THIRTEENTH ANNUAL REPORT FEDERAL COMMUNICATIONS COMMISSION FISCAL YEAR ENDED JUNE 30, 1947 (With Notation 01 Subsequent Important Developments) UNITED STATES GOVERNMENT PRINTING OFFICE· WASHINGTON. 1947 For sale by the Superintendent of Documents, U. S. Government Printing Office Washington 25, D. C. Price 25 cents ,COMMISSIONERSl 1 MEMBERS OF THE FEDERAL COMMUNICATIONS COMMISSION: [As of October 1, 1947] CHAIRMAN CHARLES R. DENNY 1 (Term expires June 30, 1951) PAUL A. WALKER' (Term expires June 30, 1953) CLIFFORD J. DURR (Term expires June 30, 1948) EWELL K. JETT (Term expires June 30, 1950) I Resigned 8S of Oct. 31, 1947. 2Dtsignated Acting ChairfQll.n Nov'. 3, 1947. 11 ROSEL H. HYDE (Term expires June 30, 1952), EDWARD M. WEBSTER (Term expires June 30, 1949) ROBERT F. JONES (Tcnn expires Jun-e 30, 1954). LETTER OF TRANSMITTAL FEDERAL COMMUNICATIONS COMMISSION, Washingtlm 35, D. C., December 31, 1947. To the Cong"ess of the United State8: Pursuant to section 4 (k) of the Communications Act, there is sub mitted herewith the Thirteenth Annual Report of the Federal Com munications Commission, covering the fiscal year 1947. This report reflects the mounting volume of work aild complexities involved in regulating postwar advances in the field of electrical com munications. Electronic and other developments are so fast moving that situations and statistics as of June 30, 1947, have altered con siderably in the ensuing 6 months. For that reason, there is included a summary of the more important of these subsequent events. Respectfully, PAUL A. ·WALKER, Acti"g Chairman. III [ Page IV in the original document is intentionally blank ] TABLE OF CONTENTS Page REPORT SUMMARY____________ __ _____________ _________________ XI 1. Highlights of the fiscal year~_________________________________ XI 2. Subsequentdevelopments~,._______________________________ XIV Chapter I. GE}jERAL .. __ 1 1. Administratioll ,. ,. ,.~~___ 1 2. Commissioners~,. ___ 1 3. Staff organization_ _________________________________ ___ 1 4. PersonneL . 2 5. Appropriations . ___________________________ 2 6. Legislation__ __ ___ __ __ ___ __ ___ __ 3 7. Litigatioll~3 8. Statistics~____ __ ___ __ __ 6 9. Board of War Communications_________________________ 6 II. RADIO FREQUENCIES____ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ___ _ _ _ _ _ _ 7 1. Radio Spectrurn_ ____ _________________________________ 7 2. Frequency service-allocations___________________________ 7 3. Government frequencies_______________________________ 7 4. Nongovernment frequencies~___8 5. InternationaL ________________________________________ S International telecommunications conferences~8 Other international conferences_ ____________________ 10 III. RADIO BROADCAST SERVICES~___18 1. Broadcast atations soar in number___ 13 2. Multiple ownership___________________________________ 14 3. (lErue book" changes_________________________________ 14 4:. Standard broadcast service____________________________ 14 Demand for facilities continues____________________ 14 Licensed stations pass onc-thous&1ldth mark___ ______ 14 More small local outlets__________________________ 15 Daytime stations increasc~______ ____ 15 Temporary expediting prooedure___________________ 15 Hearings___ __ __ __ __ __ _ __ 16 Clear channel study______________________________ 16 North American Regional Broadcasting AgreemenL__ 17 General interference consideration__________________ 17 Sky,vave interference_____________________________ 17 Economic study of standard broadcasting_ __________ 18 Standard broadcast financial data_ _________________ 18 5. Frequency modulation (FM) broadcast service___________ 20 Gro"\vth of FM broadcasting~______________20 'F11 applica.nts______ __ ___ __ ______ __ __ __ _ 20 Fi\1 construction_____ __ ______ _____ _ ______ 21 FM frequencies, cha.nnels and stations______________ 21 FM rcceivers____________ 22 v TABLE OF CONTENTS Chapter Ill. RADIO BROADCAST SERVIcEs-Continued Pa.ge 6. Television broadcastservice_._~_______________________22 Television stations • _________ ___________ 22 Television deve1opments_ _________ ________________ 23 Television receivers_ ________ ___________ _____ _____ 23 Color television hearing___ ________________________ 23 Television frequency sharing_ ___________ __________ 24 Experimental television service_ ___________________ 25 Television remote pick-up broadcast stations_ _______ 25 Television network operation~_________26 7. International broadcast servicc________________________ 26 8. Noncommercia.l educational broadcast service_____ _______ 27 9. Facsimile broadcast service~_:.._________ 28 10. Remote pick-up 'broadcast service~______28 11. ST (Studio-transmitter) broadcast service_______________ 28 12. Developmental broadcast service ...; _______ __ 29 13. Statistics_____ __ __ __ __ __ ____ 29 IV. SAFETY AND SPECIAL RADIO SERVICES .___________________ 31 1. GeneraL__ ________________ ___________________________ 31 2. Aeronautical Radio Services____________________________ 31 Aircraft radio~_______ ____ __ 32 Aeronautical land and aeronautical1ixed radio stations_ 33 Airdrome control radio stations~_____________34 Aeronautical mobile utility radio stations_ _______ ____ 34 Aeronautical navigation radio stations_ __ __ __________ 34 Flying school radio stations .;. ______ 35 Flight test radio stations___________________________ 35 3. l\Iarine radio services__________________________________ 35 Frequency assignments_ ___ __ __ __ ___ ____ 35 New marine radio devices__________________________ 36 Radio Technical Commission for Marine Services_____ 36 Marine radio interference__________________________ 36 Marine radio equipment development_______________ 37 Radio aid in sea disasters~._____ 37 Exernptions~~___37 'Waivers ,____ __ __ __ __ 37 Rule changes~38 Ship radio stations~~___38 Coastal radio stations~___ 38 Marine radio relay service~___________________38 Alaskan point-to·point and coastal radio stations_____ 39 4. Emergency radio service_______________________________ 39 Police radio stations_______________________________ 39 Municipal fire radio stations________________________ 40 Forestry radio stations_____________________________ 41 Special emergency radio stations____________________ 41 Proposed highway maintenance radio stations________ 42 5. Utility radio service___________________________________ 42 6. Railroad radio service_________________________________ 43 TABLE OF CONTENTS VII 'Chapter IV. SAFETY AND SPECIAL RADIO SERVICEs-Continued Pace 7. Miscellaneous radio services____________________________ 43 Geological radio statiolls .l___________ 44 Motion picture radio stations ' .!___________ 44 Relay press radio stations~______________44 State Guard radio statioos .:..____ 44 8. Experimental radio services .:.___________ 45 General__________________________________________ 46 Radar~_______________46 ~ncrowaverelay :. _________ ___ _______ 46 Teleca.r service .~_____ _____ 47 General mobile radio servioo .. 47 Industrial radio service~__49 Industrial, scientific and medical radio seryice_ _______ 50 Citizens radio service______________________________ 51 Rural and short-distance toll radiotelephone service_ __ 52 9. Statistics ";"_ _____ ____ 52 V. COMMON CARRIERS j-_.:_______________ 55 1. Telephone (wire and radio)_____________________________ 55 General~l_______________55 Domestic telephone services L______________ 55 Construction of wire facilities :...:_______________ 55 Speed of t.oU service .. 56 Telephone recording devices~_______________56 Rural telephone service____________________________ 56 Power line telephone service -l___________ 56 Short distance radiotelephone service .i___________ 56 Coaxial cable service_ ______ _____ ______________ 57 Microwa.ve relay service___________________________ 57 Mobile radiotelephone service .. __ 57 Coastal and Alaskan services ._____ 58 International radiotelephone services_ __________ _________ 58 Overseas private line service________________________ 58 Oversea.s program transmission service_ _____ _________ 58 Rates and tariffs______________________________________ 59 Rate schedules_ ___________ ___ _______ _____________ 59 Special permissions___ ______ _____________ __________ 59 Washington metropolitan area______________________ 59 /lOther Line" charges______________________________ 59 Cooperation with regulatory bodies_____________________ 59 Separation of property, revenues and expenses________ 59 Bell System license contracts " ..:___________ 60 State rate cases___________________________________ 60 Accounting regulations "" __ -t_ __ ___ __ __ ____ _ 60 Uniform system of accounts " -1_______________ 60 Financing and refinancing__________________________ 60 Pensions and relieL ..:_______________ 60 Preservation of records_ ___________________________ 61 New types of plant and services ...:_______________ 61 Restatement of plant on basis of original cost________ 61 Original cost schedules in annual reports_____________ 61 Continuing property records________________________ 61 New plant accounting .