, you can run the gamut from separate subsidiaries, account-
ing procedures and the kinds of things Mr. Moir suggested, which I
construe as a cell carrier's carrier or the possibility of competition
in cell areas, all of which are certainly helpful.
The committee has suggested the concept of a ban, and I suppose
if that ban were to be permanent and the possibility of predatory
practices were to fade away, then it might be overkill. But on the
other hand, if you were to try to pick a time for the temporary ban
to expire, I am not sure just what you would put in legislation,
because you do lock it in and we don't know what the situation is
going to be 10 years from now.
It may not be improved. So I think this is going to probably be
an area, unfortunately, where Congress will have to have continu-
ing oversight, as well as the Commission, to insure that we have a
free marketplace operating without a dominant carrier exercising
predatory practices if that happens to be the case
Mr MARKS Does anyone else care to comment on that?
Mr. WEINBERG. Mr. Marks, I think even a temporary ban would
ill serve .the public. I think a temporary ban of Bell in providing
cellular service would mean long delays in the public's getting
cellular service. I agree with Chairman Zielinski, who appeared
before this committee and felt that the presence of the wire line
carriers in this market really had a very salutary effect on the
radio common carrier industry and that it might well urge them to
enter this field of cellular service and other radio services. I think
a temporary ban would ill serve.
Mr. WOLF. As an engineer I would agree with Mr. Weinberg that
the tremendous effort that Bell has put into the cellular systems
certainly is worthy of being offered to the public, and I would feel
distressed if it were not successfully implemented sometime in the
near future.
However, Bell has operated in a very, very favorable environ-
ment over the past 50 years, which essentially enabled it to attain
this very dominant position it now occupies as the biggest telecom-
munications vendor in the United States. It seems to me that
Congress has to consider something akin to the civil rights legisla-
tion which essentially gives new business entities the opportunity
to grow and nurture in a climate which preserves the American
principle of small business activities.
It may be somewhat abhorrent to the engineering viewpoint, but
I think from the standpoint, of observing the American ability for
small businesses to operate and provide service on a local basis, it
is important that Congress recognize that element of necessity in
inhibiting Bell for some period of time.
Mr. MARKS. Thank you, Mr. Chairman.
Mr. VAN DEERLIN. Mr. Jackson.
Mr. JACKSON. One or two questions.
Mr. Weinberg, you seem very upset and distraught and con-
~cerned about section 331(d), but~ I really wonder what would you
.~replace it with in H.R. 3333? ~Would you replace it with public
interest, convenience and necessity, that is, language which said
the Commission shall license ~adio systems to a dominant carrier
PAGENO="0265"
1729
only if it finds it serves the public interest, convenience and neces-
sity?
Mr. WEINBERG. I think today's system, Mr. Jackson, of licensing
radios, as far as taking the public interest into consideration, is
appropriate.
Mr. JACKsoN. OK, but there is a clear component in the public
interest of the antitrust concepts. The courts have so held. Allow
me to read you something, "It is settled that practices which pres-
ent realistic dangers of competitive restraint are proper considera-
tion for the Commission in determining `the public interest, con-
venience and necessity.'" Judge Bazelon, writing on a radio licens-
ing case for a unanimous panel at the court of appeals.
If that is the case, if someone else besides Bell is ready, willing
and able to offer cellular service, and if dangers of competitive
restraint are an aspect of the public interest, then is section 331(d)
any different than current law today?
Mr. WEINBERG. Yes, I think section 331(d) totally excludes the
dominant carrier from even trying to fill the public need.
Mr. JACKSON. No. There is a condition in section 331(d) which
says if service will not be provided to the public-that is, if there is
not someone else ready, willing and able-the dominant carrier can
get the license. But if there is someone else ready, willing and able,
the dominant carrier does not get the license. Is that different from
the status quo today?
Mr. WEINBERG. I believe it is, Mr. Jackson. I think the status
today is that two eligible carriers go before a public interest body
and present their case, and the body looks at it and determines
where the public will best be served, taking into consideration all
the facts, including the ones you have mentioned on antitrust.
I think with this legislative intent the burden of proof would be
on the dominant carrier; that even with better service, perhaps,
more economical service, they would be excluded from the market.
Mr. VAN DEERLIN. We must stop now briefly. I was hoping Mr.
Mottl would be back to preside. I must go over and catch a vote. It
will not be more than 10 minutes.
[Brief recess.]
Mr. VAN DEERLIN. Mr. Collins.
Mr. COLLINS. I did not have the opportunity to completely review
all of the material you have brought up, but the subject is very
interesting and I wanted to go into two or three phases of it.
We have talked about the question of A.T. & T. getting into this
field. Is it the fact that you believe that A.T. & T. would completely
dominate it entirely? Or do you object to them having more than
49 percent? What would Motorola think?
Mr. MARSHALL. Thank you, Congressman. I would like to point
out as I start this, two things. First, A.T. & T. is our largest
customer, so I certainly don't want to offend them. Second, I would
like to point out that Motorola is restricted from going into the
mobile telephone service or the specialized mobile radio service by
the FCC. So this is not the first time there has been a restriction.
The restriction is on us right now, and we are a considerably
smaller company, by a factor of probably 40 to 1. As we see it, the
thrust of this bill is one of competition. We think if there is to be
PAGENO="0266"
1730
competition, it would be es'sentially impossible if A.T. & T. is
p~rticipating in the mobile field,
Mr. COLLINS. You wouldn't want them in for 5 percent, 10 per-
cent or 49 percent.
Mr. MARSHALL. If you could limit them to 5 percent, that might
be something, but I don't know how you would do that.
But I think a couple of things further with it. They are not really
totally eliminated from the cellular system business. Just as was
pointed out a while ago by Zip-Call, I think Mr. Wolf said the
phone company is one of his major suppliers. In the case of the cell
system that will be installed in Baltimore-Washington, which will
not be installed by A.T. & T. but by a radio common carrier, the
pro fOrma shows that the largest supplier to that system as you get
out a few years will be A.T. & T., or Chesapeake and Potomac, as
the case may be.
So you are not really totally excluding them from the field if
they cannot provide cellular systems. They will benefit from them
substantially even if they do not pay for the developmental costs of
them.
Mr. COLLINS. I get your general view. Let me see what Mr. Wolf
thinks.
Mr. WOLF. My experience has been if Bell has any share of
market that is not absolutely controlled, ultimately they will find
some way of abusing it. The problem is that you have both direct
and indirect competition, and what we have found is if we innovate
a service which competes with toll revenues, for example, as op-
posed to competing with the direct paging and mobile radio serv-
ices, that that also tends to create stresses that Bell reacts to with
predatory behavior because they see those toll revenues as a sig-
nificant revenue aspect to them.
For example, we wanted to expand our paging service access
arrangement, telephone access arrangement, so that the calling
area would be much broader than the local central office area, that
the free calling area would be much broader than just the local
central office, and that meant less revenue to Bell. They resisted
that type of access arrangement for a significant period of time.
Mr COLLINS Ms Cornell, do you think we have any problems on
this from an FCC regulatory viewpoint?
Ms. CORNELL. I am not fully certain that I understand what you
mean by an FCC regulatory viewpoint.
Mr. COLLINS. Well, they talk quite a bit about the practice they
just brought out initially, that it is a hard problem to control A.T.
& T. Some of us think it is a hard problem to control the FCC.
Ms. CORNELL. I would have to say, frankly, it is a tough problem.
As I said in opening, there is still a lot to be learned about the
benefits of having the Bell system in in terms of technology and
some other things. But there is some skepticism. One needs to look
very closely when you are asking them to own or are thinking of
allowing them to own the competition to their own wire line serv-
ices, because ultimately, mobile telephone, if it has the same qual-
ity of signal as the wire line signal, really is a competitor to the
wire line, with the adv&ntage, of course, of freeing people from
being attached to the wire.
Mr. COLLINS. Mr. Wiley, you have had experience.
PAGENO="0267"
1731
Mr. WILEY. Mr. Collins, before you came in, I had mentioned that
what we are really trying to guard against here is the possibility of
a dominant carrier engaging in predatory practices. Some people
do believe that safeguards against cross-subsidation, such as sepa-
rate subsidiaries or accounting procedures, are not going to be
totally effective in this particular instance and therefore a tempo-
rary ban of some period of time, or perhaps a permanent ban,
should be given some consideration.
I am not here to testify as to whether or not those predatory
practices are being engaged in. I do say that if the subcommittee
considers that such a risk exists, the concept in section 331(d) is
certainly worthy of consideration.
Mr. COLLINS. Mr. Weinberg.
Mr. WEINBERG. Mr. Collins, I mentioned before you came in that
I think if A.T. & T. is excluded from this business, the public will
not get the type of service, the quality of service nor the cost-
effective service they would get, and that I shared Chairman Zie-
linski's comments that the presence of the wire line carriers in this
market is, in fact, a competitive urge to help competition rather
than hinder it.
I pointed out we presently today have less than a 50-percent
market share in the two-way business, and the radio common
carriers have over an 80-percent share in the one-way paging busi-
ness-very effective competition today. I think that will remain.
We do have possibilities with cellular service to eliminate the
monopoly allocation. There are alternatives available to the Com-
mission now, I think, to look at cellular in a somewhat different
light and come up with other solutions to the problem of injecting
competition into this field.
Mr. COLLINS. I want to go on one other subject which concerns
me in this account. Were you the one who brought this up in your
testimony, Mr. Wolf? Who brought this up?
Mr. WOLF. I believe I did. Mr. Wiley did, also.
Mr. COLLINS. It has been my experience that regulatory authori-
ties do not understand normal business practice, that they just do
not understand accounting. And with the increased technology and
constantly changing needs to move and move fast, we have got to
depreciate and charge all of the stuff off quickly.
What has been your experience for you and the associates in
your particular trade association?
Mr. WOLF. I think there are several aspects to your question. I
think that our industry is much more like the computer industry
in terms of the relatively short writeoff periods.
Mr. COLLINS. How much are they allowing? Are they allowing
enough writeoff quick enough?
Mr. WOLF. It is more a matter of individual business practice
than regulatory climate at this point. The RCC's do not come under
any set of defined rules.
Mr. COLLINS. So all you have got to do is take care of Internal
Revenue?
Mr. WOLF. Exactly, yes.
Mr. COLLINS. How realistic are they?
Mr. WOLF. They are flexible. The writeoff periods run anywhere
from 3 to 7 years, depending upon the types of facilities.
PAGENO="0268"
1732
Mr. COLLINS. They do. Well, that is good.
Mr. WOLF. But the FCC is not regulating the rate of return of
the RCC's because they are considered to be operating in a compet-
itive environment where the marketplace forces, as far as intra-
RCC competition is concerned, essentially establishes a reasonable
price level. State jurisdictions in many cases established the ac-
counting practices to be applied to RCC's. But in general, those
activities are relatively insignificant at this particular point in
time. But on the other hand, on the flip side of the coin, in dealing
with Bell on interconnection issues in terms of the facilities that
we require to offer the services we provide, they exercise allocation
activities and pricing policies which are based upon allocation,
which essentially in the competitive situation quite often works a
disadvantage to the RCC.
Mr. COLLINS. I noticed in one statement-I think it yours-there
was a suggestion made by someone to charge it off against surplus
That is kind of a socialist idea Has that come up in business
practice?
Mr. WOLF. That was not in my statement.
Mr. COLLINS. You said you feared that that might be suggested or
some regulator said it or something?
Mr. WOLF. That is an interesting point vis-a-vis--
Mr. COLLINS. You can't charge off against surplus and stay in
business without charging off against business.
Mr. WOLF. One of the concerns of the cellular system is how
those development costs were paid for. In effect, those developmen-
tal costs were paid for by the ratepayers throughout the country.
In other words, Bell's licensing fees to the operating companies
funded Bell labs' research and developmental costs for the cellular
system.
So from my limited perspective, the cellular system should really
be in the public domain, rather than as a Bell proprietary system,
because of the way it was paid for.
Mr. COLLINS. If that is true, if they did it, they should still keep
it, in the parent company, shouldn't they, if you followed your
argument further9 You said the parent company did it, therefore
the parent company should retain the benefits. I am more and
more favoring the idea of a subsidiary arrangement.
I would rather they were not in the parent company, but if the
parent company developed it, they should be the one to gain from
it, and in turn let the public have lower telephone rates.
Mr. WOLF. That is one, approach. But I also think you have to
look at how that was funded by the parent company. It was funded
by the parent company by licensing fees to the operational compa-
nies, which in turn were derived from operating revenues from the
general public
And I agree with you that the only valid approach at this point
would be a completely separate subsidiary.
Mr. COLLINS. Do any of the rest of you have accounting prob-
lems? You don't hear many people say that IRS is pragmatic. I was
glad to hear him say that.
That does sound realistic from three to seven. I think A.T. & T.
has plenty of accounting problems.
PAGENO="0269"
1733
Mr. WEINBERG. Yes, we do. I am not an expert in that area and I
cannot speak to our problems, but I recognize we come under the
uniform system of accounts and it is quite difficult.
Mr. COLLINS. Your statement is an overloaded capitalization. I
know that is because of the way the rate structure has been set up
and you have never basically resisted it, but it is an archaic
system.
Thank you, Mr. Chairman.
Mr. VAN DEERLIN. It all sounds pretty socialistic to me.
Mr. JACKSON. Earlier, I was asking a question about the connec-
tion between the public interest standard we have today and the
standard in section 331(d). Mr. Weinberg has answered that ques-
tion but I wonder if anyone else on the panel wanted to contrast
the current standard with section 331(d).
Mr. WOLF. Mr. Jackson, I think it might be useful to look at the
historical activities of the FCC in the broadcast area. It seems to
me the comparative criteria which I used almost universally in a
comparative broadcast hearing would be essentially a diversity of
ownership and a control of local ownership, integration of manage-
ment ownership, avoidance of the concentration of media power,
and the character qualifications.
In effect, in 18262, the cellular system, the FCC essentially con-
ferred on Bell the qualifications as being the most qualified opera-
tor of those systems, and in fact, section 331(d) does just the oppo-
site. It says we are going to allow other operators to provide the
service, and in the absence of their capabilities, we will permit Bell
in the marketplace.
It seems to me that section 331(d) very precisely takes care of the
comparative issues which would normally be looked at by the FCC
under their current standards in terms of the broadcast criteria,
because certainly the local operator would meet the basic criteria
that is normally looked at in the comparative broadcast hearing.
Mr. WILEY. My experience at the Commission was that a lot of
the regulations we attempted to fashion would work for everyone
except when you got to the Bell System. There was a recognition
that things did not quite function the same way when you had
someone with a huge share of the marketplace.
I think implicit throughout H.R. 3333 is the concept that Bell is
going to be treated in a somewhat different fashion because of its
overall dominance. I think that that is a responsible and intelligent
way to approach the regulation of the telecommunications industry
at this point.
Now, whether or not that implies that you need a total ban in
keeping them out of a particular area or not is, I think, something
Congress in its wisdom will have to decide. But I think the concept
of a dominant carrier being treated in one fashion and the competi-
tive marketplace another does make some sense.
Mr. VAN DEERLIN. At least in a given period of time.
Mr. WILEY. Yes.
Mr. VAN DEERLIN. Obviously it presents a problem which was
not present in the airline deregulation where there was no such
dominant carrier.
Mr. WEINBERG. Again, Mr. Chairman, I do feel that even a
temporary delay, particularly with the cellular technology, as such,
PAGENO="0270"
1734
because of the heavy capital investment, would not be appropriate.
I think you would probably end up with a dominant carrier or a
monopoly carrier at a point where a second carrier could not
possibly enter.
And if the purpose of the bill is to foster competition, I think
there are better ways of doing that. I would be prepared to go into
that if the subcommittee so desired.
Mr. VAN DEERLIN. We so desire.
Mr WEINBERG This is sort of in response to Mr Moir's question
to Mr Olson I have a chart because I was fairly certain the
question would be repeated, since Mr. Olson said I would cover it
when I came before the subcommittee If I may take a minute to
lay out the cellular system as you saw over there, it really has
been divided into two distinct networks One is the electronic and
switching network you saw over there, and that has the switching
office. It also has the cell sites and all of the equipment involved,
the technical equipment. And the other part is the distribution
network. That has the customer contact, the sales, the installation,
the service, the billing, any kind of customer interface.
And really, under the present rules of cellular, as I am sure the
committee knows, there is a single eligibility for all of that There
would be a monopoly carrier covered by docket 18262 of the Com-
mission.
Mr Moir asked that we look at two possibilities or two alterna
tives. The first alternative was to come up with something which I
guess you referred to, Mr. Moir, as a system manager, which is a
single eligibility over here [indicating], if you will, under the equip-
ment itself. And over on the sales end, there would be others,
vendors of equipment, that would obtain the service at a certain
price from the manager of the system. There would be a number of
entities, including the manager of the system if so desired, to
provide the distribution network
The second alternate, is whether you split the 40 megahertz and
come up with more than one competing system, head-to-head, toe-
to-toe competition.
And what happens in the system you saw over here [indicating]
is that as you split the frequency and get down to, let's say, two 20-
megahertz systems, the cost to the customer for this portion of the
network almost doubles, so that the cost to the customer is signifi-
cantly greater than for a 40-megahertz system.
There is 45 megahertz of reserve spectrum that is to be allocated
either to cellular, private, SMR's, or whatever It is undesignated
in the land mobile band today It was designated as reserve in
docket 18262. One possibility might be to take, let's say, 20 mega-
hertz of that 45 megahertz and bring it over to cellular and split it
into two 30-megahertz systems rather than into two 20-megahertz
systems. I think 30 is a point where you could probably do it-it is
not a straight line cost so that when you go from 40 megahertz to
30, it is really about a 20- or 30-percent increase in price.
But there is a possibility of having two 30-megahertz systems toe
to toe with dual eligibility down here [indicating], and that way
you could maintain the same kind of market structure you have
today, wire line common carriers and radio common carriers
PAGENO="0271"
1735
Another alternative would be to sort of combine those two alter-
natives and have the dual eligibility of the two systems for this
network [indicating], and have multiple vendors at the end. You
could have five or six who would take the service from either one
of these vendors and package it any way they wanted to. For
example, if they bought service for $20 a month here and 20 cents
a minute, or whatever it may be, they may want to sell it for $25.
One may want to sell it for $25 a month and 20 cents a minute.
Another may want to sell it for $50 a month and 15 cents a
minute. They can repackage it ~any way they want to, plus some of
the radio common carriers or the wire line carriers may want to
have a telephone answering service or other vertical services they
would offer on that.
I think there are a lot of other alternatives, but there are so
many economic and technical tradeoffs that all of the parties have
to really get together-the privates, the radio common carriers,
and the manufacturers-and they have to sit down under the aegis
of the FCC or some other regulatory body. I really think these
problems can be worked out.
I think it is a different environment than it was when docket
18262 was written. I think the bill recognizes that and we recognize
it. Things have changed.
Mr. JACKSON. Why does this conversation have to occur under
the aegis of a regulatory commission? Why can't you just get
together and have a discussion?
Mr. WEINBERG. I think when potential competitors get together,
Mr. Jackson, there are some questions about the antitrust laws.
We would prefer to have someone from a regulatory body assure
all that it is open and that whatever is said is said in an open
environment under proper regulatory jurisdiction, if you will.
Mr. JACKSON. Is Bell relaxing its opposition to the provision of
H.R. 3333 which would require notification to a member of the
Department of Justice for network planning meetings that might
involve competitors dealing together in the provision of facilities
and services?
Mr. WEINBERG. No, I think this is basically potential competitors
getting together to discuss the basic service itself and the approach
to be taken. Since this would require, Mr. Jackson, regulatory
action-for example, some of the alternatives could require regula-
tory action-it would be very appropriate to have the regulators
there.
Mr. JACKSON. But that is exactly the case under network man-
agement. It might require applying for a satellite license or a
microwave license. So it would be perfectly appropriate. It seems to
me it is a perfect parallel. Your positions are different at different
times.
Mr. WEINBERG. I cannot comment on that, Mr. Jackson, really. I
do feel in this particular case that it would be `appropriate to have
the regulators present.
As far as day-to-day planning for the network, it seems to me to
be somewhat of a different kind of problem because this has to go
on day to day. This is the establishment of really a kind of business
structure, if you wilL We are talking about the basic structure of a
business.
PAGENO="0272"
1736
Mr. JACKSON. But again, to go back to H.R. 3333, the language in
H.R. 3333 allows network planning to occur if a Government repre-
sentative is present, and if it does, it is granted antitrust immuni-
ty.
You are saying that when you get in this mobile area and you
want to deal with a potentially competitive issue that involves
antitrust issues, you want the Government present; but when you
are in your traditional areas, you don't.
Mr. WEINBERG. I think network planning is done more on a day-
to-day basis and it is important that it be done very quickly. What
I am talking about is really a one-shot kind of thing that estab-
lishes a market structure, if you will.
Mr. JACKSON. Again, I was trying to emphasize the connection
with antitrust immunity, not the day-to-day nature of network
planning. I think the point is clearly made and I have no more
questions.
Mr. VAN DEERLIN. Mr. Wunder, minority counsel.
Mr. WUNDER. I would like to ask Mr. Weinberg. The philosophy
of this bill is that competition, when it can function, serves the
public interest better than regulation. I was wondering, on the
basis of your comments, about the restrictions upon A.T. & T. in
section 331(d). Are the problems that you foresee more long-term
problems or are they short-term problems? You are suggesting that
the public would be ill-served by this restriction. Are you thinking
near-term or are you thinking long-term?
Mr. WEINBERG. I am thinking both, Mr. Wunder. We have been
trying to implement a brandnew, exciting technology that has been
under development for 10 years I think the exclusion of Bell would
delay that implementation significantly, if not prohibit it complete-
ly. I think the presence of Bell, the presence of the wire line
carriers in this field, competitively, if you will, will enhance the
public getting the service more quickly and will enhance getting a
more economical service. And I think that goes for the short term
as well as the long term.
Mr. WUNDER. You see them as both being equally acute?
Mr. WEINBERG. Yes, sir.
Mr. WUNDER. How do you deal with the argument, however, that
the dominant carrier should be treated differently than all others,
just as the dominant carrier in the interchange market under the
bill is treated differently than all other carriers?
Mr. WEINBERG. I believe, again, if possible the competitive mar-
ketplace ought to be the guiding light rather than either legislative
or regulatory prohibitions. And I think the fact that if you are
looking for competition and you take one of the large competitors
out, you are in essence decreasing competition rather than increas-
ing competition. I just cannot understand it.
Mr. WUNDER. Thank you, Mr. Chairman.
Mr. VAN DEERLIN. Mr. Moir.
Mr. M0IR. Thank you, Mr. Chairman.
A couple of brief questions before I get to some of the questions
which were unanswered in May when I addressed some questions
to Mr. Olson. On the background to section 331(d), we have heard
from various witnesses today and in some of their testimony that
the rationale or reasoning behind prohibiting A.T. & T. from fur-
PAGENO="0273"
1737
ther involvement in the mobile telephone business is because of
their size. If that is the case, is it just that unmanageable entities
shouldn't be allowed in the business? Why should some of the
members of this subcommittee continue to endeavor to look at
designing new systems of accounts? Why should the Commission
waste hundreds of thousands of man hours, contract money, and
agenda time? Why should companies waste millions of dollars look-
ing for new systems of accounting, if the end result of a system of
accounts has no effect at all in alleviating these types of problems?
I just wonder if we could get some input on that from the
panelists here today. Why don't we start on my left. Mr. Wolf.
Mr. WOLF. I think one of the things which has become evident to
me is the changing complexion of the FCC from lawyers and engi-
neers to economists. There is increasingly an acute awareness of
the limitations of the accounting process in determining costs.
Mr. Mom. The reason I mention it is if you are going to have as
proposed in H.R. 3333 or as we have heard from a number of
spokesmen down at the Commission or NTIA, a complete market-
place-~some people call it laissez-fair economics-type of situation;
then the need of a system of accounts for those types of companies
seems to escape me.
Mr. WOLF. I think your question suggests another alternative
which is somewhat consistent with what Mr. Weinberg discussed
this morning.
Mr. M0IR. I am merely trying to get an answer to that question
because it is intertwined.
Mr. WOLF. I think you have to make a clear line of demarcation
between the systems and the services and the competitors in order
to avoid the problems of allocations, cross-subsidy and so forth. And
perhaps, for example, with the cellular approach, if the line of
demarcation were made at the switch, for example-Bell provides
everything up to the switch-on a monopoly basis, which is, in
effect, where their expertise lies, then the operators, whoever they
may be, compete in the radio services area.
You would then perhaps achieve the objective of H.R. 3333 more
rapidly and more effectively.
Mr. MOm. For all services or mobile?
Mr. WOLF. I am thinking of mobile services.
Mr. M0IR. Why draw the line on mobile?
Mr. WOLF. That is my area of expertise and where we have had
the greatest interaction. But I would* argue that there is a natural
line of demarcation between the licensed services which the regula-
tory body is concerned with and a switched landline network,
which is essentially a component of both services. By drawing the
line at that point, you can create the proper climate for competi-
tion without the threat of these other allocation problems.
Mr. MOrn. All right.
Ms. Cornell, I think you are ready to grab the mike.
Ms. CORNELL. I would argue that in a sense, accounting and
separation devices, bans, and other kinds of techniques are really
complementary. There are some things accounting can do for you
and there are some things it cannot. It is important to have a
system of accounts. It is important to start looking at it in a
51-2S3 0 - 80 - 18
PAGENO="0274"
1738
different way than it has always been looked at in terms of think
ing about depreciation and its effects
Mr M0IR The reason I ask is because if marketplace forces will
be the moving force for most carriers, it seems to me the only
logical reason for the system of accounts would be for monopoly
carriers
Ms CORNELL You have the simple problem that it goes back to
saying can you treat the dominant carrier differently from other
carriers I must again go back and say it seems to me you have got
to Because even if marketplace forces predominate ultimately,
under the world that would be created by H R 3333 if enacted-it
is not going to happen overnight You are probably talking 10, 20,
even 30 years before that transition is complete
In the meantime, you do have a concern about monopoly rate
payers and what they are paying for There are some things ac
counting systems can do and some things they cannot There is a
need to put in both tools, to be able to put in separations where
you cannot do accounting, to then let accounting work But we do
not have right now a uniform system of accounts that can do even
what accounting can do for you, which is why I don't think it is
wasting money to try to do it But it can't do everything
Mr Morn So you see the new system of accounts as merely a
way of assisting the Commission in reviewing the rates of monopo
lies9
Ms CORNELL I would
Mr Morn Not in allowing it to get into competitive services9
Ms CORNELL I don't see any reason why you need a uniform
system of accounts that applies to a carrier who has no monopoly
services But I speak for myself, I do not speak for the Commission
as a whole
Mr Morn Mr Wiley
Mr WILEY I think it is possible you could have predatory prac
tices even in a competitive environment, so I think the uniform
system of accounts may be useful in other areas as well And I
would agree with what Dr Cornell said I think it is useful to
attempt to try to improve that system It may not be the whole
answer in many areas, but I think it is one part of the response
I think the dialog between Mr Wunder and Mr Weinberg nicely
stated the problem This bill, as I understand it, seeks a competi
tive marketplace Mr Weinberg suggests that therefore Bell ought
to be a competitor, and I think the basic question you have is can
you have true competition if you have the dominant carrier corn
peting with other entities9 I do not know the answer to that
question in all arenas
Apparently in the cell area, in the radio distribution area, the
subcommittee tentatively has determined you may not be able to
do that for a period of time and they have suggested section
331(d)'s solution I think that is at least one intelligent and rational
answer There may be others And I think we ought to attempt to
pursue and improve those other regulatory techniques as we can,
and certainly the uniform system of accounts is one
Mr MOIR Mr Marshall
Mr MARSHALL I think that the uniform system of accounts may
have application or better application in other areas I do believe
PAGENO="0275"
1739
the thrust of the bill is competition, and if that is what is really
desired, section 331(d) in itself will make it possible for literally
thousands of small companies to be competing in the mobile radio
business I think without section 331(d), that is not likely to
happen.
Mr. M0IR. I guess there is no point in your commenting, since
earlier witnesses have commented. One other question.
We have had considerable discussion on the spectrum fee today. I
noticed in your testimony, Mr. Wolf, that you addressed question
No. 2. Do you have any comments on question No. 3, which really
went to the substance of the spectrum fee?
Mr. WOLF. Very limited comments, Mr. Moir.
Mr. M0IR. From your own perspective as a licensed radio
common carrier or on behalf of your organization.
Mr. WOLF. I believe if the licensing fee could be properly con-
structed to encourage the more effective use of the spectrum in an
equitable and fair manner, it would have applicability in this land
mobile area. I think the present design as it now exists would be
probably acceptable to the RCC industry.
Mr. M0IR. Mr. Wiley.
Mr. WILEY. I believe my statement expresses my View that the
spectrum -fee probably won't do much for you in the allocations
area-deciding whether spectrum will be allocated to UHF televi-
sion as against land mobile radio. Those decisions are going to
continue to be made in the political environment, as I understand
it. It may have some effect in the area of assignments.
You have to look, I think, to the basic question I point out as to
whether or not there is a public interest value in attempting to
utilize lotteries, auctions, or what have you, in order to make
assignments rather than the comparative hearing process.
Mr. Mom. Does it concern you that some of the licensees would
not be involved in that type of process?
Mr. WILEY. That is one of the problems, I think-the fact that
part of the spectrum is government oriented. And you have certain
exemptions under H.R. 3333; and then you have the situation, of
course, which I point out in my statement, that some of the spec-
trum is already allocated and assigned, and other spectrum is not.
Suppose you have a new service coming in and the Commission
allocates a very small amount of spectrum to that new service.
That could artificially inflate the value of the spectrum. I think the
subcommittee has to keep those problems in mind as it attempts to
fashion an appropriate legislative solution for a difficult area. -
Mr. MOIR. Would any of the other witnesses like to add any
additional comments on the spectrum fee other than what has been
said already within the testimony?
Mr. MARSHALL. I would like to emphasize one point Mr. Wiley
touched on. I believe that if the spectrum fee is merely to raise
money, it is not going to accomplish a lot. It will raise a few tens of
millions of dollars, perhaps, and receive a lot of complaints. If it
can be used to overcome the political problems of allocation, of
interservice use, then I think it has tremendous possibilities and
tremendous merit. I believe that can be done the way the spectrum
fee was structured in H.R. 3333 although it does not specify it. It
would seem as though it is leading to it.
PAGENO="0276"
1740
Mr M0IR So it is your opinion and your company's opinion that
the House's language or the H R 3333's language will do that
which you hope it will do
Mr MARSHALL It doesn't spell it out exactly, but it would appear
that is the direction it is going I arrive at that conclusion, maybe
inaccurately But I would look at the land mobile fee, which is
1/3 6oth of the fee for a television station in any given area I
assume that was based upon the fact that a UHF TV station uses,
with its protection, approximately 36 megahertz, and I also believe
it was incorrectly assumed there are 10 land mobile channels per
megahertz, which got the 360 divisor
We submitted an addendum to our testimony on this particular
subject, by the way There are 20 land mobile channels per mega
hertz, so that would be a divisor of 720 rather than 360 Also, land
mobile does not receive the 150 mile degree of protection that a TV
station does
The difference between land mobile and TV are certainly not the
only areas in which this could come into play I think there are
others We arrived at the conclusion that you must have in mind a
relativity of fee to show the value of UHF spectrum versus others,
one service versus another
If that is the case, then H R 3333's provisions could lead to an
economic solution rather than a political solution
Mr WEINBERG I would agree with Mr Marshall I can't under
stand how the proposed fee schedule could help out in the alloca
tion end, and I think there are some serious problems along this
line
Mr Morn Mr Marshall, clients of yours or business associates of
yours are planning, as your testimony discusses, a similar cellular
system in the Baltimore Washington area Is that experimental
system behind schedule9
Mr MARSHALL Yes, it is
Mr M0IR Could you explain why that is the case and about how
far behind schedule it is9
Mr MARSHALL There are two reasons One, the license was
granted some time after the Illinois Bell license, many months
after And another reason is the extreme amount of zoning prob
lem in Montgomery County We got our last clearance of zoning for
Montgomery County about 2 weeks ago We have gone ahead and
erected several 500 foot towers which is a very expensive invest
ment But some of them were held back because a change of the
locations in Montgomery County could cause change of the loca
tions of many other transmitter sites So that is a partial reason
Also, a third reason, I guess, would be that we are developing
concurrently cellular, trunked and conventional 900 and 800 mega
hertz systems, and that is just one heck of a lot of development I
might add this, though, that we are developing in conjunction with
this an electronic switch so that we will not be dependent upon the
switch of the phone company
This switch has a substantial export market and has already
been sold in the export market
Mr M0IR I asked the question because in previous hearings this
subcommittee has received considerable testimony from your com
pany and others in regard to this system, although I cannot read
PAGENO="0277"
1741
into the minds of the authors of H.R. 3383, it is possible they were
significantly relying upon your technology, assuming that A.T. &
T. is prohibited from offering its own. If the delays in your systems
are more than merely zoning, then there could be serious doubts
whether your technology would even be available, but for the resi-
dents of the Chicago area, short of A.T. & T. supplying it to people.
Mr. MARSHALL. Naturally, the challenge you throw out is one I
must rise to. There is no question in ~y mind or, I think, anyone
in Motorola that Motorola will install a cell system in the Balti-
more-Washington area. It is running about 1 year behind the Illi-
nois Bell system, primarily because of the startup time being later,
and perhaps a not as great resource factor came into it also.
We are participating in the Illinois Bell System to some degree,
as are others.
Mr. M0IR. Through the use of your portables and mobile units?
Mr. MARSHALL. Yes, and some of the base station work. There is
no question but that we will have the system in the Baltimore-
Washington area and that it will work equally well as the other
system.
I also believe that section 331(d), were in effect today, that Gen-
eral Electric, RCA, Collins Radio, et cetera, would be in there
pitching for this sort of business and designing similar systems
also, and it would not be just Motorola.
Mr. WEINBERG. Mr. Moir, I would just add I think if section
331(d) were in, you might see even more substantial delay rather
than having others in the market. I think the impetus of Bell there
proceeding and being ahead is a very nice competitive force.
Mr. Mom. I would like to go to the last question; one which was
asked last month of Mr. Olson. As a preface, the reason those
questions were asked of Mr. Olson, was because there has been an
obvious expression of dissatisfaction from the Bell System with the
language in section 331(d).
I myself have had some of those very questions actually present-
ed to me by Bell employees and they were not my views but rather
an attempt on my part to get them on the table so that these
potential alternatives were discussed on the record as opposed to
off the record.
With that, I wonder if any of the other witnesses have had a
chance to hear Mr. Weinberg's solution or suggestions as to alter-
natives to section 331(d). Do any of the other witnesses want to
comment on that? Mr. Wolf?
Mr. WOLF. I think it is important to recognize that the thrust of
this discussion this morning has been with respect to cellular. But
when you are looking at a time frame of 10 or 20 years, there are
going to be many, many new technologies develop which will com-
pletely encompass or supersede what is happening today.
Mr. MOIR. That is true, but with 40 megahertz proposed and
some 25 in reserve, and considering the existing allocation for
mobile services, .60 megahertz is a fairly significant amount of
impact on the mobile system.
