So it seems clear to me that CATV systems are not common carriers. because they do not hold themselves out to convey over the systems the intelligence that anyone wants to bring to them. They simply pick out of the air the signals the CATV system wants to show, and transmit them for a price.

So I think when applied to CATV systems, common carrier is inappropriate, inapposite, and really should be disregarded.

Then the question becomes, is it a public utility, or does it have any of the aspects of a public utility or a business affected with a public interest, and you use the two words interchangeably.

That gets us to the question of what is a public utility? Well, I want to quote from an authority that I think is a good one, Mr. James C. Bonbright, who is a professor at Columbia, who wrote in his book, "Basic Principles of Public Utility Rates," in 1961. He said that most public utilities can be divided conveniently into two major classes: those enterprises which supply directly or indirectly continuous or repeated services through more or less permanent physical connections between the plant of the supplier and the premises of the consumer; and two, the public transportation agencies.

The most important members of the first class are the enterprises supplying electricity, gas, water, and telephone communication.

He also said, in the same book, that two attributes of a public utility business have received emphasis in the textbooks, and will be discussed in turn. The first is the special public importance or necessity of the types of service supplied by utility enterprises, and the second is the possession by utility plants of technical characteristics leading almost inevitably to monopoly, or at least to ineffective forms of competition.

The third attribute which is generally considered to be necessary if an operation is to be classified as a public utility, is that any rate regulation that may be necessary is generally for the protection of the customers rather than for the producers of the service, or for the taxpayers in general.

Now using those guides or standards, what are the public utility characteristics of CATV? Well, first of all, CATV supplies a repeated service through more or less permanent physical connections between the CATV plant and the customer's home. This, I think, is selfevident, and is the first usual attribute of any public utility.

Second, CATV does have a tendency toward a natural monopoly in a given market. I do not mean this in any invidious sense. I simply mean that for any given area, any given market or any given area of any market, CATV's generally operate as monopolies, in that given area.

Insofar as I know, even where concurrent nonexclusive franchises have been granted, CATV systems normally do not compete in serving the same area.

Third, I think CATV does provide what generally might be considered in this context as a necessary service. My only comment on whether television is a necessary element of modern American life is to refer to the mail that you gentlemen and we at the Commission received when the public thought that its television service might be lost.

Fourth, I think that any price regulation of CATV systems would be based on protection to the consumer, his lack of bargaining power with the CATV system in his area. So it seems to me that if you take the classic attributes of a business affected with the public interest, or a public utility, or any other name that you want to call it, indicating that it should receive this type of regulation, that CATV has most, if not all, of those characteristics.

So my conclusion is that for the above reasons, the CATV does have many of the attributes of a public utility; secondly, that with respect to those instances in which CATV systems act as public utilities, they are by and large primarily in matters, the regulation of which is best left to the local and State authorities.

Now, my reasons for that are such matters as rates, extensions of service, the choice of the entity to have it serve the public convenience and necessity, and so forth, which are, I think, matters which are traditionally and best regulated at the local level.

My second reason is that Federal regulation in these areas particularly in as complex a field as CATV, would not be as effective, at least with respect to these matters, and would be a tremendous administrative burden. This is because of the facts that there are so systems, that there are so many differing sets of circumstances, and so forth, and thirdly, the best analogy that I can think of is telephone regulation, where intrastate matters of telephone operations are regulated at the local level and interstate matters are regulated at the Federal level.

The last question. If Congress were to adopt the above rationale that I have just given, would it be consistent with the bill that we proposed, and specifically, would it be consistent with section 331(c) of the bill we proposed, and what would be the effect of this bill? Section 331 (c) of our bill reads as follows:

Nothing in this Act or any regulation promulgated hereunder shall preclude or supersede legislation relating to or regulation of community antenna systems by or under the authority of any State or Territory, the District of Columbia, the Commonwealth of Puerto Rico, or any portion of the United States, except to the extent of direct conflict with the provisions of this Act or regulations promulgated thereunder.