__________ 62 VIn TABLE OF CONTENTS Chapter V. COMMON CARRIERs-Continued Page Increase in depreciation charges_____________________ 62 Depreciation methods_ ____________________________ 62 Filing of depreciation dats_________________________ ·62 Statistics. . __ . . . w_.__ __ 63 2. Telegraph (wire, cable and radio}. ... 63 Domestic service and facilities. .. _________________ 63 Western Union modernization program__________ 63 -Domestic radiotelegraph. _______ _______________ 64 Construction of wire facilities___________________ 64 Speed of service_______________________________ 64 Discontinuance, reduction or impairment of service~~____64 Rates anitariffs_~~~~_________65 Western Union rate increase~_~~_________65 Rate structure studies .___________ 65 Supervision of accounts (domestic and international) __ 66 Depreciation~~____ 66 Continuing property records____________________ 66 Pension accounting____________________________ 66 Uniform system of accounts~________66 Revision of annualreports~__~_________ __ __ 67 Preservation of records________________________ 67 Reclassification of plant-~~~___67 Original cost adjustments______________________ 67 Land-hne telegraphstatistics~~________67 InternationaL~~__~__ 68 Service and facilities~~________________68 General___ __ _______ __ __ 68 Rarliotelegraph circuits_ ___________________ 68 Review of radiotelegraph service_ ___________ 69 International telegraph regulations_ _________ 69 Rates and tariffs~_______69 Rate increases~___________________69 Rate reductions~_____69 Statistics~___ __ ___ __ ___ __ ___ __ __ 69 VI. RADIO OPERATORS~________________________________73 1. Commercial radio operators_ ___________________________ 73 2. Amateur radio service ,,- __ _________ __ 75 VII. FIEJ.D ENGINEERING AND MONITORING________________________ 79 1. Field Engineering and Monitoring Divisioll______________ 79 Examinations and inspections______________________ 79 -Radio operator waivers_ __ ___ __ _____ _______ _ 79 Radio operator examinations~__ 79 Broadcast station inspections___________________ 80 Ship inspections_ ______ ______________________ 80 Inspection of other stations____________________ 80 :'IIonitoring____ _______ ____ __ __ __ __ ___ __ __ 80 Frequency measnrements_ _____________________ 80 Tnterference_ _ __ ___ __ _ 81 TIlegal station operatioll_._______________________ 81 Direction finding______________________________ 81 TABLEOl;~CON'l'ENTS IX Chapter VII. FIELD ENGINEERIKG AND MONITORING-Continued Page Technical operations_ __ __ __ __ _____ 81 Equipment requirements___ _________________ ___ 81 Field projccts_•• ___ __ ___ __ __________ _____ __ 82 VIII. Tt:CHNICAI, STUDmj"-________________________________________ 83 1. Technical Information Divh;ioll_________________________ 83 'Vave propagatioll_ ___ ___ __ ___ _______ __ __ 83 Sunspot cycle_____ __ __ __ ____ ___ __ __ __ 83 Skywave pulse transmissions___________________ 84 Atmospheric noise___________ __ ____ __ __ __ 84 Very-high frequency recording_ _________________ 84 Special studies________ __ __ __ ___ __ _____ 85 2. Laboratory DivisioD___________________________________ 85 Industrial heating and diathermy ___________________ 86 Stratovision__ ___ __ _____ __ __ 8'1 Equipment testing_ ___ __ _________ __ ___ __ 87 TelevisioD____ ___ __ ___ ________ ____ 88 FM broadcasting~_p_88 Field intensity slirveys ._______________ 88 Ignition interference ..:___ _ ._______ 88 Production of special equipment- ___________________ 88 Loran navigation system sharing~___ 89 Low power dcvices________________________________ 89 ApPENDJX~___91 1. Field offices .__.~_____________91 2. PublicatioIl w___ 92 [ Page X in the original document is intentionally blank J REPORT SUMMARY 1. HIGHLIGHTS OF THE FISCAL YEAR 2. SUBSEQUENT EVENTS 1. HIGHLIGHTS OF THE FISCAL YEAR The fiscal year 1947 was notable for its domestic and international develop~entsof vital concern to radio. Commission activities r& flected an increasing demand for radio facilities of all types, and world conferences met in this country to modernize international radio regulations. The Commission played an active role in preparing for and partici pating in the sessions of the International Telecommunications COD ferences at Atlantic City, over which its Chairman presided. This meeting was called to rewrite prewar radio regulations in the light of subsequent events and the need·for world agreement on allocations and standards of operation to insure the·most economical and practical use of the limited radio frequencies. As far as this country is concerned, the Commission had the task of regulating nearly 40 different radio services and seeking spectrum space for more. The number of outstanding radio authorizations of all kinds (stations and operators) rose to nearly 550,000. Broadcast stations of 11 types reached a new peak of 3,551 au thorized as compared with 2,439 the year previous. More than two thirds of these were commercial standard (AM) and frequency modulation (FM) outlets. While demand for AM stations continued to increase, engineering and other problems presented by congestion in that field required many applications to be set for hearing. In consequence, most of the 580 new AM grants were to small communities, many without previous local service. For the first time the number of licensed AM stations passed the one-thousandth mark and, on June 30 last, 1,795 AM sta tions had licenses or construction grants. A 12-week expediting pro cedure, which ended May L 1947 enabled the Commission to catch up with a backlog of AM applications. FM showed its biggest and most material gain. Authorized stations doubled-from 456 to 918-and the number on the air increased from 55 to 238. This activity forecasts FM service to more than 500 com. munities and adjacent rural areas extending through all States except XI XII REPORT SUMMARY l\fontana. There were six times as many Fl\l applications for hll'ge area coverage as for purely local service. Some interference to Fl\l reception caused by operation on alternate channels was correcteu by exchanging frequencies. Previously reserved FlU channels were re leased as of July 1,1947. Manfacturers reported an increasing pro duction of sets capable of receiving FM. The first large-scale F.\I network operation started in March 1947. Television broadcast authorizations also more than doubled-from 30 to 66. These stations proposed to serve ag metropolitan areas and three individual cities. In l\{arch the Commission removed an Ull certainty in the industry by deciding. after extensive hearing, that eolor television requires further experimentation before being given commercial status. Eighty-one experimental television stations are working on this and other improvements in television techniques and apparatus. Development of microwave relay systems and extension of coaxial cable lines hold pl'Ospect of regular television network opera tion. Sharing of television freqnencies by other services was found impracticable and a new allocation plan was in preparation. Facsimile broadcast continued on un experimental basis while in dnstry resolves some differences of opinion ou technical problems to enable standards to be set up for commercial operation. . Noncommercial educational station authorizations increased to 38, which is half again the number in 1946. State-wide educational net works were in prospect. Thirty-seven international broadcast stations continued to be pro grammed and operated by the Department of State. The increasing use of radio for other than broadcast purposes was .I.MISSION consideration of other factors sucha~the need for the bl'oadca:-;t sel'\"ice and loss of invested capital which the licensee might iucur, was be yond the scope of Commission llutlHirity. The Commission's peti tion for a writ of certiol'uri to review the lower court decision was granted by the Supreme Comt on April~~,lfl46 (TVOKO, It,,·. Y. Fede'J'al(}O'lnmu'nicaNom~(}mnm.i,'58ion, 153 F. 2d (23), and in Decem ber of 1946 the Supreme Comt reyersed the Court of Appe"ls aUtl sus tained the Commission's decision. lltuTl'ay andllfey(~l'jJ{,38tel' v. Ferlo'al Commlwicatlo·/i.... (!ommis 8ion.-This case arose upon the application of vVodaamCOl'p.