Mr. WOLF. Exactly the point. And I think it is important, to
establish the climate which will encourage diversity of develop-
ment of that kind of resource to assure the public of being able to
take advantage of the technological developments. I think that one
PAGENO="0278"
1742
of the dangers in putting a lot of emphasis on the cellular consider
ation at this point is other technological advances may be discour
aged if it is allowed However there is no question we want a
uniform nationwide system having universal applicability through
out the country, primarily to drive down the cost of the mobile
telephone
But other forms of innovation should be encouraged to partici
pate in this area, and perhaps if going back to putting the line of
demarcation at the switch level as far as Bell is concerned-if you
do that, you in effect could encourage other forms of radio system
development
I am an engineer by background I have seen the Chicago system
and observed this operation and was very much impressed by it
But the thing that struck me as most remarkable was that there
was a little bit of genius in the Commission's order which required
Bell to go to outside vendors for the base station hardware Every
single item in that system is essentially today an off the shelf
primary item
So it would not be impossible for a competitive operator to put
together a system from buying these hardware items from other
vendors Bell's only area of exclusive expertise today is the switch,
and a competitive switch is rapidly being developed by Motorola I
agree with Travis With section 331(d) in the rules, you would see a
lot of major switch manufacturers, in addition to radio manufactur
ers working to fill that gap in the marketplace
Mr Moni Let me throw out one other thing while we move
down the line on this question You talked about the genius of the
Commission in docket 18262 One of the other premises involved in
that document was that you needed to have this maximum block of
licensed frequencies in order to reach the proper degree of user
cost efficiency I would like Mr Wolf to address this if he can
Is it your view that as cells increase or decrease in size, that the
cost per user remains the same, assuming that you do not increase
or decrease the size of the cell unless you have sufficient users to
wai rant that2 And I will preface that so that it is all on the table
We had expressed in the options paper that as the cell is decreased
in size and the system is forced to become more efficient, that there
is an increase in cost to users
We had a response from A T & T to that reference on page 291,
which on page 4 of your response to the options paper says that the
user costs remain approximately constant as the number of cus
tomers increase because the added on costs of smaller cells and
more transmitters are spread out over a larger group of customers
And yet this morning you said that by changing the size of the
cells, the cost would double, cutting the spectrum in half, cost
would double
Mr Wolf, do you feel that by, let's say, cutting the spectrum in
half, that their costs would double7 And while this may seem a
very technical question, at the same time it goes to the heart of
potential solutions to this problem
Mr WOLF I am troubled by that observation, not in the context
of having a clear understanding of just what the costs are going to
do, but I am troubled by it in the sense that it almost precludes the
PAGENO="0279"
1743
opportunity for having a small cell system in a small community,
which really runs contrary to a fundamental--
Mr. MOLE. I think in that situation, considering the number of
users, you could probably figure that. But let's take a major
market. Let us take a Chicago situation or a New York situation; if
your spectrum is cut in half, probably your potential for serving
customers is cut in half also, so your customer per spectrum ratio
is still approximately the same.
Mr. WOLF. Well, based upon my knowledge of the two systems
currently in development, it seems to me that a significant factor
would be the basic philosophy of the switch. I think the cell sites
basically represent a relatively precisely defined cost factor that is
determined by the number of channels in each cell, which presum-
ably the investment costs would be related to. What we would
propose is that the investment costs be related to the subscriber
volume or the subscriber size so as to keep the revenue streams
and the costs essentially in match, so that the subscribers are not
penalized by excessive front end investment in the system.
I think the switches are where the major cost factor comes in. In
order to provide the handoff and the potential for cell size reduc-
tion, it may be appropriate for Bell or it might have been appropri-
ate for Bell to build a very large switch in the initial phases to
allow for that eventuality. I think Motorola has attempted to do it
in a different perspective by building the switch to realize a certain
amount of capacity which could be expanded as the need arose.
To draw a brief parallel in our paging business, if we attempted
to put in a central office facility that would serve 15,000 or 20,000
subscribers, the 15,000 we are now serving and the 20,000 we
anticipate over the next few years, we would have been losing
money from day one. But what we have done is put in a small
terminal to serve the first 1,000 subscribers, and when we ran out
of capacity we threw that away and put in another one which
served 8,000, and when that capacity was exceeded, we threw it
away and put in one that would serve 20,000.
Mr. MOLE. Granted, if you use a 40-foot semi to carry a 2 by 4, it
would be very expensive. Maybe you could carry it by hand and do
it at a cheaper rate.
Mr. WOLF. Exactly. I think there is a philosophy that Bell has
practiced over the years of making significant fixed plan invest-
ments where it could be justified in the long term because that
builds the rate base up and allows them to create higher charges
and so forth. It can be justified on the basis of rate of return,
whereas the competitive businessman might be much more in-
clined to make a minimum investment to develop the marketplace
in a proper way and then expand upon it.
I think if you create the climate with section 331(d) to allow that
to happen, it will happen.
Mr. MOLE. Then, if I can sum it up, it is your opinion that by
cutting the spectrum back per licensee, the cost per user is not
affected. We had one example of 50 percent by Mr. Weinberg. Are
you saying it is miniscule?
Mr. WOLF. I believe it would be. I think as long as the reserves
are available potentially to expand it to that additional resource,
that problem could be minimal.
PAGENO="0280"
1744
Mr M0IR Ms Cornell, do you have any comments on the dia
logue or on Mr Weinberg's testimony where he lays out alterna
tives to this blanket prohibition?
Ms CORNELL I do want to comment on that I don't know
enough about the technology to answer the cost effectiveness, al
thotigh I think some people at the Commission are looking at that
But the one problem that I see that I think has to be considered in
going to an approach where basically cutting back to the switch, as
near as I could see-I wasn't the beneficiary of the full view of the
chart, but it seemed to be cutting back to the switch-that the
monopoly provision, if you will, and then the sales and the mobiles
and so on, were to be offered competitively, is that it continues a
situation in which a technology that is a potential competitor to
the wire line local loop for local distribution remains in the hands
of those that own that wire line local distribution system and is
therefore potentially precluded from being an active competitor for
local service
As I say, there are a lot of factors which must go into seeing
whether that is good or bad, but that is slid past That decision gets
made if one adopts the kinds of suggestions that have been made
by Mr Weinberg
Mr Morn Thank you
Mr. Wiley.
Mr WILEY Mr Moir, I have had no opportunity to examine Mr
Weinberg's specific proposals or the economics of cellular land
mobile sytems As you know, I have filed a petition with the FCC
on behalf of the Xerox Corp which involves another use of cell
systems for local distribution of electronic message services.
That petition did favor the concept of competing cellular carri
ers I cannot tell you today whether that is feasible from an eco
nomic standpoint in a land mobile arena Also, of course, as section
331(d) suggests, there may be other problems beyond economics in
competing with Bell in that area
Mr Morn Thank you
Mr Marshall
Mr MARSHALL Thank you I think we have a very complex
situation going here
Mr MOIR I hope you will also address the cost aspect per user
Mr MARSHALL I will get to that first, but there are so many
issues out on the table The cost aspect, as I see it, is this You can,
without frequency reuse, serve about 500 mobile customers per
megahertz That is 25 per channel, 20 channels per megahertz, so it
is 500 per megahertz
Now, if the market is 1,000 mobiles, and if you could serve it
with one central station, you could have 2 megahertz serve the
1,000 without having frequency re use and the additional cost that
comes about by having these transmitters located all around the
countryside
If there were two companies supplying this, you could still do it
without frequency re use if you had the 2 megahertz If spectrum is
dear and all you can have is 1 megahertz, then you will have to
have two times frequency re use, which must mean at least 15 or
20 transmitter sites to obtain this frequency re use
PAGENO="0281"
1745
Mr. M0IR. So you don't agree with the formal response we had
from A.T. & T. on the option papers where we made the very point
you are making now, and in response, A.T. & T. said that as you
cut the size of the cells, the cost per user remains the same, even
though you are granted your gross cost, increase. The cost per user
remains the same because you have not increased the number of
users.
Mr. MARSHALL. You are getting into another point there. I have
started at a very basic. If you have something that already has a
three or four times re-use, if we get to that point, and then want to
add to it, for every voice channel you are going to be adding
another transmitter. And as you cut the size of the cells, you are
adding more antenna sites, so that the costs-in other words, you
are not saving in costs the way you would if you only had one
central antenna site. The more antenna sites you have, the more
you are raising your--
Mr. MOIR. Your gross costs. But theoretically, you wouldn't add
more antennas unless you had a proportionate number of custom-
ers to increase that investment.
Mr. MARSHALL. So per customer, this may remain constant,
right, once you get a cellular system going. There will not be a
reduction in cost per customer, I think. It will be relatively con-
stant per customer. The initial thing of going into a cell system,
though, is where you make your big step, where you go from one
central antenna site to maybe 25 antenna sites to get frequency re-
use.
Mr. Mom. Mr. Weinberg.
Mr. WEINBERG. I am still not clear. I think Mr. Marshall said, as
I would say, that what happens as you have a demand above a
certain point-let's say you have a 20-megahertz system. You must
start splitting the cells when you reach that demand in order to
serve other customers earlier than if you had a 40 megahertz
system, certainly much earlier.
Mr. MARSHALL. That is correct.
Mr. M0IR. Certainly as you start out on day one, the cost per
user is very high because you only have a handful of users.
Mr. WEINBERG. Sure.
Mr. Mom. But that is only a short-term situation, and you
wouldn't make the decision even of a 20-megahertz system to split
a cell unless you knew you could rapidly-I thean you would not
split the cell for one additional user. You would split it for a
projection which would make it cost effective.
Mr. WEINBERG. I believe-and again, I would ask Mr. Marshall's
response. I am not clear on it but it seems to me, if you had 40
megahertz and you started splitting when you had to split at 40
megahertz, and developed the line on out, the cost per, customer
would be less than if you had 20 and had to split the 20 on out.
Those are two different cost curves.
Mr. M0IR. So you are saying that for 20 megahertz, if you had
the optimal use, with no cell splitting, of 20 megahertz, that system
is going to be twice the cost of the optimal use?
Mr. WEINBERG. No, no. I am sorry.
Mr. M0IR. No channel split? Why is channel splitting running
more expensive, twice the cost in a 20 megahertz system than in a
PAGENO="0282"
1746
40, since your premise on page 4 here in response to the option
paper says if you split cells, the cost per user remains the same2
That is A T & T `s own language
Mr WEINBERG But you do it earlier, Mr Moir
Mr MOIR Whether it is earlier or later, the relationship between
customers and cost is the same
Mr WEINBERG Depending upon when you get the fill, you can't
take those costs until you at least can predict when that customer
fill is going to come in, I believe
Mr Mont Mr Marshall
Mr MARSHALL I believe what we are saying is, given a set
amount of spectrum, as you increase the number of users, the
number of base stations, the cost per customer remains fairly con
stant If you change the amount of spectrum so that you have to
have more reuse for the same number of customers then the cost
per customer is higher
Mr WEINBERG I think this points out these are extremely com
plex technical and economic issues
Mr Morn That is very true, except say you have 20 times reuse
Regardless of whether you have a million times reuse-your own
written comments to this committee said regardless of how many
times you split the cell, the cost per user remains the same What
you are saying here today on the record is that is not the case
We have been trying to drive at this issue for 2 years
Mr WEINBERG As you reach a certain point, for example, with
20 megahertz, Mr Moir, and you keep getting smaller and smaller
cell sites, as you mentioned before, you do exhaust That is true I
guess you theoretically could come up with a half mile or a quarter
mile if you had to, but the costs do keep going up and you have
four cell sites for each one cell site before
Mr Morn So I would assume that the author of the statement 2
years ago was merely in error and not specific enough
Mr WEINBERG I would have to review both, Mr Moir, and I will
Mr M0IR You sire welcome to read it afterward
Mr WEINBERG I will
Mr MARSHALL I would like to add a comment to this too I think
the real question is, What is the market7 How many mobile tele
phone users will there be in a given market2 It is quite possible
that 40 megahertz will be far more than is ever needed In some
markets it certainly will be The fact is some towns don't have
40,000 people in them, and that would be a mobile telephone for
every car, or more
Mr Morn But you see, Mr Marshall, a number of us relied upon
statements of experts in the fact that as you split cells, the cost per
user would remain the same And when we get data conflicting
with that at a later date, it is confusing
Mr MARSHALL I understand
Mr MOIR That is all, Mr Chairman I am sorry for this lengthy
question and answer period
Mr VAN DEERLIN We do hope to complete this morning's hear
ing this morning, and that is now a forlorn hope. But we certainly
appreciate the participation of all five of you You have contributed
greatly
V
PAGENO="0283"
1747
Our first individual witness will be Mr. Mark Crosby, president
of Special Industrial Radio Service Association, all the way from
Rosslyn, Va.
STATEMENT OF MARK E. CROSBY, PRESIDENT AND MANAGING
DIRECTOR, SPECIAL INDUSTRIAL RADIO SERVICE ASSOCI-
ATION, INC.
Mr. CROSBY. Mr. Chairman, in that we are running a little late,
my remarks will be limited to the spectrum resource fee proposals
that are contained in H.R. 3333.
My name is Mark Crosby. I am president and managing director
of the Special Industrial Radio Service Association, Inc.
Regarding the concepts that are proposed in sections 411 and
414(a) which establish the spectrum resource fee, SIRSA wishes to
express its concern again that we simply fail to see how an eco-
nomically based spectrum management program will result in
greater spectrum efficiency in the future for land mobile users.
We agree that land mobile radio users do indeed receive benefits
when issued a license by the FCC to operate radio communicaiton
facilities. These benefits are economic in nature, with both man-
power and energy savings realized in addition to the contributions
of mobile radio for safety objectives.
The public at large also directly benefits from land mobile spec-
trum utilization, however, through the attainment of these safety
goals and business economies that for competitive reasons are
passed along to consumers in the form of reduced costs for goods
and services.
In a similar manner, then, it would be anticipated that the
additional inflationary costs created by a spectrum resource fee
program would be passed on to the consumers and public at large.
Additionally, SIRSA questions the effect that an economic fee
incentive program will have if a major segment of users are ex-
cluded as proposed in section 414(a)(2), which exempts major users
of spectrum from paying a spectrum resource fee.
We understand the reasons as to why, yet the reliability of an
economically based spectrum management program which excludes
users of a large portion of the spectrum may significantly affect
the reliability of such a program.
These concerns do not address the major decisions that the Com-.
mission would have to make when attempting to administer an
annual spectrum resource fee program to well over 100,000 land
mobile radio users in an equitable manner. We agree with the
subcommittee's method, however; that if a spectrum fee were to be
implemented for both broadcast and land mobile licensees equita-
bly, it would have to be done in the manner proposed or by a
similar method.
That is, such a program would have to be based upon the amount
of the spectrum utilized by each class of licensee or service. Over a
period of time we anticipate it would become evident, as a result of
such a program, that land mobile utilization in the public interest
was being stifled and that additional UHF allocations would be
beneficial to the public at large.
What is still disconcerting, however, is the fact that prior con-
gressional approval would have, to be obtained before such a reallo-
PAGENO="0284"
1748
cation could take place as specified in section 413(d)(1). While we
understand that such a reallocation would necessarily impact the
spectrum resource fee charged, having to further justify the reallo-
cation to Congress for its approval would appear to diminish the
possibility of a significant reallocation for land mobile use.
I thank you for this opportunity to present SIRSA's views.
Mr. VAN DEERLIN. Thank you, sir.
Are there questions for Mr. Crosby?
Mr. JACKSON. I have just one question on that last point, Mr.
Crosby.
Mr. CROSBY. Yes, Mr. Jackson.
Mr. JACKSON. You refer to t e undesirability of having any
change in the television allocati n be referred back to the Con-
gress. Would you prefer to see so e sort of mechanism where the
Commission could change television allocations and then reflect
that change of allocations, the change in the resulting scarcity,
increase or decrease in scarcity, and a change in the television
license fees? Would it be better to have that all at the Commission?
Mr. CROSBY. Yes. Mr. Jackson, I would prefer to see that deci-
sion, any shift in allocation, to be made at the Commission and not
at the congressional level. I believe this was specified in section
413(d)(1)(A). I agree with (b), (c), and (d), that is, if changes impact
the spectrum fee program, congressional approval would be neces-
sary.
Mr. VAN DEERLIN. That is an interesting suggestion. Do you have
any questions, Mr. Wunder?
[Mr. Wunder nods negatively.]
Mr. VAN DEERLIN. Thank you very much, Mr. Crosby.
Our next witness is Mr. Robert M. Booth, Jr., who is general
counsel to the American Radio Relay League.
Good morning, Mr. Booth.
STATEMENT OF ROBERT M. BOOTH, JR., GENERAL COUNSEL,
AMERICAN RADIO RELAY LEAGUE, INC., ACCOMPANIED BY
HAROLD STEINMAN, WASHINGTON COORDINATOR
Mr. BOOTH. I am Robert M. Booth, Jr. In addition to being
general counsel of the American Radio Relay League, which is the
national amateur radio organization in the United States, I am a
registered professional engineer and have been an amateur for
more than 50 years. I bring that background to the committee.
Had I known that Mr. Marshall was going to have a hand-held
radio station here through which he could access the telephone
system, I would have brought one which was one-half or one-third
the size of that which would accomplish much the same thing
through amateur facilities, our repeaters and what is known as
autopatch.
Mr. VAN DEERLIN. You just didn't know it was show and tell day.
Mr. BOOTH. I didn't know. That system, incidentally, is described
very briefly in the prepared statement which has been distributed
and which I would like to have incorporated in the record, please.
Mr. VAN DEERLIN. Unless Mr. Collins objects, it will be done.
Mr. BOOTH. The approach that the American Radio Relay League
has taken in various hearings before the subcommittee on the
rewrite of the Communications Act has been largely one to try to
PAGENO="0285"
1749
be constructive, to help the agency, whether it be the Federal
Communications Commission, a communications regulatory com-
mission or some other agency, to operate more effectively and
efficiently in administering the amateur radio service.
The amateur radio service traditionally has been largely self-
regulating in that we have done our own policing to a great extent.
We are not assigned specific frequencies for operation but frequen-
cy bands on which we are able to operate. We have various classes
of licenses which require us to operate in certain frequency bands
depending upon the class of license and so forth.
The Commission's annual reports over the years have stated in
their reports to Congress that they have devoted less time and
have less problem with the amateur radio service than any other
service.
So that our comments, basically, are intended to improve and
increase the efficiency of the agency in its work. For example,
recently-and this was touched upon in the testimony of Mr. Dan-
iels, president of the league, Harry Daniels, in September of 1977
and again in 1978 before this committeee-the Commission has
found it necessary to discontinue the issuance of licenses for cer-
tain classes of stations such as repeaters and special event station
licenses simply because of the time required to process such appli-
cations in relationship to the number of applications received.
The Commission now proposes to eliminate special licenses for
club stations which are widely used and are in existence at most of
the major universities in the country-some of these stations are
more than 50 years old-and to eliminate special licenses and call
signs for one of the most important disaster services rendered by
amateurs, the Radio Amateur Civil Emergency Service, commonly
known as RACES.
One of the proposals we have submitted before and we resubmit
in the light of what is not contained in H.R. 3333 is a renewed
request that specific authority be given to the Commission to con-
tract for not only the services in administering examinations but to
contract for even processing applications and issuing these distinc-
tive call signs.
It can be done at very nominal cost to the Commission by private
contract. There are many amateurs who are skilled in computer
techniques who have the facilities available to handle some 4,000
or 5,000 separate licenses which would be outstanding at any one
time, and to administer the service in a speedy manner.
The league is just one such organization, and that is one of the
suggestions we have in our written statement.
Another suggestion is that the provisions of the Secrecy Act,
presently section 605 of the act, be broadened again to permit other
services to become more or less self-regulating. We pointed this out
in earlier testimony and we have again in our written statement;
that, for example, the Citizens Radio Service, Citizens Band Serv-
ice, has developed along lines other than originally intended.
It is not a business service, primarily, for small businesses as was
the original intent. It has become considerably a hobby class, a
hobby-type operation. However, the secrecy provisions of section
605 of the present act apply to the Citizens Radio Service, with the
PAGENO="0286"
1750
result that that service cannot really be self policing as the ama
teur service has been as long as those obstacles stand in the way
We have recommended certain changes in those
Finally, we do appreciate very much the attention that the corn
rnittee and its staff have given to the various comments which the
league has filed in the earlier hearings We appreciate the state
ment and the explanation of H R 3333 that nominal fees would not
be charged or collected in many instances, and this would undoubt
edly apply to the amateur and citizens radio ser zice too
But we see no reason why that just cannot be written into the
act, and we would urge that that be done
I think that concludes my statement I know that you are run
ning short of time, and I would be glad to answer any questions
that you have.
[Testimony resumes on p 1766]
[Mr Booth's prepared statement follows]
PAGENO="0287"
1751~
Before the
SUBCOMMITTEE ON COMMUNICATIONS
ofthe
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE
*House of Representatives
Washington, D.C. 20515
June 7, 1979
STA'tEMENT OF R BERT M. BOOTH, JR
On
H. R. 3333
The American Radio Relay League is the nationwide and
binational non-profit organization of amateur radio operators
of the United States and Canada, with a membership in excess
of 166,000. I have served as its General Counsel for almost
18 years.
This is the third appearance of spokesmen for the League
before this Subcommittee on the proposed rewrite of the Communi-
cations Act of 1934, Harry J. Dannals, the League's President,
submitted a written statement on September 15, 1977, and
he and I participated in one of the panel discussions held
at that time. A year later, on September 22, 1978, Mr. Dannals
submitted a written statement commenting upon H. R. 13015,
and Harold Steinman supplemented the statement by oral testimony
in the absence of Mr. Dannals.
PAGENO="0288"
1752
The League is extremely pleased that a substantial number
of its suggestions have been incorporated in H.R. 3333, either
directly or in the explanation prepared by the staff which
bears Committee Print 96-IFC 11 and which we hope will become
part of the legislative history. Nevertheless, several proposals
not specifically adopted by the draft of H.R, 3333 now under
consideration bear repeating and other proposals warrant
support
Volunteer Assistance To The Commission
Section 242(b) (7) would give the Commission authority
to accept gifts and voluntary and unCOmpenSdted services
notwithstanding the provisions of Section 3679 of the Revised
Statutes (31 U S C 665(b)) In his statement of September 22
1978 on H R 13015 President Dannals expressed the League s
support of the proposed section and urged its adoption
However his proposal that volunteers be author] zed to issue
temporary authorizations but not licenses to qualified appli-
cants for Amateur Radio licenses was not included in H R 13015
and does not appear in H R 3333
The following is quoted from pages 4 and 5 of President
Dannals statement of September 22 1978 on H R 13015
However I have been unable to find that the
second part of the League s recommendation that
voLunteers he authorized to issue temporary authori-
zations but not licenses to qualified applicants
for amateur radio operator licenses has been included
in H.R. 13015. The reason authority to issue "temporary
PAGENO="0289"
1753
authorizations, but not licenses," is suggested is to
permit complete implementation of the "instant upgrading"
program recently adopted by the Commission. Under that
program an amateur who has passed an examination
administered by a Commission employee to upgrade to a
higher class of operator license with additional
operating privileges need not wait several weeks and
often longer for receipt of an amended or new license
before operating with the new and additional privileges.
"Instant upgrading" has been one of the most practical
and popular procedural changes adopted by the Commission
in recent years. Unfortunately, "instant upgrading" is
unavailable to the Novice Class, which is the lowest and
usually entry class to Amateur Radio, The dropout rate
of Novice Class licensees has been substantial, because
they must wait several weeks after having taken the
examination to learn the results and, if successful, to
obtain a license, Investigation has disclosed that one
of the causes of the high dropout rate has been loss of
interest and momentum during the several weeks between
taking the examination and receiving the license, By
authorizing "the issuance of temporary authorizations,
but not licenses", by the volunteers who administer the
Novice examinations, the delays in obtaining permission
to operate will be eliminated, In addition, the issuance
of temporary authorizations, but not licenses, is consistent
with the provisions of the Administrative Procedure and
Judicial Review Act, 5 U.S.C. 555, et ~
The number of applications received and processed by
the Commission's Private Radio Bureau has continued to increase
significantly in the nine months since the League's last appear-
ance before this Subcommittee, The ever-increasing workload,
coupled with the restraints placed upon the Commission's budget
by Congress, makes even more imperative the granting of authority
to issue "temporary authorizations, but not licenses" to amateurs
who have passed an examination administered by a volunteer
examiner,
PAGENO="0290"
S 1754
The League suggests that the following subsection be
added after Subsection 7 of Section 242(b):
(8) Have authority to'delegate to qualified per-
sons, by contract or otherwise, the preparation and
administration of examinations for amateur radio
operator licenses and the issuance of temporary
authorizations, but not licenses, to qualified
applicants.
Contracts For Services
Section 245(a) would grant the Commission authority to
"enter into and perform such contracts, leases, cooperative
agreements or other similar transactions with.. ,private organi-
zations and persons. . . as it may consider necessary or appropriate
to carry out functions now or hereafter vested in the Commission."
The League supports this provision.
Within the last eighteen months, primarily for the purpose
of making better use of its limited funds, the Commission has
discontinued the issuance of licenses and distinctive call signs
for repeater stations, special events stations, and secondary
stations. In Docket 21135, the Commission also is considering
the elimination of separate licenses and call signs for club
stations and amateur stations operating in the Radio Amateur
Civil Emergency Service, more commonly known as RACES. These
proposals have been widely opposed by the Amateur Radio community.
The amateur stations of universities, colleges and high schools
PAGENO="0291"
1755
throughout the country and their associated radio clubs, some
more than fifty years old with well known call signs, and stations
established and maintained primarily for emergency communications
in cooperation with Civil Defense and other governmental agencies
would lose their identity should club station licenses and call
signs be discontinued, The ability of RACES networks to function
effectively in times of disaster would be greatly impaired,
should the Commission's plan become a reality.
The number of licenses issued to repeater, club, RACES,
and special events stations is less than one percent of the
more than 370,000 amateur licenses outstanding. However, the
Commission's processing procedures are being so computerized
that applications, and particularly the assignment of distinctive
call signs,to such classes of stations will be hand processed.
There appears to be no reason why the Commission could not con-
tract at nominal cost with any one of many private organizations
or persons, of which the League is one, to provide such services.
For this reason, the League supports Section 245(a),
Telephone Terminal Equipment And Connections
Section 321(c) provides that "[n]o State shall have any
authority to regulate the provision of terminal equipment or
terminal devices" used in the telephoneservice. Amateurs make
wide use of an interconnection or terminal device known as a
"phone patch", by which voice communications received and
PAGENO="0292"
1756
transmitted by an `amateur station can be relayed over the tele-
phone lines. Phone patches to and from military and other
personnel overseas with their families and loved ones are
extremely important in sustaining morale and in times of emer-
gencies. Senator Goldwater's amateur station in Phoenix, Arizona,
K7UGA, is an outstanding example of the public service rendered
by amateur stations through interconnections with the domestic
telephone system.
In recent years, amateurs have developed highly effective
two-way communications systems employing repeater stations which
automatically relay transmissions to and from mobile stations
installed in automobiles and miniature hand-held stations, commonly
known as "walkie-talkies." A substantial percentage of the
more than 2500 VHF and UHF repeaters now in operation in the
United States have what are known as "auto-patch" capabilities.
An amateur desiring to communicate with a non-amateur by a combi-
nation of radio and telephone need only transmit a sequence tone
identical to those generated by touch-tone telephones to obtain
access to a telephone circuit. For example, a radio amateur
with a VHF or UHF transceiver in his car can alert police to a
serious accident merely by "punching up" a predetermined access
number and, when the dial tone is heard, punching the police
emergency number "911". Auto patches have made possible greatly
expanded emergency capability and have been widely used in every
flood, tornado, hurricane and other disaster in the last five
PAGENO="0293"
1757
years. Countless lives and millions of dollars of property
have been saved by this unique and exclusive service of Amateur
Radio.
There have been several instances in the last few years
in which state regulatory commissions, supported by the local
telephone companies, have attempted to prohibit or unreasonably
restrict terminal equipment such as phone patches and auto patches
used by amateurs. Adoption of Subsection (c) would eliminate
this potential threat to the amateur service.
Fees
Section 411 refers to "marketplace forces", Frankly, the
League does not understand how "marketplace forces" might be
applied to amateur and other non-commercial users and how such
users would be protected from "marketplace forces". The League
strongly recommends specific exemption of all non-profit services
from any consideration of "marketplace forces".
Section 414 appears to be similar, insofar as amateur radio
is concerned, to the fee proposal in Section 413 of H.R. 13015.
The following statement submitted by President Dannals on
September 22, 1978, continues to be the position of the League
with respect to fees:
Proposed Section 413 [of H.R. `l3015} would require
payment of a license fee by "all users of the electro-
magnetic frequency spectrum" based upon "the cost to
the Commission of processing the license", and "the
scarcity value of the spectrum being assigned". The
PAGENO="0294"
proposed Communications Re~,ulatory Commission would be
authorized to waive the fee if it determines that (a)
the value is minimal (b) the user is a State or political
subdivision (c) the user is a oublic telecommunications
entity, or (d) a license is required by a treaty or
provision of international law,
~~m~osit ion of a s~p~c trum feqgives thej~~e
some concern ~ trum is not
6Tthe Unitcd States_Covernment or any ot.h~~gpvernment
orcom~iatioiT~v~i~nments it is as extensive as
our unive3 se as recently demonstrated by transmission
of pictures and telemetry from the moon, Jupiter, Mars
and even farther in outer space MObt of the fre-
quencies are assigned on a worldwide basis and the
League respectfully suggests that further scud) be
given to this proposal (Fmphasis suppliec)
Insofar as Amateur Radio is concerned, the League
first opposed but later supported the imposition of
fees to cover the cost of processing applications.
However under the fee schcdule used in the past there
was no teasonable relationship to the cost of administering
the amateur service The fees collected from the Amateur
Radio Service exceeded by many times tFe cost of admini-
stering the service and imposed an unfair and
unreasonable burden upon the service
The League ca'rnot envision how the concept of
scarcity value could be applied to amateur radio
which operates on unassigned freooencies within scveral
frequency bands. Nor can the League envision how the
value of an amateur license might be determined because
by definition an amateur is a person who is interested
ii radio technique solely wth a personal aim and without
pecuniary interest The Ariateur Radio Service does not
use the spectrum to make a profit noi as a means to
mak. a profit Amateur Radio s payment for use of the
spectrum is the service iendered to the pubLic as
summaiized in Section 97 1 of the Commission s Rules
which reads as follows
.97 1 Basis and Purpese
The rules and regulations in this part are
designed to provide an anriteur radio serVice having
a fundamental purpose as expressed in the following
principles:
1758
PAGENO="0295"
1759
a) Recognition and enhancement of the value of
the amateur service to the public as a voluntary
noncommercial communication service, particularly
with respect to providing emergency connnunicatio~s.
b) Continuation and extension of the amateur's
proven ability to contribute to the advancement of
the radio art.
c) Encouragement and improvement of the amateur
radio service through rules which provide for advancing
skills in both the coamun.ication and technical phases
of the art.
d) Expansion of the existing reservoir within
the amateur radio service of trained operators,
technicians and electronics experts.
e) Continuation and extension of the amateur's
unique ability to enhance international good will.
The League recommends that the matter of fees be re-
examined and more specific proposals be submitted
for comment.
The Staff Report on H.R, 3333, in explaining the intent and
scope of Section 414, states:
The fee may be waived whenever it is minimal
and it must be waived for government users such as
police departments and fire departments and public
broadcast stations. Clearly, the fees for such users
as amateur radio or citizens band radio would be
minimal and should be waived.
There appears to be no reason why the intent of the drafters
of H.R. 3333 should not be clearly stated in the form of specific
exemptions for the Amateur Radio Service and government users.
PAGENO="0296"
1760
Susceptibilitj Of Devices To Unwanted Signals
Section 413(a) (5) would continue the authority under which
the Commission conducts certification, type acceptance, and
type approval of devices which emit electro-magnetic radiation.
Section 4l3(a)(6) empowers the Commission to regulate the
"interference potential" of equipment and, according to the
Staff Report, "allows the Commission to regulate susceptibility
to interference as well as the creation of interfering signals."
The Report states that the section "is similar in legislative
aims and goals to several bills offered in the 95th Congress,
including H,R, 8496 by Mr. Vanik, H.R. 8079 by Mr. Benjamin,
H.R. 11812 by Mr. Fisher, and S. 864 by Mr. Goldwater."
The League has been urging the adoption of such legislation
for several years The opponents, including the Electronic
Industries Association (EIA), have offered no factual data to
support their contention that manufacturers of home entertain-
merit devices such as TV receiverc AM and F~1 receivers hi-f i
:amplifiers, tape and record players, and electronic organs, have
voluntarily incorporated protective devices and designs in their
equipment In the League's opinion, the Notice of Inquiry issued
the present Commission November 21, 1978, in Docket 78-369 was
essentially a holding action which very probably will not bring
about positive, forceful action by the Commission.
Section 707(c) would direct a two-year study of the suscept-
ibility of consumer electronic devices to interference caused by
PAGENO="0297"
1761
the transmission of radio signals. In commenting upon a similar
provision in H.R, 13015, President Dannals said as follows in
his statement of September 22, 1978:
Section 707(c)(l) of H.R. 13015 would have the
Director of the National Telecommunications Agency
"conduct a study of problems and issues relating to
the susceptibility of consumer electronics to inter-
ference which is caused by the transmission of radio
signals", and to submit a report, with recommendations,
to the Congress within two years. Dozens of such studies
have been conducted in recent years by the FederalCom-
munications Commission, by manufacturers, and by radio
amateurs. Corrective measures are well known and readily
available at almost infinitesimal cost. Action is
needed now, not another study.
The League strongly urges that the substance of
the Vanik Bill, H.R. 8496, and the Goldwater Bill,
S. 864, be incorporated in H.R, 13015,
Why "fiddle while Rome burns?"
The need for legislation is greater than ever before to pro-
tect the consumer from purchasing devices which are susceptible
to interference. Adoption of Section 4l3(a)(6) is urged by the
League as strongly as possible,
Point of Sale Control of Transmitting quipmmnt
The ready availability of transmitting equipment, including
transceivers (a transmitter and receiver with some common com-
ponents and circuits in a single package), capable of operation
on unauthorized frequencies has been the direct cause of tens
an4 perhaps hundreds of thousands of stations operating in direct
defiance of the 1934 Communieations Act. The following is
quoted from President Dannals' statement on H.R, 13015:
PAGENO="0298"
1762
The Commission has been deluged by tens of thousands
of complaints of interference to television reception
from transmitters operating in the 27 MegaHertz Citizens
Band Service. A high percentage of the complaints are
brought about by the illegal use of external radio
frequency power amplifiers to increase the transmitted~
power from a maximum authorized power of four watts to
several hundred watts. A lesser hut substantial number
of television interference complaints have arisen from
the illegal operation by Citizens Band operators or
unlicensed individuals of relatively high power amateur
transceivers on frequencies adjacent to the 27 MHz
Citizens Band allocations. Over the objections of the
League and amateurs generally, the Commission has recently
modified its rules for external radio frequency power
amplifiers to prohibit the manufacture, shipment, offer-
ing for sale, or sale of amplifiers which (1) are not
type accepted, (2) are capable of operation between 24
and 35 MHz. That action was taken in Dockets 21116 and
21117. The League submitted as a counter proposal that
the present Act be amended to add the following to
Section 303:
(t) Have authority to prohibit the delivery
by sale, lease, gift or otherwise, of transmitting
and associated equipment and components to a person
not then possessing a valid authorization or
license for operation of such equipment or compo-
nents. * * * *
Point of sale control also is needed for other than
amateur-type equipment. The purchase and illegal operation
of VHF marine transceivers for private land-mobile communi-
cation systems is becoming quite widespread, For example,
a person may purchase without question or challenge a
transceiver capable of operation on marine frequencies in
the 152-174 mHz mobile band, install the unit in his
automobile, and operate on frequencies assigned to the
marine service.
The Staff Report of H. R. 3333 states that Section 413(a) (6)
"also allows the Commission to impose point of sale controls on
the sale of equipment". Without access to the Staff Report, the
intent and scope of Section 413(a) (6) is not clear. The League
suggests that the paragraph submitted by President Dannals in
1978 be incorporated into H, R. 3333.
PAGENO="0299"
1763
License Terms
Section 431(a). would give the Commission the power to
issue licenses for periods up to ten years and renew licenses.
It would not, however, require the Commission to grant licenses
for ten-year terms.
