tions do not cover the entire market in which they are operating. It is said that the FCC's rules prevent CATV extension of these UHF station signals throughout these markets. One witness, Mr. Beisswenger of Jerrold, even insinuated that the distant signal rule is urged as part of a plot to restrain UHF development.

I do not read the FCC orders as intending to prohibit cable systems from extending UHF station signals throughout the markets in which these stations operate. The FCC purposely has made provision for waiver of its distant signal importation limitations and several of the situations described seem to me to be clear cases for grant of a waiver. The Commission's order says that the concern is not with CATV broadening of a station's audience in its own market area, but the extension of its signal to entirely new markets.

CATV interests also argue that they are merely providing a reception service and are thus not competing with stations who are offering a broadcasting service. But the fact is that cable systems transmit television signals to home viewers. When distant signals are involved they are transmitting signals that the home viewer cannot receive off the air.

I do not think we help analysis of the issues by calling CATV a reception service when it is really a transmission service. And in this respect I cannot help but note that even Mr. Ford of NCTA and Mr. Beisswenger of Jerrold, both of whom argued that CATV is solely a reception service, lapsed into using the term "transmission" in describing CATV operations in their testimony.

Labels aside, the fact is that when cable systems import distant signals that are not available off the air to local viewers, they threaten to disrupt the system of free local and area television. That is why it was not only appropriate but imperative that the FCC act as it did to discharge its responsibilities to preserve the television system established in accordance with the mandate of Congress.

We have heard it said that our fears for the future of the free local and area television system are unfounded because no one has yet been hurt by importation of distant signals by CATV. The premise of the argument is wrong. Adverse CATV impact has already been felt and MST has submitted detailed evidence on this impact to the FCC. More importantly, the real problem relates to the new and different CATV that is just beginning to gain a foothold, and what will happen if it is not regulated. Until recently distant station carriage had been relatively sparse because cables were able to carry only three or five signals and usually the cable carried the local stations. But this is all changing most rapidly. Twelve-channel cables are rapidly becoming the practice and 20-channel systems are in the offing. The fact that there is not yet a pile of bodies has very little to with whether there will be if effective regulation is not imposed.

CATV interests say "let the marketplace decide" whether CATV is a valuable service. "Don't deprive the public of a service it wants.” The trouble with this argument is that a totally unregulated market could result in service being made available only to those with the money to pay for it and who are located where the service can be economically provided. Persons for whom cable fees are a financial burden, farmers, ranchers, and others living in rural areas not served

by cable, persons who rely on the local station for local news and other local programing-what happens to them if the "market" decides for unliimted distant signal importation at the expense of local stations? Only if we are willing to say to these people that their loss of television is not our concern can we let the "market" alone decide he future of our nationwide television system.

Finally, we are told that Federal restriction of distant city signal mportation is inappropriate because local government units have franchised cable systems and these bodies know what is best for the people in their areas. But this, in my opinion, oversimplifies the question. The local bodies' concern has understandably been directed o the identity of the franchise applicant and the amount of the oyalty that he will pay the city out of his revenues. Requests for CATV franchises have usually been treated much like applications for right-of-way privileges. Many local bodies when confronted vith the argument that franchising a cable system to bring in distant ignals will impair local television service have said, "That is not our problem-that is for the FCC to decide." A large number of other local bodies actually deferred passing on franchise applications ending the announcement by the FCC of its rules. Moreover, in a umber of States franchising is not required so that CATV's may tart operation merely by making a pole lease arrangement with the ocal telephone company.

In short, the local bodies have normally not attempted to decide ssues that the FCC was created to decide, and Federal regulation hould not be prohibited on the theory that the local bodies have lecided or would decide the issues.

One final issue for this committee to consider is whether CATV ystems should be allowed to originate their own material-both rograms and advertising. The FCC's bill would prohibit this, but t would allow the Commission to make exceptions by general rule. In our opinion, the prohibition should be absolute, without a proision for exceptions where the Commission decides to permit CATV riginations. We think that if CATV's are allowed to originate mateial-any kind of material-they will ultimately be bidding against roadcasters for many types of programing with the result that the ublic will be able to receive much of its program material only by aying for it. And this pay-TV system will have been built on the oundation of free broadcasting signals, which presently form the asis for CATV operations.

The CATV interests say that our fears for pay-TV are unfounded, hat they are really interested in local public service programing, such s the high school basketball games, the city council meetings, the ocal theater groups, that would not be carried on the local television ation.

We wonder. We doubt that the large CATV systems that have obined franchises to wire up entire cities, such as San Diego, Philaelphia, or Atlanta, or the vast aggregations such as Jerrold's 22 stems throughout the country, are really interested in carrying these vents that can only be of interest to a few of their subscribers. [oreover, the CATV witnesses, such as Mr. Ford and Mr. Beissenger, made it perfectly clear that they wanted the unlimited right

to originate material; that a limitation to public service programing was not acceptable to them. So I think I am being fair in saying "I wonder" when I hear the CATV interests talk about their desire to originate public service programing.

