or directors to have a direct or indirect interest in, or be stockholders, officers, or directors of, more than 7 AM, 7 FM, and 7 TV stations-only 5 of which may be VHF.

The notes following these rules enlarge upon the method of their application. Let me mention a few which are relevant to the matters under consideration at this hearing.

"Control" is not limited to majority stock ownership, but includes actual working control in whatever manner exercised. Partial ownership interests in corporate broadcast licensees represented by ownership of voting stock are considered.

Generally, in applying the rules to the stockholders of a corporation having more than 50 voting stockholders, only those stockholders need be considered who are officers or directors or who directly or indirectly own 1 percent or more of the outstanding voting stock. A regulated investment company-mutual fund-interest need be considered only if it directly or indirectly owns 3 percent or more of the outstanding voting stock or if officers or directors of the corporation are representatives of the investment company.

A bank holding stock through its trust department in trust accounts need be considered only if it directly or indirectly owns 5 percent or more of the outstanding voting stock provided it files a disclaimer of intent to control the management or policies of the broadcast corporation. In a rulemaking in 1972, banks were given 3 years to make any necessary divestiture-by May 1975-to come into compliance with this provision.

Insurance company holdings are presently governed by a 1 percent rule but a petition for rulemaking is pending to change this to 5 percent. There is also pending a petition for rulemaking to raise the 3 percent provision for mutual funds to 10 percent.

Commission rules-§ 1.615; see also § 1.613-require the filing of an Ownership Report-FCC Form 323-within 30 days of the grant of an application for an original construction permit, and each time a broadcast licensee files an application for renewal of station license-presently once every 3 years. A supplemental ownership report must be filed within 30 days after any change occurs in the information previously reported.

These reports elicit information concerning ownership, including, for corporate entities, identities of record owners, beneficial owners, officers, directors and copies of any documents directly or indirectly affecting the ownership or voting rights of the licensee's or permittee's stock. Information concerning the interests of officers, directors, and stockholders in other broadcast stations is also reported. Information disclosing certain nonbroadcast business interests of officers, directors, and principal stockholders of broadcast licensees is reported in an application for permission to construct a new broadcast station, for renewal of license, or to purchase an existing station.

Further, section 1.613(b) (5) requires the filing of mortgage or loan agreements containing provisions which restrict the licensee's or permittee's freedom of operation, for example, "those affecting voting rights, specifiying or limiting the amount of dividends payable, the purchase of new equipment, the maintenance of current assets, and so forth."

Other loan agreements entered into between licensees and financial institutions during the license period are not required to be filed. Of

course, where a loan agreement may result in the acquisition by the lending institution of licensee stock, or representation on its board of directors, such information would have to be reported in supplement ownership reports.

An applicant relying on funds from financial institutions to purchase or make changes in an existing facility, or to construct a new facility, must submit a copy of the document by which such institution indicates its willingness to provide the loan. Such document must show the amount of money involved, the terms of payment or repayment, the collateral or security required, and the rate of interest charged.

Where loan agreements or loan commitment letters indicate that a security agreement will be required, the staff generally requires that copy of such agreement be filed with the application. These loan agreements are carefully scrutinized in order to insure that they do not contain provisions which may unduly restrict the discretion and flexibility that a licensee must retain in order to operate in the public interest?

Thus, information concerning debtholder interests are set forth and analyzed in initial applications for broadcast permits and in applications seeking to acquire an existing broadcast facility. Beyond that, the degree of a debtholder's interest in a corporate licensee, and the interrelationship between the debtholder and the licensee, would only be revealed for an existing broadcaster to the extent required by the ownership reports and the application for renewal of license.

Loan agreements do not generally provide for the acquisition of ownership interests or control by the debtholder in the corporate licensee to which it is making a loan, since broadcasting is not a "capital intensive" industry. However, we are studying the advisability of requesting debt information especially as to actively traded companies.

The Commission has for years received information concerning the ownership of its broadcast licensees, who now operate approximately 7,700 commercial stations. The computer control "printout" data with respect to 7,400 stations is maintained on a relatively current basis. However, the information with respect to approximately 300 stations which are owned or controlled by approximately 30 licensees whose stock is publicly traded on an active basis has presented certain management problems.

These problems have arisen because of the continuous market activity of institutional owners-banks, insurance companies, and mutual funds who have been buying and selling broadcast stocks that are publicly traded on the major exchanges. We might add that these licensees are filing current ownership data, and, at any point in time, the ownership information can be manually reached in the files.

We are currently analyzing what can be done to secure and maintain adequate data, and control over such data, for all publicly traded companies. We are studying the annual reports that the Interstate Commerce Commission and the Civil Aeronautics Board require from their carriers. Initially, we believe that annual corporate filing by those broadcast licensees whose stock is publicly traded may well provide us with more manageable data as to stock ownership and voting rights. We are also studying the question of whether we should retain the 1

percent standard for reporting or require a report listing a specific number of stockholders-such as the top 30-as the ICC now requires. Also, as to these corporate licensees, we are conducting studies to determine what additional data may be desirable to assist us in carrying out our regulatory functions. Such other data requirements under consideration are regular reporting of: (1) interlocking directorates between licensees and financial institutions; (2) identification of debtholders on a regular basis; and (3) whether, as to these publicly traded corporations, direct reporting by financial institutions would be feasible and, if so, whether the Commission needs additional statutory authority.

One of the specific problems with respect to the ownership reporting of companies whose stock is publicly traded is that the Commission may not be receiving completely accurate information from the licensees regarding the holders of 1 percent or more of its stock. This is so because the licensees have not always been able to obtain from brokers and investment houses-and in some cases banks-the identity of the persons or entities for whom they hold such stock.