In earlier appearances before this Subcommittee on rewrite
of the Communications Act of 1934, League spokesmen have recom-
mended that license terms longer than the present five-year
maximum be permitted so as to reduce the Commission's workload
in processing applications in the Amateur Radio Service, The
League supports the ten-year maximum period,
~
Section 432(b) would provide that "any suspension., .shall
not take effect until fifteen days after the Commission gives
written notice of a proposed suspension to the licensee",
and that the licensee "shall have fifteen days in which to
mail a written application for a hearing upon the suspension
order," Fifteen days is not sufficient time for notification
of many amateur stations and operators. Until a few years
ago, amateurs were required to keep the Commission advised of
the address at which they would be operating and could be reached
when operating either portable or mobile away from their home
location. As part of its deregulation program, the Commission
PAGENO="0300"
1764
deleted this requirement from the rules. Now all that an amateur
must do is arrange to have any communications received at his
permanent address forwarded to him within a reasonable period
of time, irrespective of where he is actually located. When
an amateur is operating portable or mobile, fifteen days is
not sufficient time for a notice sent to his permanent address
to be forwarded to his qemporary address. In addition, many
amateurs are located in remote places, such as the bush country
of Alaska, where mail service is poor. The League recommends
that the time period in this subsection be increased to 45
days.
Secrecy Of Communications
Section 549(d) of H,R, 3333 is identical to Section 547(e)
of H.R. 13015, to which President Dannals commented as follows:
The Amateur Radio Service has enjoyed the reputation
of being largely self-regulating. The amateurs have
kept their house in order with but minimal enforcement
activity by the Commission. This has been made
possible to a large extent by the exemption of amateurs
from the secrecy provisions of Section 605 of the Com-
munications Act. Nevertheless, questions have arisen
from time to time because of a literal interpretation
of the last sentence of that section. In addition,
many responsible Citizens Band and General Radio Ser-
vice operators have attempted to bring self-regulation
to the CB service, only to be met by the obstacle that
the exemptions of Section' 605 apply only to amateur
and broadcast stations. To provide clarification and
enlargement of the exemption of Section 605, the
League recommended that the last sentence of that
section. be revised to read as follows:
PAGENO="0301"
1765
This section shal.l not apply to the receiving,
divulging., publishing, or utilization of the
contents of any radio communication which is
transmitted by a broadcast, amateur, citizens
band or personal radio station, or by any other
station for the use of the general public, or
which refers to ships, aircraft, vehicles, or
persons in distress,
The last sentence of Section 605 of the present Act
would become Section 547(e) of the new Act:
(e) This section shall not apply to the
receiving, divulging, publishing, or utilization
of the contents of any radio communications
which is broadcast or transmitted by amateurs
or others for the use of the general public, or
which relates to ships in distress.
The League once again respectfully requests that all non-
commercial communications of Citizens Band Radto, General Radio~
and Personal Radio Stations be exempt and that the wording
recommended by it in the earlier hearings be adopted.
The League appreciates the opportunity to submit these
comments and suggestions and hopes that they will be of assistance
to the Committee,
Respectfully submitted,
Robert M. Booth, Jr.
General Counsel
The American Radio Relay
League, Incorporated
June 7, 1979
PAGENO="0302"
1766
Mr. VAN DEERLIN. I am not a legislative draftsman, Mr. Booth,
but if that is not clear in the present language that amateur radio
operators would not be subject to a fee assessed on commercial use,
I can assure you that it will be made clear
Mr. BOOTH. Thank you, sir.
Mr. VAN DEERLIN. And if I didn't, Senator Goldwater would
make that clear.
Mr. BOOTH. Well, we hope so; but in any event, as I read the
language here, you have to go back to the staff report for a legisla-
tive history to make it clear, and I think that is undesirable if it
can be avoided.
Mr. COLLINS. Mr. Chairman, could I ask how many people are
involved in this country as amateurs?
Mr BOOTH Somewhere close to 375,000, and it is increasing at a
rate of about 15 percent per year
Mr. COLLINS. That is a real good segment of our population.
Mr. BOOTH. Yes, it is, and that is one of the reasons that the
amateur service has been so effective in times of disaster. We have
amateurs in every city, in every part of the country, and while you
may not be able to communicate, say, from Texas up to where you
have tornadoes, up to Kansas City or for emergency supplies be-
cause of propagation conditions, you can certainly communicate
into New York and get back by established commercial facilities.
That is one of the reasons the amateurs have been so highly
effective There are just so many of them and they are basically
trained and set up to operate under such conditions.
Mr. VAN DEERLIN. Are there staff questions for Mr. Booth?
[No response.]
Mr. VAN DEERLIN. We certainly do thank you, Mr. Booth, for
being with us today.
Mr. BOOTH. Thank you very much.
Mr. VAN DEERLIN. By the way, it said you were accompanied by
Mr. Harold Steinman.
Mr. BOOTH. Well, Harold is here. Stand up, Hal.
In view of the length of the time, I thought I would hog whatever
time he might have.
Mr. VAN DEERLIN. Thanks to both of you.
Our next witness is James H. Baker, executive vice president of
Forest Industries Telecommunications in Eugene, Oreg.
STATEMENT OF JAMES H. BAKER, EXECUTIVE VICE
PRESIDENT, FOREST INDUSTRIES TELECOMMUNICATIONS
Mr. BAKER. Good morning. For the record, my name is James H.
Baker, executive vice president, Forest Industries Telecommunica-
tions, better known as FIT.
FIT is an organization of approximately 1,200 member companies
that are users of two-way radios, licensed in the Forest Products
Radio Service under part 90 of the FCC rules.
I have already submitted a separate comprehensive statement
for the record on the interests and concerns of FIT membership in
H.R. 3333. I am glad to say that FIT feels much better about H.R.
3333 than it did about the previous bill. However, we still have
some concerns and I appreciate this opportunity to state our views
PAGENO="0303"
1767
As seen by FIT, spectrum-related matters are believed to be the
key. issue for the private land mobile interests in considering the
Act of 1979. Availability of adequate spectrum is important to the
forest ~industries because most of their activities are located in
rural and mountainous areas where no other form of communica-
tions are available.
Accordingly, the FCC or its successor should be provided with the
authority needed to manage the Nation's spectrum usage efficient-
ly and in a manner responsive to our requirements. One step which
can be taken is to authorize the Commission to make greater use of
the existing frequency industry radio coordinators. This would
place much of the burden of working out detailed frequency coordi-
nation matters. on the users themselves in lieu of the Commission
staff sitting in Washington, D.C.
Senate bill S. 622, section 366, proposes to do this. The addition
of a similar provision in~ H.R. 3333 is recommended for considera-
tion by this subcommittee. Procedures for the allocation and as-
signment of radio frequencies is one of the important current
issues. Title IV of RE. 3333 indicates that the CRC is responsible
for assignments, whereas in title VII, the NTA has a principal
responsibility for allocations.
There appears to be no way for the user public to input the NTA
allocation processes; It is therefore recommended that H.R. 3333
provide for that input, perhaps by bringing the NTA under the
Administrative Procedures Act.
Section 413(d)(1) proposes that any substantial change in the
assignment of spectrum use by broadcast stations must be referred
to Congress, and rules to effect such a change are not to take effect
unless approved by concurrent resolution.
To FIT, this appears to be overkill in the favor of one. user of the
spectrum. There are many users of the spectrum other than broad-
casting whose interests are vital, too. The disadvantage of section
413(b)(i) is that it has the effect of freezing the broadcast spectrum
into place regardless of changing requirements in technology.
Its deletion from H.R. 3333 is recommended for your considera-
tion.
FIT is concerned over the emphasis on economic factors as they
would be applied to private land mobile interests. The use of mar-
ketplace forces and resource fees based on scarcity value over-
looked the realities of private land mobile communications even
though they might well be applicable to broadcasting and common
carrier industries where communications is the business.
Forest industries use of radio for safety and as a tool to enhance
efficiency of operations is an example. Without radio, more lives
would be lost, property destroyed, and the general public would pay
in the end for inefficient operations. In short, the public interest is
`of a nature that economics should not be the criteria for deciding
who among the private land mobile users gets access to the spec-
trum.
Resource fees for spectrum are a particular concern. As I stated
last year, there is no objection to paying a fee for processing the
license application. However, the introduction of a fee based on
scarcity value is a cause of concern as it would require payment of
fees of an unknown and possibly exorbitant amount based on the
PAGENO="0304"
1768
scarcity value of the spectrum already in use for thousands of
private land mobile operations
How scarcity value would be applied to such operations is not
understood because the criteria used in H.R. 3333 is related to
communities, and radios used in the forest industries move about
and the spectrum is shared by multiple users, often in the same
geographical area.
Computation of equitable resource fees would appear to be unre-
alistic from a practical standpoint Additionally, FIT is concerned
that the small businessman logger could be squeezed out of radio
usage; and further still, resource fees would ultimately be passed
on to the consumer and the public in the form of higher prices
Leaving the subject of frequencies, I would make two additional
comments The prohibition of censorship provisions in section 422
is so sweeping that FIT is concerned that much needed operating
regulations will be barred as well Carrying forward the language
of section 326 of the 1934 act seems preferable as seen by FIT.
Finally, FIT feels that the Commission should have authority to
prescribe regulations with regard to transmitter and receiver char
acteristics Improvement in receiver characteristics can enhance
efficiency in spectrum usage, and it appears logical that both ends
of a radio communications system should be under the Commis
sion's purview
On behalf of the members of FIT, I thank you for the opportuni
ty to appear today, and if there are any questions, I will attempt to
answer them to the best of my ability.
[Testimony resumes on p. 1781.]
[Mr. Baker's prepared statement follows:]
PAGENO="0305"
1769
STATEMENT OF JAMES H. BAKER, EXECUTIVE VICE PRESIDENT,
FOREST INDUSTRIES TELECOMMUNICATIONS
My name is James H. Baker and I am the Executive Vice President
of Forest Industries Telecommunications (FIT). FIT is a non-profit asso-
ciation recognized by the Federal Communications Commission (FCC) as the
national coordinator of radio frequencies for the Forest Products Radio
Service. The FIT membership consists of two-way radio users licensed in
the Forest Products Radio Service by the FCC under Part 90 of its Rules
and Regulations. Approximately twelve hundred companies situated through-
out the United States make up the PIT membership. Those companies range
in size from very small logging operations using only two or three radios
to large corporations using thousands of radios. The forest industry is a
large and diverse one, vital to the national interests of our country. FIT
is interested and involved extensively in matters that affect the two-way
radio telecommunications of this industry.
The opportunity to submit this Statement for the Record with
regard to "The Communications Act of l979"(kI.R. 3333)is appreciated. The
principal interests of FIT in H.R. 3333 involve radio frequency spectrum matters
for land mobile use and how this subject is dealt with or not dealt with,
primarily in Title IV of the proposed legislation. Provisions of Titles II
and VII are related and will be addressed as well. The comments that follow
are intended to be constructive and of help to the Subcommittee in preparing
a legislative proposal responsive to the needs and best interests of the
American public.
GENERAL COMMENT
The interest of the FIT membership, as with most other land mobile
users, is in the continued availability of radio as a tool to assure the safe
and efficient conduct of operations and the provision of adequate spectrum
for that purpose. The principal business of the FIT membership is, for example,
logging, log handling, operation of saw mills, manufacturing paper and paper
51-253 0 - 80 - 20
PAGENO="0306"
1770
products and, in general, the production of things that depend upon wood.
Tree planting, fighting forest fires, and conservation are important addi-
tional activities. In a~l of these, radio is an essential tool. While empha-
sis in telecommunications in the eyes of the general public is generally on
broadcasting and common carrier issues, where communications itself is the
business, the importance of radio in industries where the primary business is
other than communications should not be downgraded.
The number one concern of most land mobile radio services, including
the Forest Products Radio Service, is spectrum congestion due to inadequate
allocations in the VHF and lower UHF bands. This problem has been facing the
Commission since the 1960's. It is FIT's opinion that the FCC (or its
successor) must in the future look seriously at the VHF/UHF bands and come forth
with a bold plan for reallocating spectrum to those Services that can only
communicate via radio. For instance the vast amount of spectrum currently
allocated for UHF-TV ~needs to be re-examined. Considering that one TV channel
will provide 240-400 two-way radio channels, it seems logical that the need
for TV to use the spectrum should be carefully scrutinized by the Congress.
The foregoing underscores the importance of effective radio frequency
spectrum management. The FCC (or its successor) should be provided with the
authority needed to manage the nation's spectrum usage efficiently and in a
manner responsive to requirements. One step that can be taken is to authorize
the Commission to make greater use of the existing industry radio frequency
coordinators. This would place much of the burden of working out detailed fre-
quency coordination matters on the users themselves in lieu of the Commission
staff sitting in Washington. Semate Bill S.622 in its Section 336 proposes
to do this. The addition of a similar provision in H.R. 3333 is recommended
for consideration by this Subcommittee.
PAGENO="0307"
1771
It seems to FIT that the Commission is focusing its attention at
present on urban radio frequency problems. Trunked and cellular systems, while
great for the urban areas, will not alleviate frequency congestion in the
Forest Products Radio Service or other rural and small town oriented radio
services. These type systems can alleviate congestion where they are economi-
cally feasible such as in the large metropolitan centers throughout the United
States. And, of course, the spectrum that is made available for these type
systems (800-900 MHz) would be, in any case, unsuitable in the wOods where radio
wave energy in these bands is absorbed by trees. In other words, frequencies
in this order would tend to "warm up the trees" instead of delivering messages
to the men in the woods.
Having made these general comments, I would point out that the views
of FIT on many of the issues involved in telecommunications legislation are
already on file with the Subcommittee through my testimony over the past two
years. In the interest of saving time, information that is already on file
with the Subcommittee will not be repeated in this statement. Proceeding now
to H.R. 3333, the comments that fofiow are submitted with the objective of
assisting the Subcommittee in its deliberations.
CONCEPT OF REGULATION: "TO THE EXTENT MABI(ETPLACE. FORCES
ARE DEFICIENT"SHOULDNOT.BE APPLIED TO THE
PRIVATE RADIO SERVICES
Sections 101 and 411 of H.R. 3333 refers to the public interest be-
ing served by government regulations only when "marketplace forces are def i-
cient". FIT is concerned over the concept of extending "marketplace forces"
to private land mobile spectrum matters. In the Forest Products Radio Service,
spectrum is used for safety and efficiency of operations. Under such circum-.
stances the decision on who should Shave or not have land mobile radio should
not be dependent upon the ability to "pay". The public interest in safety
PAGENO="0308"
1772
of life, firefighting, and production of wood products would appear to be
such that Congress should not relate the essential role of radio in that
interest to economics.
ESTABLISHMENT OF A COMMUNICATIONS REGULATORY COMMISSION
FIT does not feel strongly about establishing a Communications
Regulatory Commission and would not oppose the Subcommittee on the matter.
However, some comment is offered on the subject, for example, the extension
of the Commissioners terms to ten years and limiting them to only one term.
This means that the Commission would be "stuck" with a poor Commissioner for an
extra three years over the present seven years and concurrently unable to retain
a competent one beyond one term. We understand the term of seven years under
the 1934 Act was agreed upon only after considerable deliberation and perhaps
it would be just as well to retain it. Another point FIT suggests to make is
that at all times at least one of the Commissioners should be an engineer with
a background in telecommunications. H.R. 3333 in Section 212 would require
a balance among professional backgrounds -- FIT suggests that the Act be speci-
fic and require that at least one of the Commissioners be an engineer knowledgea-
ble in telecommunications. The Commissioners thus would not be totally depen-
dent upon the Staff for engineering knowledge.
AUTHORITY FOR ALLOCATION AND ASSIGNMENT OF RADIO
~~~NCIES NEEDS CLARIPIC
With access to the frequency spectrum being essential to radio communi-
cations, authority for the allocation and assignment of that resource is a
substantive matter. The language of Title IV refers to "assignments" as a
function of the CRC, but under Title VII, the NTA is to exercise principal
responsibility for "allocations." This division of authority has been carried
over from H.R. 13015 and is still viewed with some concern. As drafted, H.R.
PAGENO="0309"
1773
3333 provides in Section 4l3(a)(8) that the CRC will "assign" radio frequencies
with no reference as to its input to the "allocation" process under the pur-
view of NTA. Last year FIT commented on the lack of provision for public in-
put to the NTA allocation process. However, since H.R. 3333 contains essen-
tially the same provisions, FIT must conclude that there is an overriding
interest on the part of the Congress in concentrating the allocation authority
in one office. Assuming that to be the case, FIT would urge spectrum allocation
actions be subject to the Administrative Procedure Act so that all interestsT
public and private, could be heard. In short, bring NTA under the afore-
mentioned Act when it deals with spectrum allocation matters.
SPECTRUM RESOURCE FEE
Section 414(a) states that "The Commission shall assess an annual
spectrum resource fee in accordance with this section for all users of the
electromagnetic frequency spectrum licensed by the Commission under the Act.
Such fee shall take into account -- (1) the cost to the Commission of process-
ing the license; and (2) the scarcity value of the spectrum being assigned
." The Commission is authorized to waive the fees under three speci-
fic circumstances. Section 414 goes on to provide a formula for assessing land
mobile fees based on the fees assessed to television broadcast stations.
FIT does not oppose paying a fee to cover the costs for processing
its applications and, therefore, does not object to the fee schedule proposed
in Section 414 (a)(l). However, the introduction of a fee based on "scarcity
value" is a different matter as it would require payment of fees of an unknown
and possibly an exorbitant amount based on the scarcity value of spectrum used
for hundreds of thousands of land mobile radio operations. How "scarcity
value" will be applied to all these Forest Products Radio Service operations
is not understood because the criteria used in H.R. 3333 is related to communi-
ties. Radios used for logging operations are generally in remote rural areas
PAGENO="0310"
1774
but where trucks are involved the same frequencies could be used in urban areas
as well. Finally industrial plants that use frequencies in the Forest Products
Radio Service are frequently situated in the environs of urban areas
From a practical implementation standpoint the application of resource
fees appears to FIT as being unrealistic in the Forest Products Radio Service
The relating of UHF television station economics with those of wide ranging
forest products activities would be a frustrating exercise in paperwork.
CONCEPT OF TREATING SPECTRUM AS A RESOURCE WITH
A MEASURABLE ECONOMIC VALUE IS QUESTIONED
FIT has in the past expressed skepticism over proposals that would
attach an economic value to radio frequencies used in private radio services
That skepticism is reiterated Likewise the comparison of radio frequencies
with drilling mining and grazing rights is viewed as gross over-simplifica-
tions To begin with the spectrum is not a standing resource such as coal
oil, or real estate. Until someone turns on a transmitter, there is no radio
frequency (which is actually electrical energy radiating off an antenna) More
importantly, radio frequency characteristics have so many variables, particu-
larly those in mobile communications that FIT does not see how they can be
compared with other natural resources A frequency used from a mountain top
has greater range than a frequency used in a valley The same frequency used
in airplanes at 35 000 feet can cover thousands of square miles while at ground
level it is only useful for line-of-sight Grazing land is a fixed identifiable
and tangible asset capable of being measured in acres -- likewise coal which
can be measured in tons and oil in barrels Spectrum particularly in the
mobile service does not have those clear delimttations hence radio frequencies
cannot be packaged for sale auctioned or otherwise measured practicably for
an economic value
PAGENO="0311"
1775
Spectrum is not only a reusable resource, but it can be used con-
currently by several users at the same time. The same coal cannot be used in
several furnaces at the same time, nor can the same oil be put in several
different tanks. However, frequencies can be and are shared extensively in
the mobile services and particularly in the land mobile service. FIT recog-
nizes that there seems to be a momentum in some circles for the application of
economic principles to the radio frequency spectrum, bj.~t believes the effort
will fail in the end due to the realities of communications operations. For
this reason, it is felt that the concept of utilizing "economics" to determine
fees for the mobile services, particularly land mobile, should not be pursued.
"SCARCITY VALUE" CONCEPT POSES PROBLEMS
FIT feels that, in addition to the technical and operational consi-
derations that preclude a realistic "fair market value" or "scarcity value"
approach to spectrum management and determination of fee schedules, there are
other considerations that should be e,mined. When the Federal Government en-
ters into, a business arrangement ~f6~the lease of lands for mining, drilling,
or grazing, it is acting in a private capacity as born~\out by Circular No. A-25
of the Office of Management and Budget which provides that charges are to be
determined by the application of sound business management principLes, and so
far as practicable and feasible in accordance with ~omparable commercial prac-
tices. To date the radio frequency spectrum has not been treated as a natural
resource to be rented or leased. It has always been FIT's understanding that-~"
the government does not own the spectrum or the right to use it. Instead, the
Commission is charged with regulating the use of radio. (See Communications
tp~f 1934, Sections 301 and 302). Such regulation is derived from the inter-
state commerce clause in the U.S. Constitution and is intended to benefit the
"public" and not licensees. (See NBC v. United States 319 U.S. 190 (1943).
PAGENO="0312"
1776
Noting the foregoing should there be a decision at some future
time to go forward with a scarcity value approach f or the right of access
to radio frequencies there are still special problems to consider Broad-
casters and common carriers are different from private land mobile because
communications is the business of the former They derive economic benefits
because they have access (generally exclusive access) to a radio frequency as
the result of a grant by the FCC The private land mobile users are in a
different category To them radio is a tool for enhancing the safety and
efficiency of their activities The spectrum they use is often heavily shared
Private land mobile users range from small businesses to giant corporations
which is certainly the case in the Forest Products Radio Service Scarcity
value" of a frequency used by a small logger in the mountains of Idaho that
is based on the success of a UHF television station is not comparable to that
of a large logging corporation whose activities cover several states To the
former the one frequency he may have is critical whereas the large corporation
with extensive communications resources will have more flexibility Under a
"scarcity value" situation, the large corporation could easily afford to pay
what is necessary to obtain radio frequencies. The small logger would lose
out and the benefit he could have from the use of radio would be lost FIT
questions seriously that Congress intends or would want for members of the
public and for the public interest to be treated in such a cavalier fashion
A substantial number of the land mobile operations of the FIT mem-
bership are close to t1~e Canadian border Frequencies for those operations
are coordinated by the FCC with Canada pursuant to international agreements and
vice-versa on the part of Canadian users. Making radio frequency usage depen-
dent upon scarcity value in such circumstances is considered totally unrealis-
tic because of the give-and-take of Governmental negotiations at an interna-
tional level
PAGENO="0313"
1777
In sum, FIT would recommend that the "Spectrum Resource Fee" con-
cept be dropped from H.R. 3333, at least as regards its application to pri-
vate land mobile communications. The application of an economic value,
whether based on "scarcity value" or otherwise, is unrealistic to implement,
is unfair to the many small businesses and less well-off members of the public,
and finally, since the government's charge from the Congress is to regulate
the spectrum for the convenience of the public, it would be inconsistent to
reduce the subject to a commercial activity as for mining, drilling, or graz-
ing. Other means are available for managing the spectrum than resource fees.
OTHER SPECTRtHf RELATED ITEMS
While the "Spectrum Resource Fee" is our major concern in the radio
frequency area, there are some other points in H.R. 3333 on which FIT offers
the following comments:
(1) Section 4l3(d)~j~) proposes that any substantial change in the
assignment of spectrum used by broadcast stations must be re-
ferred to the Congress and rules to effect such a change are
not to take effect unless approved by concurrent resolution.
There are many other users than broadcasting who have a vital
interest in the spectrum. The disadvantage of Section 413(d) (1)
is that it has the practical effect of freezing the broadcast
spectrum in place regardless of changing requirements and techno-
logy. Accordingly, FIT recommends the deletion of Section 413(d) (1).
(2) Section 4l5(d)(l)(A)~ii) and Section 436 refers to the use of
"random selection" systems. While the use of "random selec-
tion" is optional in Section 436, it appears to be required
in Section 4l5(d)(l)(A)(ii). From the standpoint of FIT, in the
private land mobile services, an engineered or coordinated solu-
PAGENO="0314"
1778
tion is preferable to random selection As the frequency
coordinator for the Forest Products Radio Service, FIT would
be in position to handle such problems for that Service Fur-
thermore it is felt that if effective use were made of the
industry radio frequency coordinators the need for random
selection in the private radio services would be unnecessary
(3) The term newly assigned frequency is used at least in Sec-
tion 415(d) and in Section 436 Apparently the term is in-
tended to have a special meaning in regard to coordination and
licensing A more meaningful term should be used or a defini-
tion provided
(4) Section 436(b)(2) makes reference to the use of frequency coor-
dinating committees As indicated earlier in this statement FIT
recommends strongly that H R 3333 provide greater status to the
industry frequency coordinating coutmittees The provisions of
Senate Bill S.622 for the~ use of industry, coordinating committees
could be used as a guide for amending H R 3333 The coordinat-
ing committees could do much to decrease the burdens upon the
Commission staff and if used properly could cut down the long
delays that now exist in processing private land mobile applica-
tions Familiarity with the detail of their member a operations
and places the coordinators in position to act effectively and
expeditiously
PROHIBITION OF CENSORSHIP
Section 422 of H R 3333 provides that - - - - nothing in this
Act shall be construed to give the Commission the power to censor or other-
wise regulate the content of any transmission by any person using or operating
PAGENO="0315"
1779
any eSuipment for the provision of broadcast services or land mobile or other
radio services," Essentially the same provision was included in H.R. 13015 and
to which FIT expressed concern to the subcommittee last year. The wording of
Section 422 in the proposed legislation is so broad that it would exclude
essential radio operation regulations, e.g., the use of call signs, the types
of transmissions. The present FCC Rules in Part 90 Subpart N set forth general
operating requirements, including "permissible communications" for the Private
Land Mobile Radio Services. These Rules are essential to good communications
and their retention should be provided for in the proposed legislation. The
basic objective behind Section 422 is supported, however, because it is believed
that the intention was to prohibit the Commission from interfering with the
rights of free speech. Unfortunately, the wording in Section 422 is so broad
that it prohibits regulations essential to effective private land mobile comihuni-
cations. It is suggested that the intended objective can be achieved by carry-
ing forward the language of Section 326 as contained presently in the Communica-
tions Act of 19~4.
TRANSMITTER AND RECEIVER ~zuteituinitjnij~
Sections 4l3(a)(5), (6), and (12) give the Commission authority to
prescribe rules with regard to design of transmitting equipment interference
potential of equipments, and performance characteristics of television re-
ceivers. Paragraphs (5) and (6) refer to "interference" as the criteria for
transmitter design. It is recommended that the concept of improving efficiency
of spectrum usage be included in (5), (6), and (12) as well.
While concurring with the reference in (12) to the regulation of
the performance characteristics of television receivers, it is suggested that
this be broadened to include all receivers. Improvement in receiver character-
istics, particularly in television, will enhance efficiency in spectrum usage.
Further, it is logical that the Commission be given authority to regulate both
PAGENO="0316"
1780
ends of a communications system, i.e., both the transmitter and the receivers,
since the characteristics of one depends to a certain degree on the other,
and particularly as regards spectrum. Extending the Commission's authority
to include design and performance characteristics of both transmitters and
receivers is therefore suggested.
NATIONAL TELECONMUNICATIONS AGEN~
FIT does not oppose the concept of Title VII of H.R. 3333 for the estab-
lishment of an independent agency to be known as the National Telecommunication
Agency. There are two points in Title VII on which I would comment, however,
i.e., (1) allocation of electromagnetic spectrum, and (2) public input to the
development of policy.
The role of NTA in the spectrum allocation process in the United
States is a matter of concern. Section 704(4) states that NTA shall "exercise
principal responsibility for allocation of electromagnetic spectrum - - - -
Since there appears to be no reference as to the Commission's role in the allo-
cation process nor to the manner in which the public would participate, FIT is
concerned that NTA may end up with virtually total and overriding authority
in spectrum allocation matters without direct public input. FIT accordingly
recommends that some provision be made in H.R. 3333 for the Commission and inter-
ested public to participate in the allocation process.
Section 706(b) (7) of H.R. 3333 provides that the Director "shall
assure appropriate consumer representation in connection with the development
of policy by the agency." While FIT understands the objective of consumer re-
presentation, telecommunications policy has broader ramifications than "consumer"
interest. FIT would recommend that Section 706(b) (7) be expanded to include
"other interests from the non-government sector".
On behalf of the FIT and those involved with the Forest Products
Radio Service, I thank you for the opportunity to make this Statement for the
Record of this most important proposed legislation.
PAGENO="0317"
1781
Mr. VAN DEERLIN. Thank you, Mr. Baker.
Mr. Jackson.
Mr. JACKSON. I just didn't understand one point. You seemed to
indicate it was your perception that NTA would not come under
the Administrative Procedures Act, and I wondered if you could
explain why you perceive that to be the case.
Mr. BAKER. Well, it was my understanding that the NTA is the
allocator of the spectrum.
Mr. JACKSON. Wouldn't their allocation decisions be in formal
rulemakings under the APA?
Mr. BAKER. I am not sure. From the way I understood it, that
would not be the case.
Mr. JACKSON. Could you supply us with a legal memo analyzing
that? We would be very interested.
Mr. BAKER. Yes, I would be glad to.
Are there any other questions?
[No response.]
[The following letter was subsequently received for the record:]
PAGENO="0318"
1782
The Honorable Lionel Van Deerlin
Chairman, Subcommittee on Communications
Committee on Interstate and Foreign Commerce
2408 Rayburn House Office Buildfng
Washington, D.C. 20515
Re: Communications Act of 1979
(H.R. 3333)
Dear Chairman Van Deerlin
At the June 7, 1979 hearing of the Subcommittee on Communications
the question of the applicability of the Administrative Procedures Act to
the new National Telecommunications Agency (NTA) proposed in Title VII of
H R 3333 came up in connection with my testimony as a witness for Forest
Industries Telecommunications. As a result I was requested by Mr. Jackson
of the Subcommittee Staff to provide the Subcommittee with a legal opinion
on the point. This letter is in response to that request and is based to
a great extent on legal advice provided by the Washington counsel for Forest
Industries Telecommunications
The question of the applicability of the Administrative Procedures
Act came up at the hearing in the context of NTA s proposed function under
Section 704(4) of H R 3333 to exercise principal responsibility for alloca-
tion of the electromagnetic frequency spectrum for various uses and study
I had expressed concern that under Section 704(4) as written
NTA could exercise its allocation responsibility without input or comment
from the public It was my suggestion that H R 3333 be amended to assure
that there would be input and comment from the public perhaps by bringing
NTA under the Administrative Procedures Act. This led to Mr. Jackson's ob-
servation that the Act would apply to NTA and thus his request for a legal
opinion.
- - ~TJ~ ~ JSTR1ES
~iuth~~i
3025 HILYARD ST. * P.O. BOX 5446 * 503-485-8441
EUGENE OREGON 97405
June 13 1979
PAGENO="0319"
1783
Based on the views of our counsel, I am of the opinion and have
little doubt that the NTA, when established, would be subject to the Admin-
istrative Procedures Act. As far as our counsel or I can determine there
is nothing in the wording of Title VII of H.R. 3333 that could be construed
as exempting NTA from the aforementioned Act.
As I see it, there is a legitimate concern, however, that authori-
ties in the NTA in the future might not always regard spectrum allocations as
a rulemaking function and apply the Administrative Procedures Act. This con-
cern could be resolved easily with some indication of legislative intent, pre-
ferably in Section 704(4) itself, that spectrum allocations are to be effected
only after the public has been put on notice and has had a chance to be heard.
FIT offers two suggestions to resolve the matter:
-- Amend Section 704(4) by adding the words "through rulemak-
ing" at the beginning of Line 14 page 205 of H.R. 3333 so
that it would read - - - -" (4) uiemaki~g exercise
principal authority for allocations - - - -~-".
-- Include a statement in the Report forwarding H.R. 3333 to
the House that it is intended for the NTA to follow provi-
sions of the Administrative Procedures Act in exercising its
functions with regard to allocation of the electromagnetic
spectrum. Certain military and foreign affairs functions
are to be excepted at the discretion of the Director NTA
(See 5 USCA §553(a) (1))
Without some indication of legislative intent along the lines suggested
above, litigation would be required, as I see it, to resolve the i~ssue should
some future NTA Director regard spectrum allocations as being an intra-Federal
Government function.
I trust the foregoing clarifies the suggestion made in my testimony
and, at the same time, is responsive to Mr. Jackson's request-. If there are
any questions or if I can be of further assistance to you, the members of the
Subcommittee, or to the Subcommittee staff, please do not hesitate to ask.
truly
H. Baker
tve Vice President
JHB/skp
PAGENO="0320"
1784
Mr VAN DEERLIN Thank you, Mr Baker
Our final witness, going on at 1202, Mr Harvey Strichartz,
technical director for the American Radio Association
STATEMENT OF HARVEY STRICHARTZ, TECHNICAL DIRECTOR
AMERICAN RADIO ASSOCIATION, AFL-CIO AND ON BEHALF
OF AFL-CIO MARITIME COMMITTEE
Mr STRICHARTZ Thank you, Mr Chairman
As in the past, I would like to submit my formal statement for
the record and simply summarize it as briefly as I can so that we
can get out of here by 1205 or 12 06, hopefully Do I have your
leave9
Mr VAN DEERLIN Oh, absolutely There is no one else here to
object
Mr STRICHARTZ I am sure the contents of our statement will be,
as in the past, carefully examined
I am Harvey Strichartz, technical director of the American Radio
Association, appearing here today for the American Radio Associ
ation, AFL-CIO, whose members are radio officers and radio elec
tronic officers on oceangoing vessels of the U S merchant marine
We have heard from foresters, common carriers, and now we
hear from the men who go down to the sea in ships and sail in
deep waters We also appear on behalf of the AFL-CIO Maritime
Committee Our statement identifies who we are and what our
interests are
We are addressing an aspect of this legislation which is some
what different from what you have been considering It concerns
primarily safety at sea, and when safety at sea is mentioned, it is
our people, our members, and our shipmates whose lives are
involved.
We are also interested in the efficiency of communications be
cause it is our livelihood as well as our lives that depend upon the
efficient as well as safe operation of vessels
The problem is that the act of 1979 as redrafted in the instant
bill has a very serious and what could be a devastating omission
We refer to the omission of title III, parts 2 and 3, of the Communi
cations Act of 1934 These are now the only provisions in U S law
that regulate radio for the safety of life and property at sea The
failure to maintain these provisions intact in the new act could be
very destructive
In 1977 your subcommittee held overview hearings on the Com
munications Act We testified I have ascertained that there was no
testimony adverse to title III, parts 2 and 3, and no one testified
adversely to the manner in which the FCC has regulated in the
area of maritime radio for sea safety FCC has been exemplary in
this respect
Whatever else this legislation before you would do in other areas,
and we do not comment on them, its enactment with the deficien
cy-that is, the lack of title III, parts 2 and 3-would be a disaster
to the men and ships of the United States.
We earnestly urge you take intO account the following important
matters. First of all, there was no testimony on the record adverse
to the existing provisions Second, radio is exceedingly important
because it is the means by which vessels are knit together in a
PAGENO="0321"
1785
network of great and seaworthy lifeboats for each others mutual
assistance.
Third, there is a substantial legislative history and we have
appended a summary of that legislative history, to our statement,
which goes to the validity and necessity of those provisions. Fourth,
there is a new environmental concern that is quite serious. Let me
give you two recent examples.
Large vessels, when they fall victim to the perils of the sea,
especially large tankers, can spill enough petroleum products into
the sea to wipe out an entire fishing ground, destroy the coastline
of a whole State. The recent Argo Merchant oil spill threatened the
Georges Banks fishing grounds. The oil spill in the recent Amoco
Cadiz off France cost over $300 million to remedy, and the remedy
was not complete.
As we have pointed out, the deficiency of omitting these provi-
sions would leave radio regulated only to the extent of internation-
al treaties, which would mean that the lower level of regulation
arrived at through international compromises is all that would
apply to ships on international voyages. As to domestic voyages,
there would be no regulation whatsoever.
The purpose as stated in the act of 1979 is that there shall be
"regulation to the extent that the marketplace forces are defi-
cient." It must be recognized that there is no market for safety and
that marketplace forces, the law of the market and the underlying
concept of the market all act to bring costs down.
One cost which is never factored in and cannot be factored in is
the value of human life. The value of the environment is just
another such new cost which cannot be factored in.
We think the language on the purpose of the proposed act has to
be changed to provide for regulation for safety irrespective of mar-
ketplace forces. Our prepared statement offers language to do this.
