on our colleague, Mr. Pickle, from Texas, one of our very able colleagues to introduce the next witness. STATEMENT OF HON. J. J. PICKLE, A REPRESENTATIVE IN Mr. PICKLE. Mr. Chairman, I thank you. You are very kind. He is a leading businessman in southwest Texas. We had the distinction, Mr. Chairman, of going into the radio business at about the same time. I was the commercial manager of a radio station in Austin and Vann Kennedy was putting on a radio station in Corpus Christi. We used to commiserate about many problems, mainly about selling advertising. I know he is a veteran in this field. He is a leading civic personality in the southwest Texas area. I suppose he has been a friend and confidant of more individual Senators and Governors of Texas than we have ever had. I have not had a chance to read his testimony but I know he will present it forcefully and with clarity and he will even be willing to argue about it, if I know Vann Kennedy. I am happy to present the Honorable Vann Kennedy. The CHAIRMAN. We are very happy to have you with us. With that fine introduction we will expect a lot of trouble, especially with the name Kennedy. If you will proceed, I may say to you, Mr. Kennedy, that you may present your statement for the record and summarize it if you wish. We want to make the record as complete as possible. We leave that up to you. Mr. KENNEDY. Mr. Chairman, my deep appreciation to the Honorable J. J. Pickle. If you will bear with me I shall read my statement. STATEMENT OF VANN M. KENNEDY, PRESIDENT, KZTV AND KSIX, CORPUS CHRISTI, TEX. Mr. KENNEDY. Mr. Chairman and gentlemen of the committee, my name is Vann M. Kennedy. I am president and general manager of television station KZTV and radio station KSIX, both of which serve Corpus Christi, Tex., and surrounding area. Let me thank you for the privilege of appearing to advocate complete regulation of community antenna television cable systems. I oppose H.R. 12914 and support H.R. 13286, with suggested amendments thereto. Corpus Christi is a medium, or secondary market. It is not 1 of the magic 100 which the FCC has elected to protect from the ruinous. effects of cable TV. The area already has been dangerously penetrated by CATV and is threatened with total penetration. The market has already suffered shrinkage and the adverse effects of this parasitic competition are now apparent. It might be noted that Corpus Christi and the coastal bend area of Texas are served by 3 television stations and 17 radio stations. There is no paucity of broadcast service in this area. It should be emphasized, however, that this market cannot yet fully support three television stations. It is gratifying that the FCC has at long last assumed jurisdiction over CATV and proposes a modicum of regulation. Although it is disappointing and woefully inadequate in many respects, it is a worthwhile beginning. The Commission clearly needs firm guidance and specific direction from the Congress. This witness has read the dissenting comments of Commissioner Kenneth Cox to the Commission's second order with admiration and approval. It is most regrettable that the majority of the Commission did not adopt the recommendations of Commissioner Cox. The explosive growth of community antenna television threatens to subvert the entire system of free broadcasting. Here is a situation that cries out for regulation. The broadcasting industry urgently needs Congress as an umpire and protector. In effect, the FCC has met the CATV crisis by providing full protection to the large markets-which least need protection—and has handed a crying towel to the small-market stations which are suffering the most from CATV competition. It would appear that the FCC has adopted an easy and cynical compromise. The big markets are regarded as important and easy to protect. The small markets are not regarded as important and are much more difficult to protect. The obvious effect of such an arbitrary and discriminatory rule is to halt invasion of the big markets by CATV, but to encourage penetration of the small markets. The guidance of Congress is needed to correct the inequities in the Commission's order. The FCC has failed to take into account the disastrous effect of CATV competition on radio broadcasting. It is common practice for CATV systems to pick up distant radio signals for rebroadcasting over local cables. Background music services are also provided. Time, weather, and news are sometimes transmitted. This is directly competitive to local radio stations, of which there are many. Any additional fragmentation of audience is certain to be harmful in any radio market. The Commission has shown much concern and demonstrated a great zeal in the propagation of FM radio broadcasting. CATV systems commonly rebroadcast distant FM stations. The struggle for survival of FM stations is well known. The smaller the market, the greater the difficulty for the FM station. Inasmuch as the Commission has failed to provide any protection for radio stations, Congress must come to their aid. In particular, it is most vital that CATV systems be prohibited from