Now, what does that mean? Well, to me that means that nothing in the act itself or in the rules or regulations that we might issue under it shall interfere with the regulation of CATV systems by local or State authorities, except insofar as the regulation at the local level or State level might interfere with our Commission responsibilities to regulate, to effectuate our regulatory tests.

I would want to make perfectly clear that the FCC, under this bill, if passed, has no intention to regulate these aspects of CATV systems that I have referred to. The only exceptions to this general principle might be those instances in which it is necessary to do so in order to carry out its basic regulatory task, that is, to promote the larger and more effective use of radio in the public interest.

One illustration: We have said that CATV systems in the top 100 markets should not be extended significantly to additional geographic areas without our permission. Well, that deals with the extension of service, but really, it is the prohibiting extension of service rather than ordering that it go serve this customer or that customer.

So even though it is perhaps analogous to one aspect of pubio utility regulation, it doesn't intend to be that, and I don't think it will be that. It is intended simply to effectuate our larger purpose, and that is to regulate the use of radio in the public interest. I would have some language for the committee, if you decide to enact this bill, which would clarify what I have just said.

The CHAIRMAN. Thank you very much.

We will start the questioning, and normally we are restricted to 5 minutes, but the gentleman on my right has a bill introduced on this subject, so he will be allowed 10 minutes.

Mr. Rogers?

Mr. ROGERS of Texas. Now, Mr. Chairman, I would like the record to show, Mr. Chairman, and I want to know this, whether or not the people of this committee are going to get at least equal time to question the Commission, and the very important matter of whether or not we are going to be confined to 5 or 10 minutes. Now, will the Commission be back here for further hearings?

The CHAIRMAN. I am sure the Commission will want to cooperate with the Congress.

Mr. ROGERS of Texas. I am not talking about what the Commission wants. I am talking about what the Members of the Congress want.

The CHAIRMAN. Well, if you will let me finish, we are going to adjourn here at 12 o'clock until 10 o'clock tomorrow morning. Will the Commission be back tomorrow morning?

Mr. HENRY. Yes, sir.

The CHAIRMAN. We will be here, and I want everybody to have an equal chance to question the Commission. We will divide up the

time.

Mr. ROGERS of Texas. Now, Mr. Henry, you have made out a case in your own mind that CATV's are public utilities. Would you apply those same rules to the broadcasters?

Mr. HENRY. No, sir.

Mr. ROGERS of Texas. Why not?

Mr. HENRY. Well, because I say that there are certain aspects of CATV operation that are like public utility operation, but those

Mr. ROGERS of Texas. What is the difference between broadcasting and CATV operations in your mind? Let's do it that way. You see, I don't have much time.

Mr. HENRY. Primarily that broadcasting, as it has grown up here, is not a monopoly service.

Mr. ROGERS of Texas. Well, now, that is your conclusion.
Mr. HENRY. Yes, sir.

Mr. ROGERS of Texas. That is your conclusion. Now, by the same token, CATV would not be a monopoly service if there were more than one CATV operation in a city, would there?

Mr. HENRY. Well, if they were serving the same area, the same home.

Mr. ROGERS of Texas. Yes.

Mr. HENRY. Now, if they were serving the same homes, there would not be a monopoly, and there would not be competition and they would not have to be regulated.

Mr. ROGERS of Texas. And there is nothing to prevent that being done, is there?

Mr. HENRY. No, sir; but as a matter of fact, I don't think it is being done.

Mr. ROGERS of Texas. I understand, but I say there is nothing to prevent its being done.

Mr. HENRY. Well, I wouldn't think that it would be economic, because it would be terribly uneconomic and wasteful to string separate cables to the same home.

Mr. ROGERS of Texas. That is probably true, Mr. Henry, and by the same token, the operation of two powerplants, two light plants in a small town does not take away from either one their status as a public utility, but it would be much more economically feasible if there were only one there; and I know of a great number of towns where they have two.

I just don't see your thinking on this, except in keeping with the general statement in which the Commission assumed jurisdiction in which you said that all precedents that were for you were good law, and all that were against you were error being repeated, and that error being repeated is still error. I mean, I just don't follow this line of thinking.