We have listed, in addition to carrying forward title III, part 2 and
3, some other sections which should be carried forward, and this
should be done because there is effective, valid and meritorious
regulation in this area, based upon them, that has been working
well to preserve life and property.
Finally, we would like to urge that the regulation of radio be
done by the FCC or whatever radio agency the new legislation
brings forth. The Coast Guard, DOT, has expertise on naval archi-
tecture, lifeboats, navigational lanes and so forth. The FCC has the
radio expertise and has provided regulation over the years and
provided it well.
There is a very fine skein of regulation in this area. There is
staff. There is a great deal of know-how, and it is all working well
for U.S. ships. It should be kept doing just that.
Finally, the whole world is looking at the grounding of the DC-
10's. The history of regulation has been one of reacting to disasters.
Ships first had radio compulsorily required in 1912, after the Titan-
ic. The act of 1934 was amended by title III, part 2, in the light of a
whole series of disasters, such the SS Mohawk and the SS Morro
Castle, in the 1930's.
This is really not the way to legislate. The way to legislate is to
recognize that there is a continuum of forces and factors that work
51-253 0 - 80 - 21
PAGENO="0322"
1786
for safety and to preserve them, and not simply pour them out on
the ground, and say that maybe somebody else will pick them up.
No one else can pick them up. No regulatory agency can pick up
and regulate in this area unless title III, part 2 is carried forward.
There is no need to reinvent the wheel. The wheel is working and
turning well. We ask that it not be cut off the wagon.
Thank you, Mr. Chairman, and pardon me for mixing metaphors.
[Testimony resumes on p. 1820.]
[Mr. Strichartz' prepared statement and attachments follow:]
PAGENO="0323"
1787
STATEMENT o~ THE AMERICAN RADIO ASSOCIATION, AFL-CIO, IN ITS OWN BEHALF
AND IN BEHALF OF THE AFL-CIO MARITIME COMMITTEE, SUBMITTED BY HARVEY
STRICHARTZ, ARA TECHNICAL DIRECTOR
?4R. CHAIRMAN AND MEMBERS OF THE SUBCOMMITTEE;
I am Harvey Strichartz, Technical Director of the American Radio Association,
AFL-CIO. The members of the ABA are Radio Officers and Radio Electronic Officers
serving aboard the ocean-going vessels of the United States Merchant Marine. This
statement is also made on behalf of the AFL-CIO Maritime Committee. ABA shares
with other ship officers and crew members, and with all of the American people, a
deep interest in the advancement of maritime telecommunications technology, to
enable our U.S. Flag vessels to operate safely and efficiently. This is so be-
cause, in the first instance our lives are at stake when safety Is the factor,
and our livelihoods are involved in the efficiency of U.S. Flag shipping.
A further interest of ABA may be summarized In. the fact that our members,
Radio Officers and Radio Electronic Officers serving on the vessels of the
steamship companies operating In the U.S. Merchant Marine with which our organi-
zations has contractual relationships, constitute the personnel who have been
designated, In those contracts, to operate, maintain and repair all radlocommuni-
cationa equipment, and to maintain and repair all radlonavigatlon devices. (These
activities are described in the excerpts from our working rules, attached as
Appendix A). We are therefore closely Involved In the precise activity to which
our statement here today addresses itself, providing for the safety, of life at
sea through radio.
As you know, the Communications Act of 1934, Title III, Parts II and III,
coatain the only existing provisions of United States law that require vessels
of various tonnage groups, (1) to carry radio equIpment, (2) be manned by radio
officers or operators, (3) to maintain radio safety watches, (4) to maintain this":
vital equipment, and to do other things for the safety of life and property at
sea through Radio, both on coastwlse, Intercoastal, other non-contiguous domestIq~
voyages, and on international voyages. This is valid and effective law,'
and under it the Federal Communications Commission has regulated ship radio in
PAGENO="0324"
1788
exemplary fashion
A major problem arises in that the legislation under consideration H R
3333 would if enacted in the process of repealing the Act of 1934 and re-
placing it with a new Communications Act of 1979 also repeal Title III Parts II
and III In their place H R 3333 contains noth~~ on maritime radio safety
that corresponds to these provisions
For this reason irrespective of whatever else H R 3333 does in any other
area its enactment would be a disaster for U S ships and the officers crew
members and passengers whose safety during voyages at sea is presently well
provided for through the use of radio as well as for the public interest in the
safety and efficiency of U S ships and of world shipping We therefore
earnestly and respectfully urge that the Committee in its deliberations take
into account the following considerations
1 Prior to the introduction of H R 3333 (and its predecessor Bill H R 13015)
your Subcommittee reviewed maritime communications as part of an overall review
of the Communications Act of 1934 during the Fall of 1977 Your Subcommittee
reviewed the role of the Federal Communications Commission as an independent
regulatory body that had been created by the Congress to implement the legislative
will of the Congress in the area of communications In the course of those
hearings, there was absolutely no testimony~ adver~ to the manner in which Title III,
Part II has operated to serve its safety objectives nor adverse to the manner in
which the FCC has applied and enforced Title III Parts II and III to serve safety
The testimony which the ABA gave was that Title III Part II has indeed served
safety and that the FCC has enforced it in exemplary fashion
As you know historically much of the impetus for the early growth of the
radio art came from the use of radio as the means by which the large seagoing ships
of the world, sailing the great open ocean spaces, could be knit together into a
mutual self-help network. Radio made it possible for every ship to become a
potential lifeboat for each other, able to rescue the passengers and crews of every
PAGENO="0325"
1789
other ship, should it fall victim of storm, fire, collision, stranding or any
other of the perils of the sea. This is why Title III, Part II is so important,
and should survive intact any change of the Act,
These provisions were adopted as Public Law 97 of the 75th Congress, which
in 1937 amended Communications Act of 1934 to make provisions for safety at sea.
In enacting Public Law 97, Congress made its radio requirements at least equal
to, and in some respects greater than those of the Safety of Life at Sea Convention
of 1929. In considering what was to become Public Law 97, the Committees and
Members of the 74th and 75th Congress had before them, not only the 1929 Safety
Convention, but also the then recent tragic experiences of a large number of
severe sea casualties involving United States citiaens and vessels, such as
the Morro Castle and the Mohawk disasters.
The legislative history of Title III, Part II is worthy of careful study,
because the philosophy embodied in this legislation was valid when It was adopted,
and is essentially valid today. There is neither time nor need to go into detail
on that legislative history here today. We have, however, attached as Appendix B,
a detailed study of the legislative history of Title III, Part II, and will confine
ourselves to simply listing the main points of its provisions and underlying
philosophy. These are:
First, that U.S. ships should meet the highest attainable standards of safety
radio equipment, personnel and practices, not just equal the international provisions.
This was In recognition of the fact that international requirements are necessarily
compromises between those countries desiring to provide the best and those who want
to require the least, but who nevertheless have votes at international conferences,
and in the ratification of International Conventions.
Second, the Congress noted that the sea can destroy a ship navigating in the
open sea, regardless of the type of voyage on which it is engaged. Therefore, the
Act not only applies its radio requirements to vessels engaged on international
PAGENO="0326"
1790
voyages (from a port in one country to one in another) but it also applies
these requirement to U S ships that engage in domestic (or coastwise) voyages
between one port of the United States and another U S port
Parenthetically it should be noted that coastwise voyages have recently
assumed increased importance to the American people now that environmental
concerns have come to the fore The average size of tankers carrying petroleum
products has vastly increased from an average of 12 000 to 15 000 tons in 1937
to today when tankers of 90 000 tons are commonplace and sizes of 250 000 to
a half million tons are now not at all unu3u~l. This means that destruction of
a single large tanker can not only pollute the environment of an entire state
and wreak economic destruction on hundreds of miles of coastal cities and
resorts but such a diseaster can destroy an entire fishing ground as when
the ARGO NERCHANT oil-spill threatened the Grand Banks Or as another example
consider the fact that clean-up costs resulting from the oil spill in the loss
of the L~N0C0 CADIZ off the French Coast in March 1978, approximated 300 million
dollars
The United States with approximately 6 500 miles of coastline has one of
the worlds biggest environmental stakes in the safe operation of ships in its
coastal waters
If H R 13015 were enacted without including in it the provisions now
contained in Title III Part II and III in it the following would result
(1) A ~ plete void would exist as to radio safety provisions for all cargo and
passenger vessels irrespective of tonnage that engage in domestic ~pyages
(including the Alaska Hawaii Puerto Rico and Virgin Island trades) This would
include ships of a quarter million and more gross tons
(2) No reQuirement whatsoever would cover vessels carrying passengers for hire
in the open sea or in any tidewater to the open sea (so-called party boats ),
(3) 9~ the most minimal radio requirement (those that are found in internat-
PAGENO="0327"
1791
ional treaties), would cover cargo and passenger vessels engaged in international
voyages, gg~g~s ~
(4) The repeal of Title III, Parts II and III, and the consequent removal
of the legislative basis for the valid and effective regulations on Shipboard
radio now promulgated by the FCC, would leave the new Communications Regulatory
Commission, or ~ other U.S. ~ powerless to act in the area of radio for
maritime safety.
H.R. 3333 would leave U. S. vessels engaging on international voyages covered
only by the provisions of international treaties, which necessarily embody the
low common standards other nations, both advanced and undeveloped, are willing
to accept. (The least advanced nations usually have no radio law of their own,
but use only the international treaties since they desire the absolute minimum.)
The U. S. has always met and çe~gded international requirements, to provide the
highest level of safety.
* H. R. 3333 would permit regulation of maritime radio safety provisions only
"to the extent market place forces are deficient." (H.R. 3333, Section 101). Un-
fortunately, marketplace forces act to diminish costs and safety, and this could
result in sacrificing human life to economic gain.
Radio cab contribute to that safety. How does Title III, Part II of the Act
make provisions for it now?
First, they mandate radiocommunication and radionavigation equipment that is
capable of providing for safe communication and for timely assistance to your own
or other vessels in distress, by the most reliable equipment and modes.
For t~helarger, over 1,600 gross ton vessels, this is specified as radio-
telegraph equipment since it is the ~ ~gg~ and reliable,
Second, they require that when this equipment fails, corrective maintenance
(or repairs) be provided so that the equipment will be available at all times for
the purposes Just mentioned. This they do by requiring that experienced Radio
Officers be carried on the larger, over 1,600 gross ton ships. (How well this
PAGENO="0328"
1792
requirement has worked is described in the article attached as appendix C.) The
provisions of Title III Part II of the Act are most appropos and wise indeed in
that they include the requirement that before a Radio Officer may be permitted to
act as the only Radio Officer providing these vital safety services to a vessel
he must have at least six months seagoing experience
j~ they provide for practices and procedures such as safety radio watches
that effectively knit vessels together into the great lifesaving network discussed
earlier, ensuring thereby that vessels will be aware of each others plight and able
to help each other in distress
They have great wisdom in another respect; they require that the FCC consider
all of the hazards of the route or the conditions of the voyage before the Commission
may exempt any vessel from participating in this sea-safety radio network They
provide, in Sec. 352 (C), flexibility for unforseen circumstances. All of these
requirements, for radiotElegraph equipment, for safety radio watches and for Radio
Officers with six months seatime, have served well, and should be
carried forward intact, to protect lives and the environment. That is why we
propose the following
Irrespective of whatever else may happen to H R 3333 all of Title III
Parts II and III the fruits of wisdom of the Congress over the past years should
continue ~. In éarrying them `forward, no ~ should be made in their ~
since it embodies ~a~.cMAc provisions that underly specific regulations which are
now working well to provide maritime radio safety
The opening section of H R 3333 on its purpose (101) should be modified
to provide for maritime radio safety regulation !~e~i~e of rnarketp],~ç,~ ~s
as an absolute need. This would be accomplished by including the following as 101 (c):
"(c) It is the purpose of this Act to provide for regulation, irrespective
of marketplace forces, for the purpose of safety of life and property at
sea through the use of radiocommunicatiOns
In addition to Title III, Parts II and III, the following provisions of the
Act of 1934 should also be retained intact
PAGENO="0329"
1793
Section 303, on powers of the Commission as to licensing.
Section 318, operation of transmitting apparatus.
Section 320, on avoiding interference with d~stress signals.
Section 321, on distress signals and communciations.
Section 322, on intercommunication in mobile safety.
Section 324, on use of minimum power.
Section 325, forbidding false distress signals.
Finally, we urge that the regulation of radio for sea safety continue to
be the function of the Communictions Regulatory Commission contemplated by H.R.
3333, or whatever agency the legislation designates to regulate radio. We are
aware that such safety matters as ship construction, lifeboat requirements, radar,
etc., are now regulated by the Department of Transportation. This is so because
the D.0.T. agency involved has the expertise in respect of the specific areas
involved. However, the regulation of radio for safety at sea has in the past been
well performed by the FCC, which has the radio ~çp~tise. We would therefore urge
that the FCC, CRC or the whatever new radio regulatory agency might be set up by
the new legislation, be assigned the authority to regulate radio for safety of
life at sea, in the same manner as the FCC now is. And, *as we have said above,
the new agency should begin with the text of Title III, Part II and III and the
regulations promulgated thereunder, carried forward intact.
Thank you for your attention, and for the opportunity to appear before you
today. I hope we have been helpful, and look forward to contributing whatever
I can to the Panel discussion.
PAGENO="0330"
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PAGENO="0331"
1795
Section 22 (a) Radio Officers and/or Radio Elec-
tronics Officers shall perform all duties incident to the
o eration and maintenance of all radio and/or electronic
Co munica tons evices oirV.~T~operat~lTtcy
the Company. A radio an or electronic external com-
munications devices, described in Sections 2 and 3 in-
cluding Radiotelephone, Radio Facsimile, Radio Tele-
type, communications computers or any other such dev-
ices, when carried shall be located only in the Radio
Room and shall be o erated, maintained and repaired
oni b the Radio Ofticer an or a to ecti~~øI-
icer. ( aviga i n computers and o~i~?'~l~ctr&iic naviga-
tional e M~rrrstl"tc~1ocated in or in the vicinity of
the Radio Room including bridge, but regardless of loca-
tion shall be maintained and rep~ed onl b the Radio
Offi~~Zl7öflaiL[é~ètronics Officer.
(b) Radio Officers and/or Radio Electronics Officers
shall not be required to perform any duties other than
those required for the operation and maintenance and re-
pair of the vessel's licensed radio station and other
equipment and devices as outlined in Sections 2, 3 and
22(a) except in an emergency involving the safety of life
and/or property. Emergency shall be defined to mean a
bonafide distress situation.
Radio Officers and/or Radio Electronics Officers
may also be required to maintain and make repairs to the
Radio Compass when the services of Radio Compass
experts are not available; provided that under such cir-
cumstances, they shall not be held responsible for the ef-
ficiency or accuracy of the Radio Compass.
Radio-Electronics Officers a be r uired to main-
tain and make repairs to other~j tci~gic. evtces, c -
~ Section 23(b)~fl, prôv-
ided that the necessary tools, instruments and spare parts
are carried.
PAGENO="0332"
1796
AUTOMATION
Section 51. The Company agrees that plans for auto-
mation of existing or future vessels shall not involve a
manning scale of less than one Radio Officer or Radio
Electronics Officer on freight vessels and not less than
the manning scales provided in this Agreement on pas-
senger ships. On the contra ath,iUL~L0
Officers and/or Radio~EI ~j~jç,s~QJficers fro~.~,Lyessel,
~Fi~j~1~iuire that siiëlflhTen trai~iT5~y
thé~.AB.~ ~ wi~j~ç.jiffded
~ ~
lirtifIs Agreement
SAFETY AT SEA
Section 52. In the interest and for the purpose of pro-
moting safety of life and property at sea, and in the in-
terest of National Defense, the Company agrees that all
freight vessels owned or operated by the Company which
have a gross tonnage of 1600 or more and all passenger
vessels owned or operated by the Company irrespective
of size shall be equipped with properly authorized licensed
radiotelegraph and/or radiotelephone stations and shall be
manned with Radio Officers and/or Radio Electronics
Officers duly certified by the Federal Communications
Commission to act as commercial first- or second-class
radiotelegraph operators and that all such vessels shall re-
main so equipped and manned throughout the life of this
Agreement.
Ths section only applies to self-propelled craft, and, is
intended to cover oceangoing vessels engaged in coast-
wise, inter-coastal, nearby foreign, and foreign voyages.
`%hei any of the equipment in the
jurisdiction of `he U'uon s operating
improperly or is inoperative and re~
quires repairs, said repairs shall not be
delayed until reaching port if the neces
sary spa~e~arts are available and the
Radio Officer or Radio Electronics
Officer has a Radar Endorsement, if
radar equipment is involved and is
qualified otherwise
`When repairs are being done to the
ship's licensed radio station, including
the radio direction finder, ship's radar
or other equipment in the jurisdiction
of the Radio Officer or Radio Elec-
tromcs Officer, `i ~atho O5ficer or
Radio Electronics Officer ~v~ho isiè~
qmred to supervise such ripairs be
tween ` the hours of 8 AM to 3 PM,
Monday to Friday, shall not be dis-
missed, while such repairs are being
performed and until they are corn-
pleted, provided that he may be dis-
misser at or after 8 PM.
PAGENO="0333"
1797
P~DDEND1JM 1
RULES ON RADIOTELEPHONE
OPERATION
To be posted in Radio Room and on Bridge on ves-
sels equipped. with radiotelephone.
Operation of Radiotelephone equipment shall be in
accordance with the following rules which both the
Company and the Union agree do not supersede, but are
in accordance with the terms of the collective bargaIning
Agreement between them relating to such operation.
.1. air and maintenance at sea-Only the ship Ra-
dio fleer an or ~E1~ctroiics Officer shall be
assigned to or perform duties necessary for maintenance,
repair and operation of Radiotelephone equipment at sea,
(Section 22 (a)).
2. OPERATION-(a) Radio Officers and/or Radio
Electronics Officers shall perform all duties incident to
the o eration maintenance and repair ~lfla io an or.
e ectronic comm es vessels operated
by the Company. All radio and/or electronic communi-
cations devices, described in Section 2(a), including Ra-
diotelephone, when carried, shall be located only in the
Radio Room and shall be operated and maintained only
by the Radio Officer and/or Radio Electronics Officer.
(Section 3(b) and 22(a)).'
/WDE4DUM 3
(m~ The parties recognize mat VHF and other types
of communication for: (1) meteorology, (2) data trans-
mission, (3) oceanographic, (4) radiofacsimile, (5) prin-
ter, (6) navigation, and (7) public or other correspon-
dence to and from vessels via satellite relay Mll . be
tested shortly, and jointly stat g&~.en and. un-
derstanding that pursuant to and subject to Section 3 of
the parties' agreement I es and steps of such~
munications as prove to be feast e to o~ from me vessel
~
~m~ronics ~FF rs,an no other personnel, not-
~antn~nyo1itcrOviSiOflS made herein.
(e) All radio and/or electronic communications
equipment other than the portable units described in 2.
(a) above shall be located only in the Radio Room and
shall be o2erated, rna~ntained a~cliçt~ai~.,only by the
Radio Officer or I Iio [ectronics Officer. The porta-
ble equipment described in 2. (a) above shall be ~
d and re aired only by Radio Officers and/or Ra-
dio Cs ic rs.
PAGENO="0334"
1798
7. M~tintcnance and repair of all the equip-.
ment~crrctoj~tijsAcic1endum No.4 shall
continue to be performed only by the Radio
Offi~,er 0. P.idio LlecLi.onjcs Officer
8 a Maintaining inventory of spare parts
and requisitioning ot spare parts as may be
required for the ship's Licensed Radio Sta-
tion, R~cLo clelyoe, Loran, cø11i~ion
course computers associated with Radar and
On) other equipment in the maintenance re-
cpon.,. bil ity oL thc Radio Officer or Radio
Electronics Officer, and reventative main-
tenance thereof
~ 3. shall he ~rfoi~~~t sea on a ~reek-
1 basis (procedures~~flcfonn-
ul'ile by the AR~ UHF PLogr~m `ind
ag~.eed by the Union `ma the Compan-.
~s) ,,~
b ~ thafl be
deemed to be those procedures performed on. a
normally functioning device, to maintain it in,
such normally functioning condition, and may
include, as applic'ible, ie~ular inspecLion,
cleaning, tightening, lubricating and test-
ing of such devicxs, including spares,.as.
well `is align-'eat, caUbraLio~-t, adjust `ent
(at frequencies appropriate to the particu-
lar device), and any other necessary pro-
cedures.
c ~1~" shall be deemed to be
those procedures performed on a non-func-..
tioning oi m'i) funLtlonlng device, 10 restore
it to nor~"al tunc t o-~ing condition, and may
include any o C the procedures us ted in (h)
above ~h~n performed on a non functioning
or n'ilfunctioinng unit
PAGENO="0335"
1799~
APPENDIX B
E. Legislative History of Title III,, Part II of the Aät.
I. ~eeariy leg ativ! history.
1. Senate Resolution No. 7~ (74th Cong~~J: It ordered
an investigation of the ~rro Castle and Rohawk disasters, and auth..
orized the investigating committee to reccinmerid necessary remedial
legislation:
"The Norro Castle and the Mohawk disasters
moved the senate of the United States to adopt a
resolution requesting the Committee on Commerce of
the Senate or a subcomfttttee thereof to conduct a
study ~f the causes of' these disasters, to make
studies which might throw light on the question of
safety of life at sea, and to make recommendations
to the Congress for greater security of persons and
property at sea.,,'! Senate Report No. 196 (on 5.595,
* . Public Law No. 97, 75th Congress, 1st Session), p. 2,
March 17, 1937. .
2. te Biil~5~, This legislation was passed to add
Title III, Part XI, to the Communications Aót of 1934, as amended,
and,
* 0 - "As a result of this study of the problem
* the bill which the Commerce Committee now report,
* with certain modifications, was prepared and intro-
duced by Senator Copeland,.." Senate Report No.
196, above, p. 3.
3. ~lio Law No. 97 (75th Congress, 1st Sessi~: Its
object was to lricrease.safetyat sea. This legislation received bi-
partisan support, mince the members of both parties were unwilling
to play politics ~witb human lives.
(a) pose o~ the law was to increase safety at sea:
"...Section 1 of the Communications Act of' 1934
is hereby amended by inserting after the words `for the
* purpose of the national defense' a comma and the words
`for the purpose of promotin~ safety of' life and proper
t brough. the use of wfrè andradio communication." -
ection 1, P.L. 97, 75th Congress, C. 229 - 1st Session,
8.595, approved Nay 20, 1937 (emphasis supplied).
(b) Senate Renort No. 196 stressed that safety was
to be the aim of the Commission in enforcing this law:
"The Committee feels that it 8hould be the aim
of the~Commission to assure itself, within practicable
limits, that the radio installations required by law
to be installed upon ships are at au times in operating
conditions, manned by competent operators, and available
to give the greatest assurance of protection to life and
property on the ~high seas ,.." - Senate Report No. 3.96,
(on. Public Law 97, 5, .595), March 17, 1937, 75th Congress,
1st Session, p. 4.
Cc) Method: Coastwise and international voyages
were similarly treated for the purposes of' safety at sea. Congress
~P~)1led the same p~inciples to coastwfse shipping as it applied to
PAGENO="0336"
1800
vessels making international voyages, and imposed the same radio re-
quirements for ~ vessels over 1600 tons:
* "In this bill, therefore, an endeavor has been
made to apply the requirements of the convention to our
domestic shipping so far as ~ !!~~Jl ~ into. th~
* sea are concerned and to restore some of ~he lost
prestige which has cone through our failure to keep
abreast of modern developments in this important feature
of safety at sea
"Today, there are probably 600 or more ships of
the United States of substantial tonnage carrying many
persons as passengers and crews, which neither by our
law nor the Convention are required to carry radio. No
more pointed illustration of the danger and of the
tragedy of this inadequacy of law can be found .jthan in
the fact that there was an Pmerican ship not required
to be equipped with radio within 30 miles of the Vestris
and which sailed away because it did not receive the
SOS signals of that doomed vessel. We are told that
that ship was so near to the Vestris that* it might have
saved all.. ." - Senate Report, No. 196, p. 2 (Emphasis
supplied.)
(d) The reason Congress took this approach is obvious.
Vessels entering the ~ sea face the sane dangers and can provide
the same contribution to a common network of vessels, knit together
by radio, for mutual assistance in emergencies. The House Report on
the sane legislation noted that:
"...a considerable number of ~ 2p~t~g in
* coastwise service which at present are not required by
* either theTiàw or the treaty to be equipped with radio.
These ships ~ to sea, face the same ~ ~
* available as liThboats to distressed vessels, in the
sa~ñ~e manner as those required by law to carry radio.
This bill remedies this inconsistency...
"These ships cruise in ~ ~ face
the same dan~rs as those in interna14PP~i yo~~s7 -
~i~se Report No. ~6(~Ii P. L. No. 97, S595~J i~pril 23,
1937, pp. .2, k, 75th Congress, 1st Session (emphasis
* supplied).
* (e) Coveragq~ or ~ from the radio requirements
were based on the hazards encountered on the ~ of ~ ~
the circumstances of the voyage, and other conditions of the same
nature; thus voyage considerations, not the nautical mileage limita-
tions, were p~mary in the exemption provision Cortgresa placed In the
Act, since the Congress had before It the facts of the Morro Castle
disaster which had occurred well within the 20 and 150 mile limits,
and in fact within ~jg~ o~ land:
"The proposed legislation provides -
* * "(a) That the Comnission may exempt ships or
make blanket excnptlons ~ clarses of ships If It
considers that the reute or the condItions of the
* ~ or other circums~p~ are such as to render a
radio insta11at~ unreasonab~ or ~ ... -
PAGENO="0337"
1801
* House Report No. 686 (on Public Law No. 97,S595) April
23, 1937 p. 5~ 75th Congress, 1st Session (emphasis
supplied).
~F. ernatiorial ~ standards were met - and raised:
The Safety of Life at Sea Convention, London, 1929, had provided
* Congress with guidance on tlie coverage, (to commence with 1600 gross
tons and up) and had indicated conditions relevant to exemption.
(Safety Convention, London, 1929, Articles 26 and 28.
Congress, however, had taken these Convention requirements
* fox' international voyages, and in P.L. 91 ~ppLied them to coastwis~
yç~yages, as well:
"The 1929 Convention (Safety of Life at Sea
Convention, London, 1929) applies only to vessels
employed on international voyages... Senate Report
No. 196, p. 1.
"This bill has taken from the 1929 Convention
on Safety of Life at Sea the part thereof relating to
radio and has sought to adapt it to our circumstances
and our requirements. Your committee assert generally
that we have written into the bill the standards of
the world, that in some pects we fl~ raised such
~.~ndard~, and we assert, unqualifiedly tE~i~~ have
immeasurably lifted the standards of present United
* States Law. - Senate Report No. 196, p. 3.'
.5. During the floor debate in the Senate on this bill,
Senator Copeland underscored two points:..
a) the bi-partisari nature of the legisla-
tion, and
b) the safety purpose of the bill:
"MR. COPELAND.. .A full agreement was reached
by all parties in interest; and by unanimous vote of
the Committee it was recommended that ttiibfll be re-
ported for the calendar and be passed.
"The bill provides, as the Senator from Arkansas
has said, for carrying out the conclusions of the
*i International Convention for the Safety of Life at Sea.
It provides for radio on ships, so that in case of
disaster or distress there may be cornmunication.The
L~I~ in t~ public interest and certainly is in the
interest of the preservation of.human life..." - 81
Cong. Record - p. 2k65 (1937). (emphasis supplied).
6. The floor debate in the House concerned itself, among
othet' matters, with the exemption and coverage ot various classes of
vessels.. House Merchant Marine Committee Chairman, Congressman
Bland, replied to an inquiry as to just which ships were referred
to in the coastal trade, as follows:
* "MR. BARDEN. Mr. Speaker, reserving the right
to object, may I ask the gentleman from Virginia to
explain just what boats this refers to in the coastal
* trade? * -
51-253 0 - 80 - 22
PAGENO="0338"
1802
SP~ BLAND As to ~fj~ht vessels they must
be of ~ ~oss tons and as to passenger ves.~els
affected It~~s not affect any boats on the bays or
`inland waters." - 81 Cong. Record - p~ 4134 (1937).
* (emphasis supplied).
XI. The `more recent_legis)a~j~ehi5tq~ - Public Law No.
~B3~~iss 2nd ~essi.onJ reveals the following
* factual history:
i) As to Senate Bill 211.5~ A recent session of
Congress the 83rd Congress 2nd Session had before it S 2453
Amendments to Lommunications Act Requiring Radio Equipment and Radio
Operators On Board Ships (aporoved August 13 1954 Publ4.c Law ~84
83d Congress Chapters 7 to 9 2d Session 50 Stat 192 ) During
the course of consideration of 5 2453 Congress reviewed again
found valid reaffirmed and further extended the previously expreszs~
Congressional intent relative to ship radio requirements of P L 97
as to
a) purpose - safety
b) method - through covering coastwise voyages as
well as international voyages
c) reason - sane hazards faced in common safety
network needed by ships in open sea
d) coverage or exemption - voyage conditions route
circumstances
e) Treaty standards - met and raised
t) Bipartisan rature - passed unanimously in both
House and Senate
This is amply explained in identical wording in both Senate
and house Renorts on S 2453
"In 1929 an International Safety of Lire at
Sea Conference was held in London at which time a com-
pulsory s'iip radio formula was developed covering cc
tam classes of ships engaged on international voy~e
"The convention was ratified by the United
States in 1936, and in 1937 the Congress amended the
Communications Act (mainly the addition of pt. II to
title iii) so as to implemer~t the provisions of the
convention This amendm'~n~ also we~i~ be~~ the radio
provisions of the convention of p~yj~ higher techni-
cal radio standards to United State, vessels and to
foreign ships o~ nonconvention countries ~hen departing
from ports of he United states for a vo~age in th'~
s~a ~egardless of whether such vo~age wrs int~r-
natio'~al or not In con eq~ence the new leg_slation
covered vessels on coastcn.se done&1.c ~ as eli
those engaged on mnternationaI~voyages
The amendments contained in this bill (S 2453)
are similarly designed to raise ship raaio safety re-
quirements for United St tea ships on~prrestic o,g~çap,
3Lcyagca. and for foreign noncor;en~ion siips departing
fron United States ports by bringing them in line with
those mow specifically internationalized by the 1948
Safety of Life at Sea Convention The principal effect
PAGENO="0339"
1803
of the legislation would be to insure that vessels en-
gaged in domestic ocean y.9~&es would comply with
safety radio i~~irements no less effective than those
applicable to ships engaged in intérnat'iónal voyagos. -
Senate Report No. 1583 (June 11, 1954), p. 2, and House
Report No. 2285 (July 19, 1954), p. 2.
2) ~?453 ~ lemented and exceeded'theprovisionsof1~,
Lofldon Convention of 1948: The 83rd Congress adopted 5.2453 amend-
ing the Communicat4ons Act of 1934 to implement and to exceed the
International Convention on Safety of Life at Sea, London, 1948,
which had previously been ratified by the Senate. How does this
1948 Safety Convention approach exemptions?
a) Regulation 3 of Chapter III - "Life Saving Appliances,
etc." of the 1948 Ôonvention states:
"Exemptions - (a) Each Administration, if it
considers that the sheltered nature and conditions of
the voyage are such as.to render the application of the
full requirements of this Chapter unreasonable ~
necessary. may to that extent exen~pt from the require-
inents ofthis Chapter individual ships or classes of
ships belonging to its country which, in the course of
their voyage, do not go more than 20 miles from the
nearest land." (emphasis supplied).
b) R~gulátion 5 of Chapter IV.. "Radiotelegraph and Radio-
telephone" of the 1948 Safety Convention reads:
"Exemptions from Regulation 3 "(a) The Contract-
ing Governments consider it ~ desirable not to
deviate from the application of Regulation ~, neverthe-
~~i~ch Administration may grant to Individual passen-
ger and cargo shins belonging to its country exemptions
of a partial and/or conditional nature, `or complete ex-
* emption from the requIrements of Regulation 3. (The
Regulation 3 referred to is the 1948 Safety Convention
requirement for radiotelegraph.)
"(b) The exemptions permitted under paragraph
(a) of this Regulation, shall be granted only to a ship
engaged on a voyage where the maximum distance of the
ship from the shore, the length of the voyage, the
* * absence of general navi~ational hazards, and other
condi&ons affecting~fety are such as to render the
full application of Regulation 3 unreasonable or un-
necessary.
"(c) Each Administration shall submit to the
Organization as soon as possible after the first of
January in each year a report showing all exemptions
granted under sub-paragraphs (a) and (b) of this Regu-
lation during the previous calendar year." (emphasis
supplied).
It is well to observe the general principle that it is highly
desirable not to exempt from safety at sea requirements, as set
forth in sub-paragraph (a) above.
PAGENO="0340"
1804
Note also that though mileage limitations here dropped in the
Convention (though not ~n the Communications Act as shown hereafter
the absence of general navig~~onal hazards along the route of the
voyage is retained
3) S 2453 specifically deals with the classes of vessels
embraced within the requiremend of law The very question of what
clesses of vessels shall be equipped with radiotelephone and what
classes with radiotelegraph was considered and Congress met forth
precise provisions in that regard in ~S 21453 The Bill as adopted
made the following provisions
a) Radio requirements were extended by amended Section 351
(a) (1) to cargo vessels of 500 gross tons and over which `leave or
attempt to leave any harbor or port of the United States for a voy-
age in the open sea
b) Section 3514 (a) renumbered as new Section 355 (a) was
reworded so that the radio installation required by Section 351 (a)
(1) was required to corsr~ise a riain a~id an emergency or reserve
radiotelegraph installation reaffirming the previous meaning and
intent of the law that radiotelegrap1~ equipment operators and
watches provides the firmest foundation for safety at sea through
radio
c) For Cargo ships between 500 and i6oo gross tons the
radiotelegrat'h requireme~its were made optional and such vessels
were per~nit;ed to carry a radiotelephone installation in lieu of
radiote.i.egrapn ~Section 356)
d) These provisions were enacted to carry out the follow-
ing obligations of the 1948 Safety Convention
The change in paragraph (1) of section 351 (a)
of the act is designed to carry out the requirerient
contained in re~ulation 4 Radiotelephone ir~tallation
of Chapter IV Radiotelegraph~r and radiotelephony of
the 1948 Conve'ition - Senate Report No 1583 83rd
Congress 2nd Session (1951) p 12
That regulation reads am follows
`Radiotelephone Installation - Cargo ships of 500
tons gross tonnage and upwards but less than 1600 tons
gross tonnage unless fitted with a radio~elegraph in-
stallation compl~,ing with the provisions of Regulations
9 and 10 shall provided they are not exempted under
Regulation 6 be fitted with a radiotelep~tone installa-
tion complying with the provisions o~ Regulation 15 -
Reg 14 Chapter IV o~ the Safety of Life at Sea Con-
vention London 1948
PAGENO="0341"
1805
It is thus clear that neither the Congress nor the International
Convention is silent on ~,hich class of vessels shall operate with
radiotelephone and which shall be required to carry the full radio-
telegraph installation and a qualified Radio Operator.
It.is quite obvious that Congress was well aware of both the
advances claimed for radiotelephony as well as its continuing limila.
tions that prevent it from replacing radiotelegraphy as a safety
system for ocean-going vessels~. It is ob-
vious, too, that while extending the classes of vessels requiring
communication equipment, Congres refused to weaken the existing
scope of the radio network for safety at sea to appease the economic
appetites of certain shipowners anxious to eliminate the cost of the
Radio Officer, as set forth in the Hearings on S. 2453 (see Section
H below.)
Congress thus recognized that the most precious commodity is
human life. Bythe specific wording of Public law 584 (83rd Congreon,
2nd Session) it extended communications coverage, while fully re-
taining and strengthening the existing coverage for cargo vessels
above 1600 gross tons as radiotelegraph requirements.