~licellHee" of radio statio 'VOV, for permission to transfer coutrol~)fthe cor poration to 1\1:ur['ay and~Ie~yel'~Iester.The application was desig nated for hearing to obtain, llmong other things, "full illformatiOil with reference to the qualificati at that time to 1,795, liS compared with 1,215 in 1946. The net result was that nearly 600 new stations were authorized during fiscal 1947,. 01' more than twice the number for the previous year. In addition, 666 applications for new stations were pending. MORE SMALL LOCAL OUTLETS Of significance in connection with standard broadcast station grants lind applications is the fact that the smaller towns and commnnities have become increasingly interested in establishing small local outlets.. In consequence, a large portion of the new stations are in towns with populations under 5,000. DAYTIME STATIONS INCREASE The Commission's rules have always provided for the operation of daytime stations and, from an engineering point of view, a large num ber of such assignments are still available. Applicants in the past, however, have felt that unlimited time operation was mare economic and have accordingly not been particnlarly interested in daytime sta tions. But the greatly increased interference problems involved in nighttime operation have resulted in a trend which indicates willing lless Oll the part of IIpplicllnts to accept daytime facilities when night time operation is not feasible. So a large percentage of the new stations have been for day operation only. TEMPORARY EXPEDITING PROCEDURE During the 6-month period from Jnly 1946 until December 1946 applications for new stations or major changes in existing facilities "'vere being received at an average of about 140 pel' month and grants were being mllde at an average rate of about 50 per month. In January 19+7 the Commission announced the udoption of a tem porary expediting procedure for pro._._. . _ 'rotal broadcast exPBnses. __ ••• . __ • •••_._I -'-__I -'--,+ _ Broadcastlncome •• _•• • •• _4·· ·I~=~;;;=_I~~~;;;="I~~=~;;;" All stations: Numberofstations, 831, Totalbroadcast revenues.•.__ •~•••••~_._ TotalbrOadcastexpenses··_· •__··~I--_-'-_1 -'-_.1 "':"-'-'- Broadcastincome ••_~~~_~. Broadenst Income Broadcast income •• _ Clear channel 50 kilowatt part time: Numberofstatlons,4, Total broadcast revenues~~._ Total broad(Jll:jtexpen~__ -- --- --- ------- ----- ----.---I---.:.:"c=-I---.:.:-:':=-I-----:c:':: Broad(Sst lncome ••••~~__~~.._~.I~~~;;;~ Clear channel 5-20 kilowatts unlimited: Number of stations, 26. Total broadcast revenues. • __~_ Total broadcast expenses__ .. -.--"-'.- -.__1__-.:.:=.,-:'-1__--'-:'::=-_1 -:'::':: BrOadcastincome·· •__ • ·····_·_· •__·I~~~;;;;;;;,_1~~~;;;;;;;'_I~~~';;;;;;; Clear channel 5--20 kilowatts part time: Number of stations, 2. . Total broadcast revenues . _..__ ._ . _ Total brooocast expcnses .. . __ •__ Standard broadmst :!tatlons (excludIng 10 key stations of Nation-wide networks) All broadcast income shown is before Federal incoroe taxes, The following table compares the 1945-46 broadcast revenues, ex penses, and income of the four Nation-wide networks and their key stations: 4 Nation-wlde network!! and their 10 key stations 1945 1946 Percent increase or (decrease) Total brooooostrevenues.~.~oM~_.._._._~____$85,151,875 $86, 494,. 599 l,liS Total broadcast expenses__ •~__ . .~_7,_OO_1_,3_5~_~71~'.C708:=-,9~':1+__".:7~.03:,::- BroadcBSt income (before Federal income taxes)________ 18,150,524 14,785,678 (18. M) 20 REPORT OF THE FEDERAL COMMUNICATIONS COMMISSION The distribution of the 1946 broadcast revenues and broadcast income as between networks and stations is here shown: Distribution of total broadcast revenues Amount Distribution of broadcast Income (before Federal income taxes) Amount Percent Percent ----------_._--_._----------------- Networks, In.cluding 29 owned end o-perated stations_____________ $.19,344,123. 25.:\ Networks, including 10 key stations________________________________ 14,837,871 19.4 19 other network owned and operated stations____________ _.1~~4;",~50~6,~2";"~1~~~~'=;;.9 996 other stations. •• --- _------ 1__"-'-'_122.:.,_1_23_ 1 '_'_.7 801 stations serving as network outlets . ._ _ __ 53, 185, 098 69.6 195 stations not serving as D£ltwork outlets--------------I~=co3;;,;;937;;,;;O;;2b+~~,;5;;;.1 Total brORdcast income_.~~____ ___ __ 76,466,246 100.0 5. FREQUENCY MODULATION (FM) BROADCAST SERVICE GROWTH OF FM BROADCASTING The fiscal year witnessed a tremendous spurt of lWtivity in FM broadcasting, further demonstrating the important role this new and superior broadcast service is assuming in the postwar era. The number of FM stations on the air rose from 55 on July 1, 1946, to 238 a year later. Total authorizations donbled-from 456 to 918, indicating that a thousand FM stations may soon be in operation. Those already anthorized or applied for will provide FM program service to more than 500 commnnities and surrounding rural areas, inclnding every State except Montana. Althongh the workload in this field has increased proportionately, the Commission has endeavored to process FM applications as promptly as.possible and otherwise assist in getting FM service estab lished throughont the Nation. Under the Commission's conditional grant policy, FM stations can go on the air as quickly as they can get their transmitters up. FM APPLICANTS As of March 1, 19'107, three-fourths of all FM applications were from standard broadcast interests, and one-third were from newspapers, REPORT OF THE FEDERAL COMMUNICATIONS COMMISSION 21 23 percent of which were in tlie standard broadcast field. These groups are in a position to support the new industry until it reaches profitability. Standard broadcasters have an advantage in being per mitted, thus far, to transmit their programs over their FM facilities. Since FM channels can accommodate more stations than are available in the AM band-50 to 100 percent more per city-there is little danger of AM interests monopolizing FM, but certain regulations hltve been adopted to encourage new entries in the FM field. FM CONSTRUCTION Production of FM transmitting equipment increMed rapidly dur ing the yeltr, but most FM stations on the air have not completed full construction and are employing low-powered equipment on a tempo rary basis. FM transmitters are generally built so that higher power amplifiers may be added as desired or as equipment becomes available. The Commission has encouraged interim operation with available equipment in order that FM service may be provided in as many areas as possible. Because of the difficulty in getting equipment and due to other construction delays, several hnndred requests for extension of con struction time were granted. Many of these were in connection with modifications. Under Commission regulations, permits for all types of broadcMt stations call for construction starting within 2 months and completion within 8 months. The Commission sent inquiries to FM permittees on their construction status, and has not granted the full extension of time requested in all cases. PM FREQUENCIES, CHANNELS. AND STATIONS FM broadcast is between 88 and 108 megacycles. FM standards adopted in 1945 provided for the assigument of alternate channels with a 400-kilocycle separation of stations in the same area. Separate blocks of frequencies were allocated for community (now clltss A) and metropolitan-rural (now class B) stations. In June 1947chang~swere made in the assignment of frequencies to provide for a class B station in every fourth instead of every other channel-in other words; for an 800-kilocycle instead of 400-kilocycle separation for stations in the same area.