Much more could be said about the CATV problems facing this committee. But time is short, and my prepared statement, which contains a more detailed discussion of the problems, has been submitted.

I will close by saying that the fundamental issue is not whether the public should have a choice of television service, but rather what should the nature of the choice be. Should it largely be among a few nonlocal huge superstations located in the New Yorks, Chicagos, or Los Angeleses and brought to some of the people by CATV for a fee? Or should it be among the present and future local and area stations serving all the people without a fee?

The second fundamental issue is whether CATV should continue to perform its traditional supplemental service to help improve reception in areas where reception off the air is difficult, or whether it should be permitted to use free television as a base for building a system of CATV-originated programing, thereby taking us well down the road to pay television and using free television to kill free television.

Mr. Chairman, we tried to keep my oral statement short, and my prepared statement was prepared for submission earlier in these hearings. I would like to request the same permission that Mr. Ford received the other day, that we be permitted to submit a supplementary statement with respect to other points which have arisen or may arise. The CHAIRMAN. Without objection, it will be accepted, if it is pertinent to the hearing. Yes, Mr. Lindow.

Mr. LINDOW. Thank you, Mr. Chairman. (The supplemental statements follow :)

MEMORANDUM OF ASSOCIATION OF MAXIMUM SERVICE TELECASTERS, INC., ON CONSTITUTIONALITY OF FCC DISTANT SIGNAL REGULATIONS

The FCC rule limiting the importation of distant station signals by CATV systems does not conflict with the first amendment guarantees of freedom of speech and press.

At the outset it is useful to state the context in which the constitutionality of the FCC's distant signal limitation might be challenged by a CATV system. A CATV system operates by taking programs broadcast by television stations off the air, without payment for the programs or permission from the broadcaster, and retransmitting them to its customers for a fee. When distant station signals are involved, the CATV system uses these programs, for which it has paid nothing, to fragment the audience of local stations that have to pay the lawful owners of their programs for the right to broadcast them. In this respect, the CATV system is a parasite. It lives entirely off the product of broadcast stations and it uses the product to impair the broadcast capabilities of other stations.

In any event, it is clear that a CATV system has no greater rights under the Constitution to extend the signals of broadcast stations than the stations themselves have. When the FCC determines that a CATV system may not transmit the signals of a television station, it is merely determining where and under what circumstances the signals of those stations may be carried. This is precisely what the Commission does with television stations. It establishes the areas that may be served by television stations by establishment of limitations on the transmitting power and the antenna heights of those stations. When it does so, it is not engaging in a prior restraint, or otherwise violating the first amendment. The FCC is not required to allow the stations in New York to operate satellite television stations throughout the United States for

he purpose of having their signals transmitted nationwide. This is not prior estraint or abridgement of the right of freedom of speech. It is rather a imitation on the area which those television stations may serve by extension f their signals, and that is precisely what the Commission does when it reguites CATV.

"The business of the Associated Press is not immune from regulation because is an agency of the press" (Associated Press v. NLRB, 301 U.S. 103, 132 1937)). Certainly the business of CATV is not immune from regulation when is not an agency of the press.

OMMENTS OF ASSOCIATION OF MAXIMUM SERVICE TELECASTERS, INC., ON STUDY OF CATV AND UHF DEVELOPMENT AND POTENTIAL WITH RESPECT TO THE FCC's "TOP 100 MARKETS" RULE, SUBMITTED BY THE NATIONAL COMMUNITY TELEVISION ASSOCIATION

The NCTA study on CATV and UHF development, submitted as an appendix the testimony of Frederick W. Ford, draws certain conclusions concerning the pact of CATV on UHF development. Specifically, the study concludes that ATV has not impaired development of UHF stations heretofore, and that CATV ill assist UHF development in the future because it will bring exposure to UHF ations in homes not now able to receive UHF stations off the air. The study nsists of arrangement and rearrangement of statistics relating to the number stations in the top 100 markets, whether they are network affiliates or indendent, and whether they are UHF or VHF.

The conclusions concerning the past impact of CATV on UHF development are t particularly relevant. Until the very recent past there have been relatively w UHF stations on the air, except in certain all-UHF markets, because the blic generally was not equipped with receivers that could receive UHF signals. oreover, until recently CATV systems have been performing their traditional pplemental role of filling in television service where reception by home revers is difficut or impossible and certainly have not attempted wide-scale netration of potential UHF markets with multiple distant signals. The impact on UHF of the traditional form of CATV is not the issue. The portant issue is the impact that the new, burgeoning form of CATV, with its oposed widespread carriage of distant signals, will have on the hundreds of w and potential UHF stations that are now being and hopefully will be estabhed as a result of the success of the all-channel receiver law. A recent report the Electronic Industries Association discloses that over 30 percent of the evision receivers in use as of the beginning of 1966 had UHF capability. This licates that the rate of conversion to all-channel sets is outpacing the rate edicted at the time the all-channel receiver law was passed in 1962. It means it within a very few years the conversion to all-channel receivers should be ostantially completed and that UHF stations should be able to reach the great k of the viewing audience.