In the case of cargo vessels of above 1600 gross tons, the
amended Act now eliminates all doubt as to the nature of the required
radio installations. ~ must be radiotelegr~ph. It is therefore
respectfully submitted that this specifically excludes from the
Jurisdictional power of the Commission the right of choice or selec-
tion between radiotelephone and radiotelegraph, in the case of ships
of the gross tonnage covered by the Termant application (pver 1600).
The consideration by the Ccmmlssion of the instant voyage conditions,
route, and circumstances cannot therefore result in a substitu~tion
of radiotelephone for the radiotelegraph requirements of the Act,
to participate in the international radiotelegraph sea-safety net-
work. The ~inited exertiption provision of Sec1~1on 352 (b) is certain-
ly not a power of substitution, since Congress has expressly limited
such power of substitution to vessels in the 500 to 1600 ton class.
PAGENO="0342"
1806
o Section 352 (b) of the Act --- Recent Legislative Developments
1) This amendment attempting to eliminate (from Section
352 (b) (2) exe'iption provisions) specific numerical limitations and
replacing them with general widely flexible tents would have weak-
etied the Corgressional intent to moose these numerical limitations
as minimal limitations to be considered after the general considera-
tions of route conditions of voyage and other circumstances
were to be satisfied
2) ARA and RCU asked that any flexibility that the
Commission might require to exercise its limited exemption powers,
be specif~.cally spelled out
Similar domestic vessels could be specifically
exempted by including the exact list given in
that letter (from F C C Chairman Paul A ~salker
to the Vice President, March 5, 1953) without.
further flexibility as they call it being
necessary In this zay the broad powers to set
standards can be retained b~, Congress and the
minimum standards Congress had already set can
be kept." - Testimony of H. Stnichartz, S.2~53
Rearing p 13
PAGENO="0343"
1807
3) The Congress had before it A -ROPs request to
* "...de].ete the proposed change to Section 352(b)
and permit that section to remain as an influence
for raising world standards as well as maintaining
* our own."- Testimony of ~ Stricharts, S.2453,
Hearing, p. 13.
1&) Congjess also had before it the statement by Commission-
er B. N. Webster thaj the Commission needed a provision that would
"...permit the Commission, after consideration of
* all relevant factors, to take, care of special hard-
ship mases in a practical way without sacrificir.g
essential safety reguir~ments ~ ~S .2453, Hearing,
p. 35.
* 5) After hearings and conferences on S. 2~53, Congress
* recognized the validity of the ARA-ROTJ request that Section 352(b)
be left intact and, in Senate Report No. 1583 and House Report No.
2285, 83d Congress, reaffirmed previously expressed Congressional
intent relative to coverage. (See Sections., as toPL 58k, this
Statement and ~rief).
* 6) Congress did make provision for the Commission's ex-
pressed need, by providing a specific and limited authority, in a
new subsection 352(c):
* !`If, because of unforeseeable failure of equipment,
a ship is unable to comply with the equipment re..
* quirements of this part, without undue delay of the
ship, the mileage limitations, set forth in paragraphs
(1) and (2) of subsection (b) shall not apply; Pro-
vided, that exemption or the ship is found to be
reasonable or necessary in accordance with subsection
(b) to p~git the ~ to proceed to a nort where the
equipment d~Tlciency ~ be renedi~."~ ~~lT~1~w
5d4, 53d"~Congress, 2d Session (l95J4~J. (emphasis
* upplied).
* .7) Such exemption was deemed necessary because Congress
desired to give a strict int~rpretation to the exemption provision.'
In making the specific provision for this type of exemption,
Congress reiterated its intention to petain the' broad power to set
safety standards and to grant only limited, power to the Commission
in' matters of exemptions from the provisions of. the Act; this limited
power to be exercised "without sacrificing essential safety require-
ments." *
8) In applying such limited exemption authority, the
Commission must perforce apply it in conformity with the plain im-
port of the law, and the intent of Congress as revealed by the
legislative history,'ineaning and application of the Act.
PAGENO="0344"
1808
In applying that limited exemption authority the Commission
in the past has recognized the above 8 considerations This is
revealed by the analysis below in Section U of prior decisions
by the Commission on applications under Section 352(b)
~ The Applicable Law
Shortly after the passage of Public Law 97 the Commission
was flooded with applications which sought a `loose' interpretation
of Section 352(b) Exemptions were sought front the radio provisions
of the Act for vessels ~f over i600 gross tons in the coastwise
trade
1) In Matter of Atlantic Refining~ Docket 1~856 5 FCC
Rep. io4 (1938), p. 105, the Commission recognized the "limited dis-
cretion given us by Congress The headnote of the official report
states
that where no material showing is made to
distinguish the operation of the vessel from the
* operation of the whole group of vessels to which
the laws apoly the Commission has no basis for
the exercise of its limited authority to grant
exemptions' p. i~J4 ~ (emphasis supplied).
The Commission found that all the norn'al hazards of ocean
navigation are present in this coastwise operation and it was there-
fore precluded from granting the exemption sought
* "For the purposes of this application, then, we'
nust consider that the route navigated bj this
* vessel lies along practically the entire length
of the east coast o" the Uni~ed States from Miami
to Boston The operation over this route is not
seasonal but is corducted at anj time of the year
so that the vessel tray be expected to encounter any
weather conditions that occur along this coast
We do not feel that it is necessary to enter
into a discussion of the hazards inherent in
coastwise navigation along the Atlantic Coast
other than to state that the record discloses
that at least all normal hazards of ocean navig~
tion are p~s~p~ over tie route navigated by this
V~i~eTnor do we~1~zn it necessary to dwel.. upon
the value of a radio installation as a measure of
safety to other shipping The applican' has
offered not1~ing to distinguish tie operation of
its vessel from the operation of the g~at nurrber
of vessels normally plying in the coasti~ise trade,
and we thene ore Iaje no basis for the exorcise
of the limited discretion gIven us by Congr~ss
p 105 (er~phasis supplied)
In denying the application, the Commission concluded;
It is our conclusion that the applicant has not
presented facts sufficient to warrant this
Commission in finding that the route and condi-
tions of the voyage, or other circumstances, are
* such as specified in the Convention and in the
Act.' p. 106. * *
PAGENO="0345"
1809
2) inNatter of Bouchard Transportation Co.,~tnc., 5 FCC
Rep. 163 (1938, Docket No. 11887, the Commission again acknowledged
the Congressionai intent to include coastwise. vessels in the inter-.
national radiotelegraph safety network. In doing so, it stated:
* "With respect to assistance to other vessels, it
was p'ainly the intentions of Co~g~ess to increams
satet of life at sea by increasing the effectiveness
o ra io. To accomplish this purpose, Congress not
only provided f hr the installation of satisfactory
radio equipment, but provided for the necessary
corollary, namely, maintenance of a continuous listen-.
ing watch on vessels so equipped. Therefore, the
exemption of any vessel operating in normal ocean
~áde removes one unit from the total of vesseIt
~~ng up the potential~safety.ract~ c~ntemplated
* . ~ p. 164. (emphasis supplied).
The Commission then found that it could not grant an e~emp-
tio~.to a vessel which sails in the normal~ hazardous conditions of
* a coastwiae run:
"We find that kia;ardous conditions frequently
* - occur in this area - (Atlantic Coast).
* "From a full consideration of the Examiner's
Report, the record, and the exceptions and oral argu-
* ment of counsel, we have reached the conclusion that
the operations of this vessel are not substantially
different from those to which Con_gress intended the
Act to app~, and, that E1~Foii¾e and~conditioii ~
~~iyages, or other circumstances~ are not Such as
warrant an exemption of the vessel.' p. 165.
(emphasis supplied).
3) ~ of Eastern Steamship Lines~, Inc., 5 FCC Rep. 166
(1938), Docket #4857, is another case in which the Commission reached
the conclusion that Congressional intent was to ex~p~but to
~id!~ coastwise shipping, within the radio requirements of Treaty
and statute.
In concluding that the Applicant in that case failed to
make a sutficient showing that the requirement of a radio installa-
tion on the Applicant's vessels was unnecessary or unreasonable for
the purposes of Part II of. Title III of the Act, the Commission
stated:
"The principal contentions of the applicant was
that the coast is well supplied with aids to navIga-
tion; that harbors of ~ frequent; that the
tine s ent in t1~e o en sea is donnara~i~jl short;
* an , ha the radIo installation is unnecessary as an
aid to other shipping for the reason that the vessels
follow well travelled steamer lanes where other craft
could be of more assistance because of their superior
- speed and accommodations.
PAGENO="0346"
1810
We do not see that these conditions or circurt-
stances are peculiar to the vessels in question and
if they were to be adopted by this Commission as the
basis for exemptions, the result would be to remove
the requirement of radio in respect to a lar~enur~bIT~
of coas~wisesteamsh~p~ This~ we are cert _n~w~
iiot the intzmtion of. Congress.' p. l67, (emphasis
supplied)
In the Oliver J Olson Comp~py~(applications X-549x-554)
the Commission had before it exemption applications in which the
same trade similar ships carrying the same cargoes on voyages with
the same conditions route and other circumstances were involved as
are involved in the instant application In denying these applica-
tions the Commission noted
`2 The applications show that the vessels carry lumber
products and wood pulp between ports in Washington Oregon and Cali-
fornia that their routes are rarely more than seven miles and
never more than 25 miles from land (enphasis~supplied~
"6 Vessels such as the instant vessels engaged in the
West Coast coastwise lumber trade have heretofore been the subject
of applications for exemption In Matter of Uestern Transoort,~~
al Docket No 4774 et al 5 FCC l6~ tl~3~3) the Commission denied
exemption tb such ;essels aLter finding that the routes and condi-
tions of the voyages of the vessels were no less hazardous than in
the case of any other coastwise vessels and stating at p 173 that
these groups of vessels should be `~equi~ed to fill thei~ places
in the general scheme to provide increased safety by increasing the
number of vessels instantly available as potential lifeboats
"8 The applicant has not made or attemoted to make any
showing that the conditions and circumstances of the voyages or the
ships are so exceptional that despite compliance since 1937 by four
of the vessels and co-rnliance s1~ce 1947 and 1948 respectively by
the remaining t~o vessels with the radiotelegraph requirements of
Title III Part II of the Act such compliance has now become ~.n-
reasonable o~' un'iecessary MEMORANDUM OPINION AND ORDER adopted
March 16 1955
When the Oliver S Olson Co requested reconsideration and
hearings jn denying Olson's request the Commission shed consid-
erable light on the history and philosophj of the provisions fron
which Applicant seeks exemption in stating
8 It appears that Olson has misconstrued the philosoohy
underlying the provisions of Title Ill Part II of the ~ct and the
basis for the Corirnission's denial of its auplications
`9 Th'~ Morro Castle and MDI-awk marine disaster~ occurred
sho~t distanceS o'~f the New Jersey coast (the M'rro Castle was
within sight of l~. d ~nd the ~ohawk wa~ appro~imate1y 8 miles off the
coast) A senato lal investigation of the.e disaster~ resUlted
among other things in a recor~endation by the sub omm.~tte'~ of the
Senate Committee on Corm'~rce for amendmeit of the Communications Act
by in effect adding Part II to Title III of the Act (Serate Report
776 Part 2 714th Congress 2nd Session pursuant to S Men 7 74th
Congress 1st session) Ttis recomm'~ndation finally e~entuated in
S 595 which was enacted into law in 1937 a. Part II of Title III of
the Communications Act of 1934. In Senate Report No.. 196, 75th
Congress accompanying ~ 595 it was made very clear that one of the
purposes of the bill was to assure the aeplication of radio require-
PAGENO="0347"
1811
merits to certain vessels engaged incoastwise voyages in the open
sea as well as those engaged on ii~ternationai voyagei~ Vessels on
the latter types of voyages were already required by reason of the
International Convention for the Safety of Life at Sea, 1929, to
comply with specified radio requirements. Thu3, the report stated:
" `In this bill , . . an endeavor, has been made to
apply the requirements of the Convention to our domestic
shipping so far as vessels which go Into the open sea are
concerned . . . . (emphasis supplied),
"The' report goes on:
`Today there are probably 600 or more ships of
the United States of substantial tonnage carrying many
persons as passengers and crews, which, neither by our
law nor the Convention are required to carry radio. No
more pointed illustration of the danger and of the
tragedy of this inadequacy of law can be found than in
the tact that there was an American ship not required to
be equipped with radio within 30 miles of the Vestris and
which sailed away because it did not receive the SOS"sig-
nals of that doomed vessel. We are told that that ship
was so near to the Vestris that it might have saved all.t
"10. The House Report (Report No. 686, 75th Congress, let
Session) on 5. 595 stated the proposition concisely as follows:
" `The 1929 Convention applies only to vessels em-.
ployed cm international voyages. The United States has
a very large and important merchant marine engaged in
purely domestic shipping. There remain, therefore, a con-
siderable number of ships operating in coastwise service
* which at present are not required by either the law or the
treaty to be equipped with radio. These ships go to sea,
* face thesame dangers, and are available as lifeboats to
distress vessels, in the sane manner as those required by
law to carry radio. This bill remedies this inconsistency,
"Thus the Congressional intent was clear that ships over
1600 gross tons sailing in the open sea whether on coastwise voyages
or Ori international Voyages should constitute a pool of mutual assist-
ance whose effectiveness would be in dIrect ratio to number of yes-
sels
~ii~fl~ormity in~'~'Fiéradio equipment of these vessels was necessary if
the plan of mutual assistance was to be carried into force. So far
as direct response of one vessel to another vessel's distress signal
is concerned, it does no good for the distressed vessel to transmit
the distress signal by radIotelegraphy on one channel, when its poten-
tial rescuer is listening on another radio channel for a radiotele-
phone signal, and by the same token, a distress signal transmitted by
radiotelephone on. one channel will .not be heard by another ship ha-
teriing for a radiotelegraph distress signal on a different channel.
"11. Title III, Part II of the Act expressly recognizes this
principle ~f minimum equipment uniformity and specifies that vessels
of 1600 grqss tons and over nuist be uniformly equIpped `fOr partIcipa~
tion in a radiotelegraph safety system. The Commission has consist-
ently applied this principle of minimum uniformity to all ships which
are members of the radiotelegraph safety system. Each such ship,
which is regularly navigated in the open sea; is compelled to meet re.
quirements so long as circumstances indicate that its permanent parti..
cipatior, in summoning or rendering assistance would be of substantial-
ly normal value to the system and so long as inherent Size, space or
design limitationa did not render its participation peculiarly im-
practical or impossible. The necessity for a priniople of equaltreat..
merit for all such ships similarly situated is obvious in the absence
of any method of determining in advance which ship in the system might
at any given instant be required to give or receive assistance."
"18, In the light of foregoing precedonts, explanation and
`legislative history, we turn to the Olson allegatIons. The Olson
vessels are over 1600 gross tons; they are engaged in.coastwise voy-
ages in the open sea; they navigate in waters also navigated by other
PAGENO="0348"
1812
ocean-going radiotelegraph ecuipped vessels they are vessels which
now constitute a part of ~
which eongress contemplat~'d In the enact1nen~ of' Title III Part II
There is no showing or ibdeed allegatLon that other radiotelegraph
equipped vessels cannot or should not depend upon the Olson vessels
for direct response to distress signals in the same way as other
large vessels subject to Title III Part II Co-iversely Olson has
not shown or alleged that the safety of its vessels a-id their crew
members would not be enhanced by reason of its ability to summon ~ d
directly from other large vessels also equipped with radiotelegraphy
In short although fully ex~laining the usefulness to it of radio-
telephony Olson has failed to show why the effectiveness of the
Congressiona~.ly created radiotelegraoh safety sjstem which depends
upon universality would not be unreasonablj and unnecessa~'ily im-
paired if its vessels were excepted therefo'm
20 Olson's petition for rehearing remedies none of the
defects of its original request for e~cemption Instead it makes
clear its failure to;comprehend the statutory scheme of'~marine safety
created by Title III Part II for ships like its own
21 Thus the only facts it again alleges in support of
its request for exemption are
`(i) the vessels operate at all tines within 25_
miles of the Pacific coast along which an efticient network
~T'~astal harbor radiotelepho'-ie stations is maintained
But it has been demonstrated that one of the primary pur-
poses in enactment of TItle III Part II was to en ure
direct participation in the radiotelegraph safety system
of vessels of 1600 gross tons or over which engage in
coastwise voyages (emphasis supplied) MEMORANDUM
OPINION AND ORDER
Adopted Nov 25 1955
In Matter of Western Transport Co et als 5 FCC Rep 168
(1938) Docket #~774 et als twenty-eight shipping companies filed
application in behalf of 57 vessels plying the Pacific Coast for
exemption from the requirements of Treaty and S~atute Six of the
vessels here used In the t~'ade o~' fish reduction Fifty-one o~'
the vessels were lumber schooners (like the vessels involved in
the Tennan~ oetition)
In the Western Transport case the same trade same or
similar ships carrying the mane cargoes on voyages with the same
conditions route and other circumstances were there involved as
are involved in the instant application The Co-mission denied the
applications for exemptions The decision stated as follows
Held that the route or conditions of the
voyages or other circumstances were not shown to
be such as to re'mder a radio installation unnecessary
or urireaso~ab1e in the operation of the vesse..s along
the Pacific Coast p 170
At page 172 the CommL~sion fourd relative to the 6 fish-
reduction vessels that
"During most of the'. operations the vessels lie
at anchor between the conver~,ing ~hip lanes entering
the Gold~'n Gate This area is in the vicinity of
PAGENO="0349"
1813
Point Reyes, which is the point of maximum fog on the
Pacific Coast and one of the foggiest localities in
the United States, averaging some thirteen hundred
hours of fog per year. The records show that there
is an average of 21 days of dense fog at this point
during the month of August. Wind velocities of 91
miles per hour have been observed at Point Reyes, and
on 142 days of the year the winds blow with a velocity
greater than 31 miles per hour. During the winter the
coast is subject to periodic gales of great severity.'
The lumber schooners covered by the Tennant application for
exemption, sail regularly through the area described above.
The Commission then discussed the facts as to the 51 "lumber
sohooners" involved in the Western Transport case, as follows:
"The remainder of the vessels here considered
are of a type known on the Pacific Coast as lumber
schooners". They operate in a general cargo and lum-
ber trade between San Diego and .Puget Souhd, with the
southbound movement of lumber being the principal
source of revenue. The vessels are comparatively slow
and of a shallow-draft to enable them to cross sandbars
and enter small rivers and inlets to pick up lumber at
or near the places where it is cut. All of the ships
are over 1,600 tons and the average is well over 2,000
tons. In the course of their voyages they are never
more than 150 miles from shore and are therefore eligi-
* . ble.to be considered for exemptions."
* "On the southbound voyages the vessels are
* heavily laden and carry very high deck loads. In this
* condition their speed is greatly reduced and they have
little maneuverability, although they are said to be*
* practically unsinkable. Nevertheless, there is danger
of capsizing, and the vessels are of course subject to
all normal hazards of ocean navigation such as colli-
* sion, breakdown, fire, and running aground. The
* course of the southbound voyage follows the regular
* coastwise steamship lanes some 20 to 30 miles off
shore. Northbound, the vessels are more lightly loaded
with miscellaneous car~o, but even then it is frequently
necessary for them to `hug" the shore line and avail
themselves of the protection of the capes in order to
* make reasonable progress against the prevailing winds
and currents. Although the masters of the ships have
* attained unusual ability in this type of navigation,
* we cannot but consider it a hazardous operation in
view of the ~g_condit1ons, heavy winds, ~certai~~.
of Pacific Ocean curr~O~ unchartered~pinnac1e~ocks,
~ ~ppp~ratively few places of refuse alon~ the
coast.' p. 172. (emphaSis supplied).
Although Applicants in the Western Thansp~~ case stated
that if the "exemption" application were gratited, they would continue
to maintain existing radio installations and to employ qualified
operators, the Commission, in 4~g the application, nevertheless
stated:
"We have not been convinced that the routes or
* conditions of the voyages, or other circumstances,
have been shown to be such as to make the operations
materially less hazardous than might be expected in
the case ~
* ~ ~O~f /&ttels~shcñflc~ not be
* required to fill their_places in the general scheme
to ~
of vessels, instantly available as potential life-
* boats.' p. 173. (emphasis supplied).
PAGENO="0350"
1814
APPENDIX C
~EF~ OURNAL O~ OCFAN(C ENGINFERING VOL OF 2 NO 3 JULY 977 223
The Skilled Radio Officer Key Resource for
At Sea Maintainability
HARVEY STRICHARTZ
Ab -La g I f ft g h p fm d tn d mm t impact of new technology in the area of marine services
d h 5 Ii 5 5 t 5 g d di q pm 5 f and quantitative estimates of impact of new technology
mm S d d g 5 q as f S bit ~ new equipment needs e g navigation communications
Sty for rest-time continsosS operation undee the wide range of physi-
cal stresses encountered by maeitime mobile units in the hostile ocean meterology, and oceanography [1].
m t A S b sty f t f th b I ty/maa I b sty In responte to this request the RTCM submitted a Report
of such apparatus. Sssce 100-percent reliability cannot be assured at .
this sfate of the technological art, the maintainability side of the for- to the Presidents Task Force on Communications Policy (en-
meta must necessarily provide that the avaitabiiity will be 100 percent, dorted June 13, 1968). Positing an era of "substantial new
b f th larg p tal I set lb 1 It t p l-d y sh p con truction ffo t the RTCM Report anticipated that
merchant marine units, can depend on these modern sophisticated de-
cot f lb f ly g t d b us tI mm t the new ships themselves will reflect novel concepts and be
Ma I b Sty S en it f m lb ppl t fm y geared to more sophisticated communications cqu pment
(p t t t m ts toot I h at d m t t I h and systems [2]
p I t ) ~ t-s mat t b th p t d t
Th k y f lb ppl t C all th lb lb I h Among its conclusions the RTCM noted that
lb lull 4 d rr wh m t p sets I g d b I ty
pth sly f mall I th I se d pta t at mat t basic radio requirements of ocean goingvessels particularly
d p kilt th t b d d 4 p1 hI o gb to rv th as related to safety are firmly rooted tn international con
ss d ty f w d o-el I d as lb y ftt d Th ventions and other treaties [3]
development of such a technirian-seafaree type, known as the radio-
electronic officer, is discussed both historically and functionally; inter- Its final conclusion spelled out the interrelationship be-
at Ct 5 lb I h b I ii d 1 1 d and mpl tween the new technology the martttme environment and
d personnel standards requirements thus
PERSONNEL: The ability, to use more sophitticated
I TSE BY ocean gosn shipping among the earliest applies mo~les of communtcatson (including satellite and other
~_) lions of the new radio art dramatically publicized the techniques herein mentsoned) on a continuous and reliable
young scsence asssstsng in its rap d de elopment and leading basss under the wide range of phys cal stresses and strains
to its dsverssficatson snto radionavtgatton as well as radio encountered in maritime mobile units in deep sea trano
communication. In the two decades since the appearance of portation requires that peroonnel standards, i.e., training
the radio dsrectson finder (Kolster) in 1916 to World War II and FCC licensing requirements be kept abreast of these
the growth of the maritime radio art was steady, if relatively changes in equipment and practices. The importance to ship
slow and undramatic operations of more sophisticated communications equip
The rapid development of high frequency radar loran and ment will increase with the trend toward automation Such
other applications during and immediately following World equipments can not be expected to serve their purpose at
War II, produced another "spurt" in the growth of the mars- the necessary high level of efficiency unless properly opec-
time mobile sec ice (MMS) As to she nonmilitary MMS It ated and maintained While FCC license requirements have
mostly ssvolved civilian applications of what had been secretly kept abreast of the changing technology in the past, a
de eloped for naval and air combat craft in the maritime whole sew genre of changes so now in the offing [4]
environment
RELIABILITY/MA1NTAINABIL1TY/AVAILABILITY
PRESIDENT S TASK FORCE
This conclusion was entirely in accord with classical ccli
Early in 1968 the newly dynamic tempo of developments abilsty/matntasrsab lsty/avarlabtlsty theory the problem in a
in maritime rad ocommunicatson and rad ona igation resulted capsule may be formulated thus
n the in ration by the Pres dent s Task Fo cc on Communsca
lions Policy to she Rad o Technical Committee for the Marine the relat onshrp between reliability (mean time b iween
Services to provide it with estimates t tteralra as to failures MTBF) and maintamabslsty (mean time to repair
MTTR) is availability as follows
hi Pt dM h14 1977 MTBF
Th It w lb Ii Am R d A 5 AFL-CIO K w Availability =
Y k NY 10016 MTBF + MTTR
C py ght 01977 by Th I it I f El t cal d El i E e I
P I d iSA An I N 7570E004
PAGENO="0351"
1815
IEEE JOURNAL OF OCEANIC ENGINEERING, JULY 1577
This equation establishes the equipment's availability over
the course of time [5].
Further to this concept, an RTCM paper, "Resources neces-
sary for on.board preventive and corrective maintenance of
radar equipnsent" (approved February 19, 1977) notes further
tlsat
operational availability is defined as
MTBF MTBF
MTI3F MDT MTBF MTTR MTAR
where
MTBF (Mean Time Between Failures) = average elapsed
(meter) time commencing when the system meetu specifi-
cation and ending when a fault is recognized;
MTTR (Mean Time To Repair) = average clock (calendar)
time to complete diagnosis and repair of a fault and make a
performance check, given adequate teat equipment, tpare
parts, technical literature, and an available qualified tech-
nician;
MDT (Mean Down Time) = average clock (calendar) time
commencing when a fault is recognized and ending when
the system meets specification;
MTAR (Mean Time Awaiting Repairs) = MDT - MTTR.
The MTBF and hence the reliability (of which it is a meas-
ure) is initially influenced by the quality assurance meaturet
used by the manufacturer [61.
Maintainability of radio equipment, and indeed of the
entire spectrum of radiocommunication and radionavigation
equipment, it dependent upon the on-board resources of the
vessel, both in materials and in trained personnel which are
brought to bear upon faulted equipment, This involvea the
following.
a) A program of preventive maintenance, to be regularly
scheduled and performed at the necessary intervals, is needed
to maximize the availability of the system. Since the occasions
when preventive maintenance is due will rarely coincide with
vessel availability in those ports where this service may be
provided, a capability for preventive maintenance at sea is
necessary on board.
b) Also needed is corrective maintenance, occasioned by
the recognition of faults in the equipment, which may be de.
fined as performance outside of or not in accordance with the
equipment specification.
The moat rapid and economical meant to accomplish re-
pairs and restore a malfunctioning equipment to operation, is
to be able to replac~ the part that has failed, whether it be
an individual component or a replaceable module. Judgment
must be exercised as to where the distinction is made between
the two.
Repatr by module replacement can be overemphasized. If
it is, superficial nossolusions may result, and expeditious
repair capability be diminished. The probability is great that
the replacement modules wilt also fail because the root cause
of the initial failure has not been determined and corrected.
Root cause removal can beat be accompltslsed by in-depth
analysis of the malfunction by the personnel involved.
In this connection, it must be noted that the advetit of fast
loading/discharging, versatile, barge.carrying, and roll.on/roll.
off ships (equipped with their own ramps), the proliferation of
tanker off.thore oil pipeline facilities, and the practice of ore
ships frequenting remote mining areas, has resulted in a situa-
tion where a growing number of these larger newer vessels do
not make use of the facilities of major worldwide porta for
the purpose of loading or diacisarging their cargoes, but utilize
countless remote bays, inlets, sounds, river entrances, and
offshore loading/discharging facilities in almost every part
of the world.
These newer ahipa can load, or discharge within extremely
short time frames, sometimea in as little as only an hour or
two. Therefore there could be circumstances where service
and/or spare parts would not be available at these locationa
and perhaps not even at regular global port service depots.
Shortages of trained service personnel, spare parts, or modules
would be even more acute at the thinly spread out depots of
authorized service agents whose stock will contain only a mini~
mum supply', if any, of more expensive components. Even
where personnel and replacement parts are available, time may
not permit completion of repairs prior to the nhip's scheduled
sailing. Thit situation can result in long delays in obtaining
service and replacement parts, such units being shipped long
distances at great expense in order to bring malfunctioning
equipment back into aervice. Thus maintenance time and
costs would be increaned, and the operational availability of
the apparatuu severely reduced, unless in-depth analysis and
correction of malfunction can be performed on board by
qualified personnel.
Repaira mutt begin an soon as possible after a failure it
recognized, which, more often than not, is at sea, Where
efforts to correct faults are postponed until the veasel'a'next
availability in a port where a service capability is provided,
the availability of the device will be lost, or its performance
degraded, precisely when it it most needed: during approach
to a port. The key to at-sea maintenance is she skilled person.
nd factor. How has this problem been addressed?
MAINTENANCE/REPAIRS ASSIGNED
TO RADIO OFFICERS
Steamship companies operating approximately 92 percent
[7] of the U.S. flag merchant fleet have formally attd specifi-
cally assigned maintenance and repairs at sea of radiocommu-
nication and radionavigation apparatus exclusively to the
vessels' radio officers and radio.electronic officers. They have
alto agreed that
repairs shall not be delayed until reaching port if the ne
cessary spare parts are available and she radio officer or
radio.e!ecsronics officer han a radar, endorsement, if radar
equipment is involved [8].
Admiralty courts have held that in the face of serious de.
fects in navigation equipment, the mauler of a vessel is not,
PAGENO="0352"
1816
STRICHARTZ SKILLED RADIO OFFICER 225
except in extenuating circumsta ices at liberty to postpone datd transnstssion slow scan television facsimile printer
attempts to undertake corrective action. He is obligated to and satellite devices selective cathode ray tube display,
ensure that an effort is made employing the resources avail ser o mechan sms read out devices with particular refer
able to h m to correct faulty equipment which has a potential ence to maintaining the equipment in 5cr ice [9]
negative influence upon safe vessel operation. A decision not The reasoning behind the US. V/ARC proposal was stated
to attempt repairs on such equipment would place a presump- as follows.
tion of negligence and consequent liability upon a vessel subse-
quently involved in a casualty in which the faulty equipment Major chan es in maritime radio and electronics technology
was or would have been an iIwredient. ~ have occurred and are occurring iii radiocommunications and
The maritime industry requirement that radio officers radionavigation equipment, techniques and modes, with much
(or specially trained radio officers known as radio-electronic of the nesv equipment of increased complexity. Ships of half
officers) be assi"ned the task of preventive and corrective million gross tons have made their appearance, and the average
mainten nce results from a) a realistic factor and b) an evolu s ze of maritime craft has really increased creating safety
tionary factor both of which a e interrelated economic and environmental considerations of greater
In wei,,hing these factors it must first be noted that it magnitude
would be unrealistic to assume that the maritime industry "As technology has advanced, aniricrease inboth theoretical
could compete with the big glamorous corporate names in and practical coo vledge is required of holde a of operator
the shoreside engineer ng per o net ma ket Few engineering certificates in order to produce a higher standard of practical
graduates would be attracted by shipboard employment performance than has hitherto bees necessary Maritime tele
offering as it does to the landlubber, great inconvenience communications can enhance safety, economic and environ-
deprivation of the normal social life and pleasures of civiliza: mental considerations if the holders of certificates possess the
lion and bea ing a measure of personal risk as eli as eco higher qualifications set forth in this proposal
nom c insecurity For those few who m ght be attracted the A general understandmg of theoretical principles must be
practical back round and the seafarers makeup would be possessed by operators as the basis for greater skill in both
absent in too many cases and an unacceptably high personnel effic cot operation and repairs at sea provid ng maximum utili
turnover rate would result. zation of the new, more complex devices. It must necessarily
Considering then, candidate groups to be retrained and ~s- be of a higher order, since the rapidly changing technology
graded among existing vessel personnel who are already sea- involves continual introduction of new devices; and practical
farers, what group was and is better fitted to go on doing maintenance and repair skills for such changing devices will
what they have been doing and to refine their skills to do require an adaptability of technical skills that can only come
more of the same, and do it better and on a higher skill level, from the type of requirements set in this proposal.
than the ship radio officer? Has~ing spent years in acquirin' "At this time it is necensar~' not merely that the new general
the education, skill, and experience in maritime mobile radio certificate shall maintain these [existing] standards, but that
electronics, having lived and worked with it, and adjusted to they shall be increased to the exteat necessary by the current
its changes having grown with its growing needs the radio and developing technology [101
office vas clearly the man to be reconverted metamorphosed The United States ach eyed creation of a technically superior
into the sk lied radio electron c o~f cer the new maritime tech certificate for use aboard ships in the adoption by the ITU
nob y requires WARC of the radiocommunication operator s general certificate
(maritime) In two respects the proposal n language but not
ITU CERTIFICATE CHANGES its substance was modified
a) First where the U S proposal had requited theoretical
U S government recogn lion of th s need for ship radio and practical knowledge of a number of specific types of
officers to possess greater electronic ma ntenance skills s modern radiocommunicalion and radiona atson equipment
found in the Proposals of the United States of America for the new radio re ulalioss provision as adopted in RR 870D
the World Administratis'e Radio conference for Maritime uses instead list general all-inclusive terns "modern radio-
Mobile Telecommunicat ens (Geneva S itzerland 1974) sub comma nication equipment to descr be the equipment in
misted to the Intern'iiional Telecommunications U on in vol ed Since all the items listed by ii e U S proposal vere
September 1973 by the U.S. Department of State after con. subsumed in that general term, and since ITU RR 9 defines
siderable consultation wills various maritime iiidusiry interests "Radioco,nmunicatiOii: Telecommunication by means of radio
invol ed waves md ITU RR 2 defines Telecommunication Any
The specifc propos I the Un ted Sirtes made to ITU was I ansm sian emission or recept on of ii ns signals I ng
n I Ily to s ppl meat and later to replace the I st nd ima es and so ads or intell ence of any nature by ire ad o
second lass ridiotelegraph cc r f cats held by th si p r d o sual or other elect oma n I c systems this Ian us e modifi
off ce vith a rad ocommi n c lion ope ato s general certifi citron as ens ely in accord iii the U S propo al Iris clear
tate equr in h gher technical and p ofess onal knowledge tb-it the leim r diocom nun cat on e nbraces all the items
levels inch din knowledge of modern ridiocommunications lb e Un ted States Is d listed in its p oposal and includes radio
cc pm nI such s na igation equipment as well
PAGENO="0353"
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IEEE JOURNAL OF OCEANIC ENGINEERING, JULY 1977
b) Second the adopted text strengthened site U.S. intent
for effective shipboard maintenance by requiring
practical knowledge necessary for the location and
remedying (using appropriate testing equipment and tools)
of faults which may occur during a voyage [11].
The intent and substantial requirement of thia text is
clearly to implement the technical maintenance duties of the
certificate holder by mandating "appropriate testing equip.
mens and tools" on board, while requiring that the certificate
holder shall have the knowledge necessary to use them to per-
form these duties.
Thus the ITU Radio Regulations now authorize a new class
of certificate, generally referred to as the ITU general ctrtifi-
rate, creating it technically superior to the previously existing
ITIJ first and second class radiotelegraph certificates. One of
these three types of certificates must be held to perform the
duties of radio officer aboard a vessel compulsorily fitted with
radiotelegraph installations, as a consequence of Chapter IV,
Regulation 2(c) of the International Convention for the Safety
of Life at Sea, (SOLAS), which reads as follows:
(c) "Radio Officer" means a person holding at least a first
or second class radiotelegraph operator's certificate, or a
radiocommunication operator's general certificate for the
maritime mobile service, complying wish the provisions of
the Radio Reguissions, who is employed in the radiotele-
graph station of a ship which is provided with such a station
in compliance with the provisions of Regulation 3 or Regu-
lation 4 of this chapter.
SAFETY CONVENTION CHANGES
Chapter IV, Regulation 6 of the International Safety of Life
at Sea Convention (SOLAS, 1960) has set forth certain limita-
tions on the duties of the radio officer, jilts requirements that
he stand listening watches of at least 8 h a day on cargo
vessels. (On passenger vessels, 24 h of listening watches have
been required, but few passenger vessels now remain in the
world's merchant fleets.)
