ing traditional ratemaking concepts and practices to determine what revision may be required in the light of competitive and other conditions characterizing the present market for communications services. As soon as we have determined such principles, we will proceed to apply them to the separate service classifications which are already the subject of pending, but temporarily deferred, proceedings.

ETV INTERCONNECTION

What I have mentioned here as the second phase concerns rate structures and prices for various classes of service. In passing, I would like to mention that the Commission is also considering the problem of common carrier interconnection for noncommercial educational broadcasting. I will discuss this matter in greater detail when I reach the subject of public broadcasting.

COMPUTER INQUIRY

One of the most significant technological developments in a field closely related to communications has been the computer. It is estimated that, in another year or so, about 25 percent of all computers will be linked to their users or other computers by communications channels. Because the existing communications network has been designed principally for voice transmission, its adaptation to meet the requirements of data transmission is not without its problems. In addition, data transmission and data processing service are being provided by both carriers and noncarriers, a situation which opens up a number of issues as to the kind of regulatory measures, if any, that may be required under the Communications Act. With an awareness of the growing interdependence of computers and communications, the Commission in November 1966 instituted a comprehensive computer inquiry. The inquiry has provided a most timely and needed forum in which to anticipate, examine, and resolve the regulatory and policy questions presented by this interdependence.

Voluminous information, views, and recommendations have been submitted by 61 parties, representing computer manufacturers, users, service bureaus, common carriers, and Government agencies. These submissions provide an invaluable background for the Commission's regulatory actions in a number of related areas. Most important, the inquiry has served as an orderly framework for the public exposure and discussion of problem areas. The common carriers have already reacted by modifying their tariff offerings to meet certain of the concerns which were crystallized by the inquiry. I expect that other changes will follow on a similarly voluntary basis.

What I am pointing out is the inquiry and collection of information has stimulated improvements.

In a few weeks, we will be receiving the final report of the Stanford Research Institute which we engaged to assist us in the analysis of the responses filed in the computer inquiry. We will then determine what further regulatory actions should be undertaken to dispose of the unresolved questions.

I would like to make this observation: While industry generally may be expected to react against any assertion of regulatory authority or investigatory purpose, in this instance the leadership of the Commis

sion in its initiative has been recognized as appropriate and necessary. Mr. MACDONALD. Sir, could I ask you how much that Stanford Research Institute report is going to cost the Commission?

Mr. HYDE. We have two projects contracted to Stanford Research Institute. One was the study of our methods of handling the mobile radio services and the other was this. I believe the costs are about equally divided. The total contract is $500,000.

INTERCONNECTION AND FOREIGN ATTACHMENTS

One area of major concern evidenced by the responses filed in the computer inquiry was the restrictions maintained by carriers against the interconnection of customer-owned equipment and private systems. By our decision last year in the Carterfone case, we determined that these restrictions were unlawful in failing to discriminate between harmless and harmful interconnections. Following this decision, the telephone companies filed new tariffs, effective January 1, 1969, by which they have greatly liberalized the ability of customers to interconnect their own equipment and systems with the services provided by the carriers. A number of questions remain to be resolved concerning various aspects of the revised tariffs and we are in the process of dealing with these matters. It is the Commission's view that these actions are greatly expanding the opportunities for entities other than common carriers to develop and market communications equipment. They are also certain to produce expanded use of common carrier services and facilities.

SALE OF TELETYPEWRITER EXCHANGE (TWX)

One other important matter that warrants the attention of your subcommittee is the agreement recently concluded for the sale by the Bell System of its TWX service to Western Union. As you know, this has been a subject of discussion or negotiation-on and off-for the past 20 or more years. It has also been considered, in principle, by you in years past and by the FCC's Telephone and Telegraph Committee's Report in the Telegraph Investigation, dated April 29,

1966.

Western Union, as required by section 222 of the Communications Act, has filed application for Commission approval of the transaction. Hearings are mandatory under the act, which requires a finding that the transaction will be in the public interest.

Mr. MACDONALD. On that point, how much was the sale price?
Mr. STRASSBURG. $80 million.

Mr. HYDE. The gentleman who responded was Bernard Strassburg, chief of the Common Carrier Bureau. The indicated overall price, as he mentioned, was $80 million. There are many details of the arrangements between the two carriers. It is a very complex one, but I think what you wanted was this overall figure to give you some perspective? Mr. MACDONALD. Was that the hangup that it took 20 years to reach that figure?

Mr. HYDE. There is a considerable period for payment and a considerable transition period.

Apparently I misunderstood your question. It has been suggested that A.T. & T. was not eager to dispose of it. I have to be a little cau

tious about my comment here because the whole question of whether or not the sale should be approved will be subject to a hearing before us. However, the report of our study did point up the possibility that a much broader record coverage such as the combined Western Union and Bell System TWX could be a good contribution to public interest in communications. I presume that the study that we released had some bearing on the ability of the parties to get together.

DEFINITIVE INTERNATIONAL SATELLITE ARRANGEMENTS

On the international scene, the United States currently is host to the international conference which is to negotiate definitive international arrangements for a global communications satellite system. I note that Congressman Broyhill has been participating in some of these activities.

Ambassador Leonard Marks was named chairman of the conference and I am serving as a vice chairman of the U.S. delegation. Several Commission staff members are also serving as representatives and advisers. Over the past several years we have actively participated with other interested government agencies and Comsat in preparing a U.S. position.

As you know, the International Communications Satellite Consortium, for which Comsat is our representative and for which Comsat acts as manager, has been functioning under an interim agreement signed in 1964. The progress made under Intelsat toward the establishment of a global system has been rapid and substantial. I am confident that we will be able to formulate definite arrangements that will extend this record of progress.