· Class A and class B stlttions are now interspersed, and the former are allocated in the same manner as class B stations by interference contours rather than by mileage separation. This revision was adopted after it was found that operation on alternate channels produced some interference in receivers then being produced. It was accomplished by trading channels within one area for those in other areas. No city lost channels, and some evincing need 22 REPORT OF THE FEDERAL COMMUNICATIONS COMMISSION actually gained. Transmitters in use required no change except re adjustment and retuning. The great bulk of FM applications thus far have been for the higher-powered class B stations which are designed to render service primarily to a metropolitan district or principal city and the sur rounding rural area, or to a rural area removed from large centers of population. At the end of May 1947, applications for class B stations outnumbered those for class A by almost 6 to 1 (898 class B to 154 class A). While linking of FM stations through rebroadcasts is not new, the first large scale regional operation was launched by the Continential Network on March 26, 1947. Its operation snbseqnently embraced 27 stations in the northeastern part of the country. Following a hearing, the Commission in July 1946 reserved until June 30, 1947, every fifth channel in cities or areas which had been allocated five or mOre channels. In March 1947 this policy was ex tended to include 4 out of the 20 channels designed to serve commu nities and adjacent areas. This reservation plan was to permit late comers to receive consideration with other applicants for channels in areas where the demand exceeds the supply. PM RECEIVERS FM receiver production in 1946 was limited, due principally to the large production of table model standard sets. As a result, only 181,000 FM receivers were manufactured during that calendar year, or 1.4 percent of the total of all sets made. During the first half of 1947, however, FM set production was intensified, and the industry estimated that approximately 2,000,000 would be manufactured in 1947. Indications were that FM would be included in nearly all future console models, as well as in an increasing proportion of table models. It is important to the full development and utilization of FM broadcasting that receiving sets be available at the lowest possible cost. The appearance of reasonably priced combination AM-FM sets gives promise that the benefits of FM receptiort will soon be available in varied price brackets. Meanwhile, converters have appeared which make it possible for AM sets to receive FMprograms. Since FM service under the station allocation and assignment system depends, to a large extent, on thc selectivity of FM receivers, the Com mission is sample testing the latter as they are manufactured in order to have information on this subject. 6. TELEVISION BROADCAST SERVICE TELEVISION STATIONS Six television stations held licenses at the close of the fiscal year, with 60 construction permits outstanding and 9 applications pending. REPOIl'I' OF THE FEDERAL COMMUNICATIONS COMMISSION 23 In addition to the six licensees, six newly constructed stations were also furnishing program service. Thirty-three large metropolitan areas and three smaller cities either had or will have service from the television stations licensed or building. The Commission continued to relax its requirement of a minimum of 28 hour,s of program service by each station per week. TELEVISION DEVELOPMENTS Of interest to the industry was the expansion of the coaxial cable system, the development of microwave equipment for relay pick-up and studio-to-transmitter links, improvement in tubes, and the in creasing number of technicians trained in television and related work. Television demonstrations during the year included it,s use as an in structional aid in schools and hospitals, televising pictures in art galleries, on-the-spot news shots, and large screen theater television. TELEVISION RECEIVERS During the war thcre were only about 10,000 television receivers on the market, about one-half of these being in the New York area. At the close of fiscal 1947 an estimated 50,000 sets were in the hands of the public, with the bulk in cities having television broadcast service. The television audience was estimated at 300,000. Receivers varied in price from about $250 for table models to $2,500 for the large floor models. Their viewing screens ranged from 5 to 24 inches in size. COLOR TELEVISION HEARING This proceeding arose from a petition of the Columbia Broadcasting System, filed September 27, 1946, seeking operation of its (Columbia's) particular color television system in the ultra-high frequencies of 480 to 920 megacycles, currently employed for television experimentation. Hearing was held in Washington, New York, and Princeton, N. J., at intervals between December 9, 1946, and February 13, 1947. Dur ing its course, the Radio Corporation of America demonstrated an other color television system still in the laboratory stage but for which it claimed certain advantages. The CBS petition was denied on March 18. While recognizing the advances that have been made in color television development, the Commission conclnded that further experimentation is needed. It was also of the opinion that there may be other systems which offer the possibility of cheaper receivers and use of narrower band widths. Before a new system of television is established it must be given ade quate field testing. There is a great difference between laboratory performa!,ce with trained personnel and home operation by the aver age citizen. Also, decision Ill!)St be made all standards. Otherwise the public could not purchase receivers with any assurance that they 24 REPORT OF THE FEDERAL COMMUNICATIONS COMMISSION would be able to receive programs from all television stations, or that their sets would notbecome useless if the existing station should change any of the fundamentals. So, before approving proposed staudards, the Commission must be satisfied not only that the system proposed will work but also that it is as good as can be expected within a reason able time to come. The method of transmitting colo'r is only one of the many principles that must be fixed. Additional considerations cover number of lines, frame rate, type of sound system, etc. In all of these things the re ceiver must be constructed to "key" with the transmitter in order to receive the program. If at any time a broadcast company should change these standards, the receivers it previously served would be come useless. Unlike the automobile or vacuum cleaner, which re mains capable of operation long after a new model is brought out, a basic change in the television system would immediately render 1946..______________•._____________________ 23. $78, 896, 450 3,100.8 16,580 12,261 1947. ___________ . ______ . ___________ . ____ . __ 23. 1'26.325,771 5,587.7 23,490 IS. 976 The Bell system added about 1,600,000 miles of toll message chan nels, which increased its previous total by 11.9 percent. Carrier sys tems continued to provide about 90 percent of the new channels. Coaxial cables are discussed elsewhere in this report. Speed of toll service.-The Bell system was able to install mw equipment and secure additional operators which reduced the average speed of service for completing toll-board calls to 2.3 minutes in March 1947, a decrease of 0.4 of a minute compared with the year previous. Telephone recording deviees.-On March 24, 1947, the Commission issued a final report on the use of recording devices in connection with interstate and foreign telephone service. It concluded that a real need exists for this adjunct but held that its use should be under conditions which will give adequate notice to parties that their con versation is being recorded. The Commission decided, among other things, that this should be accomplished by an automatic tone warn ing signal repeated at regular intervals during the conversation. How ever, it deferred issuance of a final order pending resolution of various engineering questions considered at an engineering conference on April 29. Rural telephone serviee.-At the close of fiscal 1947, some 330,000 additional rural families were receiving telephone service. This in crease was about three times that of any previous year. About 18,000 miles of pole line were constructed in rural areas. Also, some sub scribers were receiving service over electric power lines or by means of radiotelephone. PfYloer line telephone Bervioe.-Initial installations were made of a new carrier system modified for short-haul toll operation. It was developed in connection with "hitch-hiking" telephone messages over rural electric power lines in some southern areas and has proved economical in cases where wire construction would otherwise be neces sary. Known as the MIA in its modified form, five or six channels can ordinarily be operated on a power line. Short distanoe radiotelephone serviee.-Telephone companies have shown an increasing interest in harnessing radio to expand short dis tance service. They were working toward the nse of radio to bring REPORT OF THE FEDERAL COMMUNICATIONS COMMISSION 57 service to isolated ranches in the West, small rural communities at a distance from large cities, and as a replacement for wire lines where construction and maintenance costs are prohibitive. Preliminary studies indicate that, under geographical conditions favorable for wire lines. (See also "Rural and Short-distance Radio telephone Service".) ooaaJial cable service.