The Intergovernmental Maritime Consultative Organization
(IMCO), a,United Nations body, is charged with the adminis-
tration and amendment of SOLAS. IMCO's Subcommittee on
Radiocommunication (11CC) has been assigned Chapter IV, the
radio chapter, as its responsibility.
Discussion of the listening watch on board radiotelegraph.
equipped ships during the fifth session of the Subcommittee
on Radiocommunications led to the following tentative con-
elusion is that session's report.
"The existing listening watch requirement on 500 kHz is
regarded as satisfactory and should be retained for the time
being. As, however, reliable selective calling equipment could
become available consideration should be given at a later stage
to a relaxation of the human watch, in order to allow the
skilled radio officer to carry out repairs on radar and other
electronic equipment" [121.
The master was reopened at the sixth session of RCC. In a
Note by the Government of the Utsited Kingdom, the view
was presented that consideration of changes in the provisions
for watchatanding on 500 kHz should be given at once. The
United Kingdom argued the following.
"The electronic equipment on ships is becoming more and
more sophisticated. Much of it is in the interests of nafe navi-
gation and maintenance of such equipment is necessary in the
interests of safety at sea. Radio officers during their normal
training acquire a useful knowledge of electronics and are
often the best qualified officers on board to maintain the
various pieces of electronic equipment. The time available for
such maintenance is, however, very limited. Regulation 6(d)
of Chapter IV of the International Convention for the Safety
of Life at Sea, 1960, requires an eight hours listening watch in
the aggregage, and this watch may only be broken to perform
other essential radio duties" [131.
The United Kingdom proposed that consideration be given
"to the possibility of making more time available to Radio
Officers for the maintenance of electronic equipment ..."
[141. In a note submitted to the seventh session of RCC, the
government of the United States stated its
".,. agreement for the end objective of reallocating tome
of the radio-electronics officer's wstchstanding tinse for dec.
Ironic equipment maintenance and repairs having to do with
the safe navigation of the vessel and the overall interest of
safety at sea. However, the U.S. does not believe isis in the
interest of safety to reallocate for this purpose, any of the
hours of watchssanding now required until such time as the
ship involved has an internationally agreed selective calling
device installed and operating as part of the radiotelegraph
station
"The U.S. views technical maintenance and repairs to radio
and electronic equipment, used for safety at tea and for the
safe navigation of the vessel as an important safety activity.
Certain duties are now internationally required to be per-
formed by skilled radio officers. Is it the intent of this pro-
posal to release the skilled radio-electronics officer for such
additional' technical duties as are required by changing tech-
nology, when and as necessary" [141.
This matter was considered at the aeventh and again at the
eighth sessions of the RCC, where the United Stales pressed
for the amendment of Chapter IV, Regulation 6, which was
finally adopted at the eighth session and subsequently ap-
proved by thE Maritime Safety Committee, the Council, and
the Assembly of IMCO.
The text of amended Regulation 6(d) provides, among
other conditions, that the radio officer whose watch duties
are being relaxed, at tlse discretion of the administration
concerned, must be appropriately qualified to perform the
duties of maintaining rsdioconsmunicstion and radio-electronic
navigational equipment, and that she vessel is fitted wish
receiving selector meeting the requirements of the ITU Radio
Regulations.
Upon the coming into force of these amendments (when
the 1974 SOLAS, in which they are incorporated, is ratified),
the U.S. Federal Coinmunicationa Commission will isatse
appropriate domestic regulations to ensure that the ship is
51-253 0 - 80 - 23
PAGENO="0354"
1818
STRICFIARTZ: SKILLED RADIO OFFICER
fitted with a recEivu~g selector which meets the requirements to utilize nesv devices and modes; most of all, ii benefits the
of the Radio Regulations (such selectors are now under devel- maritime industry and the nation it serves in peacetime corn-
opnsent and testing is under way). and that the radio officer merce, and in maintaining the nation's strength to keep the
is properly qualified to perforni the nsaintenance duties. (The peace.
FCC is currently considering appropriate qualifications for the Late in 1958, an outside training consultant was engaged
skilled radio officer, to insplement the 1974 (TU \~`ARC to survey the nature and extent of ARA radio officers' previ-
provisions at to Radiocommunication Operator General ous training, the amount of time the men svere willing to
Certificate.) devote to correspondence and resident-type training, the needs
Adoption of these amendments to SOLAS constitutes of the indastry, the scope of the training required, and the
international recognition that the maintenance of equipment tssaterials, facilities, and costs of developing and operating
used for radioconsmuflicatiOn and radionavigation is a safety such a program. Based on the survey data, the general conclu-
activity on a par with' the standing of safety radio watches, sions of the consultants were
and that the possessiots by the radio officer of the additional ARA radio officers are a stable group who seek professional
skills necessary to perform such maintenance on the more advancement and who may be expected to remain in the
complex sophisticated equipntent likewise serves safety of industry They have a fairly good academic background and
life at sea. To further the acquisition by radio officers of such the capacity to absorb trainin~ materials, and they are over-
skills, Es'ICO reconsnsended in its policy document on the whelmingly interested in devoting time and effort to
development of the nsariiime distress system, the training of improve their technical skills.
radio officers as measures to be implemented both for the
nçar future distress system and the distance future distress in the fall of 1959, the ARA Technology Institute for Marl-
systens. (Extract's from IMCO Resolution A.283(VIlI) are time Electronics (ARA TIME) commenced correspondence
attached as Appendix I) and resident training courses, on a progressive basis, Starting
with a refresher in nsathematics and electronics foundation
theory, going on through test instruments, receivers, transmit-
TRAINING PROGRAM FOR RADIO OFFICERS ten, direction finders, auto alarms, single-sideband techniques,
radiofacsitisile, radioteletype, and ott up to radar, loran, logic
Paralleling the domestic and international developments circuits, computers, and automation instrunsents, the training
discussed above, initiatives in this areawere takenby the Amen- given applies advancitsg electronic developments to radio-
can Radio Association (ARA), an AFL-CIO affiliated organiza- consmunication auth radionavigation.
tion representing radio officers professionally, as well as in col- The ARA TIME Prograits us conducted with the most
lective bargaining on thteirbehsalf with the steamship companies. modern adaptations of educational material and methods.
At its fifth conventiots in May 1958, ARA adopted what is Training curricula and devices developed for use of similar
called its "TIME" Program. It was a comprehensive proposal, programs of the U.S. government and for other industries
in whicls ilse initials TIME stood for four different things. have been reworked for merchant marine application. Ample
First, TIME stood for Technical Investigation of Maritime mathematical groundwork is provided. On the practical side,
Electronics, a research and developtssetst program to st~rvey the laboratqry bench work approach Is used to produce and
and evaluate existing electronic installations, operating/tech- reinforce the technical know-how, and do-how, needed
niques, atsd the latest available materials and methods ~vith a aboard ship. The objective of ARA TIME is to update and
viesv to their itttprovements. upgrade the radio officer to the point where he is familiar
Secomsd, TIME stood for Technical Information on Man- not only whIr the circuitry of modern electronics, bst also
time Electronics, a program to promulgate widely to those with the logic and ratiotsale of circuit analysis, to make it
itsvolved, both on ships and ashore, the findings of such possible for hitss to service any number of devices where
investigation. these circuits are used to electronically achieve the various
Third, TIME stood, hopefully, for Technical Innovatioti its contnsunication, nseasurement, and control effects.
\laritirsse Electronics, a program of orderly progress of replace- time school is work, intense and concentrated. From tlse
liens and ittspi'ovensent that could britig the frtiits of the simple to the complex. the training proceeds. Beginning with
elrctronic age to tIme service of tile industry, test instruments, it goes ois up through various components of
Fourth, TIME stood lot' Training its Maritime Eheciroisics, eqtiipnsettt such as receivers, transmitters, auto alarms, and on
to keep radio officers abreast of technological changes and to the nsost complex and sophisticated circuits and devices.
t tsp o steers n t mu tie electit i cs TI ese are tested adju ted md repaired The trainees learn to
his thin sumisser of 1958. the major shipowtser groups agreed analyze the probletst first, tlsen to solve it, svot'king first on test
witls ARA that a jointly administered ARA \Vehfare Plan could chassis, then on uusits of tisoderis equipment that thse school
consnsence to implement tire fourths point, training, since it has acquired.
was a pivotal elenuent in such a program. Agreement to ttsove Flow effectively has the prograns been svorkiisg? Ilow has
alsead ors training svas an important step, for radio officers participation in the prograns been progressing? As of March 31,
svlro were aided in keeping their skills abreast of the changes 1977, 91 percent of the ARA radio officers active in the nsari-
in tIre nsar'itissre electrotsic techiusohogy, and for mite comsspanies time inclsmstry had completed tIre courses necessary for certifi-
whim were betrefired by their increased efficiency and emsabled cation as radio.electromsic officers.
PAGENO="0355"
1819
IEEE JOURNAL OF OCEANIC ENGINEERING, JULY 1977
ESTABLISHMENT OF THE RADIO.ELECTRONIC
OFFICER
As maritime electronics has developed, the title and status
of "radio operator" uvas changed to "radio officer." Now,
again as maritime electronics comes of age, through the joint
efforts of the companies and the unions, a new category has
been designated: the radio.electronics officer. This it how it
evolved in the U.S. Merchant Marine.
On the one hand, the technology of shipboard electronics
has btoadened as it has evolved into the complex of devices,
systems, modes, and applications described earlier. This proc-
ess has created the need for men with the broad and high level
of knowledge and professional qualifications required to
service and maintain the modern electronics apparatus, and to
expedite the introduction of even more advanced electronic
applications.
On the other hand, radio officer personnel aboard the ships
has been growing, as the profession has grown in scope and
responsibility. First on their own, later through participation
in the ARA TIME Program, they have moved along with the
times. By the summer of 1964, a small but growing number
of men had completed all the ARA TIME training courses,
thus qualifying themselves to take their places as the trained
and skilled men to expedite maritime electronic progress.
Early in 1964, in negotiations between ARA and major
Organizations representing steamship companies, the parties
consideted all of the factors involved in the recent develop-
ment of men and technology. They agreed that this willingness
to retool their qualifications and competency merited recog-
nition, and that, at the same time, the needs of the new mari-
time electronic technology called for the establishment of a
nesv shipboard category to expedite it. The new category of.
radio-electronicn officer wan thereupon established by
agreement of ARA and thene companies operating a majority
of the freighters, tankers, and passenger ships under U.S.
flag registry.
The agreement that established the Radio-Electronics
Officer (REO) was subsequently consumated with other com-
panies that dealt with the Radio Officers Union (ROU); as a
result, she companies involved operate a total of 92 percent
of the U.S. flag merchant ships. Radio-electronics officers were
defined by this agreement as men who have all the qualifica.
lions of radio officers, and, who in addition, are certified by
the ARA TIME (or successor institution) as having satisfac-
torily completed all correspondence and resident training
courses and/or otherwise fulfilled the requirements of the
training program, and certified thereby as being qualified to
maintain radiocommunicationu and radionavigation devices
used aboard ship.
Preference in shipboard employment was given radio:
electronics officers in assignment to specially equipped vessels,
nesver vessels, and one-third of the position on passenger ships.
A requirement was also set requiring nesvcomern into the
industry to qualify as radio-electronics officers during their
first three years of sailing.
In the emergence of the radio-electronics officer, maritime
radio personnel and their organizations are nseeting the chal-
snge of the future, in cooperation with steamship company
management. In the most profound sense, they have all
stepped out to meet the future, to seek solutions to its prob-
lems. With the radio-electronics officer a reality, the future
of all radio-electronics officers and of the nsaritime industry
are tied necurely together, wills electronlc progress an the
binder.
These skilled radio officers (radio-electronics officers) face
the future of electronics afloat, confident that they are part
of the future, contributing and sharing in the progress of the
maritime industry. Their organizations (ARA and ROU) are
ready to participate in the development and tenting of new
electronic apparatus and techniques and to assist in the evalu-
ation of these tests. Not the leant, REO'n are proud of the
deserved recognition for a job well done. They have come of
age professionally, as maritime electrotsics has come of age.
The ARA TIME Program is the nsodern radio officer's link
to the future; more than that, it is also the maritime industry's
link to the future,
APPENDIX I-EXTRACT FROM IMCO RESOLUTION
A. 283(VIII)
RECOMMENDATION ON THE DEVELOPMENT OF THE
MARITIME DISTRESS SYSTEM
II. Near Future Distress System
3.2-It iS recommended as a matter of urgency that
(g) the training of radio officers and radio operators be
expanded. Radio officers and radio operators should
be given appropriate training, according to their
differing technical backgrounds, in maintenance and
repairs at sea of the telecommunications and other
electronic navigation equipment involved in thC
safety of life at sea. In addition, all crew members
should be trained in the use of lifeboat and survival
craft radio equipment.
III. Distant Future Distress System
5,7-The training of radio officers and radio operators
should be further expanded, as appropriate, to ensure con-
tinued and adequate maintenance and repairs at tea of the tele-
communications and other electronic navigation equipment
involved in the safety of life at sea.
REFERENCES
Ill RTCM Report to Task Force, June 13, 1968.
121 -`p.4-
131 -`p-3.
141 -p.6.
151 Final Eseineeeing Report for Marine Equipment Environmental
Study, Phase I, prepared for National Maritime Research Center,
Department of Commerce, Maritime Administration, p. 55,
1974.
161 RTCM Paper 21-77/EC-214/SC 65-232.
171 This 92-percent figure is taken from data droetoped by the Os-
lice of Maritime Manposuee, US. Maritime Administration, U.S.
Department of Commerce.
181 CB Aereement effective June 16, 1977, ARA and ROU with
various Companies.
191 Proposed ADD 885C, U.S. WARC Propouat, p. 57~
1101 Ibid., pp. 57-58.
1111 ITURRR7ejF,
[12) IMCO RCC, Report of 5th seusion.
1131 IMCO RCC Document COSI V1/3/22.
114) IMCO RCC Document COM VH/2(a)/t.
PAGENO="0356"
1820
Mr. VAN DEERLIN. No; I think you mix them very well. And I
recall a very lively testimony that you rendered during our ad hoc
panel sessions going back 2 years on the subject.
If we are reacting to disaster, it is only that we view so much of
the 1934 act in other fields as a disaster, and I assure you that we
will be darn careful to preserve that which has worked.
Mr. STRICHARTZ. Thank you, Mr. Chairman.
Mr. VAN DEERLIN. Are there other questions for Mr. Strichartz?
[No response.]
Mr. VAN DEERLIN. We surely do thank you. I am sorry to have
kept you here, but it is not too late for a three martini lunch.
The subcommittee will reconvene on Tuesday of next week at
9:30 in room 2123, the main room downstairs. And if anyone cares,
we are going to start marking up a bill on the second day after the
Fourth of July recess, Wednesday, July 11. We have scheduled at
least 7 days for markup, going through July 23. The full committee
is not expected to be in session then. We will schedule however
many additional days as necessary to produce a completed bill
before the August recess, which begins on August 2, and we expect
to have major legislation ready for the full committee as soon as
the full committee is equal to facing it after the August recess.
I hope that all schedules will be adjusted, and if there is any last
minute red hot catchup lobbying to be done, everyone knows what
the dates are now.
Thank you very much for your attention.
[The following statements and letters were received for the
record:]
PAGENO="0357"
182~1
TESTIMONy OF ELECTRA COMPANY
DIVISION OF THE MASCO CO~ATION
By Alan Krauss
Vice President
and General Manager
Electra Company
300'East County Line Road
Cuxnberland, Indiana 46229
317-894-1440
Electra Company ("Electra") appreciates this opportunity
to submit written testimony to the Subcommittee with regard
to H.R. 3333, entitled the Communications Act of 1979.
Electra is a division of The Masco Corporation. It manu-
factures communications receivers, in particular the Bearcat
brand line, which includes so-called "scanners" which can
be used to monitor one or more discrete frequencies or an
entire band of frequencies. Scanners have enjoyed wide pop-
ularity through the country, with over four-million sets in
use, and annual sales currently in excess of one million units,
Electra wishes to focus its testimony on Section 549
of the bill generally, and Section 549(b)(l)' in particular.
The apparent intent of Section 549 `is to broaden the scope
of Section 605 of the Communications Act of 1934, to make
it easier to act against unauthorized interception of private
communications without the need, in simple terms, to prove
that the information intercepted was divulged or used for
the interceptor's benefit.
PAGENO="0358"
1822
The desirability of protecting legitimate expectations
of privacy in communications is recognized and appreciated
by Electra, particularly in the area of wireline communica-
t~ons, where the law protecting privacy is well developed.
However, care must be taken not to enact statutory language
which inadvertently prohibits many legitimate radio reception
activities or which is impractical and unforceable.
In this regard, Electra supports the suggestion of the
National Telecommunications and Information Administration
("NTIA"), at pages 32-33 of its written testimony dated June 6,
1979, that the words "under circumstances justifying such
expectation" be added to the phrase "communication which is
*sent with a reasonable expectation that such communication
is not subject to being intercepted or read" in Section 539(f)
(4) of the bill. The addition of this language will conform
the bill to 18 U.S.C. § 2510, imposing criminal penalties
for unlawful interception of communications thereby avoiding
possible conflicting interpretations of the two laws and em-
bracing a long line of judicial precedent as to what consti-
tutes a legitimate expectation of privacy in communications
which the law should protect.
The Congressional reports on the legislation should also
make it clear that the congress.understaflds that the public
at large knows that radio receivers of all kinds are readily
PAGENO="0359"
1823
available and that members of the public regularly listen
mon radio communications which are transmitted generally
over the air and can be received on conventional receiving
equipment. Those engaged in communications of this nature
do not. and should not expect. that no one but the person to
whom a message is directed is listening in.
Listening to non-broadcast radio communications is a
practice as old as the radio art itself. In the early days
of radio, when public service and other two-way radio users
operated on "short wave" bands, many hobbyists and others
obtained or built themselves radios which could receive these
bands. In later years, as radio operations moved up in frequen-
cy to VHF and then to UHF bands, receivers became commercia~lly
available for those who wanted to listen to the new bands.
At first, these receivers were controlled by variable tuners,
later by crystals., Now new technology allows synthesizing
of frequencies and the "scanning" of as few or as many frequen-
cies as the listener desires. These developments have made
communications receivers increasingly popular, which is why
we estimate that more than four-million scanners, and many
millions of tuneable or multi-band receivers, are in use in
the United States today.
Communications receivers play an important role in the
lives of many Americans in their every day activities. In
areas which rely on volunteers for public service activities,
PAGENO="0360"
1824
such as fire, rescue, and auxiliary police, members of these
forces may purchase receivers to keep track of activities
of their organizations and to know when their help is needed.
Medical personnel can learn of medical emergencies, businessmen
can keep track of their company operations while off company.
premises or at home and hobbyists can enjoy listening to
the "pulse" of their communities. Many public safety officials,
such as police and fire departments, have found that members
of the general public listening to their communications learn
to appreciate the efforts of the agencies involved, and they
have endorsed the use of receivers by the general public.
The large number of receivers being used and their general
availability make it apparent that no one may legitimately
expect that listening to his communications by an unknown
party will not occur. Moreover, users of communications equip-
ment must know that their messages will be intercepted, because
monitoring of one kind or another is required in any situation
where more than one transmitting unit shares the use of a
radio channel, both as a practical matter in terms of success-
ful radio operations and also to comply with FCC rules Any
time that a transmitter is activated on a channel, a check
must be made, in one way or another, to make sure that the
channel is free; otherwise, intolerable interference will
result. This is true on the shared Business Radio channel,
with perhaps dozens of users in the same community, as well
PAGENO="0361"
1825
as the police, fire, or taxicab channel, where, even with
only one or two users in a community, mobile units must coor-
dinate to avoid interfering with one another. Monitoring of
other people's transmissions is the rule, not the exception;
and it has never been suggested, nor could it be, that such
monitoring is a violation of anyone's privacy or should be
prohibited.
In other words, in any situation where more than one
transmitter shares time on a single radio frequency, monitoring
of one kind of another is legitimate and appropriate and should
be expected by radio users.
While there are certainly situations where the ability
to transmit communications by radio on a confidential or pri-
vate basis is desirable, regulation of conventional receiving
equipment is a poor way to attain this objective. A flat prohi-
bition on reception of radio messages by any person other
than the intended recipient of the message being transmitted
would be impractical and impossible to enforce and would entrap
innocent members of the public.
Communications receiving equipment is easy to obtain,
either by purchase or by home construction. Changing the fre-
quency of a radio is not difficult -- even in the case of
an FM broadcast receiver, which can be altered to receive
VHF communications in commonly used bands just above the FM
PAGENO="0362"
1826
broadcast band. A heavily used band lies between television
channels 6 and 7, and `reception is within the capability of
a television receiver. Television receivers are intended to
receive the 470-512 and 806-890 MHz bands (TV Channels 14-20
and 70-83), which are shared by television and land mobile
operations; and they can pick up land mobile communications
in this band. In other words, there is no practical way to
prevent anyone who wishes to do so from using an existing
receiver, or altering one, or constructing one, to receive
non-broadcast radio communications in almost any band. Any
attempt to legislate against such activity would be an attempt
at futility.
The fact that non-broadcast radio users expect that mem-
bers of the public may hear their messages is underscored
by the universal agreement among witnesses appearing before
the Subcommittee on June 6, 1979, including representatives
of the FCC's private Radio Bureau, NTIA, and the Land Mobile
Communications Council. All agreed that if complete privacy
is desired, the burden is on the party transmitting to take.
steps to protect his signal. The most obvious step is to use
a scrambler or other encoding device to prevent reception
by conventional receivers, protective devices of this nature
are becoming more and more commonplace and less and less expen-
sive. They are within easy reach of anyone who wishes to use
them. The witnesses before the Subcommittee were specifically
questioned by Dr. Charles L. Jackson, the Subcommittee's Staff
PAGENO="0363"
1827
Engineer, and all agreed on the appropriateness of using pro-
tective devices if privacy is desired and on the fact that
those not using such devices cannot reasonably expect that
their communications will not be heard by others.
In view of~the large and established market for communica-
tions receivers and scanners, the millions of units now in
the hands of the public, the need for. monitoring of radio
communications to avoid interference, and the ease with which
receiving equipment can be obtained or built, it is readily
apparent that those who desire privacy when using radio to
communicate should be expected to take affirmative steps to
achieve that privacy by installing scrambling or coding cir-
cuitry in their equipment. Otherwise, they should not have
any reasonable expectation of privacy.
Electra again endorses the proposal of NTIA that the
bill be amended to conform with the language of 18 U,S.C.
S 2510 regarding "circumstances justifying. . . expectation"
of privacy and that the legislative history make it clear
that such "circumstances" require affirmative steps by the
sender of a communication to prevent reception by conventional
receiving equipment.
Electra again thanks the Subcommittee for this opportunity
to present this statement in behalf of the scanning monitor-
receiver industry, and the many millions of users of other
radio receiving devices.
PAGENO="0364"
1828
My name is Dr. William M. Young, and I am President of William
M. Young and Associates, Oak Park, Illinois. Our firm
specializes in media consulting for public interest organizations.
Our company designed and manages the National PTA campaign
against television violence. Other clients include educational
and medical organizations. After review of HR 3333, I would
like to submit the following observations.
Under HR 3333, it would be required that:
"No person shall rebroadcast or otherwise retransmit
any program or portion of a program by a broadcast
station without the express authority of such a
station or the person who owns or controls the
exclusive rights to the programs involved."
At the present time, about 14.5 million households are able
to receive cable television. Cable has demonstrated that
consumers can have choice and variety in programming, as
opposed to many houses that only receive the three network
programs, and perhaps an independent station. In these homes,
oftentimes the consumer doesn't have choice because of the
effects of the networks' use of counterprogramming.
Both program suppliers and broadcasters favor retransmission
consent as a basis of reducing competition for the broadcaster
and increasing revenue for the program suppliers. The cable
industry cannot compete effectively with the broadcast
industry. The average cost per 1,000 homes to a network is
about $3.40, utilizing the cost of a typical sitcom. Using
the same pricing mechanism, the costs of the cable industry to
support network programs would be approximately $18.00 per
household. There is no doubt that the cable companies could
not compete -- and secondly, even if they could compete, the
broadcasters and/or program suppliers could refuse retrans-
mission consent to cable companies. A form of program
retransmission was adopted by the FCC in 1968, and later
abandoned because it was apparent that the cable operators
PAGENO="0365"
1829
could not receive transmission consent.
In the Young and Rubicam study of cable, it was demonstrated
~that cabl virtually no impact on broadcas~-~idience.
This findiiig was additionally substantiated by the FCC's
Economic Inquiry Study.
As a result of negotiations between the National Cable
Television Association and the Motion Picture Association of
America, ~agreement was reached that the cable industry would
pay certain copyright charges. The substance of this agreement
was incorporated in the Copyright Act of 1976. Payments next
year are expected to total $20 million by cable operators under
this agreement. The Copyright Act also stated that the
Copyright Tribunal could review every five years the rate
schedule, and alter the rates. This can still be done without
the retransmission consent section of HR 3333.
Cable television is being used effectively in providing for
specific demographic needs, i.e. children's programming,
educational shows, and instructional programs. If. the basis
of cable, which is retransmission, is hampered, then these
other program services will be denied to the American public
which will then be forced to accept the limited choice of the
three mega-giants, the networks.
In the past, the FCC and the Justice Department have expressed
concern over the power possessed by AT&T, and indeed, have
regulated the activities in which this company could engage.
HR 3333 would open the door for AT&T. and the major independent
telephone companies entering the cable field. This action could
lead to a monopoly in the cable industry, and would not serve the
public interest. Cable offers the hope of diversified services.
No action should be taken by the United States Congress which
would alter the variety of services which American consumers
could receive.
PAGENO="0366"
1830
STATEMENT OF ESTHER PETERSON
DIRECTOR, UNITED STATES OFFICE OF CONSUMER AFFAIRS
ON THE BROADCASTING ASPECTS OF H.R. 3333
BEFORE THE SUBCOMMITTEE ON COMMUNICATIONS
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE
UNITED STATES HOUSE OF REPRESENTATIVES
JULY 5, 1979
Mr. Chairman and members of the subcommittee, I
appreciate this opportunity to appear before you today to
express my concerns about the broadcasting aspects of H.R. 3333.
I should emphasize at the outset that I am speaking in my
capacity as Director of the U.S. Office of Consumer Affairs;
I am not speaking for the Administration. As Henry Geller
has previously indicated to this subcommittee, the Adminis-
tration has not yet taken a position on H.R. 3333, and it
does not do so with my testimony today.
In my view, deregulation of broadcasting, as envisioned
by H.R. 3333, would be a serious mistake.~ I do not say this
lightly. I recognize the widespread feeling in our country
today that government has been doing too much regulating and
that it is time to cut back. But we should be selective about
deregulation. Just as we. should regulate only when it does some
good) so we should deregulate only when it does some good.
PAGENO="0367"
1831
H.R. 3333, if passed, would immediately eliminate public
trustee .regulation of radio. Public service programming obli-
gations, periodic license renewals and assessments of performance,
the fairness doctrine, equal time requirements - - all these
would fall by the wayside. And as to television, these same
steps would be taken at the end of ten years.
What I would like to discuss with you today are the
implications of such deregulation - - which I believe are both
serious and adverse - - for the distribution of information
and power in our `society. Before `turning to' thos.e points, I
would like to make some `initial observations.
The test of.a regulatory framework in this area -- indeed,
in any area -- should be whether it serves the public well.
This country now has, under the Communications Act of 1934,
a thriving broadcasting industry that presents a good deal of
news and other programming designed to serve the public interest
more than the interests of profit. I would urge the members
of this subcommittee to assess the broadcasting provisions of
H.R. 3333 from the standpoint of the blic's interest.
At the same time, the subcommittee should avoid making
the mistake of basing its evaluation of the public trustee
concept on its assessment of the FCC's administrative competence
over the years. Much of the benefit derived from the public
trustee concept is ~ function not of formal FCC inyolvement, but
of the prospect or possibility of such involvement. Thus, the
PAGENO="0368"
1832
public trustee concept provides a basis for community and
citizen group negotiations with broadcasters, who are more
responsive to t'he concerns expressed because of their public
trustee obligations and the FCC's power to enforce them.
Even in the absence of direct citizen group pressures, broad-
casters must be on their guard; would-be licensees (and
nascent citizen groups) are not in short supply, and present
licensees have every incentive to avoid giving them grounds for
going to the FCC, rn large measure, then, the public trustee
concept is self-enforcIng, it serves as. a spur to responsive-
ness and a deterrent to irresponsibility.
I should add here that whatever the FCC's administrative
shortcomings may be, they are not inherent in the public trustee
concept - - or in Its administration. I recognize the desira-
bility of streamlining FCC processes, clarifying and strengthen-
ing FCC standards, and reducing FCC discretion. To these ends,
I would be inclined to support, for example, a legislative pro-
vision that prohibited the FCC from renewing the license of
any broadcaster whose station presented less than some set
percentages of news, public affairs and local programming. I
emphasize, however, that while a case has been made for
administrative reform, one has not been made for scrapping the
public trustee concept.
If the public trustee obligations of broadcasters were
to be elininated, what would happen? I think that the answers
are rather clear - - and rather disturbing,
PAGENO="0369"
1833
First, some broadcasters, absolved of their fairness
doctrine responsibilities to present contrasting viewpoints.,
would use their access to the public airs~raves to promote their
own private interests and viewpoints on public issues. Indeed,
I would anticipate that some major corporations and other
wealthy entities and individuals would try to buy stations for
precisely that purpose.
Second, if broadcasting were to be deregulated, members
of the public would be exposed to substantially less infor-
mational programming then they are now, Many broadcasters
would drastically reduce their public service programming.
The reason is very simple: much of the programming that is
now required by the public trustee bargain between government
and broadcast licensees is less profitable to broadcasters
than conventional entertainment programming.
Public trustee regulation seeks to assure that all
listeners and viewers, regardless of which stations they
tune in, are exposed to at least a modicum of news and other
public affairs programming. The objective here is to increase
the knowledge and understanding that members of the public
have of current issues and developments so that they may more
intelligently function as citizens. The proponents of deregu-
lation seem to assume that this goal would be served so long
as listeners and viewers who wanted to absorb some public
affairs programming, and were willing to track it down
51-253 0 - 80 - 24
PAGENO="0370"
1834
assiduously were able to find it somewhere on the dial
Many listeners and viewers would not be so zealous in their
search for edification at least not on a regular basis -
and as a consequence the overall civic literacy of the
broadcast audience could be expected to decline The goal
of informing the public is best served when all stations
are obligated to contribute to its advancement
Third many broadcasters would be less responsive to
minority and other citizen groups within their communities
Without the fairness doctrine and other avenues of FCC involve
ment as a backdrop the ability of these groups to negotiate
with broadcasters for programming directed at their needs and
concerns would be sharply diminished
It has been suggested that this loss could be offset
at least for certain racial and ethnic minority groups by
taking steps to increase minority ownership of broadcasting
stations However even if as a result of those steps the
number of minority owned stations were to increase considerably
what basis is there for assuming that the new owners would
present more minority oriented informational programming than
the old ones9 If such programming is less profitable than say
mass audience entertainment programming i~hy should we suppose
that minority owners would be more willing to sacrifice profits
than non minority owners9 In effect the government would be
releasing non minority owners from the obligation to present
programming responsive to the needs and concerns
PAGENO="0371"
1885
of minorities, and then expecting minority owners to take
up the slack.
Public trustee regulation - by imposIng on licensees
the obligation to present programming that deals with the
major concerns and issues in their communities, and *by
providing avenues for citizen involvement in broadcasting
policy and negotiation with broadcasters - - encourages all
stations to~provide programming that is responsive to minority
needs and interests. As ~. result, those needs and interests are
communicated to all segments of communities; this contributes
to greater'rnutual understanding and communitycohesiven~ss.
These benefits could be largely lost if non-minority-owned
stations were no longer expected to present programming
responsive to and reflective of minority concerns.
Fourth, moi~eftd interests would take advantage of the
absence of a fairness doctrine to distort to their own ends a
process that was designed to promote democratic decision-
making: the referendum. Let me illustrate this point with an
example. In Miami, tobacco companies recently spent more
than $700,000 advertising against a proposition that would have
banned smoking in public places. The Media Access Project, a
public interest law organization, contacted sixteen Miami
broadcasting stations regarding the resulting imbalance of
their coverage of the referendum. Fifteen of the stations
promptly took remedial action that was satisfactory to the
citizen groups that MAP was representing. A complaint was
PAGENO="0372"
1836
filed with the FCC regarding the one station that did not. If
the fairness doctrine had not been available as a tool for the
citizen groups to use in seeking additional coverage of con-
trasting viewpoints, the public's perceptions of the issues
involved would have been bought by the side with more money.
I should note that a weakened fairness doctrine that did
not obligate broadcasters to cover, and cover fairly, ~j~c
issues would be of no help in the context of a referendum like
the one in Miami in which one side can afford to outspend the
other by double-digit multiples. Many citizen groups do not
last as long as a broadcaster's license period; they coalesce
around particular issues and then disband for lack of resources
or because the issues they were formed to deal with have receded
or been resolved. Such groups cannot be expected to show up in
a license renewal proceeding long after the occurrence of a
fairness doctrine abuse topresent documentation of apattern of
flagrant irresponsibility by the station over the preceding
several years. Moreover, the possibility of Commission action
at license renewal time is no substitute for the opportunity to
obtain rectification of a fairness doctrine abuse soon after
the abuse occurs and while the subject matter involved is still
a live issue. Retention of the current fairness doctrine, which
gives citizens a context in which to seek contemporaneous
remedies, is vital, especially given the growing frequency and
importance of referenda.
There is one other aspect of H.R. 3333 that I would like
PAGENO="0373"
1837
to comment on briefly' today. 1~he bill would eliminate current
limits on the number of broadcast licenses that can be held by
~~any one individual or entity, That, in my view, would be a
step in the wrong direction - a step toward concentration,
rather than diversification, of media control and, with it,
of social amd political power.
In closing, I would just like to say this: Congressman
Van Deerlin and I are good friends of long standing. But
even good friends have to disagree sometimes. And, Van,
although we disagree about broadcasting regulation, I want
you to know that I admire your having raised these difficult
issues with your customary thoughtfulness, tenacity, good
humor, and grace. And I commend you for your sensitivity,
reflected in the bill, to the need for a program of public
participation funding to assure that communications policy
decisions are made on the basis of more complete and balanced
records,
That concludes my statement, I would be glad to answer
questions about the matters that I have discussed.
PAGENO="0374"
1838
STATEMENT OF
JOHN P CLEARY DIRECTOR
hEW JERSEY OFFICE OF CABLE TELE~ISIO~1
Mr Chairman ~nd embers of the Subcommittee
My r me is John P Cleary Director of the New Jcrse Office of
C~ble Television Bo.rd of Public Ltilitie~ wtich is the regulatory agency
responsible for cable television franchising ~nd for the regulation o~ cabin
television generally within the State. I am also Chairman of the Conference
of State Cable Agencie ~hich is an associ~ on o~ Sti~te t~mclcs ~aich
regulate cable television It is in my capacity as Director that I mate the
statement herein
hew Jersey shares the near consensLa opinion that the tech-
niogical advancements within the corsaunicationS irmdm_stry during the last
forty-five years mandate the revision of the Communications Act of 1934
The State commends the Subcoroaittee on CoranuricatiOnS in drafting this
vital legislntion
House Resolution 3333 premised toon the Congressional finding
that re~,ulation is nece~sary to the extent rarl'etplace forces are deficient
constitutes a major breakthrough in the regulation of interestate and
foreign telecommunications ~~ithin this regulatory frariewori ~ew Jersey
anticipates that the mri~c of emerging and e~cisting technologies in a com-
petitive atmosphere will further the public interest in the development of
technologically diverse and financially independent telecommunications
mediums
Federal Cable ~yisiom ~~io~g
In the above contest hew Jersey strongly supports the elimina-
tion of outmoded Federal regulation of the cable televisior industry We
believe any fears that the lack of Federal restrictions will encourage the
blossoming of ever more abu~ive rt.ste and local limitations to be entirel)
unfounded Paranoia of State regulation is actually a fear that the most
ppropriate regulator) tier the State night becore the primary regul~ntor
PAGENO="0375"
1839
The State is big enough to establish a regional policy with the
necessary expertise, while at the sane time small enough so that it is
close to those who are affected by the regulation. Federal authority is
remote to the public. Remoteness can also be expressed in terms of geo-
graphic distance and travel inconvenience. There is no way that people
in Uash~ngeon can deal with local needs, particularly when we are discuss-
ing an essentially local industry such an cable.