If you are going to take the position that the broadcasting industry is to be completely protected from any form of competition, I would have some difficulty in reconciling the past actions of the Commission, especially with regard to the daylight stations on the radio.

Mr. HENRY. Well, of course, in my judgment, we don't take that position. We take the position that and I am sure you will hear much testimony to the contrary-we take the position that we give some sort of minimal protection to the local station in order to enable that local station to provide the local service in an adequate fashion. Mr. ROGERS of Texas. Well, now, isn't that a monopoly?

Mr. HENRY. No, sir; we do have situations in which there is only one local station. I might add, broadcasting can be distinguished, I believe, from CATV systems in a number of additional ways, two of which are that it does not charge a fee to the subscriber, or to the viewer, and there is no physical connection between the broadcaster's plant and the subscriber's premises.

Mr. ROGERS of Texas. Now, Mr. Henry, about this fee business, you told me a moment ago you were going to come back to the proposition that I raised during your statement about broadcasters using CATV customers as part of their market and making charges for them. Now you know as well as I do that there isn't any such thing as free TV, as such-that every bit of it is paid for in one form or another, isn't it?

Mr. HENRY. Yes, sir.

Mr. ROGERS of Texas. Either by the price of a pair of pants or a bar of soap or whatever is being advertised. Somebody is paying the bill. Now you say that there is no fee being charged of the people directly for what?

Mr. HENRY. For the reception of off-the-air broadcast service.

Mr. ROGERS of Texas. For the reception of off-the-air broadcast service. Now, is it your position that this is the sale of a service by a CATV operator, or is it the sale of a program?

Mr. HENRY. Well, it is the sale of a program, and that generally is the sale of a service. Program service is the way it is usually put. Mr. ROGERS of Texas. A program

Mr. HENRY. Well, service as distinguished from a program.

Mr. ROGERS of Texas. There is a great difference, Mr. Henry, between the sale of a program and the sale of a service, is there not? Mr. HENRY. Well, I think in the sense you mean it, it is a program service and, therefore, it is a service as distinguished from a commodity, or something of that nature.

Mr. ROGERS of Texas. Well, now, don't you think it is important from the standpoint of the discussion with regard to pay TV as to whether or not it is a service or whether or not it is a program, because you have merged the two together in all of your arguments. You have held up the specter of pay TV, pay TV, pay TV. Now you have before you, as you pointed out, an application right now for what we call subscription TV, do you not?

Mr. HENRY. Yes, sir.

Mr. ROGERS of Texas. You haven't acted on that, have you? Mr. HENRY. No; we have issued instructions to the staff, and it will be out this week. We have acted on that.

Mr. ROGERS of Texas. As to whether or not you would approve this type of operation?

Mr. HENRY. No.

Mr. ROGERS of Texas. The use of one of the channels for this purpose?

Mr. HENRY. We haven't acted to approve or disapprove it. We have acted as to whether we should issue a proposal, looking toward approval.

Mr. ROGERS of Texas. As to whether you should

Mr. HENRY. As to whether we should issue a notice of proposed rulemaking, which in turn looks toward some such operation.

Mr. ROGERS of Texas. And you say that will be done this week? Mr. HENRY. Yes; it has been done, and will be issued this week. Mr. ROGERS of Texas. Now as was brought out in the hearings back in the late 1950's, that would have to do with the sale of a program, would it not, and it is what we know as pay TV?

Mr. HENRY. That would have to do with the sale, yes, of a program, of a television service, I would call it, on a per program basis, over the air.

Mr. ROGERS of Texas. Yes. Now, of course, the CATV operation is not like that, is it?

Mr. HENRY. It is not that; no, sir.

Mr. ROGERS of Texas. Well, let me go back just 1 minute now, to the broadcasting situation. Haven't you taken the position on some occasions in the past that broadcasting ought to be subject to public utility-type regulations?

Mr. HENRY. No, sir; never.

Mr. ROGERS of Texas. Now you say in your statement the bill was introduced, talking about the bill I introduced, "because of the Commission's recent CATV action, and is aimed at reversing that

action."

Now, I don't recall having discussed that bill with you, Mr. Henry, before I introduced it. Where did you find out why I introduced it?