-Coaxial cable installations are designed for radio broadcast and television transmission as well as for telephone and telegraph traffic. In the fall of 1946 rates were instituted by eight Bell telephone companies for the use of local channels in connection with television operation. Since then, extension of the coaxial cable sys tem has taken on a new importance in the light of the need for inter city exchange of television programs. The American Telephone & Telegraph Co. continued to make its coaxial link between New York and Washington available without charge for television tests. This was the only section open for this purpose in fiscal 1947. However, a national coaxial system of 12,000 miles is expected to be in operation by 1950. On Jnne 2, the A. T. & T. filed coaxial cable rates for television service, but they were withdrawn for fnrther study before they became operative. Microulave 1;elay service.-Microwave radio relay dev"elopment (more fnlly described under "Experimental radio services") received considerable impetus through the grant of a construction permit to the American Telephone & Telegraph Co. for an experimental system to link New York and Chicago, and similar authorizations to the Raytheon Manufacturing Co. for connecting New York and Chicago, and Los Angeles and San Francisco. These are in addition to previous authorizations to the American Telephone & Telegraph Co. and the Western Union Telegraph Co. for systems between New York and Boston and a triangular system linking New York, Philadelphia, Washington, and Pittsburgh, respectively. The New York-Boston chain was expected to be in service in the fall of 1947, offering tele phone, teletype, broadcast, and other communication services. Mobile radiotelephone service.-Bell system and independent tele phone companies are continuing experimental development of mobile radiotelephone service. The first urban mobile system went into operation in St. Louis on June'17, 1946, and at the end of fiscal 1947 commercial service was being afforded in 42 cities in 26 States, with prospect of 19.more cities being added at an early date. The first highway mobile system started operation in the vicinity of Green Bay, Wis., on August 28, 1946. Highway service on a com mercial basis is now available in 19 areas, and installations in 78 more are nearing completion. Plans call for such service along approxi mately 5,000 miles of the Nation's trunk highways. 58 REPORT OF THE FEDERAL COMMUNICATIONS COMMISSION The general mobile service is being extended to ships and aircraft operating in the vicinity of land service facilities. Various persons who never before rendered communication service for hire have also obtained experimental authorizations. The rate of expansion of this service indicates that, within a few years, it will be possible to communicate with radio-equipped vehicles in ma.ny parts of the country. The present rates for urban and high way service vary from 30 to 40 cents for a three-minute call within a local telephone exchange area, with long distance calls charged for at the person-to-person daytime rate. In view of the mounting demand for mobile service, the Commission ordered a public hearing for late 1947, to consider the establishment of this service on a regular basis. Problems to be considered were the types of mobile service which should be authorized, the frequencies which can be allocated for the service and the manner in which they can be apportioned among the different classes of users, the extent to which service shall be afforded by common carriers or private car riers, and other information necessary to drafting proposed rules and regulations. (Further reference to mobile service will be found under "Experimental radio services.") Ooa:;tal awl Ala:;kan seruiees.-Coastal harbor, coastal telephone, and Alaskan radio communications services are discussed in the chap ter on Safety and Special Services because of their relationship to radIO aids to the safety of life and property. During the year public radiotelephone service was inaugurated between various coastal har bor stations and aircraft at rates generally the same as for coastal harbor communication with ships. In Alaska the communications picture is peculiar in that the nature of the terrain and population distribution make radio an almost exclusive medium for communica tion. Accordingly, virtually all the coastal and point-to-point services there furnish public service. Independent stations throughout the territory are interconnected in a network operated by the Alaska Com munication System, an agency of the United States Army Signal Corps. INTERNATIONAL RADIOTELEPHONE SERVICES During the year radiotelephone service was reestablished with 16 countries to which it had been suspended during the war, and became available for the first time to foul' other countries. Some 90 overseas points in 63 foreign conntries and United States possessions are now served by 6 companies in the United States and 3 in its Territories. One other company furnished an interisland service in Hawaii. Oversea:; private line seruiee.-Private line service was established for the first time to Norway, Puerto Rico, Spain, and Great Britain. Oversea:; program transmission se,."iee.-This broadcast relay serv- REPORT OF THE FEDERAL COMMUNICATIONS COMMISSION 59 ice was reestablished to 9 countries, maJring a total of 54 to which such service is available. RATES AND T.ARIFFS During the fiscal year, overseas message toll telephone rates were reduced between the United States and five foreign countries. Rates for overseas private line telephone service were reduced between the United States and Great Britain, France, and Switzerland, as were program transmission rates from Hawaii to the United States. There were no major changes in interstate telephone rates during the year. Rate schedules.-Approximately 27,000 tariff publications were filed with the Commission. Of this total, 19,400 related to telephone and 7,800 to telegraph services. At the close of the year, 365 carriers had tariffs on file with the Commission. Special pC'l'1l1li8siO'l!8.-During the year, 276 applications for special permission to make tariff changes or to file new schedules with less than the required notice were received. Of these, 266 were granted, 8 denied, and 2 withdrawn. Washington metropolitan aTea.-In early 1947 the Chesapeake & Potomac Telephone Cos. of Virginia and Baltimore City filed revised tariff schedules increasing the charges for certain interstate telephone calls between points in Virginia and Maryland within the Wash ington metropolitan area. The Commission suspended the proposed rates for a period of 3" months pending a hearing as to their lawful ness. The telephone companies have challenged the Commission's jurisdiction in this matter. "OtheT line" chaTges.-Bell system companies continued to estab lish direct rates for interstate message telephone and telegraph traffic interchanged with independent companies on an "other line" charge basis. As of January 1, 11)47, only 11 independent companies applied "other line" charges on 393 telephone and 454 telegraph routes. COOPERATION WITH REGULATORY BODIES Sepamtion of popeTty, Tevenues, aru1 e",penses.-The Commission cooperated with the National Association of Railroad and Utilities Commissioners in a review of procedures employed by Bell system companies to separate telephone property, revenues, and expenses among exchange and interstate and intrastate toll services. The study included an appraisal of the results developed by the procedure for the division of interstate message toll revenue and for the establish ment of the level of intrastate earnings now under consideration by various State commissions. Data to be obtained by Bell system com panies through incorporating revised procedures in their division of toll revenue contracts will be examined by the Commission in con- 60 REPORT OF THE FEDERAL COMMUNICATIONS COMMISSION nection with its general investigation of telephone separation methods (Docket 6328). Ben SY8tem license contraots.-The Commission also cooperated with the NARUC in continued study of services performed by the American Telephone & Telegraph Co. associated companies for its long-lines department and of the methods employed in allocating the costs of furnishing those services. State rate c@es.-Under its policy of cooperation with State utility commissions in related regulatory problems, the Commission fur nished information and other assistance in intrastate rate proceedings before those State bodies. ACCOUNTING REGULATIONS Uniform S1jstem of account8.