Decentralization of cable television regulation will not create
confusion, increase the size of bureaucracy, nor be too c~stly. Initially,
we note that a fear of bureaucracy is more justifiable when the Federal
government tries to take on all responsibilities instead of placing then
in the proper channels. Federal regulation encourages complexity and
unmanageable administration. By limiting the role of the Federal govern-
ment and by scattering the authority to fifty States, management is reduced
in scope. There would be no need for a substantial increase in personnel
because there should be a reallocation of job to accompany the reallocation
of functions. In fact, the trend in recent years in New Jersey at both the
State and local level has been against more comprehensive regulatory struc-
tures and toward the gradual deregulation of cable television service on
a competitive basis. In this regard I point to ~ew Jersey's Common Tariff
for the regulation of basic subscriber rates for cable television reception
service.
Put simply, it is the opinion of New Jersey that State regula-
tion is the best tier in which to regulate the cable industry. The State
is large enough to handle the regulatory load, while small enough to have
the necessary expertise to be aware of local problems.
PAGENO="0376"
1840
The termination of local regulatory au hority will substantially
impair both existing and future contract rights between local entities and
cable operators.. This effectively renders if difficult, if not impossible,
for ideal communities to have significant input as to the type and quality
o~ services provicied bj cable operators "nus Tew Jersey opposes tFe
N P 3333 proposed elimination of currert state regulation of cable
In this context to the extent H R 3333 eliminates outmoded
Federal regulation New Jersey supports it Of course any such deregula-
tion rust recognize and protect appropriate areas of Nederal concern
While attempting to lessen its regulatory burden the Subcommittee rust
acknowledge cable television's status as an important facet of the "rapid,
efficient, nationwide" communication system sought in the Communications
Act of 1934 HoT.e~er while we agree ~ith both the F 1 3333 intended
expansion of marketplace effects on regulation and cable television's r~gbt
to compete therein government rust not impose itself on the marketplace
in such a manner as to give one communications entity a competitive ad-
vantage over others absent an overriding pi_blic interest
An example of such an area is that of pole attachxnents~ As
recently as 1978 Congress recognized the co~~petitive disparity irposed
by the marketplace and enacted the Corinunic~t~~nS Ac' Aendmep~~ of 1978
(47 USC 224 Pub L No 95-23A) These Amendments provided for a Federal
rcgulatory authority over pole attachments in those instances s~here States
failed to enact appropriate regulatory legislation While "dew Jersey
continues to advocate State regulation in ratters of local corcern to
avoid restoration of the historically uncompetitive, unregulated. relation-
ship between utility pole owners and cable television companies it is
urged that the 1078 Amendments be retained
PAGENO="0377"
1841
While technical standards for cable television systems say be
viewed as local in nature, both protection of the public safety and the
national interest in having compatible telecocnuunications networks demand.
a Federal presence. New Jersey believes that, whez~ possible, Federal
standards should be eliminated. However, where appropriate, the Act should
establish minimum and maximum technical standards within which States may
set their own standards. This minimal degree of federalization will serve
the public interest better than if technical standards were the sole
responsibility of the Federal government, for then we would be subject to
a "lowest~common~denominator" standard. In the structure sugg ~sted, subject
to minimal Federal restrictions, the industry can strive for the best pos-
sible 1 Federal restrictions, the industry can strive for the best pos-
sible technical standards which the State feels will not impede the growth
of cable in its region.
Another area that should be subject to a dual regulatory author-
ity is that of access channels. Cable has traditionally been "sold" to
municipal and state officials on the basis of its seemingly limitless
availability of outlets for public access. As such, access is an inpor-~
tant part of that which makes cable unique from other communications
mediums. The right to local expression, regardless of ones opinion of the
type of programming provided, is still diversification.. Elimination of
this right to access will be a disservice to those unsuccessfully seeking
access and to thosewho will never receive the degree of local diversity
in programming that they were promised, that they exepecu and that they
deserve. Accordingly, New Jersey advocates a degree of regulation ade-
quate to secure access. As access services are, by their nature, matters
of local concern, New Jersey advocates State regulation thereof. }iowevar,
the interest of the public and the cable indus~ry are such that, should a
PAGENO="0378"
1842
State fail to enact appropriate regulator) legislation then Federal regula-
tory authorit) over access should commence
Further matters of traditional interstate corcern within the
correunications indr.stry should remain the subject of Federal concern
Specifically ~ew Je~se) ~dvocates Fedar_l retulation of (`) cable equal
employment opportunity (2) access for political candidates (3) equal
time and the fairness doctrine and (4) antisiphoning rules to protect
broadcast sporting events of nationwide interest such as the World Series
the Super Bowl and the Olympics
To the extent P R~. 3333 is intended preclude all governmental
regulation of cable distant signal importation ~ew Jersey supports it
The First Amendment encourages the widest possible distribution
of and access to all forms of communications free of governmental pro-
cription of an) type Although signal carriage rules do not seek to
preclude communication of any particular viewpoint their effect is to
limit the total ` olume of information which ~ould otherwise be available
Thus viewer access and the public's right to available expression is
curtailed Clearly such artificial quotas are strong evidence of the
arbitrary type of censo'ship that directly contravenes both the ~plrit
and intent of our First Amendment
With the eceptiofl of the prohiol ion against the regulation of
pay cable services in ackriot ledgement of market place competitive forces
the present regulation of cable television under the 1934 ~ct contains dis-
criminatory prohibitions and inhibitions designed to litait the diversity
of television programming and services which cable television may provide
to the public Such regulation is anticomsumer and anticompetitive
PAGENO="0379"
1843
- Retention of network non-duplication rules, precluding a cable
television system from offering a program shown by network affiliates, is
merely artificial support for a local broadcasters' programming monopoly.
Clearly, this is contrary to the Subcommittee's reliance on a competitive
marketplace. The promise of cable television is that it makes it possible
for television stations in one locality to éornpete with those stations in
another, while, at th~~ame tine, optimizing the full range of available
programming services.
A traditional objection to extending the concept of open com-~
petition to the importatioi~'of distant signals by cable television systems
has been the absence of copyright liability for such activity. Without
such liability, competition was thought to be unfair. The General Revision
of the Copyright Law by the 94th Congress imposed such liability on cable
television companies. This eliminated the need for both distant signal
importation rules and syndicated exclusivity rules.
R.R. 3333 provides, as a trade off for the elimination of distant
signal importat3on rules, that a cablecaster be required to obtain consent
either of broadcasters or program owners prior to retransmitting a program..
While we support protecting the property rights of producers and broad-
casters, we feel sane could be accomplished through a relook at the Copy-
right Law to provide a more equitable accounting for use of products and
Admittedly, satellites have made the conpulsory copyright fee required
tinder current law outdated, but retransmission consent is not the answer.
To require such consent in light of existing syndicated exclusivity
contracts would effectively eliminate viable programming available for
satellite users.
PAGENO="0380"
1844
It is t±e position of ew Jers~y t1at ~hile the present copyright
fee schedules may deli'~ered programming to the ration a cable s)sterns has
not resulted in under compensat on to programsera Pather the public~ is
given access to diverse prograrn~ing and television stations get a profit
opportunity since cable syster~ a~e required to carry their advertisements
Copyright holders get comoensation by chargi'~g higher prices to stations
who benefit from distant carriage ard by collecting a reasonable copyright
fee from the cable industry Of course local broadcaster e~calusivity
contracts ~ould be adjusted to reflect possible importation of signals
Fair market vali~e for programming would ultimately be worked into the
contracts In that regard it should be noted that cable is not the only
bar to absolute exclLsivity Overlapping television markets have always
done this
While it would appear on the surface to be fair to allow a cable
operator to approach either the cop)right bolder or broadcaster for consent
to carry a particular program over his system such is based on false
assumptions about the marketplace and is totally contrary to the public
interest.
Petransiliss_on consent ~vill recessitata large scale regotiation
between the cable operators individual stations and copyright holders
As the araller operators will be entering in o direct competition ~ittt
the smaller broadcasters they will be placed in a take it-or-leaveit po~.itiori
be foreclosed froti' any effective bargaining position and will ultimately
be forced to cease operation
Further retransmission consent ill place the cable operator in
the untenable position of having to seek the permission of the p~rty with
~hich it would ha'e to co'pe e in order to obtain the progr r'-ing to of fLr
in competition The corpulsory license s ster w~.s a cr~a ccl to ivoid such
a r diculoiS situ~tion
PAGENO="0381"
1845
New Jersey is in favor of fair conpetitior, but where there is
no competition we need regulation. There are no real marketplace competi-
tive forces in effect today. A comparison of the cable industry's marginal
profits when compared to those of the broadcast industry clearly under~-
scores that point. At least in the short term, high tranrmissj~~ costs
and long tern exclusive contracts might result in full cable retransmis-
sion consent becoming the practical equivalent to a total prohibitjon of
distant signal carriage. Requirement of such consent would curtail the
industry's ability to offer unique programming option'; including all day
chidren's channels, movie and sports channels, and all day news and
religious channels. Because operators ~do not have to compete in the cur-
rent market they can specialize by appealling to individual levels of the
community. In order to offer such diverse services cable operators must
-have an economic base from which to build. *Such a base would be denied by a
retransmission consent requirement.
None of the fees collected under the current copyright law have
yet been distributed. No harm has yet been shown. It should be noted
that under the present Copyright Act, if the F.C.C. were to authorize
retransmission of additional signals, the copyright tribunal could, upon
petition by a copyright owner, establish a new formula for the new signals
Since the F.C.C. is now in the Process of deregulating cable, we may anti-
cipate that new signals will be added and that there will be a new formula
to cover them.
The Copyright Law has been in effect only since January, 1978.
The fee schedule therein, approved by Congress, was the result of negotia-
tions between the National Cable Television Association and the Motio~i
Picture Association of America. It is not based on empirical economic
justification. If modification is necessary, same should be accomplished
PAGENO="0382"
1846
under procedures in the Copyright Law Ix a new schedule more closely balancing
rarktplace r~a1ities as to corpetition xth i rore equitanle co-persaticn
for product ~s rece~sary retransmission consent is not the way to accow-
plish such a balance
Cable Televsion System ~~y~hi
H H 3333 in effect permits telephone company ownership of
cable facilities sub3ect to certain qualif_cations as to program content
Additionally the Bill would leave it to the Justice Department to decide
whether broadcast crossownership of cable systems should be prohibited
Ne~ Jersey submits that the historical separation (2 coasnon car-
rier transmission facilities and content thereof should be maintained
The technologic~d developments which nay lead to cable television usage
of comron carrier facilities necessitates that the de facto monopolization
of both facilities and content be avoIded. To allow otherwise could foster
the inequitable result of requiring "conpetition' between a common carrier
and a cable television company over the use of the comv~o-i ctrrier's facili-
ties Unified control over common carrier facilities and content would
ultimately lead through attrition in the nutsber of cable television
companies to a reduction in the availability of telecomnunicatioos ser-~
vices to the public Such a reduction in services not resulting from a
true competitive situation is in con~lict wito the cortceut that regulation
is necessary to the extent marketplace forces are deficient Directives to
prevent ronconpetitive practices while admirable sill not prevent the de
facto monopolization anticipated herein P separation of facilities and
content will
PAGENO="0383"
1847
Thus, New Jersey supports a prohibition against all common
carriers, including telephone companies from offering video entertain-
ment services. Any such service in rural areas should be allowed only
on a case-by-case waiver basis. All waiver requests should be viewed in
light of creating possible anticompetitive conditions. In that regard,
New Jersey supports broadcaster ownership of cable systems with one excep-
tion. It is felt that, ~to avoid the monopolization of communications
media in one geographical area, broadcasters should be prohibited from
owning cable facilities in the same zone in which their broadcast facili-
ties operate.
Conclusion
The New Jersey Office of Cable Television believes the 1979
* revisions provide a good approach to the necessary. and overdue re-
write of the Communications Act of 1934. b~hile its shotgun approach to
the deregulation of cable television needs revision, the competitive
tenor incorporated in the proposed Act should guarantee the future avail-
ability of telecommunications services.
* Thank you very much for this opportunity' to express the. views of
our Office.
John P. Cleary
PAGENO="0384"
1848
STATEMENT BY
TERRY HERNDON EXECUTIVE DIRECTOR
Mr. Chairman and Members of the Communications Subcommittee: I am
Terry Herndon Executive Director of the National Education Association
representing 1 8 nillion teachers and other educators from preschool
through higher education
NEA is truly national in scope because its members are everywhere--
in every Congressional District in each hamlet town suburb and city
Wherever there are children going to school, there are NEA members in their
midst We have a special interest in the legislation before this Subcommittee
We thank you for this opportunity to share the concerns of our members about
H R 3333, the first revision of the Communications Act of 1934
I would like to commend Chairman Van Deerlin for taking a leadership
role in rewriting and updating the nation's communications law We think
this congressional action is long overdue, in light of the revolution in
telecommunications technology in the 45 years since the Act was passed
(In fact, new developments can be expected to render H.R. 3333 obsolete
before it is even enacted.)
NEA s relationship with the nation 5 broadcast industry continues
to be a unique one Our members primarily public employees do not
exercise any ownership of mass media Our state and local affiliates
seek access to airtime they do not control On the other hand we
support the industry by promoting quality shows for children and their
families We assist broadcasters by developing and distributing materials
related to these shows In this sense we are partners-~the NEA and the
broadcast industry--in making commercial radio and television programs
a constructive learning experience
Our views on H R 3333 flow out of our recognition that the ownership
of media be it electronic or print provides a powerful opportunity to
shape public opinion. Anyone who possesses such tremendous power has
PAGENO="0385"
1849
a profound obligation to exercise it in the public interest. It is the
government's obligation, in turn, to provide the statutory framework
and administrative wherewithal to ensure that broadcasters do in fact
act in the public interest.
We believe Congress can best approach this task by strengthening and
reinforcing the current requirements for equal time, fairness, and
ascertainment of community needs. We believe congressional attention
is also needed in two other critical areas: equal access of minorities
to media ownership and employment, and the impact of broadcasting on
children. I would like to address each of these broad topics briefly,
beginning with the public interest question.
Even under the current law, with a regulation designed to remind
and require broadcasters to use their great powet and influence in
the public interest, our surveys have found evidence that they do not
always do so. The problem is most serious in small or medium broadcast
markets where the newspaper company owns a radio and/or TV station (or
vice versa), presenting an almost unlimited opportunity for media control.
In Tacoma, Washington, last fall, after teachers called a legal strike
and the school board closed the schools, two broadöast facilities and
a major daily newspaper, all owned by the same company, editorialized
against the teachers. The radio and television stations claimed they
couldn't find a teacher representative to interview, although a teacher
representative placed a call each morning to both stations and a teacher
telephone hotline was updated daily. Meanwhile, twenty miles away,
Seattle's. major daily newspapers offered balanced coverage.
Teachers in Illinois, Ohio, and other states have reported similar
violatjons of the Fairness Doctrine, which we have shared with the FCC
51-253 0 - 80 - 25
PAGENO="0386"
1850
in earlier comments .~ Two radio stations in Peoria and Decatur refused to
air public service spots, editorial opinions, or any views whatsoever
provided by our Illinois affiliate. The two station managers were quite
candid in stating that they personally opposed the teachers' positions
and in fact made certain that their communities knew where they stood.
A year ago, the National Broadcasters Editorial Association articulated
the following principle: "Replies to editorials should be solicited
vigorously. As a means of stimulating public dialogue on issues and in
the spirit of fairness, replies should be afforded scheduling and placement
equivalent to editorials."2 Unfortunately, this is a voluntary standard
adhered to by only a small percentage of broadcasters. NEA has had
many complaints from its associations in small and medium markets that
they were denied the opportunity to reply to unfavorable editorials.
We feel strongly that the Fairness Doctrine must be maintained and
vigorously enforced for both radio and television. A repeated argument
against maintaining the Fairness Doctrine is that it is misinterpreted by
broadcasters and the public, or that it is confused with equal time.
That is not a valid reason to eliminate these regulations. It is an
excellent reason to. improve their implementation. In 1970 in Comrnitt~
For the Fair Broadcasting of Controversial Issues3 the FCC, citing the
celebrated. Red Lion case, stated that the Supreme Court had indicated
1First at an en banc meeting in May of 1977, and then in February
of this year in response to the Commission's inquiry on Public Issues Un4a~
the Fairness Doctrine and the Public Interest Standards of the CommunicatiO~4
~.L. (BC Docket No. 78-60).
2Statement from the code of ethics adopted by the NBEA at its annual
convention, June 1978.
3Vol. 25, FCC Reports 2d. Page 283, 293 (1970)
PAGENO="0387"
1851
the Fairness Doctrine is not only constitutional but may well be constitutionally
required.' It went on to say the 1959 amendments "codified" the doctrine.4
There is no question that there is a legal mandate for the Fairness Doctrine.
We believe there is an ethical one as well.
We also feel that the legal mandate for broadcasters to ascertain
community concerns should be maintained for both radio and television. The
traditional argument against ascertainment has been that a broadcaster in
a small market has no need to ask questions of the community to ascertain
issues of concern, because a small market broadcaster already knows all
the answers. From the report of our affiliates in small communities, we're
not convinced that these broadcasters necessarily know even some of the
answers. Maybe they don't even know the questions.
A number of TV stations, including outlets in Hartford, Miami, the
District of Columbia, Raleigh, and Hoston, have developed innovative public
affairs shows around the concept of ascertainment. In all cases, the "community
needs topic list" required by the FCC was successfully used to generate
timely, interesting, and useful programming.
Iwour surveys we have also learned of many commendable uses of public
access to the airwaves. We have discovered that stations on the West Coast,
as well as here in Washington, are using Free Speech Messages: short,
one-minute spots repeated five or seven times throughout the week on current
controversial issues. Another creative use of access is telephonically
recorded public opinions from listeners on controversia11~sues which
play in short segments one~ right after another.
As an organization with a firm commitment to affirmative action,
NRa endorses the Equal Employment Opportunity requirements that now cover
4lbid., page 293.
PAGENO="0388"
1852
broadcast employees. If anything, more aggressive action is needed to
ensure minority involvement in radio and television. As Chairman Van
Deerlin noted this winter in the Christian Science Monitq~, "out of 755
commercial television stations only one is owned by blacks and only
41 of the some 8,000 radio stations are owned by minorities."
The question of children's programming is one of very special concern
to NEA members, who are well aware of the enormous amount of time children
spend watching television and listening to the radio. Broadcasting has
tremendous influence on the behavior and the opinions of young people.
Teachers see this every day in their classrooms. We are well past the
stage where teachers view their students' electronic playmates as irrelevant.
Teachers are interested in helping children learn how to use television,
so that they can. be critical viewers of what they watch and better consumers
of what they buy.
We agree with the comment made this winter to the FCC by our New
Jersey Education Association: "The industry does not have apositive
precedent f or policing itself, and there is no background to assume that
the industry will begin to do so without standards regarding children's
programs."5 Only one of the networks has anyone assigned specifically
to manage broadcast standards and practices for children's programs.
Even in that one case, the person still has no jurisdiction over the
prime time programs which make up the majority of children's television
viewing.
We remind this Committee that there is a clear precedent for congressional
action in this area. Recognizing the profound impact television can have
51n the Matter of Inquiry on Children's Television Programming and
Advertising Practices, BE Docket 19142.
PAGENO="0389"
1853
on children,~the Emergency SchooL Assistance Act (P.L. 95-561) has provided
some~$52 million over the past six years for "the development and production
of integrated children's television programs" aired free of charge to
help change attitudes toward school desegregation.
Commercial broadcasting too, at its best, has demonstrated that it
can be an educational tool of great force. In recent years NEA has given
its recommendation to many outstanding programs on all four major television
networha. ABC's Teacher's Guide to "Roots: The Next Generations," endorsed
by NEA,~played a~major role in that program's educational success, as
some 500,000 NEA teachers and 20 million students shared a nationwide
learning experience.
NBC has also discovered the value of study guides. For the "Holocaust"
broadcast, NEA helped develop materials for children and adults to extend
the valuable lessons of this program into millions of homes, classrooms,
and civic, community, and religious groups.
NEA has likewise participated in the CBS network's Reading Program,
which has sparked hundreds of students to discover the excitement of the
printed word as they read real television scripts of special prime time
programs.
Nor, of course, is prime time entertainment the only source of `creative
education' on commercial television. News and public affairs programs have
brought the lunar landing, China, a solar eclipse, and other remote places
and events into our living rooms. Families have confronted difficult
issues such as drug abuse, human sexuality, delinquency, and vandalism
through hard-hitting and timely television documentaries. They have learned
about health, nutrition, and even critical TV viewing skills through innovative
public service announcements.
It is clear, then, that teachers and broadcasters can support one
PAGENO="0390"
1854
another in developing that well-informed and educated constituency
which Thomas Jefferson said is vital to making democracy work. But as
broadcasting expands its influence, we feel the need for continued federal
regulation to ensure that the gains teachers and broadcasters have achieved
together are not reversed.
This brings us back to H.R. 3333. We sincerely appreciate the long
and diligent effort put forth by this Committee and staff in the massive
task of rewriting a 45-year-old law that is clearly out of sync with
current technology. There are certain elements in the bill with which
we can concur. We are pleased that at long last the importance of ensuring
that New Jersey and Delaware each have at least one VHF station has been
recognized. We feel that the proposed spectrum fee for broadcasters, given
the economic advantages of the industry, is both valid and long overdue.
We applaud the concepts of a minority ownership investment program and -
minority loan guarantee program, although we question their real impact
in the proposed absence of EEO requirements.
Unfortunately, however, H.R. 3333 does not measure up to what we
believe is needed in the areas of public interest, affirmative action, and
children's programming. We have grave concerns about its proposed
deregulation of the broadcast industry--deregulation which the broadcasters
claim is necessary to protect their First Amendment rights. It is our
contention that the First Amendment is rooted in the public's right to know--
to be presented with accurate information or, in the absence of facts, with
a fair and balanced spectrum of opinion The First Amendment protects the
very same public interest standard that the broadcast industry is opposing--
a regulatory standard embraced by the 1934 Communications Act but dangerously
diluted in H.R. 3333, at a time when the increasingly pervasive influence
PAGENO="0391"
1855
of the media would seem to call for strengthening, not weakening, this public
protection.
Another provision of LR. 3333 which we view as absolutely dangerous
is the proposed lifting of the prohibition on cross-ownership of media
outlets. The FCC has made real progress in limiting such cross-ownership
over the past several years. Now is not the time to retreat from a
stand so clearly in the public interest.
Likewise, in light of the many complaints NEA has received from
teachers denied the right to respond to unfavorable editorials, we believe
that what is needed is regulation to encourage fair editorial policies,
not legislation that would eliminate all requirements for editorials, as
H.R. 3333 would.
NEA is also concerned that H.R. 3333's lifting of requirements for
news, public affairs, and..other types of radio programming, coupled with
its proposed elimination of the ascertainment mandate, would relieve
broadcasters of the obligation to reflect any community concerns at all.
We are equally alarmed at the proposed elimination of the equal time
provision for radio and all television except paid time. This would clearly
give a broadcaster an unfair advantage in influencing any political election.
A case in point: The state of Wyoming, which sends only one member to the U.S.
House of Representatives, has only three TV stations, one of which covers
75 percent of the state. This station has been charged with several cases of unfair
editorial practices. Without equal time requirements for broadcasters,
we are concerned about the scenerio in Wyoming and elsewhere during the 1980
political campaigns.
H.R. 3333 also falls short on the test of minority involvement guarantees.
In a clear step backward, it proposes to eliminate--immediately for radio
PAGENO="0392"
1856
and eventually for television-the current Equal Employment Opportunity
requirements for broadcast employees. Its provision ending the competitive
license process for radio renders growth in minority ownership unlikely.
We do not believe that the random selection process for assigned
television frequencies, with a double chance for minority applicants, is
any more than a double dose of useless medicine--a placebo. It insults
the existing gains for minority involvement in radio and TV throughout
the country.
Turning to our final concern, we believe it is imperative that children's
programming not be deregulated. It was only after considerable public
outcry that the FCC finally decided to reopen the inquiry into the need
for further regulation of this critical area. Both the Federal Trade
Commission and the FCC are currently studying the effect of TV commercials
on children. We fear that under LR. 3333's deregulation, whatever
progress has been made would be wiped out in the return to an uncontrolled
marketplace that sacrifices quality programming to economic profit.
Our conclusion is a simple one. LR. 3333 does not adequately protect
the public interest. It moves backward on affirmative action. It does
nothing on children' s programming. As written, H * R. 3333 ought not to
become law If it cannot be improved we would be better off to remain
under the Act we have now.
Thank you.
PAGENO="0393"
1857
Definition of Tare
~eg~4atory Standard. The public interest, convenience, and necessity.
Licensees are "public trustees" who are subject to
regulation by the Federal Communications Commission.
Mcertainment. Under the public interest standard, the FCC has required
stations to survey the taste~ needs, . and desires of their
comnumities and present programe to meet them.
Access. Access to ownei~ship and employment from within. Access
to the airwaves from without.
Fairness Doctrine. Under the Act, FCC has developed policy requiring
each broadcaster to air controversial issues and to
offer balanced treatment of questions that are raised.
EEO Requirements. FCC has developed Equal Employment Opportunity rules
under the public interest standard.
~qual Time. All legally qualified candidates for a public office must
be offered equal opportunity if one candidate for that office
uses station time.
PAGENO="0394"
1858
Revision of the Communications Act
Currently and during the 96th
Congress the National Education
N A T I 0 N A L E D U C A T I 0 N A S S 0 C I A T I 0 N Association shall actively lobby and
OF THE UNITED STATES OF AMERICA worktoseekchangesintheproposed
revision of the Communications Act of
1934. The Association opposes those
sections of the proposal which would
severely limit and inhibit access to the
airwaves of radio and television by
public interest groups. The proposed
revision would change the system of
license renewal and the process of
I challenge to broadcast licenses by
R eso ut' transferring the burden of proof of
whether a station is acting in the
p public interest from the broadcaster to
the public. It would unduly restrict
B , the funding process for public broad~
e w usiness casting programs. The Association be.
lieves that broadcasters must continue
10 serve community needs and in-
terests. It is imperative that those legal
relate directly.to NEA goals-such as
d requirements currently in effect which
the fairness doctrine, equal time re-
quirements, ascertainment, and affirm-
ative action regulations-be included in
~ any revision of the Communications
IITnflr Act
U LI 151 The Representative Assembly
directs NEA to act immediately to re-
vise responsibly the Communications
Actions Act of 1934 and urges all states and
local affiliates to communicate their
concerns to congressional representa-
tives and candidates for the United
States Congress. 11978-171
(New Business Item)
1978-79
RESOLUTIONS
78.18. Media Legislation in the Public Interest
The National Edscstion Association opposes legislation so release the broad-
casting indusssy from the requiremests of serving the public interest.
The Associatios su~rports those public interest groups that work for responsible
reform of the Communications Act of 1934 and foe media legislation in the public
interest, It urges its state and local affiliates to express their concerns to their
- representatives in the United States Congress,
78.15. Television Programming
TIre National Education Association recognizes that children are an especially
vulnerable audience who mast be protected from violent television programming,
race and sex stereotyping of the medium, and enploitatinn by advertisers, It encour-
ages advertisers and broadcasters to promote a variety of programs of the highest
calibre for chi5dren of alt ages.
The Association urges its affilIates to establish television study comndtlces to
monitor television activities, to provide research material on television to teachers,
and to promote positive, edscational programming.
PAGENO="0395"
1859
ABC SALUTES
THE NATIONAL EDUCATION
ASSOCIATION FOR ITS
INNOVATIVE USE OF TELEVISION
AS A TEACHING TOOL.
In 1969, the National Education Association, America's largest organization of teachers,
recognized the educational possibilities of quality television programming. It was the first
educational organization to endorse a television documentary and has continued to be a leader
in the endorsement of quality television programming to motivate dassroom learning.
The Next Generations" as
~s endorsed by the NEA,
e was produced and
cussionund was used
~portantgoal.-.to enrich the
ica's youth.
~ortant educational
~rward to future
ABC ThNgfwoRK~
PAGENO="0396"
1860
Tim N~~tiona1 Educatiou Association
Before time Federal. ComneinicaLions Commission
~!ashington, i).C. 2O5~4
In the Matter of the Inquiry )
on Children's Television Programming ) BC Docket: 19142
and Advertising Practices )
Comments Filed by the National
Education A~;sociation
:1: Office of Communications
.mj
~-
February 12,1979
Susan Lowell
Director
Staff:
Karen Klass
Communications Specialist
PAGENO="0397"
1861
The National Education Association is a professional organization
of 1.8 million teachers located in every state and congressional district
in the country, in Puerto kico and in the Department of Defense schools
around the world. The goals of the NEA specifically include three objectives
which relate to the impact of television and radio upon students:
1. to stimulate educational research that is responsive to
problems of classroom teachers.
2. to provide information that will enable Association
and affiliate leaders to influence developing public
policies on education.
3. to provide information systems which support individual
members in their professional practices.
The NEA is very pleased that the FCC has provided us with the opportunity
to comment on the children's television programming and advertising practices
of the commercial networks and local stations around the country. We
have participated, through our state affiliates, in the four FCC work-
shops on Public participation which included a session on the "Children's
Inquiry." As a result of these workshops and subsequent notices to our
members we have received many specific responses from teachers which we
will attempt to summarize in our comments to Docket 19142.
The first issue of concern which was mentioned consistently by every
teacher who contacted us was. the definition of children's programming
as adopted by the Commission in 1974. It is quite clear to us that a
revised definition should take into account the percentage of ehildren
in the viewing audience in determining whether the program should include
considerations for children. One survey of teachers conducted by the
Garden Grove Education Association, from a 812 student school district
PAGENO="0398"
1862
in Orange County California found that more than 75% of children watch
adult entertainment after 8:30 p.m. Less than 1/2 experience full
supervision; more than 1/2 the homes involved had more than 1 TV set;
and several teachers noted that there were "no limits on viewing,
parents go to bed and children watch what they want."
A statement from the New Jersey Education Association cOmments to
this docket states that "the TV industry does not have a positive
precedent for policing itself, and there is no background to assume
that the industry will begin to do so without standards regarding
children's programs (ref. second notice p. 5 #14),A case in point,
only one network, ABC has someone assigned specifically to manage broad-
cast standards and practices for children's programs. Again, this person
oversees weekend, Sunday evening, and prime time and after school
specials; all of which make up the minority of children's TV viewing.
Although we will address some of the question' $ presented by the
Commission in terms of current standards for children's television,
we believe that the one overriding issue at hand is t~e total affect
that TV in all time periods has upon our nation's children.
Many of our teachers voiced concern about the subject of age -
specific programming (second notice p * 8 #23). The Iowa State Education
Association conducted a. survey of 31 teachers representing the entire
state. The figures. showed that although most respondents felt there
were more shows aimed at specific age groups, the biggest problem is
that there is not sufficient information available to the public as to
what age groups really are being targeted for specific shows. The NJEA
(New Jersey) felt that statistics should be compiled of programs aimed
at separate groups of children i. e. pre-school (1-5); through seventh
grade (6-12); youth from 13-17. The California teachers added that this
PAGENO="0399"
1863
lack of information made parental guidance very difficult.
The Iowa survey asked whether "the rights of children t~ diversity
of programming designed for them is being adequately provided for by the
television networks and their local stations?" (Second Inquiry, p. 13
#41) The largest difference in answers was to this question. 75% said
,no. Of the.25% who answered yes, all said diversity was met on the
national level not the local level. They also said that quality was
most often sacrificed for quantity on both the local and national level.
The Iowa survey followed up with a question as to whether the FCC
should adopt requirements concerning children's programming for local
stations and networks to meet. Again, the overwhelming answer, 70% was
yes. The most often stated comments concerned the elimination of
commercials (though respondents were doubtful as to the real feasibilty
of this action) and elimination of jui~ik food ads. Many teachers (and
all of the 30% who opted for no requirements) stated the importance
of parent responsibility in children's TV viewing. Three specific
comments are unique and noteworthy.
1. "If all advertising goes - there will be more of
a need to establish requirements to assure quality
programs."
2. "Local stations should do shows with local talent
and artists. 50% of a show should be entertainment
without cartoons prepared by local artists in lieu~~
of live talent.
3. A requirement should be made of broadcasters to
assure the portrayal of local values in a community,
This could be done on the network level with more
PAGENO="0400"
1864
diverse characterization; as one teacher states, "few
* $ew Yorkers know anything about rural agricultural values
and they tend to portray midwesterners as hicks, let the
rural ghetto be heard from." Or requirements could be made
(with the help of local ascertainment procedures) to make
sure that these values are reflected in local children's
* shows.
One teacher from the state of Maryland provided a formula for use
in determining how many hours should be programmed for children.
"To suggest how to measure compliance with the requirement that
licensees make a "meaningful effort" to serve the child audience with an
adequate amount of overall programming is a difficult charge. A meaningful
effort is open to wide interpretation. The formulation of a percentage of
total air time which must be devoted `to children's programming may be
the fairest method. This at least would set minimum standards. A
percentage of 5% per week would mandate approximately 7 hours. This
percentage could start at 5% in 1980, rise to 6% in'l982, and 8% in 1984.
This phase-in period would allow for stations to grow in expertise in
children's programming. A report on this should be part of the ascertainment
procedure."
On the question of the amount or appropriateness of advertising
in children's programs the opinions from the Iowa survey varied greatly.
The results were fairly evenly divided between reducing the number of
commercial minutes beyond the current 9½ and 12 minute limitation and doing nothing
About 2% of the respondents hoped for total commerical elimination.
Another 2% wanted a control of the quality and type of commercial material
(repeats of concern over junk food ads) `Judy Lonning, a teacher in Des
Moines Iowa says, "ads directed toward children are unfair and deceptive.
PAGENO="0401"
1865
Children lack the maturity of judgment, the full ~apacity for individual
choice and the perspective needed to deal adequately with commercials.
Children are a special category deserving special protection such
as they are accorded in other ways: school requirements, work, laws,
prohibition of sale of certain products. Children are a valuable
resource and should be nurtured and protected rather than ruthlessly
targeted as consumers."
Teachers repeatedly emphasized, as they did in the area of
programming, the necessity for parents to help their children in becoming
discriminating viewers, especially when the children "are not the
primary consumer" (Diane Davis, Ames, Iowa). Another teacher from Iowa
4
suggested that schools should have "media education" as part of their
curriculum opportunities. Many teachers were concerned about the
content of the commericals more than the number of commercials. One
teacher supported commercials because they, "provide tine for parents
to take a break from the program and discuss the show with their children."
The comments from NJEA reflected considerable doncern in the area
of commercials on children's programs. New Jersey felt that, "There must
be stronger emphasis on the separation, of reality and unreality on radio/
TV. Children are too susceptible to these seductions and are totally
unable, especially at early ages, to separate.the two. They must have
more help in this matter from adults. (ref. p. 3. #7.) "Why the
differentiation between weekday commercial time limits from weekend
commercial time limits? Children are not consumers, their parents are."