Moreover, the NCTA study does not come to grips with the all-important stion of the impact on UHF stations of CATV systems' importing distant nals into the service areas of the UHF stations.

CTA points to the fact that there are several markets among the top 100 ich have been exclusively or predominantly UHF in nature for some years yet that non-network-affiliated UHF stations have not come into being in se markets. From these facts, which are unquestionably true, NCTA draws › conclusions. The first is that it is not to be expected that the all-channel eiver law will have any significant effect in bringing into being non-networkiated stations in the top 100 markets and, a fortiori, it is even less likely t this will occur in markets below the top 100. NCTA urges that the two icipal reasons why UHF has not developed and, presumably, why it will not elop are the lack of network affiliations and the fact that, generally speaking, F stations do not have as large service areas as VHF stations. lowever, the NCTA analysis is grossly incomplete and, as is true of so much ts approach, it seeks to predict the future on the basis of a past which has ing to do with the future.

1 the first place, it should be noted that there are a number of markets in top 100 where a UHF station will provide the third network service and an 1 greater number of markets below the top 100 where UHF will provide the d or even the second and third network service if CATV importation of dissignals is now allowed to impair the viability of such stations.

In the second place, as fourth or fifth UHF stations go on the air in increasing number in markets within the top 100, they, together with the present non-network-affiliated stations in huge metropolitan centers such as New York, Chicago, and Los Angeles, will provide the nucleus for additional network service, for regional networks and for special networks and also a greatly increased market for nonnetwork programing. In other words, if CATV does not obstruct the normal development of UHF stations, the combination of a large number of such stations will provide the basis for the programing which hitherto has not been available for a fourth UHF station in the very small number of markets which have been entirely or predominantly UHF.

In the third place, to the extent that the NCTA “study” suggests that the inhibiting factor in UHF development may be the shorter reach of UHF signals as compared with VHF stations operating in the same market, it again misses the market. Totally equal service areas are not essential to effective television station competition or UHF station viability. Moreover, television station satellites and translators may be used to extend the reach of UHF signals to make their service areas comparable to those of VHF stations operating in the same market. Furthermore, the Commission has provided for waiver of the distant signal rules in appropriate situations. Where the grade B signal of a UHF station does not extend as far as the grade B signals of the VHF stations operating in the same television market, MST believes that CATV would be performing its historic supplementary function by carrying the nongrade B signals of the UHF stations as well as the grade B signals of the VHF stations located in the same market and that this would be an entirely logical and reasonable situation for the grant of a waiver which could be issued on the basis of a simple request, without elaborate pleadings and without an evidentiary hearing. But the limited reach of UHF signals is not a justification for CATV carriage of distant signals from other markets that fragment the market of the local UHF station. To the extent that it imports distant signals, CATV jeopardizes UHF development. In essence, the question is not whether CATV can help UHF by carrying a UHF station in the city where that station is located, in its normal service area, or in the television market in which it operates. There are doubtless situations where CATV is and would be beneficial to the public served by UHF stations just as it is to the public served by UHF stations by providing a fill-in or a supplementary service. But any such benefit that CATV can provide for any such station will be outweighed many times by the importation of outside distant signals. And in the case of the UHF station struggling for audience and struggling to obtain programing which will produce that audience, the fragmentation that will result from the importation of distant signals and, indeed, the bringing into the UHF station's market of the very same programs, whether or not at the same time, that it must acquire if it is to establish an audience will impair UHF station operations and obstruct the development and the maintenance of UHF television service as well as television broadcast service generally.

STATEMENT OF ASSOCIATION OF MAXIMUM SERVICE TELECASTERS, INC., CONCERNING PROFITS OF TELEVISION BROADCAST STATIONS

The latest Federal Communications Commission report on television station financial data, covering the year 1964, shows the following for the 536 stations reporting: 17.2 percent (92 stations) reported losses: 24.2 percent (130 stations) reported losses or profits before taxes of less than $25,000; 30.0 percent (161 stations) reported losses or profits before taxes of less than $50,000; 39.5 percent (212 stations) reported losses or profits before taxes of less than $100,000; 53.5 percent (287 stations) reported losses or profits before taxes of less than $200,000; 67.7 percent (363 stations) reported losses or profits before taxes of less than $400,000.

These reports do not include the 15 network-owned stations.
Data for UHF stations only shows the following:

Of 78 UHF stations reporting, 67.9 percent (53 stations) reported profits and 32.1 percent (25 stations) reported losses. The breakdown of the 78 UHF stations reporting profits is as follows: 26.4 percent (14 stations) reported profits before taxes of less than $25,000; 64.1 percent (34 stations) reported profits before taxes of less than $100,000; 100 percent (53 stations) reported profits before taxes of less than $400,000.