-In addition to issuing instructions and interpretations on specific problems submitted by individual com panies, the Commission amended the nniform system of accounts for class A and class B telephone companies to provide, principally, (ll accounting for write-ups of plant and other plant adjustments not arising from acquisitions of plant and (2) accounting for capital sur plus as distinguished from earned surplus. Further amendments are under consideration, particularly with respect to improved classifica tion of income items which will tend to make the accounts more in formative. Studies were continued to determine the extent to which the carriers were complying with the accounting regulations pre scribed by the Commission. Financing and refinancing.-Due to postwar construction, there was heavy issuance of new securities, both stocks and bonds, by telephone companies. Many of these issues gave rise to special accounting prob lems. Special studies of prospectus uses were made in collaboration with the Securities and Exchange Commission and the accounting data included therein were checked against data on file with the Commi, sion. There was also increased activity in refunding of old issues of bonds. This activity required extensive research into (1) the reasons for refunding, (2) current interest rates, (3) the accounting for call premium, bond expense and bond discount, and (4) the most de.,irable method of disposing of unamortized bond discount. Pensions and relief.-Increased wages and liberalization of pension benefits were responsible for pension costs of communication carriers being larger than ever before, reaching approximately $85,000,000 for the Bell system alone. Problems of pension accounting, therefore, became of greater significance, particularly in regard to (1) the pro priety and reasonableness of pension costs, (2) the methods of deter mining the costs, and (3) the accounting for these costs. Continuing studies were pursued in regard to all companies, but an extended study was initiated with respect to Bell system actuarial methods. The REPORT OF THE FEDERAL COMMUNICATIONS COMMISSION 61 Commission granted Bell system companies' request for limited re portiug of changes in their practices regarding payment of termina tion allowances to employees. Further consideration was given to the matter of additional lump-sum payments into the pension-trust funds of certain companies. Continued attention was given to charging current operating expenses with the cost of pensions based on service prior to the adoption of a pension plan. Other studies were made of data submitted by carriers regarding their pension plans. Another consideration was excluding from the current operating expenses of certain carriers all pension costs in excess of normal accruals on the full-service ba.sis (that is, the respective annual amounts that would be paid into a pension-trust fund if the company had established such a fund during the employees' successive periods of service). Pr-e8eTVation of r-ecor-d8.-In cooperation with technical consultants, industry representatives and regulatory agencies, extensive inquiry was made into the feasibility of microfilming carriers' records. Tenta tive rules were prepared and submitted to interested parties for com ment. Substantial progress was made toward attaining uniformity in rules governing preservation of records. Regulations were revised to relieve telephone companies of the burden of maintaining a pre sCl';bed index of records ill certain instances. New types of plant and ser-vices.-Special studies were initiated to ascertain the applicability of existing accounting rules to new services furnished by telephone companies, such as police and other emergency telephone services, commercial mobile radiotelephone services, and rural telephone services by radio or power-line carrier. Re8tatement of plant on basis of original cost.-General agreemeut was reached with most Bell system companies on the nature of the original cost adjustments to be made with respect to acquisitions of plant made prior to the present system of accounts. Accordingly, these companies are completing restatement of plant accounts on an original cost basis and are disposing of the amounts set aside and recorded in the plant acquisition adjustment accounts either directly to surplus or through appropriate amortization over future periods. During the year adjustments made by telephone companies reduced the net book cost of plant through charges to income or surplus of over $19,000,000, thereby increasing the accumulated adjustments to over $35,000,000. Original cost schedules in annual r-epor-ts.-In order to furnish the Commission with systematic and periodic data, new schedules were de signed and incorporated in the annual report (Form M) giving anal pes of the carriers' accounting for plant acquisitions and adjustments therefor. oontinving prope'l'ty 'l'eco'l'ds.-Accounting and engineering studies were continued jointly with State commissions and representatives of 62 REPORT OF THE FEDERAL COMMUNICATIONS COMMISSION the telephone industry with the view of developing continuing prop erty record procedures that will (a) provide a continued and per petual record of quantities and costs of plant as of a certain date and reflect changes subsequent to the date, (b) provide data for determina tion of original cost of plant retired, (c) serve as a basis of inventories with a minimum of field work and as a hasis for summarized plant records, and (d) furnish pertinent data necessary for determining plant mortality, service lives, and depreciation charges. Emphasis was given to improving the accuracy of the estimated average unit costs used in retiring mass quantities of plant, thereby reducing to a minimum the distortion in plant accounts. New plant acaountinq.-Telephone companies have developed pro cedures to account for new plant used in mobile radiotelephone service, rural radiotelephone service, and power-carrier service. These pro cedures, many of them preliminary and experiInental in nature, will require further study to determine whether the new plant can be prop 'lrly classified into present accounts and subaccounts or whether new accounting classifications must be provided. Increase in depreciation aharlles.-The depreciation problem as sumed far greater importance in the fiscal year than ever before. This was largely due to (1) the shortening of the life of present plant by improvements in the art of communication, and (2) the increased costs of construction. The depreciation expense for the Bell system companies alone aggregated $200,000,000 in 1946. In determining the reasonableness of rates for telephone service, depreciation plays an important part as an annual operating charge representing cost of plant expired in service, and as a deduction to an equitable degree from the cost of plant in service in determining the residual invest ment on which af~irreturn should be earned. The factors that pro dnce annual depreciation expense also produce accrued depreciation. It is essential, therefore, that there be consistency in determining the two elements. Depreciation method8.-Because of the vital importance of deprecia tion to the regulatory duties of the Commission, joint engineering and accounting studies continued in regard to changes in depreciation rates. Particular study was made of the methods applied by Bell sys tem carriers in estimating the service lives, salvage factors and the resulting depreciation rates with respect to plant in service. Field· studies were conducted in the offices of four of the principal Bell sys tem companies to determine the reasonableness of increased rates for certain classes of plant. Filing of depreciation data.-Revisions were made of the require ments that carriers report currently their proposed changes in de- REPORT OF THE FEDERAL COMMUNICATIONS COMMISSION 63 preciation rates. These revisions will require the submittal of more useful data to be used by the Commission in determining the reaSon ableness andjustification of new rates, yet minimize reporting require ments regarding minor changes. Studies were continued in the matter of determining the degree of compliance of carriers with respect to their reporting proposed changes in depreciation rates, and in the reasonableness and propriety of such changes. The Commission re scinded a previous order requiring the larger carriers to segregate plant and related depreciation reserve accounts with respect to plant (constructed because of the program for national defense) classified as "emergency facilities." STA.TISTICS Annual reports containing financial and operating data were filed by 146 common carriers and 33 controlling companies. Among the common carriers reporting annually are 118 telephone, 12 wire-tele graph and ocean-cable, and 16 radiotelegraph carriers. A few im portant financial and operating items for the calendar year 1946, as compared with 1945, are shown in the following table: Telephone carriers Item Investment in pla.nt and equip!benL • _ Depreciation and amortization reserves.