"Commercials which urge children to purchase items not in their best
interests, i.e. regarding health, personal safety, etc. are not
defensible." (p. 16 #45, footnote 52)
:6
PAGENO="0402"
1866
NJEA also felt that the ideas of PSA a for consumers would greatly of f-
set some of the negatives of TV commercials They suggested that the
FCC should encourage the networks to solicit child-oriented PSA s For
example ABC produced a PSA based on the Action for Children's Television
guidelines Westinghouse has produced PSA's for their stations and the
,Television Information Office in New York has produced some PSA s for
their members Clearly this is possible With a stronger incentive -
broadcasters could provide children and adults with much in the way of
consumer information relating to children. The NJEA comments state:
With further regard to Public Service Announcements geared for
children one strong advantage is to get messages to them such as those
geared to their health and welfare i e against sociai abuses junk
foods etc The physician members of the New Jersey Coalition for better
TV viewiig have spoken of these numbers of tines These need not be only
against abuses but positive things such as reading physical exercise
outdoor play
It is appropriate to mention some exawples of positive uses of television
which we feel indicate the potential for additional progress in this area
The networks have provided materials on special shows NBC developed
a study guide for the Holocaust which was distributed to their affiliates
Through Prime Tine school TV a non-profit publisher ía Chicago ABC
distributed a 16 page study guide for Roots II CBS has established
a very successful reading Program by making scripts and study guides
available for certain prime time television .~pecials Community
organlzations such as United Council of Churches and the B'Nai Brith
Anti Defamation League have provided educational materials on certain programs
PAGENO="0403"
1867
Citizen's groups and teachers associations have formed coalitions
and have begun to establish projects on the topic of children and television.
The NEA already has samples of programs from its affiliates in Massachusetts,
Iowa, Colorado, Maryland, New Jersey, New York, Pennsylvania, ~nd
California. The business community has also participated in this endeavor.
The Associated Press distributed scripts from Roots II to member. newspapers.
Many sponsors of programs on prime-time as well as afternoon programs
have published educational materials in conjunction with their shows.
Research (copy synopsis attached) indicates that instruction combined
with TV viewing does make a difference in attitudes children learn from
TV (such as anti or pro-social messages or absense and the presence of
lex-role stereotypi..~). One local teacher's association in Maryland
has designed a TV literacy curriculum which has been very successful in
the Baltimore County Schools. Even the U.S. government under the Office
of Education has provided grants to develop critical viewing skills on
television.
If the networks were required to provide more educational materials,
both on their programs and in conjunction with their programs - they would
receive plenty of help. As an extensjou of the concept of ascertainment
an Advisory Board representing teachers, parents, civic, religious groups,
cultural organizations, etc., could provide assistance to the broadcasters
in the area of program ideas, ancillarymaterjajs, and PSA's. They could
help the broadcaster with data on age specific programs and assist ~n
monitoring where the needs are in this area. They could even assist
in distributing information and materials about programs of educational
value. Many teachers have suggested topics which they wish would be
addressed on TV ranging from ecology, exploration of self and the world,
PAGENO="0404"
1868
and the rights and well being of others Ideas and resources could
be available to the broadcaster that could generate different and
exciting quality programs
Already there have been a number of new and creative ideas to
address the needs of children and television The President of Quaker
Oats, a major. sponsor of children's television programs, suggested the
creation of a single television network that would bring high quality
shows to child audiences In Los Angeles a coalition of writers
directors and producers of television programs who have a commitment
to children have been meeting to address the issue of improving the
4uality of television especiaUy as it affects children They are
investigating a revolutionary concept of an hour each week on each network,
called the `family quality programming hour
On January 5, 1979, at a meeting of the Public Relations Council
in San Diego California (representing NEA PR Directors from every
state) a resolution was passed relating to the FCC Inquiry on Children's
Programming and Advertising Practices Recognizing ,that television
greatly affects the education of the nation's children and can severely
inhibit or appreciably assist teachers in their instructional efforts
the PR Council applauds the FCC Inquiry on Children's Programs and
Advertising Practices and pledges its cooperation to the NEA and the
FCC in their efforts to improve programming and to enhance teachers' and
childrens' benefits from television `
The NEA plans to continue to investigate the subject of children
and television in order to provide teachers parents conununity groups
and the broadcast industry with assistance in achieving more positive
affects of TV on children We will seek out more known resources to
facilitate the educational values of the television medium
PAGENO="0405"
1869
I~ the coining year the NEA is planning to establish a children' a
TV clearinghouse for local prograns. Any station that wishes to see
examples of local qi~iality television prograns for children may request
a sample tape of programs reconainended by NEA state affiliates. Each
station with a nominated program will receive a certificate of nerit.
We are encouraged by the increased awareness of educators, the general
public, the industry, and the FCC to the concerns of the impact of
television upon children.
We must all make a major. commitment to the development of the
positive relationship between television and children and we will encourage
parents and teachers to cooperate with the broadcast industry to develop
positive aspects of children's TV viewing.
PAGENO="0406"
1870
Apocrd iC t
~ 11' 1 LFFC S O~ Co r~r PC .LAI ~T I 10 OLI c !Tt1Jtr~
b, I Jjnn~ `fun Bj uirc ~ ociuL three or ~`or jnform.~tion .~c~rvice-~ NJTA
3.
By ago 16 toe avc~agc. child will have pan~ 15 000 hou.i vatchin~ t~levisio1
The impact of thi~. volume of expo ure to one form of nas., reclia i~ of concern
to many parents, educators, and other professional groups. A Washington, D.C. media
reform group has been given a $25,000 grant by the American Medical Association to
study television violence The National PTA has initiated a project to combat
violence on television and will hold eight public hearings to gather testimony
from e~perts to support its thesis that television violence results in child violence
The trend of research evidence suppo~s toe association s theory ~ha~ violent
television entertainment heightens aggressiye motivation and increases the probability
2
of subsequent aggressive behavior by some children and youths. This might affect
classroom discipline and control Imuortant studies on ~his aspect of television
influence on children include
U S Surgeon General s Scientific Advisory Ccnmittee'on Televisicri and
Social Behavior Reports `tnd Papes edited by George A Coustock
and Eli A Rabinstein 5 volumes Washingto'i, D C , Government
* Printing Office, 1972.
Volume I Media Content and Coitrol
Research focused on (a) amount and charaCter of television violence;
(b) the circumstances and milieu in which violence is created; and
(c) formal and informal influences which affect the selection and
prohibition of televi ion content Conclusions arrived al wore that
since violence seems to be fevorably r.eeived by the general vic~ring
public and i~ also the solution to problems related to dramatic e\]5'-
encie~ of television prouuction, coitcexcial bionclcas e.~ mU co~inue
to u&o violcn~e in tneir progi.ams
Alberta I Sic~el Ccnurtunicating mrith th~ Ne\t Coneintion, Journ49~
Communications 25,~: ?2, Aulustn, 1975.
2
Sic~el cii cit p 10 Cooi~c Com~tocI' The E~idenco so Pa , Jouinml of
~ :27, Autumn, 1975
PAGENO="0407"
1871
Volume II: Telovln;.on awl ~oc~1. Tearnin;~.
Revicw~ research :u.tes~ii~re on ch:i ldccn recpon:~es to television violence
and contains reports on five studies conducted for t},e cor2niLtec. Again,
findings indicate that intorpersonsi. aggre scion in. children will increase
for a short period or time after the viewin, of violent television programs.
Volume III. Television and Adolescent Agr~rca~jon~.
Contains reports of eight I~icld s~~ioc ~f~fect of adolescent exposure to
violent television programs upon aggressive social behavior and fee1in~s.
Findings: viewing television violence can account for no more than 10 per
cent of the total variance in measures of adolescent agressions.
Volume IV: Television in Day-to-Day Life: Patterns of Use.
The'eight research projects reported in this volume include a study on children's
use of television and other media, children's television behavior and viewing as
perceived by the child and his/her mother, and effect of television advertising
on children and adolescents. Findings include: amount of time spent watching
television increases throughout the elementary years, peaks at early adolescence,
and decreases in the high school years; brighter children show more variation
in their program preferences; viewing of violent programs is lower among girls
than boys; amount of television news watching is positively related with news-
paper reading; children. copy behavior of characters on programs they're watching;
and very heavy television viewers are the most likely to have problems of social
adj~stment.
Volume V: Television's Effects: Further Exulorations.
Investigations concluded that the amount of violence a child views, and his/her
acceptance and feelings about violent behavior are related to a child' a economic
background and age. ` .
Addendum Volume: Television and Social Behavior: An Annotated Biblio~amhy
* of Research Focusing o~Televisions Impact on Children. -
McCarthy, Elizabeth B. et al. "Violence and Behavior Disorders."
Journal of Communications. 25,~:7l-85, Autumn, 1975.
Conclusions of this study are: (a) children with the lengest viewing hours
score highest in variables of regressive anxiety, mental problems, depression,
fighting and delinquency; (b) children who piefer the most violent programs
evidence more aggressive behavior, i.e. conflict with parents, fighting and
delinquency; (c) the lower the family' a economic status, the greater the like-
lihood of the child' s preferring violent television programs; and. (d) children
whose mothers are either not highly educated or are single parents tend to
prefer violent shows.
PAGENO="0408"
1872
I c ~. rLher.~ tic' I md n~ mdi C tI, 0 tf~J.CvJ ion C fl a! 0 CO iriUnicai/'
~ocm~mlly v~mlucd bch vmor and ~tLm uk
Poulos, Rita Wicks, Eli A. Rubinotcin, and Robert U. Liebert.
"Positive Social Learninf." Journal of Coxmunicat.~on~~
25,1~:9O~~97, Autunn, 1975.
Aspects of televisions effects on social behavior in children
were studied: analysis of positive social examples appearing on
cosinercial television; demonstration of possible ini'luences of
actual tele\ised po it_se behavior and scrutmn! of datar~unan+~
of children's attention to progrenseing. Findings include: (a)
children ~ho saw the prowcial pcoEv~.r1 helii.~1 signi~'ican ly more
than those who view the n utral pro,~r~m (b) tee proseci~.l program
`.~as attendrd to more b~r bo~h se> e tnan the neuLraJ. prozram ~nd
Cc) the amount of action and. background are important determiners
of child's attention to either prosocial or neutral programs.
Collins U Andrew et `ml Asyects o~ Te1evi.~io~Co'itePt and Childrei~s
Social B"h'wior Minneapolis ilinri Institute om Child Develop-
ment Minnesota Universi~y, l971r
Studied ixapwt of different types nm television cootent on ~he soci~.l
behavior of children of various ages. Results indicated that the
hero who uses constructive coping strategies to solve the problem
may have more effect on young viewers than the violent hero. If
the hero has both good and bad characte~'isties the imp..e~ of any
aggression is greater than if he is definitely evil
Walling, James I The Effect of Interactio'i on Learning from
Television CosimunicationEdttCati~2p 25 1 l6~2I ~an~.ry 1976
This study found tha" children who watched. t~x. experimentally selected.
television shows were better able to answer questions about the social
roles and functions of such parsons as paramedic~, lawyers and private
detectives. Children whose parents watched,and discussed the programs
with them were better able to solve problems similar to those presented
in the selective shows they had seen. Nbnviewers and children who viewed
the shows alone were equally poor in solving these problems.
Research also shows that televised persons provide an example or a model for
3
vie~er behavior Unfortunately television can reflect the social and
cultural stereotypas of society
McGhee, Paul F Telcvi'mo'i as a Source of Le'mrnmn Se~~Ro1.e'~t~yPqS
Paper pre.~eneed `mt the Biennial teeting of the Socaetr for ?cs~.aac1i
in Child Develop'n.flt Denvem Colorado, Api il 10 13 1975 (LD 111 526)
The amount of time chmlthen in giac es K 2 1~ and 6 sp..n~ ateth ng telex msmon
was determined by a telvision program checklist;. Each child was given
3
Siegel, .2R ~ p.23
PAGENO="0409"
1873
MeGhec (~ontinu.c:u)
a tc&;t to :neaaurc his/her preference for ccx ntercotypecl toys or
activj,tins. Children who watched the moat television acored snif-
icantly hi~hcr in the test than isv televiajon viewere. Results
ifldicate that television affects children's acquisition of ccx role
typing.
Women on Words and Images. Channsliivr. Children: Sex Stereot~~'
in PrJmm-TiraeTclevj~on. Princeton, I~.J.: Wornen~n ~!o~ds
and Images, 1975.
Contains a statistical survey of sex stereotyping in dramatic,
family-oriented programs fro.m the 1973 television season and plot
`, summaries of popular l97t~ programs. Results include: (a) more men
than women appear on all the analyzed shows and the male/female
ratio increases in adventure programs; (b) men were shown in twice
the number of occupations womsn were employed in and male ocàupations
were more diverse and "professional" than women's jobs;. and (c)
women are shown in more instances of negative or incompetent behavior
than men.
Research seems to indicate that only if parents and teachers combine home
entertainment viewing with follow-up activities, does television have signif-
icant impact on a student's learning in language arts and reading. Also,
television can be viewed as a motivational device to interest children in books.
Becker, George 3. Television and the Classroom fleadin~ Program.
Newark, Delaware: International Reading Association, 1973.
Discusses how teachers can use home television viewing to improve
reading/language arts instruction. Gives practical examples.
Fasick, Adele M. "Television Language and Book Language."
Rice entary English, 50,1:125-131, January, 1973.
The gap in language development between middle-class and lower-class
preschoolers has not lessened with exposure to commercial television
(as distinct from positive effects of educational television's
"Sesame Street'~ and "Electric Company"). Reasons for this include:
(a) language heard on television must be understood at first hearing
or not at all; (b) child has no control over pace of speech or content;
and (c) no interaction with child and person speaking on television
can occur.
PAGENO="0410"
1874
Ikuculton -c.c3cn JJcrnh~irlt Thc~ F ] c~o hin I ic n 5r~1 ii. rin~
~_~I~L J J~_L~_~ ~LLL~__W_ U Doe
Di. t Liort BC) tort Un yes t cho'si a i U Lj.o'c 1973
Tested the comprehen~ton rind reacts en of students to books with
teicvision. tic-me and to otkor types of books read voluntarily
by the students durin~ç a six week ps~iod.. Conclusions indicated
that telcvi ion t_c-in rcre pce~rr_d o'~er nori tcl~vi~ioa i.e
tine pent ~atching telr~vi ia-c ~ three tirw~ len~r thin tn~ tine
spent re~cii1c~ ~nd paient.~ ex~r U ii tie or no control over th~
telev~sioi how tncir chiid~-n ~ ccl
Starkey John D and Helen L~e Sir nfo~d Peaciin~ Do~ Telein Sian
V3 ciri.nr~ T_ae Af~hctIt? Dc ~lb I o the~'n I1lirco~. Un_v
In this stuo~r of 220 fifth nd i/b gr-iies bct~er readc~s iui cocci
less television than poor re~ci~rs A lair p.rcent_re of parenal
supervision of television hoc s ua~ reported lb rel~~tionshio as
shown bet men a child o min5 his/her pe~sona1 tel~vision et ~nt
viewing time or reading ability. The authors conclude that children
shouldbe.taught to be discriminating television viewers.
Studies on the effects of coecmercial television on coilciren are continually
being ~one Dr Cldrence Bergeson of SIJNY is still correlating data fras
his research es'oeriments studying children in six dif~erent states and
living in -urban suburban and rural areas A~ Harvard University the Center
for Research in Children s Television ha~ been established and has ju~t issued
a report on sex stereotyping of o~.cup~tions p~esented th children on television
programs and toe effect on career education programs
PAGENO="0411"
1875
The National Education Association
Before the Federal Communications Commission
Washington, D. C. 20554
In the Matter of
The Handling of Public Issues
Under the Fairness Doctrine ) BC DOCKET No. 78-60
and the Public Interest
Standards of the Commur)ications )
Act * )
Comments Filed by the
National Education Association
Office of Communications
June 28, 1978
Susan Lowell
Director
Staff:
Karen Kiacs
Communications Spc~cialist
Tonyn Allen
1~1VT~ TnIr.~*,~
PAGENO="0412"
1876
We are pleased that the Federal Communications Commission
has granted us the opportunity tp present comments on. ±he issue
of public access to the broadcast airwaves and specifically in
regard to the Fairness Doctrine.
The Fairness Doctrine and access procedures are important
to the National Education Association because as a public interest
organization representing specific views of the education community,
we believe that there is a strong need ~or legal support to main-
tain "fairness" in broa~dcazting. Based on our experiences, we are
convinced that broadcasters must have a legal obligation to search
out community views. . .
The NEA is a professional organization of 1.8 million
teachers located in every state and congressional district in
the country, in Puerto Rico and in Department of Defense schools
around the world. From our Headquarters in Washington, in every
state, and in every school district across the nation, teachers
are deeply involved in, and concerned with the information which
is. broadcast on radio and television. Teachers, like any other
citizen's group, have thoughts, ideas, and information to com-
municate. We are anxious for greater participation by teacher
leaders with their local broadcast stations.
Last May, Susan Lowell, NEA Director of Communications
Services, issued a statement to the FCC cx~banc, in support of
improved broadcast access. By survoying NEA affiliates, we ob-
tained an "establi~hcd record of opinion" on the subject of broad-
cast accessibility and the Fairness Doctrine in particular.
PAGENO="0413"
1877
-2-
Mrs. Lowell presented to the FCC results of this informal na-
tional study which included examples of successes and failures
among some of our local associations working with broadcast
outlets.
Continuing our informal poll this year, we .have still
found severe misuse and misinterpretation of the Fairness Doctrine.
Most problems occur in small markets in rural areas where, for
example, formal ascertainment requirements are not required.
One radio station in Peoria, Illinois and another in Decatur,
Xllinois refused to ai~ any public service spots, editorial opinion.
responses, or any views whatsoever held by our . I*llinoi~ affiliate.
The two station managers were quite candid and open in stating
that they personally opposed the positions held by Illinois teachers
and, in fact, made certain that their communities knew where they
stood.
* * In Northwest Ohio, the former owner of a radio station
happened to sit on a local school board. His station's news stories
~ere biased against teachers. His interviews, for example, would
turn into debates on all kinds of teacher matters, often quite un-
related to the topic of the interview. The teachers' point of
view was, of cour~e, never aired.
It is.clear to us that if the Commission decreases fair-
ness regulation~ and continues to require no formal ascertainment
procedures in small markets, the problems which currently exist
can only increase. It is in small market stations that unfair
representation of community mattors occurs most often.
PAGENO="0414"
1878
We do noL feel that all hroec1cd.~ters arc inhcrc~ntly evil
and that they therefore maliciously spew the vie is rcprcsenLc~c1
on their air Thu problem is one of priorities If the govern-
ment lessens the federally mandated guidelines for presenting
controversial issues of public importance, then the control and
monitoring of `fair access" to a particular station becomes mini-
mal. Quite simply, what isn't required often does not get done.
The station has no real incentive, given the responsibilities of
running a business operation to regulate access to its air waves
Our problems aren t always with small markets however
Two years ago in Central']. Ohio, an impending school strike was a
manor issue in the community A large radio station conducted
a talk show in which only members of thL school administration
were invited to participate The station refused to allow teach-
ers on the program stating that the show would oml~ deal with
technicalities such as school hours transportation of students
what parents should do etc On the contrary the program turned
out to be a full-blown discussion of the issues st~rrounding the
impending strike which directly and specifically involved teachers
Moreover, listeners were deprived of `hearimg the teachers' very
important views about the strike views as impoitant and as valid
as that of school administrators.
On the matter of ascertainment which allows community
input to the broadca~ter,nany radio and television stations in a
!.a~c~ mctropolitin area approach the needs of the community from
very different perspectives In one of our srn~e~ed nrtikets one
stat3On updttes it.~ checklist twice a week one st-~tion upd-itcs
PAGENO="0415"
1879
its list monthly, and another updates the list yearly. While
three stations update every three years (for license renewal)
one station confessed that their list is updated "rarely."
While we recognize the importance of allowing different interpre-
tations of community problems - we are concerned that the p~cess
by which these problems are discovered is too flexible to be
valid. If, for example, a station doesn't update a `community
needs' topic list annually, how relevant can that list be?
A significant point was made by an assistant in Community
Affairs at one of our s,,urveyed stations: "Renown community lead-
ers are always ascertained, whereas., lesser known citizens may
be overlooked." This major problem which exists around the
country and which seems to allow for input from `established lead-
ers' who may or may not reflect current community opinions, won't
be solved by eliminating formal ascertainment procec~ures for
radio and television stations.
One often-stated criticism of ascertainment is that it is
a meaningless waste of time. Broadcasters interview community
leaders, file the reports, and continue blindly programming the
Same information to the public. This doesn't have to be the case.
More varied guidelines as to the ascertainment forms which the
broadcasters must fill out could be provided by the FCC. A simple
suggestion, such as carbons of the interviews (if the inte~viewee
agrees) could be distributed to key people at the station. At the
very least, a summary of the interview could be circulated to
these people. The station staff person in charge of ascertain-
ment could solbct a representative number of those interviews for
PAGENO="0416"
1880
di~tribuU.on (poo.~ibly choo.ing differc-nt onc~ for diffcrent
broadcast pcr~onncl depending on the topic) so th tt the procc~so
does not become ineffcctivc~ due to a paper overload Names
organizations eiamples which are brought out in an ascertain-
ment interview can prove to be a valuable resource to a broad-
cast producer reporter, editoLialist or public service or
public affairs director.
The FCC currently has a primer on the Fairness Doctrine -
but it is not much easier to understand than the legal doctrine
itself We strongly suggest that some wor1~ be cone to clarify
the obligations of the broadcasters and the rights of the public
Then, this clarification would be understood and utilized by
broadcasters and by the public
NEA recommends that the Commission possibl~ through its
Consumer Assistance Office prepare a simpl.e and cox~cise brochure
on the Fairness Doctrine and on ascertainment for the average
citizen that serves several purposes. First, the brochure might
mention examples of ways that stations have successfully and
creatively e~pandcd their community leaders list Second, the
brochure could detail pertinent regulations and guidelines con-
cerning access and fairness Third information -tbout what sta-
tion departments are likely to deal with - issues like fairness
and ascertiinment should be included Above all this material
should be uride widcly available to community gioups as a souice
of assistance to them ts well as to st itions This riaterial will
not only tnsst the iublic but should sc'i'.e to enlighten the
st-ition We feel th-~t one of the siqntficmt pioblcm ieguding
PAGENO="0417"
1881
`fair access' to the airwavec COritinUOS to be failure of the
broadcaster to clearly understand the concc'pt of `fairness~'
Many stations totally avoil controversial issues, clearly a
violation of the legal u~andate, because they fear the complexi-
ties of representing opposing points of view. We firmly believe
that the `Fairness Doct~jn~' is quite ].0050 enough to allow for
dontrasting opinions without unduly and unrealistically burdening
the broadcaster.
We also have some concerns regarding the current system
of broadcast editorials, and editorial responses. Recent surveys
of our state associatjo)~~ indicate specific problems regarding
editorial policies. One of our midwest affiliates is frequently
attacked by stations through unfavorable editorials and, in most
cases., is not given sufficient time to respond. Moreover, the
station has the option to accept or reject responses~ rendered
by the association. Time being a vital factor in responding to
editorials, the station usually has the last word. We strongly
support the recommendation of the Nati6nal Broadcasters Editorial
:Association (NBEA) made at a meeting in Philadelphia this year,
in which they suggest improvements in their code of ethics,
standards, and practices. Their suggestion Which provides better
public access to editorial opinions states that "replies to edi-
torials should be solicited vigorously as a means of stimu~.ating
public dialogue on issues. And in the spirit of fairness, replies
should be afforded scheduling and placement equivalent to edi-
torials."
51-253 0 - 80 - 27
PAGENO="0418"
1882
`rho W~A cuppw: t:s sevc3:al ropo:a1_ :; I: ted in tAils 3CC
inquiry_ which arc currently before the Ccmninsi.on arid ~,hi.ch are
aimed zit a trciicjthcnincj the 1'airries:; Dec triro and as cc:r tainmcrit
procedures. One proposal by henry Gcllcr recommend:; a `teri-insu~
approach' requesting television liccnsee~ to forme).iy list, on
an annual basis, ton issues that have received the most coverage
on the air. This annual list would hckcigon file at the station
and available for public inspection. The FCC would review this
list as part of the license renewal process. This policy would
allow the licensee to review each year its overall activities in
meeting the obligation of presenting `controversial issues of
importance.'
We agree with some of the proposals nade by the United
Church of Christ, notably: that "quantitative and other standards
be set to determine whether the license has rendered a substan-
tial informational program service to its area of li~ense and
acted in a meaningful way as a local outlet for expression of
diverse views on issues of public importance.
that formal ascertainment procedures should
be followed by all broadcasters to ascertain
the problems, needs, and interests of all
significant segments of their service areas.
- that broadcasters should make a "good faith"
effort to design programming that reflects
these problems, needs, and interoats.~
and: to make sure that programming is current
and up-to-date ifl rc~prC!Cfl L.tiicj coimsulu. ty c~C~Th *
and views, we feel that annual ascertainment:
reporL. should be filed with tA~ Commin~:ion. Thus
~Jua3:an t:ecinçj tisi I. t)ie~.:c procj ram ar.a,5 are m~ci~ ta med
PAGENO="0419"
1883
Also in agreement with the United Church of Chrjct, we
suggest that these programs be aired in times that best reflects
the licensees' audience. By encouraging stations to use "access
information" in its news programs, public affairs programs, and
locally originated prog~ams, this information will more ade~
quately reach the public.
At the same time, the NEA still maintains the right and
responsibility of the broadcaster to decide the frequency and
formality of information disseminated on their air. Therefore,
we take certain suggestions from the United Church of Christ
proposal to encoutage 1~roadcasters to devote time, for example,
to educational informational needs of children, and issues from
special interest groups in the community., if these issues are
considered relevant to the licensees.', audience.
It goes without saying that stations should make tine
ayailable, without charge, for public service annourmcements and
access messages allocated t~ requesting individuals and groups
representative of significant community segments or concerns.
NEA suggests that more stations become. involved in using
~the concept of public access creatively. A proposal by the Con-
mittee for Open Media recommends the use of Free Speech Messages
(FSM), short, one-mii~ute spots repeated five or seven times
throughout th~ week on a current controversial issue. Through
this strategy, the public could be presented opposing vicw~ of
an issue, free from biased attitudes. We believe that Free
Speech Messages should be a vol~mt~~ option to allow broadcasters
another link to community opinion.
PAGENO="0420"
1884
Two exnrnples in Washington, D.C. of effective uzuacjo of
access include WRC Radio's(WaZh., D.C.) `Direct Line," and
"Speak Out" on WMI~L-TV(Wa5h., D.C.) "Direct Line" begins with
confrontation, an open question `rendered by one of the stations
commentators. In turn, another commentator presents an opposing
view of the same issue After the program is over the public
is invited to call in and voice their opinions which are aired
later that same day. "Speak Out" is an issue-oriented program
pionéered'bY a station on the WestCoast. A person is granted
a 22-second and 42-second Public Service Announcement Ofl any
7
topic whidh meets the legal PSA requirements. Each announcement
is aired four tines a day; at prime-time - morning, afternoons,
and a sign-off These exariples of creative access not only allow
for the presentation of opposing views of controversial im-
portance, they allow on-going input from the public as well
An ~rinovative and extensive use of `ascertainment' information
was done in the fall of this year by the Post-Newsweek television
stations in Hartford, Conn., Miami, Fla., Jacksonville, Fla. arid
Washington, D.C. WTOP-TV (in Washington) produced a three hour
progrtm which aired in prime-time entitled, Nobody Evei Asked
`Me." Over 60 community leaders were interviewed via live cameras
on location (in Maryland, Virginia, and the District of Colwubia)
and in the stuc~io by WTOP news reporters. In the months to follow
the station has aired several 30-minute follow-up programs, ad-
dressing new issueS Ofl the `community needs' list.
In Raleigh, North Carolina WRAL-TV broadcasts "Impact"
weeks sometimes as often as once a month. The entire weeks'
public affairs ~nd public service programming is devoted to one
PAGENO="0421"
1885
community problem. The ~orxnat includes PSiYs, editorials, public
affairs programs, and often a mini-news sorics. They hove even
sponsored. a special project, such as one week in which the topic
was apathy; they broadcast a 12-hour live program called a
Volunteer-a-thon which concluded the week. WBZ-TV in Boston,
Z4ass. also schedules "Impact" weeks. They schedule one hour
of public affairs time each week to a subject on the `community
needs' list. WBZ usually schedules these programs from 10-11 p.m.
before the news, and if the interest is still high, goes back to
broadcasting live with guests in the studio after the news with
open lines to the public. Some shows have gone on as lath as
2 qr 3:00 a.~t. Both WRAL-TV and WBZ-Tv promote their "Impact"
weeks on their own air as well as in other media. A key `to the
effectiveness of this programming is a statement by one of the
statio~ managers, "continuing ascertainment deals with monitoring
the changing problems in the community. This means that a station
has to be `up-to-date' on issues to have interesting and relevant
programs."
These examples of using community access in a regularly
scheduled format which has proven successful makes one important
point clear. If broadcasters are given a mandate Csuch as the
~`airriess Doctrine or Ascertainment) which is firm but at `the
same time broad in scope - they will find a way and can find a
way to make that guideline relevant to their programming g'oals,
standards, and practices, In other words, it's not too tough an
as~i~nment for a major market or small m~rkot bro~dcastcr to use
the concept of ascertainment or to follow thc regulations of the
Pairnoss Doctrine creatively.
PAGENO="0422"
1886
COMMUNICATIONS SERVICES
NATIONAL EDUCATION ASSOCIATION 1201 15W St., LW., Wo~hm~tOfl, DC 20035 * 232~ 333-.~4~
JOHN RYOR. P~cRdR'~t i,.~. ~ C
WILLARD H. McGUIRC, ViCR.PWd~~I
JOHN 1. MCGAIIIGAL, SecetaryT~C3CWC~
$TATENENT OF THE
NATIONAL EDUCATION ASSOCIATION
IN SUPFORT OF
IMPROVED BROADCAST ACCESS
BEFORE THE
FEDERAL COMMUNICATiONS COMMISSION
PRESENTED BY
SUSAN LOWELL
`DIRECTOR
COMMUNICATIONS SERVICES
NATIONAL EDUCATION ASSOCIATION
MZsY 31, 1977
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Good morning, my name is Susan Lowell, Director of Communications
Services of the National Education Association. I would like to
thank Chairman Wiley and his lady and fellow Commissioners for the
oppo-tunity to address you this morning. As I am sure you know --
the NEA is a professional organization of 1.8 million teachers, most
of whom are.classroom teachers representing the entire nation, Guam,
Puerto Rico and the Department of Defense schools around the world.
You may wonder wh&t a teachers association would have to say to the
FCC? Here in Washington- our national headquarters has a communications
staff of 39 persons. We serve our members through many areas of
communications services including the field of broadcasting.
For years the National Education Association has recommended to
its memb~rs certain radio and television programs (both commercial
and public) which it felt were of educational value to students. As
outstanding example of this endeavor was the ABC presentation of
"Roots." In 1972 Alex Haley addressed our Representative Assembly
at the annual NEA convention. We followed-his progress closely and
alerted our members to the television series based on his book. As a
result of ~this suggestion -- we rereived hundreds of letters from
teachers around the country tel-ling us how they used "Roots' in the
classroom. The network has also acknowledged our contribution to the
utilization of the series among school children and their families.
A very new program developing f~r our members is a "teacher-training
project on childrej~'s radio and television programs. We have contacted
broadcasters, public interest groups, and teachers, who ore interested
and imvolved'in children's Programming -- as well as your own Task Force
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on Children's Television -- in order to put together a broadcasting
resource kit for teachers. We plan to include guidelines for using
programs of educational value in the classroom, ways to encourage
parental involvement in children's viewing and listening, resource
information on supplementary materials related to the programs,
and basic information and bibliographies pertaining to ch-ildren's
programming. The purpose of this project is to do all that we can
to encourage good programs for children and -- accepting the enormous
amount of time which our children spend watching television ana
listening to radio -- we turn that experience to their educational
advantage as much as possible. We hope to have the opportunity to
share more with you about that project at a later date.
I would also like to mention another project in which we are
involved. The NEA is a member of a coalition called .Arne~ican5 For A
Working Economy. We have been working, unsuccessfully to date,to ob-
tain access on the national television networks, (the two networks
inparticular which ran the Advertising Council's `Economy~ Public
Service Announcements) for our own PSA's regarding the economy. We
are hopeful that the generally positive response to our spots on local
radio and television stations around the country will eventually be
reflected by the networks' decision to run our spots.
The most signigicant involvement which we have with the broad-
casting community is the subject about which I would like to deVote
the rest of my time this morning. There are 12,000 local affiliates
of the NEA, each a member of a state association. These local asso-
ciations vary in size from as little as one to as many as 10,000
members -- all adding up to 1.8 million teachers.
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Our story beings in the Fall of 1976. For one week in November all
across the country, in large metropolitan areas and small rural com-
munities -- teachers, parents, and students celebrate American
Education Week, a cooperative project of the U.S. Office of Education,
the National Congress of Parents and Teachers, the American Legion,
and the National Education Association. We had been asked by many of
our local associations for new and creative ideas for American
Education Week. We decided to design a model project here in the
Washington area. If it was successful it could be repeated in other
cities, we planned a campaign utilizing broadcast media which we
felt would reach students and parents and teachers as well as the
general public. We looked for radio and TV stations that would be
willing to involve several aspects of their programming. This in-
cluded involving sponsors as well as listeners and viewerh. The
television station which participated in our project was WMAL-TV,
Channel 7. They ran a series of editorials on educati~n during
American Education Week. They also ran special PSA's all during the
week. The radio station, WMAL-A~M produced an extremely innovative
and comprehensive campaign. They ran a series of editorials -- all'
generated by their own editorial board and relating to local educa-
tional issues. They ran PSA's, and a special four-part public
affairs mini-documentary on the subject of `reading and writing' in
the school. They aired a contest among their listeners for parents
who are most hepful with their childrens' education. Over 300
nominations were submitted by students and twenty winners received
$25 gi'ft certificates from one of the sEations' sponsors -- Giant
rods. The supermarket chain also displayed posters promoting American
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Education Week throughout their stores in the metropolitan area
The radio station assembled material which we supplied on various
subjects to help parents work with their children -- ar1ded their
own bibliography -- and offered their own American Education Week
packet free to their listeners Needless to say this campaign drew
many follow-up responses in the form of letters print and broadcast
editorials and was considered extremely successful
In January of this year we took our success story to an NEA
conference of state public relations directors What ~e found was
very interesting Many of our state representatives were enthusiastic
about a comprehensive broadcast project Many had already produced
their own very successfully But just as many-related stories of
frustration, confusion, and despair regarding the use of radio and
television for educational goals We returned to Washington armed
with a long list of questions from small markets to large With the
help of the FCC Consumer Assistance Office the chief of that office
having attended and addressed our conference, a member of our staff
met with three people here at the Commission. Interviews were con-
ducted with individuals from the Fairness and Political Broadcast
Branch the Complaints and Compliance Branch and the Renewal Branch
Our questions basically dealt with the areas of the fairness doctrine
and Section #315 Public Service Programming and Ascertainment
Procedures We found the staff at the Commission extremely cooperative
and willing to spend as much time as necessary to answer our questions
We decided that we needed a compr~hens~y~ Broadcast Access Project
Something we could use to train our teacher leaders
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The project consists of three parts:
A pilot workshop for teacher leaders to find out how much they
knew about their rights to broadcast accessj
-- a survey of broadcasters to find out what they felt their
responsibilities actually were to the public, and therefore to
our teacher organizations;
-~ and finally, a survey of our state ~ommunicati~ns directors to
determine actual examples of problems and successes with radio
and television stations around the country.
The purpose of this project would be to eventually supply our
local and state associations with enough information so that they
would have realistic expectations regarding their participation on
radio and television. After we conduct a final survey of more
broadcast markets, we plan to share this informatior~ with~ our members
through our publications and through seminars, workshops, and con-
ferences which we conduct throughout the country.
The pilot workshop was held in Austin, Texas in February 1977, where
local teacher leaders were meeting to learn about communicatioms, A
staff member from our Washington Communications office discussed
some of the questions which were asked at the FCC. A video tape
highlighted some of the most common problems which teachers (and the
public in general) have in dealing with broadcasters. Ideas for this
script had cone from the January Public Relations conference. The
"WMAL American Education Week" success story was also explained in
detail. The Texas teachers had a chance to ask their own questions
and share their own experiences.
Phase two of our project meant interviewing broadcasters. A
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member of our staff interviewed e'