originating news, time, and weather information. You are not being asked to arbitrate and decide an issue between two self-supported and free-standing businesses that have a conflict of interest. The only question here is to what extent you will permit a greedy parasite to devour a vital public service which is free to all of your constituents. The broadcasting industry has not asked you to stop or control new forms of free broadcasting. Radio broadcasters did not ask you to urb or halt the growth of frequency modulated broadcasting, or TV roadcasting, or UHF development. The broadcaster has met these new forms of industry competition on equal footing. Now the broadcaster, notwithstanding the increased and intensified competition within the industry itself, is called upon to support a dangerous and unregulated competitor. Congress has fathered and fostered the free broadcasting system, which, in an amazingly short time, has come to serve the entire Nation in splendid fashion. This system serves all of your constituents--both rural and urban. It is not only for the affluent few. It must be remembered that a CATV system does not provide the broadcaster with just one competitor; it usually provides some 9 to 11 competitors. The modern CATV system provides service on all 12 VHF channels. Future CATV systems will be able to provide additional services on a large number of UHF channels. To have one additional competitor is a very serious problem to a small market broadcaster. To have competition on 11 or more channels could be ruinous. It should be noted that the effect of CATV within the broadcasting industry is a one-way street. Only big-market television is salable by CATV. The small city stations cannot hope to have a signal repeated in the big markets by means of CATV. The first 100 markets are certainly not threatened by CATV penetration from smaller markets. The basic problem is that the average person feels that he can only get big-time television from big-time markets. The resident of the big cities would scorn any television service from smaller markets, no matter how excellent and complete. CATV enables the big broadcaster to compete with the little broadcaster in the smallest markets for the national advertising dollar. The big broadcaster gets bigger, while the small broadcaster gets smaller. Thus the effect within the broadcasting industry of CATV must be considered. The impact of CATV is not limited to its adverse effect on broadcasters. It actually brings about market shrinkage. It repeats the signals on the big market stations and thereby extends their coverage and enlarges their market size. The small market thus penetrated becomes a smaller market. Markets are now defined by the area and size of their TV coverage. The big market becomes bigger and more important in a marketing sense, and the CATV-penetrated market becomes smaller and less important as a marketplace. This is reflected not merely in advertising, but in jobbing, distribution, and retailing. The radio and TV stations are not the only media to suffer from CATV competition. It has an adverse effect on the small city daily and the county weekly. The CATV system takes money out of the local retail market. The shrinkage of retail sales in a small city is immediately felt by all media-both print and broadcast. CATV provides the means by which big-city retailers grow and prosper at the expense of the small city and town retailers. Big-city retailers, through CATV, can compete directly with in-city penetration of neighboring small cities. Good highways and fast automo 62-610-66- -40 biles make it possible for anyone to shop in the largest cities 100, 200, or even 300 miles distant. Congress should examine the impact of CATV upon small market retailers. Small businesses should be protected from ruinous compe tition by big business. The FCC has kept TV stations carefully within the boundaries of their natural contours. The big-market station has not been permitted to invade the territory of smaller markets by means of translators, but this same invasion and pentration is taking place by means of CATV. The Commission has seen the wisdom of prohibiting one station from invading the coverage area of another station by means of translators. Why has it been so reluctant to prohibit this invasion and penetration by cable? The Commission has stood by and permitted CATV to accomplish what it prohibited broadcasters from doing; and now the Commission proposes to put its protective arms around the first 100 markets, almost all of which have become bigger and more prosperous at the expense of their smaller neighbors, thanks to CATV. Congress has wisely provided for absolute fairness in political broadcasts. Section 315 of the Communications Act prohibits censorship of a candidate's speech, and provides for equal opportunities in broadcasting for all candidates and political parties. Moreover, the specific obligation is laid upon broadcasters "to operate in the public interest and to afford reasonable opportunity for the discussion of conflicting views on issues of public importance." The