~_ Net investment in plant Bnd equipment. •__ Local service re\'enues. ._._ Toll service revenues . . _ Total operating revenues l~_ Operating expenses I. _. _. "' • _ Taxes, illc!udinginoome and e:tcess profits _ Net operating income after all taxes _ Net income_. _". •__ • • . Dividends declared. __ ._•••_•• . _ Company telephones: Busincss _ Residential .~_ .A vemge number of calls originating per month: Local 2•• ••• _ 'roll 2 , _ Number of employees at end or October__ . __~•__ Malc •• _ FelIlalc _ Total pay roll for the year _ 1945 $6, 060, 028, 722 $2,167,674,373 $3,892,354.349 $1, 108,350,679 $867,579,478 $2,075,410,511 $1,380,348,934 $of20, NO, 213 $274,321,589 $190,157,344 $192,813,713 8, 723, 714 15,598,560 3, 405, 052, 934 147,612,394 398,665 109,778 288,887 $936, 689, 151 1946 $6,684,830.044 $2,350,398,973. $4, 334, 431. 071 $1,237,229, HiS $899,828,351 $2, 2lil, 942, 629 $1,714, 9Ot, 566 $273, 262, 22'J $263, 779, 140 $226,813,615 $198,831,671 9,594,087 18,234,914 4,012, 045, 963 171,322,349 525,623 160,695 36<1,828 $1,306, 053, 484 Percent Increase or (decrease)• 1946 over 1945 10.31 8.43 n.36 n.63 3.72 8.51 24.24 (35. 1M} (3,84) 19.28 3.12 •." 'a 00 11.84 16.06 31.82 46.38 26.29 39.43 I Intercompany general service and license fees and rents, amonntlng to approximately $39,000,000 for 1946, and $37,000,000 for 1945 have not been eliminated. 2Partly estimated by reporting carriers. 2. TELEGRAPH (WIRE, CABLE, AND RADIO) DOMESTIC SERVICE AND FACILITIES We8tern Union modernization program.-Modernization of West ern Union, which contemplates the construction of 2,700,000 channel miles of telegraph microwave radio relay systems and the leasing of 64 REPORT OF THE FEDERAL COMMUNICATIONS COMMISSION approximately 1,000,000 telegraph channel miles from the Bell system, made substantial progress. Plans call for 26 large message centers equipped with reperforator-switching systems which ultimately will be connected by microwave radio relay systems supplemented by leased telegraph carrier bands. Relaying of messages through these centers will be largely automatic and is expected to result in improved ter minal handling. Five such offices have been constructed and several more will be put into operation during fiscal 1948. The program calls for completion by 1949, but, due to delays in deliveries of some essen tial items, will probably be delayed until 1950. In this connection, 'Western Union wires, poles, conduits, and cables along railroads will be sold to the railroads. Agreements have been reached with 8 railroads involving cash settlements of more than $2,000,000, and negotiations with 24 additional railroads are continuing. Domestw radiotelerrraph.-Western Union's experimental micro wave chain between New York and Philadelphia has been operating regularly with telegraph traffic diverted from wire facilities. Similar equipment is being installed for use in its New York-Washington Pittsburgh triangle. Another Western Union experiment, being conducted in Baltimore, involves the delivery of telegrams by radio facsimile. The message is transmitted to an automobile cruising in the area and the driver makes delivery at the indicated address. The speed and efficiency obtained by this method has encouraged Western Union to plan ex tension of the idea to practically all principal cities. OO'Mtrudion of wire facilities.-During the year, 76 applications and requests for wire telegraph certificates were filed. Four similar applications were carried over from the preceding year, making a total of 80. Seventy-seven authorizations were granted. They covered 502,619 telegraph channel miles and 2,422 telegraph wire miles at an estimated construction cost of $4,795,315 and annual rental of $713,799. These facilities will replace 272,648 miles of wire and 11,038 miles of poles originally costing $21,426,298. Speed of service.-The quality of service rendered by Western Union deteriorated during the year. The time required to route messages throngh 25 message centers in principal cities averaged 11 minutes. This covers the interval from the time a message is received in a relay office to the time it is sent from that office. The monthly average varied from 9.8 to 12 minutes. The average time required by the Bell system to establish teletypewriter exchange connections between sub scribers was 1.6 minutes. Di8continuance, reduetion, or impairment of servwe.-In December 1946 the Commission instituted an investigatiou and hearing of the REPORT OF THE FEDERAL COMMUNICATIONS COMMISSION 65 over-all plans of Western Union to cnrtail telegraph service through closure of company-operated offices and reduction of hours of other offices, the standards to be applied in carrying out such plans, and their effects on telegraph service. Western Union contemplated filing about 1,000 such applications during fiscal 1948 to effect economies iu operation and because of technological improvement and normal post war contraction. The matter was pending decision. During the year, 682 requests for authority to close public telegraph offices or reduce hours of other offices were filed, in addition to 84 ap plications carried over from the preceding year. Of this number, 614 were granted. In most cases where the Commission authorized closure or reduction in hours of offices, alternate service was available to the communities affected. RATES AND TARIFFS WesteN' Union mte inC1'ea.,e.-The 1946 annual report referred to Commission proceedings which culminated in a 10-percent increase in domestic interstate telegraph rates, effective Jnne 12, 1946, for a period of 1 year. Following further hearings, the Commission in October 1946 ordered Western Union to eliminate its so-called "excep tional" or "special" city-to-city and city-to-State rates as being unlaw fully discriminatory, preferential, and advantageous. These rates were lower than Western Union's standard rates otherwise applicable. It was estimated that raising these rates to the standard rate level would produce $3,700,000 additional revenue from interstate service. After public hearing on Western Union's "first supplemeutal peti tion" for a further increase in interstate message telegraph rates, the Commission on December 27, 1946, authorized replacement of the 10 percent flat increase, allowed by the Commission in June 1946 for a period of 1 year, with a 20 percent flat increase with no time limitation. The flat increase amounted to a 9.1 percent increase over the existing rate level, as against 15 percent requestcd by the company. It was estimated that the December action would produce additional annual interstate revenues of $8,500,000. In its December report the Commission stated that rate increases are not the ultimate answer to Western Union's situation, and that further increases will worsen its competitive position in relation to the telephone companies and the air mail. Nevertheless, because of the immediate urgency of Western Union's financial situation, the Com mission permitted the increase. Subsequently, and as part of the same proceeding, the Commission authorized the company to increase its "extra United States domestic" message rates (involving service to Canada, Newfoundland, Labrador, and St. Pierre-Miquelon) by 20 percent. It was estimated that these increases, with corresponding 766635-47-6 66 REPORT OF THE FEDERAL COMMUNICATIONS COMMISSION increases on south-bound traffic, would provide about $411,000 addi tional revenue to Western Union after divisions with foreign carriers. Rate structure studies.-8tudies were made of Western Union's domestic rate structure, having as objectives the equalization of charges for equal service and the supplying of the greatest amount of service at the lowest possible cost. In the present stage, attention is being directed primarily to devising a rate pattern which would provide, uniformly, like rates at like distances to replace the existing State-rate pattern in which rates for lO-word telegrams transmitted, say a thousand miles, range from as little as 72 cents to as much as $1.44. Competitive and other aspects of the problem have made neces sary the statistical analysis by Western Union of several million messages in testing numerous distinct trial rate structures. SUPERVISION OF ACCOUNTS (DOMESTIC AND INTERNATIONAL) Depreaiation.