In such cases these brokers or investment houses merely report to the licensee what they hold for the benefit of customers, no one of whom owns as much as 1 percent of the licensee's outstanding stock. The problem with such reporting practices is that an individual or entity may hold 1 percent or more of the licensee's-or parent of licensee-stock unknown to the licensee or parent because it is held in street name accounts of less than 1 percent each with two or more brokers or investment houses. This problem and the problem of "nominee" reporting are two of the more important aspects of the study mentioned above.

If the Commission should decide to revise the corporate reporting requirements for licensees whose stock is publicly traded, this portion of our action will be ready for implementation in the near future-by fall we hope. We will be studying our disclosure requirements for all broadcast stations, not just those that are owned by actively traded corporations.

Most of this work is being done with the proposed new computer system in mind and it may be several years before the desired results are achieved. We may be able to act even sooner by purifying the data base used by our existing computer system.

Our new automated system will provide a more accessible ownership history of each broadcast station. Also, the system will be able to maintain contractual data for each station which the present system is not capable of adequately maintaining.

Thus, the system will provide a complete ownership and contractual data-base, together with history files for tracing ownership trends, on a more current basis and in a more readily retrievable form.

So to recapitulate, our corporate disclosure studies are composed of two parts:

1. The first portion is to devise a more detailed system of corporate reporting and control for corporations that are publicly traded. We believe that separating out the companies whose stock is publicly traded, and devising a special intensive program for those companies

will produce, at a ready reach, meaningful data as to those companies within a relatively short period. This portion of the study will also look into such questions of interlocking directorates and debt reporting.

2. The overall corporate disclosure study will be keyed to the new automated system. We know that report form revision will be necessary to make the current information more manageable for automated controls even for those 7,400 stations whose data is substantially correct in both the files and the computer printout.

CABLE TELEVISION SYSTEMS

With respect to cable television, the Commission now requires every cable television system-which now number more than 6,000-to file an annual ownership report and an annual financial report under sections 76.401 and 76.405 of our rules.

Generally, the ownership information called for by FCC form 325 relates to the system itself, any "parent" companies owning 25 percent or more of the voting stock of the system, and any "subsidiary" of the system where there is a similar 25 percent or more voting stock connection. This information continues through every corporation or other business entity up and down its business "family tree."

For each such company, the Commission requires a listing-by name, city and State of residence, social security, personal or employeridentification number, and percentage of voting stock-of every officer and director, and every stockholder who holds 3 percent or more of the company's voting stock.

If stock is held in a street name, that fact must be noted in the ownership report but the name of the stockholder is not divulged. Where any stockholdings reported on pursuant to these criteria involve beneficial ownership, the report must set forth the name, residence, and social security, personal or employer-identification number of both the beneficial owner and the person or entity voting such stock.

Any close family relationships between officers, directors, and stockholders must also be divulged. In addition, we require information. concerning other communications-industry interests-broadcast stations, cable systems, cable TV equipment manufacturing, daily newspapers, common carriers of all officers, directors, stockholders, beneficial owners, and companies listed in the system's ownership report.

Our ownership-report form does not, however, ask whether the stock of any of the companies reported is publicly traded; nor does the annual financial data reported to us indicate whether "parent" companies, as distinquished from the cable TV system filing the report, have revenues in excess of $1 million a year. Finally, no information is specifically requested concerning the extent to which banks have interests in cable systems, except as described above.

The Commission's cable files are not subdivided or cross-referenced by the formal character of the business entity-by whether the system itself or related companies are corporations, partnerships, or single proprietorships.

The filing of annual ownership and financial information by cable television systems is a program which has been in operation for just 3 years. Our efforts to computerize this information have been delayed because of unforeseen complications in the installation of new computer facilities. Thus, we do not yet have access to configurations of our cable ownership data by means of computer printout. And it would be a burdensome manual task for the Commission staff to isolate and assemble information regarding cable television corporations whose stock is publicly traded at various exchanges and over the counter.

The FCC has not previously had a significant need-in terms of its usual regulatory activity-to arrange its cable television industry reporting forms and files in the manner that would facilitate ready compilation of the type of data the subcommittee is seeking.

As we gain further experience with the data now received, and the extent of our CATV regulation more clearly evolves, it may well be that our information requirements will be changed in this area also.

Mr. Chairman, this concludes my prepared testimony. I have with me representatives of our operating bureaus and we will be pleased to attempt to answer any questions.

Senator METCALF. Thank you very much for a most interesting testimony, Mr. Wiley.

Let me remark with respect to cable television. I realize that it is a fast growing and expanding area and I suppose that the next time you appear at an oversight hearing before one of the Government Operations Committees you will be expected to have a more amplified report.

I think personally that it is a most exciting prospect of opening up CATV, its ownership and its possibility for disseminating of information.

It has to have close scrutiny and regulation both by you and by the Members of Congress, the legislative branch and the regulatory

branch.

So I can understand about the growth and the fact that we have legislation to give you guidance is important here but ownership of this medium of communication is going to be terribly, terribly important to the people of the United States.

Mr. WILEY. I would agree with your comments, Mr. Chairman. Senator METCALF. So next year when you are up here on one of these routine oversight hearings we will ask for more definite information.

Mr. WILEY. All right, sir.

Senator METCALF. We have already provided you, as I understand it, with a copy of the report filed by A.T.&T.' with the Federal Communications Commission this year.

Those who seek information from the Securities and Exchange Commission, the Interstate Commerce Commission, your Commission, the Federal Power Commission, come back and say that it is a jungle and it is almost impossible to find out who the companies' major stockholders are.

1 See p. 9.