cable operator, on the other hand, is completely free from any of these restrictions and obligations. He can censor your speech at will, or suppress it altogether. He is completely free to repeat endlessly the speeches and advertisements of your opponents. He can "black out" candidates and parties by whim and caprice. He is under no obligation to form any fair and balanced presentation as between parties and candidates on the multiple channels in which he can rebroadcast or originate political material. The se lected stations being rebroadcast might provide for an unfair concentration upon one political viewpoint. Cable systems are being put together in large groupings and chains. This monopolistic grouping could have serious political consequences unless the provisions of section 315 are made applicable to CATV systems. The FCC, backed by Congress, gives a searching scrutiny of the legal and character qualifications of broadcasters. An alien cannot own a broadcasting station but he can own as many CATV systems as he can afford to buy. Congress will not permit a broadcasting station to be sold or transferred without the approval of the FCC. There are no restrictions whatever upon the transfer of cable systems. In fact, there is a very lively traffic in cable franchises. The FCC weighs the character qualifications of broadcast applicants and does not hesitate to find against those who have blemishes of character. No character qualifications are required for ownership of a cable system. An enemy agent, a felon, a rabid racist-or even a horsethief, can own a cable system. The FCC, with the approval of Congress, has punished most severely concealed ownership and control of broadcast stations. Without regulation, ownership and control of cable systems may be Concealed and manipulated to the detriment of the public interest. The FCC has drastically limited the number of broadcast stations which any one individual or group may own, and no one may own more than one facility in any given market. No limits are placed upon the number of cable systems which may be owned by the same group. Large groups or chains of cable systems are now forming. These constitute a dangerous concentration of natural monopolies. The Commission has imposed a vertical duopoly rule, but has permitted horizontal duopoly through CATV. If ownership qualifications and limitations are sound policy for on-the-air broadcasters, why not for cable broadcasters? Wisely and properly, the FCC has prohibited the broadcasting of information concerning lotteries or programs which involve the elements of a lottery. A broadcaster will be punished severely if he permits his station to be used to aid and foster horserace gambling. This is not only morally right, but it prevents one broadcaster from using unfair and questionable methods to attract audiences. Cable operators are under no such restraints. They can broadcast lottery information, schemes of chance, and operate as a touting service for racetrack gambling. Moreover, the antenna systems can conduct audience-building contests of a type proscribed to broadcasters. Broadcasters may not broadcast obscene, profane, or salacious material. Broadcasters are subject to fine, imprisonment, and license revocation. CATV is unrestrained. Cable operators are free to originate any kind of material they choose. It is unlikely that most CATV operators would be guilty of broadcasting indecent language or obscene material, but unless put under some form of restraint, it is possible that a few of them would be tempted to originate "adult only" type of movies, and "blue" nightclub acts. The unrestrained growth of CATV is being permitted to violate the spirit, if not the actual letter, of section 307 (b) of the Communications Act, which directed that the FCC should "make such distribution of licenses, frequencies, hours of operation, and of power among the several States and communities as to provide a fair, efficient, and equitable distribution of radio service to each of the same." Pursuant to this provision of the law, the FCC has established tables of allocation, but CATV systems are destroying the balance and equities which were built into these tables. A completely lopsided and inequitable system is resulting. Congress did not intend to set up and support a system of big-city broadcasting only, but CATV is now bringing this about. Congress wisely decreed that all sections of the Nation should fare equitably and evenly in the distribution of broadcast facilities. If this wise policy is to be maintained, Congress now must act to prevent the tables of allocation from becoming a complete shambles. As it is now growing, CATV is going to enlarge greatly big-city broadcasting and slowly kill off small-city and rural broadcasting. It will provide service for the affluent few and wither the free service available to the poor and to rural residents. Eventually the entire free system would be supplanted by a pay system. By its enactment of section 325 of the Communications Act, Congress has recognized that the broadcaster has a property right in that |