-Detailed analysis was continued of Western Union's depreciation practices which is of particular importance in view of prospective premature retirement of plant under its modernization program for which only partial depreciation has been provided. An independent study of the company's depreciation records was under taken to determine the reasonableness of rates, the adequacy of reserve requirement, and the propriety of the methods employed. As a result, itwill be possible to recommend (1) the adoption of depreciation rates more closely conforming to probable future experience of the company than provided for by rates now in effect, and (2) an adequate depre ciation reserve reflecting actual depreciation existing in plant, also (3) to outline procedures whereby the company may improve upon its present depreciation practices. Studies of the depreciation rates of international telegraph common carriers continued. Oontinuing properw reaords.-Western Union has made substantial progress in establishing a continuing property record. Effort con tinues to obtain compliance from ocean cable and radiotelegraph car riers. Companies which do not have a continuing property record plan are required to submit bimonthly reports of progress in that direction. Pension aacounting.-Studies of carriers' pension plans continued, including actuarial methods used by RCA Communications, Inc., Radiomarine Corporation, and Mexican Telegraph. Further con sideration was given to excluding from current operating expenses of Western Union all pension costs in excess ofnormal accruals on the full-service basis (that is, the respective annual amounts that would be paid into a pension trust if the company had maintained such a fund during employees' service). REPORT OF THE FEDERAL COMMUNICATIONS COMMISSION 67 Uniform system of aecoumts.-A'list of retirement units for out side wire-telegraph and ocean-cable plant was added. Itwas designed to show what units would, upon retirement, be accounted for by depreciation rather than by direct charges to expenses. Supplemental instructions included accounting for revenues for transmissions at gateway and inland points. An amendment deleted "foreign-exchange differential" accounts and permitted carriers to make entries direct to income accounts for gains or losses arising frolli- differences in rates of exchange. Revision of annual reports.-Annnal report Forms 0 and R were revised by deleting unnecessary schedules, adding new schedules, and consolidating several others, thereby resulting in shorter reports yet providing adequate information to the Commission. Preservation of records.-Regulations governing preservation of records were modified to relieve carriers from preparing a prescribed index of records in certain instances. Progress was made in drafting revisions which will reflect modern methods of record keeping, such as machine bookkeeping and microfilming. Reclassification of plant.-Western Union progressed in reclassi fying its plant despite the fact that introduction of radio-relay plant created many new problems. The Commission approved the com pany's proposal to record the book cost of the new radio-relay plant in accordance with prescribed radiotelegraph plant classifications. Since 1938 adjustments have been made reducing Western Union's net book cost by approximately $77,000,000 (exclusive of about $43,000,000 pertaining to former Postal Telegraph plant). Plant of international carriers has been reclassified in accordance with the plant accounts prescribed in the new systems of accounts. Original cost adjustments.-Further progress was made in restating the plant of international carriers on the basis of original cost. In the case of one carrier, adjustment required reduction in recorded book cost of over a million dollars, with a charge to surplus created as a result of reduction of capital. LAND-LINE TELEGRAPH STATISTICS Twenty-eight annual reports were filed by wire-telegraph, ocean cable, and radiotelegraph carriers for the calendar year of 1946. Some selected financial and operating items compiled from Western Union reports for 1946, as compared with 1945, are shown in the table below. These figures relate to land-line operations of that carrier, inasmuch as the data applicable to its cable operations are included in the table pertaining to ocean-cable carriers shown in the "Inter national" section of this chapter. 68 REPORT OF THE FEDERAL COMMUNICATIONS COMMISSION The Western Union Telegraph CO,l Item Investment in plant and equipment - _ Depreciation and amortimtion reserves _ Netinv~tp1entin plant and equipment TransmiSSion revenues . _ Total operating revenues .. .. _ O~:~:~~J:~~ti~Iis~~~r~~!~~~~~:_~~_~t_~~~.~~~~~~~_ Net operating revenues ,___ _ _ Netincome ._______ _ . _ Dividends declared_ . , _ . _ Revenue messages handled_. _ Number of emrrloyees at end of October _ Total pay roll or the year. .. _ 1945 $.357,783,838 $157,243,013 $200, 540, 825 $166,544, 597 $182,047,743 $174-,847,497 $7,200,246 2$7,812,003 $2,432,594 245,157,962 63,446 $126, 662, 000 1946 $361,618, 200 $161,825,750 $199,792,450 $160,242, 193 $175,535,860 $18.1,365, 261 I $7,829,401 2 $10,030,010 ----221;243~091 57,644 $137,292,715 Percentincrease or (decrease), 1946 over 1945 1.01 2.91 (.37) (3.78) (3.58) 4.87 (208.74) (100'-00) 1 9.75) 9.14) 8.39 J Represents data for land-lme operatIOns. Figures covermg cable operatIOns Included in table on p. 68. Amount of dividends appHcable to cable operations cannot be segregated. J Deficit. INTERNATIONAL SERVICE AND FACILITIES General.-The Commission participated in the work of the Tele commnnications Coordinating Committee, which is made up of repre sentatives of Government departments and acts in an advisory capacity for coordinating United States policy in the field of international communications. The Commission likewise worked with the Inter departmental Radio Advisory Committee which functions as a clearing house for Government frequency assignments. Since the end of the war, all but 7 of the 100 frequency assignments borrowed by the Government for war purposes have been or are about to be reassigned to commercial carriers. This will help meet the demand for frequencies in the 2 to 20 megacycle range used for inter national communciations. In addition, approximately 150 new fre quency assignements were made during the year. The major portion was within the presently authorized bands and represent an expansion of use of licensed channels resulting from improved operating tech niques andequi.pml..',nt~thereby promoting more efficient use in the radio spectrum. Radiotele[fmph circuits.-Postwar expansion of international com munication saw the establishment of direct radiotelegraph service with Athens, Greece; Geneva, Switzerland; and Nanking, China; and the reestablishment of prewar circuits with Saigon, French Indochina; Batavia, Java; Manila, Philippine Islands; and Shanghai, China. On June 26, 1947, the Commission issued a proposed decision in Dockets 7094 and 7412 looking to authorization of only one direct radiotelegraph circuit with each of the following countries with which the United States does not now have direct circuits: Jamaica, Saudi Arabia, Palestine, and the Union of South Africa. It also proposed to discontinue one of the two direct radiot Part 42, Preservation of Records, revised to Ma;y 21, 1943____________ .10 Part 43, Filing of Information, Contracts, etc. of Telecommunications Carriers revised to September 29, 1943__________________________ .05 Part 51, Classification of Telephone Employees, effective July 25, 1944_ .05 Part 52, Classification of Wire-Telegraph Emplo;yees, effective July 11, 1944___________________________________________________________ .05 Part 61, Construction, Filing and Posting of Scbedules of ChargeS for Interstate and Foreign Communications Service, revised to August 1, 1946___________________________________________________________ .10 Part 62, Applications Under Section 212 of the Act to Hold Interlock- ing Directorates, revised to May 23, 1944__________________________ .05 Part 63, Extension of Lines and Discontinuance of Service by Carriers, revised to December 30, 1946____________________________________ (') Part 64, Miscellaneous Rules Relating to Common Carriers, revised to September 19, 1946_____________________________________________ (') 2 Obtainable temporarily from the Federal Communications Commission, Washington 25, D. C., without cbarge. o