We have a going system. There are some 66 administrations participating in it and we have the momentum and the success of this prearrangement which I think gives strong encouragement to the probability that the conference will work out a definitive arrange

ment.

OTHER INTERNATIONAL DEVELOPMENTS

The Commission has made a number of decisions in the area of space communications which have provided direction for the development of satellite services. In December 1966 the Commission provided for joint ownership of earth stations in the United States by Comsat and international common carriers. In 1966 the Commission also decided that, except for special circumstances, other common carriers were the only authorized users of Comsat satellite services and channels. This decision has resulted in the filing of certain lower rates for leased-circuit services by U.S. oversea carriers. These lower rates reflect the economies of satellite transmission.

The economies are in the range of 25, 35, or even 40 percent as against previous rates.

In 1968 the Commission resolved the problem of whether granting an application to construct another cable to Europe would make impracticable the orbiting of a fourth-generation satellite system, both of which would have begun operation about 1970. The Commission granted the application of A.T. & T. and other U.S. carriers. for construction of a 720-circuit cable between the United States and Spain. The authorization contains several conditions, the most im

portant being the requirements that common carriers to whom cable channels are leased reduce their rates and that they use satellite facilities so that both the cable and the satellite will be filled at about the same time.

These are conditions to prevent the establishment of the cable being an obstruction to the further development of satellite communications. Mr. MACDONALD. I have one question. I was also a delegate to that convention in addition to Mr. Broyhill. I could not find out about the Russians and how far their system had advanced.

Mr. HYDE. I do know that the Russians have lofted a communications satellite and they do make some domestic use of them, but I do not think they are big in the international field.

Mr. MACDONALD. Do you think they are going to insist on it?

Mr. HYDE. There are indications that the Soviets are interested in the international consortium. They have seen fit to send observers to the conference and I believe they are taking a constructive interest in the conference.

THE FAIRNESS DOCTRINE

I was about to get into a discussion of matters in the broadcast field. The first is the fairness doctrine.

A basic principle in the broadcast field, specifically made a part of the Communications Act in 1959, is the fairness doctrine, which assures that the public will have access to conflicting viewpoints on controversial issues of public importance. Although the general doctrine has evolved primarily on a case-by-case approach, we believed it useful to codify the particular requirements relating to personal attacks and political editorials. The purpose of codification is to provide certainty of application and to make available the remedy of forfeitures for flagrant violations. Denial of renewal is not appropriate for individual violations. These rules, adopted and revised during 1967 and 1968, require that notice and an opportunity to reply be given to a person or group attacked during discussion of a public issue, and also provide for an opportunity to reply where a station supports one political candidate or attacks others in station editorials. It is important to mention in this connection that we are now before the Supreme Court in cases challenging the constitutionality of the personal attack and political editorializing rules. Although the personal attack reply requirements were sustained by the Court of Appeals for the District of Columbia Circuit in a case arising out of a specific ruling by the Commission, they were stricken down by the seventh circuit when challenged in general-rule form. Our brief in the Supreme Court has recently been filed, and we expect the case to be argued this term.

The Commission has applied the fairness doctrine in the area of product advertising in a very limited situation, and has held that, because of the special danger to health, reasonable opportunity must be given for the expression of views as to the hazards of cigarette smoking. This ruling was also based upon the duty to inform the public on this important issue. On appeal our cigarette ruling was sustained by the court of appeals. A petition for a writ of certiorari has been filed with the Supreme Court.

Mr. MACDONALD. Mr. Broyhill.

Mr. BROYHILL. I am very much concerned that the Commission has applied the Fairness Doctrine to cigarette advertising. I feel very strongly that the Commission has singled out, very arbitrarily, and one might even say capriciously, this one product area.

I would like to ask this question: Did the Commission impose any hearings or permit any testimony to be heard by the advertising industry, or the broadcasting industry, or the public, in formulating or applying the fairness doctrine to this particular product?

Mr. HYDE. No, Congressman; there were no hearings. As your question suggests, the promulgation of this ruling was not supported by public hearings.

It developed in the following manner: There was a complaint under the fairness doctrine which is already a matter of Commission policy and also a matter of congressional policy since it is incorporated into section 315 of the act.

In ruling on this complaint we made an initial ruling after first giving the stations concerned an opportunity to respond to the complaint that we thought the fairness doctrine policy already established was applicable.

There were petitions for reconsideration by interested parties and there was public notice of these petitions for reconsideration. So, in a second opinion we did deal with the viewponts which were urged against it, and we would take the legal position that was not establishment of a new policy but rather application of an already established one of longstanding and in fact statutory policy.

The matter was appealed to the Court of Appeals for the District of Columbia Circuit, and this court examined it in a very thorough opinion and found that the Commission's ruling was valid as against all of the objections as to both the procedure and jurisdiction of the Commission.

Mr. BROYHILL. Of course, it is easy for you to say that but obviously you should, sitting where you are. I think this was a very important decision. Hearings should have been held on this. You should have followed a more careful procedure. In fact, as I recall, the court of appeals even stated in their opinion, even though they did rule in your favor, they did state, did they not, that more careful procedures should have been followed?

Mr. HYDE. I would say the court of appeals did caution us about using extreme care wherever we invoke the public interest. They made it clear we could not say public interest requires this and thereupon impose an arbitrary ruling of our views. They were more concerned about the first amendment question than the due process question. Mr. BROYHILL. You are talking about the first amendment, free speech question, are you not?

Mr. HYDE. Yes; I believe their emphasis in their examinings of the Commission related more to first amendment, free speech, than it did to due process under the Constitution.

Mr. BROYHILL. This was an innovation where you have a decision by an administrative agency and a far-reaching decision being made without hearings and without all of the established procedures that you have. It seems to me that this is just going too far. I would certainly hope that you would reconsider.